TMW study finds TL carriers eager to diversify

May 16, 2013
Survey also reveals maximizing miles is a key to driver retention

According to the results of TMW Systems’ first annual Transportation & Logistics Study – North America For-Hire Truckload Carrier Benchmarking Survey, truckload carriers continue to innovate to remain profitable— especially via service diversification and efforts to improve driver retention.

“When asked to rank the most important business challenges or opportunities facing their organization today, respondents sent a clear message,” pointed out TMW president David Wangler. “Maximizing asset utilization was the most common issue cited (24%),followed closely by driver constraints (19%). Surprisingly, with all the talk about the economic recovery, the industry revealed a more cautionary stance. As the third biggest challenge reported (16%), the economic downturn was clearly still on the minds of participants heading into 2013.

“With increasing regulations, driver constraints and rising costs of equipment and labor, truckload companies are struggling to stay profitable,” Wangler also pointed out. “Companies that are increasing profit margins are diversifying and using technology to drive optimization. Metrics-based management is critical to staying competitive.  Progressive truckload carriers have already invested in and deployed these technologies to improve asset utilization and are reporting positive results."

TMW found that truckload carriers that are diversifying their businesses are adding new higher margin services, including brokerage, logistics, LTL to TL consolidation, dedicated services and intermodal services.

Those carriers looking to expand are exploring dedicated services first (27%) followed by brokerage services (21%). What’s more the majority of these fleets reported they ae working on an accelerated schedule-- within a one-year time frame to achieve this growth.

The survey determined that driver miles is the most important factor in retaining drivers as turnover and utilization are directly tied to driver pay miles.  Turnover rates closely follow driver revenue miles per week.  Companies whose drivers log the most hours have the lowest turnover rates, indicating the higher the utilization, the lower the turnover.  Trucks sitting empty not only impact financial performance, TMW advised, but also have a “devastating effect on driver morale and overall retention. While home time is important, it is quantitatively clear that drivers need that time away from home to be consistently productive.”

Government regulations, driver constraints and increasing costs of equipment and labor are among the factors keeping operating ratios (OR) high.  Seventy-one percent of survey respondents report 94% or higher OR, whereas the industry’s best performers achieve an OR of less than 90%.  “Survey results uncovered a strong correlation (~75%) between utilization and OR, so it’s clear why this issue consistently rises to the top of fleet priorities,” TMW observed.

Survey respondents also reported that the biggest challenge over the next one to two years will be maximizing asset utilization (24%). The average utilization (revenue miles per seated truck per week) is 2,230.  No company with fewer than 2,000 revenue miles per truck per week achieved better than 97% OR.

Down time continues to pose a challenge, per the survey. Respondents reported 5.64% of their tractor fleets have been down in the last 12 months, “an alarming figure as anything over 5% is typically viewed as unacceptable,” noted TMW.  “The average age of fleet at 44 months is older than ideal, potentially resulting in higher unscheduled breakdowns negatively impacting asset utilization.”

The study was developed from a benchmarking survey conducted online from October 24 through November 16, 2012. Executives from more than 60 national transportation firms with more than 21,000 units provided TMW Systems with detailed financial and operational metrics and opinions on industry’s  issues.

According to TMW, the study “represents the industry’s most unique performance scorecard for North America truckload carriers” and captures and analyzes key trends, challenges and opportunities facing for-hire carriers. 

The full survey is available here.

TMW Systems is provides Transportation Management Software (TMS) solutions to for-hire and private fleets, brokerages and 3PL organizations.

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