Although many aspects of trucking operations are uncontrollable, there are proactive measures companies can take to maximize success. Two fleet industry professionals collaborated on common errors that reduce profit, sharing tips on how to identify and eliminate waste.
Dart Transit vice president of revenue management Stephanie Williamson joined TMW Systems director of value engineering and professional services Damon Langley in a webinar hosted by Fleet Owner, titled Maximizing Profitability Without Minimizing Your Client Relationships. The webinar was sponsored by TMW Systems.
During the webinar, both discussed crucial elements every trucking company can target to increase profits and maintain stability in an increasingly volatile industry. And it’s no surprise data was first on their list.
Data is the foundation to overall balance, especially in constantly-changing markets with concern over rates affected by various factors from a driver shortage to new regulations. And because data is emotionless, Langley recommended using it when meeting with customers.
Significant data includes revenue per hour, revenue over time, yield, and throughput. The ability to oversee and work with data, along with the quality of that data is what matters, Langley said.
He also stressed that correct data must be emphasized with drivers, such as arrival and departure information, because accuracy creates a domino effect for the other data-related business aspects. Langley suggested automating estimated time of arrival and projected time of availability and incorporating driver commentary to offer an expanded perspective.
Langley also explained that planning is streamlined when bookings are balanced; not over or under booked, and with the right loads.
“Depth of customers by market will help you mitigate balance issues,” Langley said. “The more customers you have to choose from, the easier it is to book your network.”
Network design uses data, and proper utilization helps account for fluctuating rates, he added. When booking loads, determine both potential revenue and potential cost, Langley said, and decide which customer is most valuable to earn money with. While rates differ by area, there’s more to the equation than rates alone. Creating an excel calculator for appointments based on transit can be profitable, as it displays cost and returns corresponding to time, he added.
A company’s network has increasing importance with regulatory changes. Merely monitoring customer behavior will not provide a complete, accurate picture because there are other pieces to the story, Langley explained.
“Length of haul can make a difference, and will make a difference, especially with hours of service and electronic logging device changes,” he said, adding that it provides a window to increase revenue by knowing the time commitment involved with each haul and ensuring enough time is scheduled.
When the conversation involves a shipper, Langley proposed asking where they need help to align both company’s needs. Tell the shippers how the proposed changes can benefit drivers in terms of pay or getting home on time, he said. This is an opportunity to explain the fleet’s network requirements and strengthen the business relationship.
“You’re currently in the driver’s seat, pun intended, when it comes to your network; never has there been a better time to engage with your customers to get the freight that you want to better fulfill the network that you want,” he stressed, adding it is as direct as telling shippers they need to be more efficient.
“Within your network you’re going to find lanes that stand out both above and below the line,” Langley said. He recommended carriers focus on the top 20 and bottom 20.
And when it comes to rates, Langley said rendering them the sole indicator can be detrimental if other areas, like utilization, are ignored.
“Fortunately, rates are also rising right now, so you’ve got some room to breathe,” Langley said, and estimated that in 2018 nearly 50% of rate increases could go directly to driver pay.
Yet rates will fall, Langley assured, and when they do, the margin has to come from another area. Crucial are utilization and cost control, in addition to operational efficiencies, reducing flaws in maintenance and network strategy, which in turn benefit utilization.
Overall, these business aspects won’t improve themselves—analysis is required. Langley described a profitability lifestyle starting with analysis, which leads to a strategy and its execution, ending with further analysis. It is a cyclical approach including multiple divisions of a fleet enterprise that can, and should, be part of a company’s larger strategy.
In searching for areas of waste, Langley broke it down into simple comparisons: how much should have been billed, how much was billed, and how much the client paid. Large spreads between what should have happened and what did, or what was billed versus what was paid indicates errors or inefficiencies.
“Your front line and customer service guys need to have the intelligence, they need to have the operational and business intelligence set in front of them,” he said.
Langley explained the significance of making smart decisions like booking advantageous appointments with the right yields and good throughput.
Trailer management is another potential area where money is unnecessarily wasted, according to Langley. “We’ve found that it is not uncommon at all for people to waste an average of 15 minutes per driver per day due to a lack of good trailer management.” With 2,000 trucks, he said, that is a loss of $8 million in one year.
“If you have more than 100 trucks and you’re not using fuel optimization that can save you pennies per gallon, you should do that,” Langley said. “And honestly if you’re not getting 8 mpg on your truck or more that’s a conversation to be had.”