Some transport sectors, like airlines, operate their assets for as many minutes a day as possible. The trucking industry does not consistently attempt to run its rolling assets 24/7, but there certain...
Some transport sectors, like airlines, operate their assets for as many minutes a day as possible. The trucking industry does not consistently attempt to run its rolling assets 24/7, but there certainly is room for improvement, even under the one-driver one-truck model.
Many carriers do not seek such improvements because too often they boil down the entire cost of running their operations to a simple cost per mile, according to Duff Swain, president of Ohio-based Trincon Consulting. “It is very common for us to get profit and loss [figures] from a sizeable carrier and see that they do not separate variable from fixed expenses. They cannot appreciate the penalty associated with idle trucks and trailers and can only take a haphazard approach to wringing more use – read revenue miles – out of them.”
The total fixed cost of owning a truck; e.g., marketing and sales, operations, maintenance and truck payments, can be totalled up to determine what Swain calls the burden rate per truck per day. Variable expenses include driver pay, fuel and tolls. If a truck has, say, a one dollar per mile variable rate and a $300 daily burden, a 500-mile, one day trip will cost $1.60 per mile. The same trip, taking a day and a half, will cost $1.90 per mile.
The more a fleet can increase the number of load miles a truck travels a day, the lower the per-mile cost and hopefully the more profitable the day.
Trincon’s TruCosting software provides a detailed breakdown of a fleet’s variable and fixed costs by department, truck, or other variables. These numbers expose inefficiencies in asset utilization, among other things, and help planners make better decisions. The TruCosting what-if capabilities allow a fleet manager to plug numbers into a model to test different operating scenarios. Consider the effect of adding a second shift per day to a truck currently running a trip out and back in a single trip. “If you do that, your gross profit margin for the second shift all goes to the bottom line. Your pricing can become very flexible, [allowing you to] go to your customer and say ‘If you co-operate I can save you some money,'” Swain says.
Or, by matching a driver with enough available hours to a particular load, he will be able to turn around the trip without any off-duty time. The truck can then be sent out with another load without delay.
Since profitability software can drill all the way down to individual trip segments or shipments to provide detailed costs for each truck, reporting tools can expose delays that may prove unreasonable.
Ken Manning, the president of Maryland-based Transportation Costing Group, discusses how his company’s Cost Information System (CIS) software suite can break out costs and identify areas of profitability and loss. “Each activity, like pick up, driving or cross-dock, has its own set of overhead costs in addition to the direct costs. We accumulate all the activities consumed by any individual shipment, accumulate their costs and get a total cost to move a shipment. We compare that to revenue produced by the rate we charge. The cost of each activity is reported back to the price analyst at the carrier so she can understand the why of a cost and drive out inefficiencies.
“Suppose that when they deliver freight to a place and every time they come in, the manager who signs for the shipment is busy. The stop time is not 10 minutes, but 30 minutes and is the consignee’s fault. Report that, look for a solution, and if necessary, charge extra for that freight.”
Then there is the difference between a straight increase in utilization – more loaded miles per day – and the quality of the utilization – revenue per mile. CIS identifies profitable and unprofitable freight, so when new freight becomes available, the carrier can decide whether it should replace less profitable freight it currently hauls. Although the substitution might not increase the hours per day trucks are utilized, they will earn more per hour.
“One of our client’s major terminals was operating at or over capacity, and he had a chance to add new business. The cost of adding doors was going to be very high. They used our software to [identify, then replace] less profitable business, without adding capacity,” Manning recounts.
Trailer utilization can also be better managed. Take trailer pools, where trailers are stored at shipper locations for loading. It might take three days for one to get a load, or three might get loaded in one day. “The theory is that a shipper loads a trailer at his convenience, saving the carrier loading costs. But there is a cost in having that trailer tied up for three days, and that should be accounted for,” says Manning.
A CIS analysis could show that one shipper is giving 30 loads a month at a commitment of 90 trailer days by the fleet, and another is giving you 30 loads a month for 35 trailer days. The first shipper needs closer examination. “Maybe the shipper is using the trailer for storage. Maybe it is the carrier’s fault. Maybe we have an agreement with a shipper to drop seven trailers a week, who gives you six loads a week. But then his freight volume drops off to three loads a week, but you are still dropping off seven trailers a week. One hand might not know what the other is doing. It happens all the time,” Manning says.
TransCore, headquartered in Pennsylvania and creator of the 3sixty suite of tools for managing fleets and improving efficiency and profitability, has noticed an increase in trailer tracking with its satellite trailer tracking and monitoring systems, for improved equipment utilization.
Trailer tracking can, for example, show excessive dwell time in a customer’s yard, which can be raised in contract talks. “You can charge for detention time, or change to a different account,” suggests Claudia Milicevic, general manager of TransCore Link Logistics Corporation.
Trailer tracking can reduce theft, or increase the rate of recoveries, which help control insurance costs. In fact, says Steve Blair, general manager of TransCore Operations Management, “It is not uncommon to lose a trailer entirely without some type of tracking system.” Trailer tracking, tied in with reports generated by fleet management software, would spot a trailer racking up unusually-long dwell times long before being labelled as lost.
Equipment utilization can be increased by reducing deadhead miles, an oft-forgotten strategy, according to Ben Murphy, the president and chief operating officer of Texas-based Integrated Decision Support, maker of the Netwise Enterprise profitability tool.
“We may find you are running loads in to markets you shouldn’t. Every load you enter into the system will create or eliminate deadhead miles,” says Murphy. “You always want to add freight from an undersold market to an oversold market.” But dispatch might jump the gun, add a trip to an undersold market and unwittingly create hundreds of deadhead miles.
Trip planning is a huge mathematical exercise, for which profitability software is better suited than the human brain, says Murphy. “With Netwise, we give the planner a plan: put these trucks on these loads to maximize profit per day. If there is something that deviates from the model, they can see from an economics and service perspective how to maximize the margin per truck per day.”
Shaw Tracking launches mobile fleet logistics solution
Company officials say Shaw Mobile is the only logistics solution able to provide real-time delivery and dispatch information giving visibility to anyone in the supply chain. The platform has built-in programming designed to recognize customer-specific exception-based data such as schedule changes, delayed ETAs and unplanned stops.
Shaw Mobile is designed to help fleets reduce fleet operating costs through increased visibility, mobility and efficiency; enhance productivity through real-time event management; improve delivery planning through POD (proof of delivery), GPS and integrated mapping/routing; and customize and/or integra
te to existing Legacy software.
The solution works in four components which include the Electronic On-board Recorder (EOBR), the Handheld Application, the Hosted Application/ Custom Integration and Professional Services.
The Shaw Mobile EOBR component provides GPS tracking, vehicle activity recording, incident recording and automated IFTA, fuel tax and mileage reporting. Data is presented in a Web-based platform and requires no software or IT involvement. Non-critical data is transmitted via Bluetooth to reduce costs while mission critical data is transmitted in real time via GRPS. Reports are exception based and can be customized.
The Shaw Mobile Hosted Application and Custom Integration component allows users to completely customize their data delivery or integrate to the ASP with their existing software. The Mobile Handheld component can be employed by any device that supports Windows Mobile 5.0. It provides the visibility of signature capture for proof of delivery (POD), allows dynamic delivery and pick-up schedule changes, and tracks freight through barcode scanning.
Hosted application features include:
Real time visibility: list of all active vehicles and their corresponding routes; route progression and ETAs displayed in real time in a colour-coded format;
Supply chain visibility: real-time visibility of order status can be printed and/or e-mailed on demand; searches can be customized by order number, customer number, customer name and/or phone number;
Reporting: all reports can be data and time stamped; historical information can be used for pre- and post-analysis to standardize and modify routes and ETAs. mt
Carroll McCormick is an award-winning writer who has been covering transportation industry issues and technologies for more than a decade. He is based in Quebec.