Seeing the trees

COMPANY: Averitt Express OPERATION: Carrier providing LTL, TL, dedicated, time-critical and import/export freight transportation as well as supply chain management services PROBLEM: While the problem for any business manager often may be seeing the forest for the trees, in trucking the trees also need to be studied and studied closely. Such is the view of cost analysis as taken by the management of

COMPANY: Averitt Express

OPERATION: Carrier providing LTL, TL, dedicated, time-critical and import/export freight transportation as well as supply chain management services

PROBLEM:

While the problem for any business manager often may be seeing the forest for the trees, in trucking the trees also need to be studied — and studied closely. Such is the view of cost analysis as taken by the management of Averitt Express.

The company runs some 4,000 tractors and 11,250 trailers out of more than 80 service centers in North America, and it provides international transportation services to 100 different countries.

Having such extensive and varied operations certainly means riding herd on costs is a challenging and constant exercise. What the company realized, according to Mark Davis, vice president-pricing & traffic, was that in both its LTL and TL operations, Averitt Express was employing cost analysis software that did not meet its needs for data accuracy nor did either of its solutions reconcile against the firm's general ledger — which led to more second-guessing.

“We needed to gain a better understanding of specific cost applications that could be reconciled at the shipment, service center and corporate levels,” Davis explains.

SOLUTION:

Looking into available costing capabilities on the IT market, Davis says Averitt found that many leading carriers were using the LTL Cost Information System (LTL/CIS) and Truckload Cost Information System (TL/CIS) from Transportation Costing Group (TCG). After several months of internal data cleanup and testing of each product, followed by on-site training conducted by TCG personnel, Averitt started implementing LTL/CIS in mid-2006 and TL/CIS in early 2007.

“Some of the features that were particularly attractive to us were that the TCG systems calibrate back to the general ledger, which should provide credibility of the results,” Davis says. “Also, unlike other solutions, LTL/CIS and TL/CIS allocate overhead costs in a much more specific and accurate manner. Last but not least, TCG systems' reporting capabilities are extensive, allowing us to conduct profitability analysis by customer, service center, lane, sales representative, shipment size, and numerous other factors.”

Now, Averitt's pricing analysts use the two TCG solutions to analyze existing business as well as prospective business. Price concessions, proposals, bids and rate increases are constructed using these tools, Davis notes.

“Other systems we've used lacked comprehensive data and the ability to accurately account for circumstances affecting costs,” says Davis. The TCG systems also have superior reporting capabilities that provide extensive analysis of profitability.”

Davis says that with the TL and LTL markets weakened since July 2006, Averitt has not yet been unable to use the TCG solutions to their full extent for yield management purposes and to measure revenue growth or profits, which at this point he says would be skewed by market conditions. “In time, the systems will provide accurate, specific cost information for pricing, and for traffic, profitability and operational productivity analysis,” he explains. “There is no doubt that the CIS systems will become highly effective business management tools for us. They will not only help Averitt make pricing decisions. We also expect that use of a universal measurement tool will provide more specific direction that will lead to a more efficient and profitable organization.”

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