There are all sorts of issues bedeviling motor carriers these days – the ongoing driver shortage, downward pressure on freight rates, a perhaps mythical capacity crunch; go ahead and take your pick – and most bring significant financial challenges along with them.
For example, tackling the driver shortage requires a focus on wages and benefits – typically the largest line-item within any trucking company’s fiscal ledger – and other forms of compensation, such as home time, that while not affixed with a price tag does create costs for a motor carrier to manage.
And, of course, freight rates generate the money stream trucking firms need to pay their drivers, buy equipment, purchase fuel, insurance, and settle the many tax bills levied upon this industry.
None of that is easy to tackle on the operational side of the freight-hauling business, but they also generate a host of specific monetary issues chief financial officers (CFOs) need to deal with.
I got some insight into some of trucking’s fiscal issues at the first-ever CFO Conference hosted by McLeod Software in Chicago this week; an event that brought 70 CFOs, controllers, accountants and others together from trucking companies, logistics firms, and freight brokerages to discuss a wide variety of industry issues.
Take fraud, for example. Marcia Wood, CFO for Choptank Transport, explained that she spends about 15% of her time dealing with a variety of fraudulent efforts directed at her company – from email phishing scams to fake money transfer orders.
“You can’t rely on caller ID [identification] to verify phone numbers anymore; you have to hang up and calling the carrier’s SAFER number directly to verify it’s them” she explained.
“We’re also moving to ACH [automated clearinghouse] instead of using paper checks. There’s a cost to produce [paper] checks so we’re driving [motor] carriers to use ACH as much as possible to reduce this cost while also reducing the risk of fraud,” Wood noted.
In terms of a broader picture of trucking’s fiscal challenges, Mark Reed, president of ReedTMS Logistics, which operates 76 trucks, pointed out that he now uses technology to monitor the revenue generated by each of his units and his drivers on an hour-by-hour basis.
“Visibly has really changed our business,” he said. “We have to manage the asset-side of our business on an hour-by-hour basis now: how many loads we have for the fleet at 10 a.m.; how many we have at noon. Because once you miss out on revenue in this business, it’s gone.”
Getting to such a real-time level of fiscal management isn’t either, either, as it’s predicated on getting quality data into the transportation management system (TMS) used by a particular motor carrier, broker, or logistics provider.
Dwight Lloyd, controller for PS Logistics, which operates flatbed carrier P&S Transportation, noted for example that just trying to figure out the exact mileage accrued on a daily basis by his firm’s 2,200 trucks is a complicated task – especially when trying to build key performance indicators or “KPIs,” the metrics by which many trucking firms are judging success or failure.
“We found a big difference in our fuel cost per mile because one part of our business calculated that cost by total miles driven as compared to total fuel miles driven,” he said. “That created a difference of 12 cents per mile.”
Then there are the miles that sometimes get left out of such calculations, such as for deadhead or to get driver’s home. “There’s a whole number of miles driven outside the system that affect fuel cost, maintenance cost, and total life cycle cost, etc.,” Lloyd noted. “And those are the numbers that make a truck profitable.”
Those are just some of the issues CFOs in the trucking and logistics space are wrestling with – issues that will only change and grow, methinks, in the weeks and months ahead.