Numbers, numbers, numbers

Aug. 15, 2017
Figuring out and comprehending stats is key for profitability

There are all sorts of issues bedeviling motor carriers these days: the ongoing driver shortage, downward pressure on freight rates, and perhaps a mythical capacity crunch. Take your pick. 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.

While providing more home time might not come affixed with a direct price tag, just rescheduling routes alone to provide more of it creates a host of costs for a motor carrier to manage.

And then, of course, there are the freight rates the industry needs to generate the money stream required to pay all of a fleet's bills: driver wages and benefits, trucks, trailers, fuel, insurance, taxes and fees.

As this is our annual ‘Trucking by the Numbers' issue, we total up and break down many of those costs. Yet it's also good to keep in mind that there's a group of folks within this industry— specifically its chief financial officers (CFOs), among others—for whom the proper management of such numbers can ultimately help motor carriers succeed or fail in the rough and tumble business of moving freight for a living.

I got some insight into some of trucking's fiscal issues at the first-ever CFO Conference hosted by McLeod Software in Chicago at the end of June.  This  event brought together 70 CFOs, controllers, accountants and others from trucking companies, logistics firms, and freight brokerages to discuss a wide variety of industry issues.

Take fraud, for example. Marcia Wood, CFO of Choptank Transport, ex­plained that she spends about 15% of her time dealing with fraudulent efforts directed at her company, everything from email phishing scams to fake money transfer orders.

"You can't rely on caller ID to verify phone numbers anymore; you have to hang up and call 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."

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.

"Visibility 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. and  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 easy either, as it's predicated on getting quality data into the transportation management system used by a particular motor carrier, broker, or logistics provider.

Dwight Lloyd, controller of PS Logistics, which operates flatbed carrier P&S Transportation, noted 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.

"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¢ per mile."

Then there are the miles that sometimes get left out of such calculations, i.e.,  deadhead miles or miles to get drivers 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."

CFOs in the trucking and logistics space wrestle with many issues such as these, which will only change and grow more complicated (I think) in the months and years ahead.

About the Author

Sean Kilcarr | Editor in Chief

Sean previously reported and commented on trends affecting the many different strata of the trucking industry. Also be sure to visit Sean's blog Trucks at Work where he offers analysis on a variety of different topics inside the trucking industry.

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