trucking profitability experts

KSM Transport Advisors (KSMTA) exclusively serves the trucking industry, providing freight network engineering and profit improvement services.

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Our carrier profitability assessments are designed to be self-funding, provide a thorough analysis of the current situation and create a roadmap so the identified issues can be quantified, prioritized and pursued.

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Our products are designed to support and improve carrier profitability, and are used within our assessments and implementations to provide the intelligence and knowledge for change and action.

KSMTA insights

Metrics Matter: Know Your Numbers to Improve Trucking Profitability  

As trucking consultants, we are regularly asked to help our clients benchmark their revenues, costs and productivity. Metrics are the building blocks of business planning and profitability, and minor changes in key metrics can have a significant effect on the performance and profitability of any trucking company. The transportation industry has never been more metric driven than it is today; and as a result, access to industry data is becoming more prevalent with new benchmarking endeavors covering all aspects of the business including general financial data, driver recruiting and retention statistics, maintenance and a wealth of operations statistics.

In order to properly use the information available (and to understand your own company’s information) it is important to recognize how key factors are defined and measured. For example, miles, revenue, and trucks, the building blocks of many trucking statistical elements, can each be defined in several different ways.

Mileage-based metrics typically utilize different “miles” depending on the metric. Fuel and many equipment maintenance statistics (tractor maintenance cost per mile, miles per gallon, etc.) are usually presented using odometer, hub or ECM miles. This can be confusing when comparing to fuel and maintenance costs per mile as presented in financial reports which use dispatch miles, and therefore reflect a higher cost per mile, as by definition dispatched miles are less than odometer, hub or ECM miles.  

Miles used for billing between two points may be different than miles used to pay the driver between the same two points due to routing or mileage program differences. Understanding these mileage differences is crucial when evaluating or proposing rates to shippers. Historically, the carrier has an understanding of its operating costs and quotes its prices based on the dispatched miles generated in the carrier’s TMS or dispatch system. Shippers may specify the mileage engine (Rand McNalley, PCMiler, etc.) and mileage type (short, practical, etc.) when requesting rates in bids; sometimes shippers provide their own miles. Carriers must understand the variance in the miles used by the shipper and the miles used to generate the carrier’s costs when submitting bids or quotes. Failure to do so may result in under or overpricing the freight; a 3-5% variance between the miles used for calculating operating costs and the miles used for invoicing the customer could possibly mean a 3-5% “discount” given to the customer.

The different types of revenue can also cause confusion when looking at various revenue statistics. Are fuel surcharges or other accessorial charges included in the statistic? When comparing rates among customers or to industry rate indices, fuel surcharges should be included, but when comparing rate trends over a long time period they probably should not. (For more on this issue see Paradigm Shift: Linehaul + Fuel Surcharge is the New Linehaul.)

Truck counts can vary for productivity, driver turnover and other statistics depending on whether the statistic is using total trucks, active trucks, staffed trucks or available trucks and how each of those terms is defined.

The key point is to be aware that there are differences in how various elements used to measure key performance indicators and other statistics are defined. When looking at industry statistics try to find out how the key factors are defined and use similar definitions when comparing your own statistics. This will allow you to more accurately benchmark your activities and results, and to more accurately price your freight.

If you are interested in learning more about trucking profitability metrics, contact us or visit our Carrier Profitability Assessments page to learn more about our trucking company consulting services.

.
Trucking Roundtable Highlights Driver Recruiting and Retention Trends  

In his presentation at the Trucking Owners Business Roundtable held in Nashville, Tennessee last week sponsored by Katz, Sapper & Miller, KSM Transport Advisors and Baker Donelson's Transportation Group, Gordon Klemp of The National Transportation Institute discussed company driver and owner-operator compensation and trends. 

In addition, Steve Prelipp of Prelipp Consulting discussed driver recruiting/creating a pipeline of drivers; and John Biblis of Truck Safety Advisors discussed how to hire the right drivers to improve safety, productivity and retention. Finally, Mark Baugh of Baker Donelson provided legal updates related to drivers.

A few key takeaways from the meeting include:

  • One reason drivers are exiting the truckload market: more than 50% are 45+ years in age.
  • 47% of carriers offer sign-on bonuses today compared to 12% two years ago.
  • Recruiting advertising channels have changed as media has changed. Newspaper is out. Social media is in. 
  • 100% of participants agree they have more freight than capacity (i.e. capacity crunch).
  • Data mining, target marketing, and remarketing of opportunities is critical to recruiting success.
  • Drivers are isolated employees who need and want personal communication with the company.
  • Productivity-based pay is becoming more prevalent. A short feedback cycle regarding performance is critical for success.
.
Paradigm Shift: Linehaul + Fuel Surcharge is the New Linehaul  


 

Pop quiz: A carrier has two customers that ship from Indianapolis to Dallas. Customer A pays $1.56 linehaul per mile plus FSC (fuel surcharge). Customer B pays $1.73 linehaul per mile plus FSC. Which customer has the better rate? 

Correct answer: It depends on the FSC for each customer.

The long-established truckload industry practice of using linehaul rates to compare shippers’ rates on a given lane is no longer valid and can be extremely misleading.

Each of our clients has a standard FSC; however very few of our clients’ customers utilize that standard. In today’s world, the shipper drives the FSC using one of many methodologies: shipper standard FSC, PADD-specific FSC, Breakthrough® Fuel, Zero Peg Fuel, all-in-rate, etc. Most, but not all, of these methodologies use the Department of Energy’s (DOE) National Retail Diesel Average as the source to calculate the FSC.

The standard FSC today is that there is no standard. To understand the reason for this we must take a quick look at the history of fuel surcharge in the industry. Fuel surcharge came widely into play during the early 1990s as a by-product of The Gulf War. Fuel had been consistent over a long period of time since the oil embargo of 1973; with the uncertainty of supply created by the war, fuel prices spiked to unprecedented levels and carriers and shippers searched for a means to mitigate the uncertainty of fuel cost. Truckload carriers and their customers created a FSC system with a base price based on the DOE of $1.15 or $1.20 per gallon with the carrier receiving a FSC of .01 for each .05 increase over the base (based on trucks getting then around five miles per gallon). This system was fair and bilateral as there were times when carriers were applying a negative FSC when the DOE went below the base. What was implemented as a temporary solution has become an integral part of today’s pricing landscape.

Fast-forward to today and there is no standard FSC that is applied by carriers and shippers. Carriers and shippers negotiate based upon an “all-in-rate” and push the dollars to either the linehaul or FSC buckets depending on the optics that will help finalize the deal  and make the rate appear most favorable in the eyes of (generally shipper) stakeholders.

The ability to compare rates is critical when working bids, comparing rates to indices, managing metrics and trends, or analyzing specific shippers or lanes. It is critical in all of these endeavors to compare “apples to apples.” To that end, KSM Transport Advisors has created a new metric LH+F (linehaul+ FSC) that has been implemented in all of our work products, methodologies and processes. We are encouraging our clients, and everyone with a stake in a truckload carrier, to shift their rate paradigm from linehaul to LH+F.

To learn more about trucking metrics, LH+F, or our trucking company consulting services, contact KSM Transport Advisors today.

.
 

Click on a logo to see what our clients have to say about us.

%%clientname% Logo

We have worked with several consultants over the years, and KSM Transport Advisors (KSMTA) is truly a cut above the rest. While many consultants will try to “strong arm” you into buying into their recommendations, KSMTA most certainly doesn’t operate that way. In fact, I felt as though they became a fully integrated part of our team. They are able to leverage their industry experience and tools to deliver options that are well thought out, quantified, and most important, can be realistically implemented. They offer real-world solutions to real-world problems.

One example is their maintenance assessment. We felt confident about how we handled our maintenance practices, but they showed us innovative ways on how we could improve even further. The report they compiled contained metrics and analyses that were both thorough and easy to understand. We were so impressed that we engaged them to help us implement their solutions. I would recommend KSMTA to anyone who is interested in driving down their maintenance costs in order to maximize profits.


Averitt Express, Inc.

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Working with David Roush has been an invaluable experience. David worked with us in the details of our business, but also guided us at a higher, strategic level. In both instances, TransCorr was led in a better direction. David's experience in the trucking industry is vast, and he used that knowledge to help us in many different business scenarios. With KSM Transport Advisor's (KSMTA) help, we have been able to improve our LH/Mile by $0.14 within 12 months. And with David's guidance, we were able to more strategically develop a new market.

In addition, David is extremely personable and easy to relate to. He's been a reliable person to converse with for quick questions or for longer strategic discussions. I have greatly enjoyed the experience working with David and KSMTA and I look forward to continuing working together.

Michael Kuebler, Director – Business Intelligence
TransCorr

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We called on KSM Transport Advisors (KSMTA) to evaluate our company's recruiting strategy. We did not believe we were properly configured to achieve the performance benchmarks we'd outlined for ourselves, and needed assistance with improving our core recruiting methods to ensure we were bringing in the right people.

KSMTA brought decades of experience to the task and continues to play a large role in helping us to strengthen our recruiting group. The firm made several site visits and offered a series of recommendations regarding the metrics, advertising, and other tools we were implementing to attract new hires. In the past month alone, we've seen a 10 percent increase in seated trucks. Moreover, our new hires have been a great fit for our firm. I'd highly recommend KSMTA to anybody who wants to improve their driver recruiting results.

Chip Watkins, President, Transportation Division
Watkins Associated Industries

%%clientname% Logo

Boyd Bros. hired KSM Transport Advisors (KSMTA) to evaluate our freight network. We had purchased and implemented TMW’s IDSC Netwise® software, but our use of the software was sporadic, and thus so were the results.

We do not use a lot of consultants as we have had several negative experiences in the past. Our experience with KSMTA was very positive.

We have implemented a systematic weekly and monthly review of our freight network based on the best practices shared with our team by KSMTA. We have integrated KSMTA as an integral part of our go-forward network design to ensure we continue to maximize our operating margins.

I highly recommend KSMTA and their Freight Network Assessment as a high value project that delivers real-world insights and solutions.

Richard Bailey, President
Boyd Bros. Transportation, Inc.

%%clientname% Logo

Our company engaged the services of KSM Transport Advisors (KSMTA) after our board of directors determined that key ingredients to improving our overall operating performance were missing. KSMTA's challenge was to help our company create a business plan that was attainable, sustainable and would allow us to achieve our profit goals.

KSMTA hit the ground running. They visited every company location, conducted a complete review of our business plan and our existing resources. They asked critical questions about our revenue models and our personnel needs. They examined what our competitors were doing and looked at how federal regulations were affecting our business. They were proactive, results driven and impressed us with their knowledge of the freight industry.

Ultimately, they determined our company was heading in the right direction, but helped to sharpen our focus and make sure that our business model was both strategically and statistically sound. They met their deadlines, were competitively priced and were considerably more engaged than other consultants we've work with. We continued to work with David and KSMTA on various follow-up projects, and I would recommend KSMTA to any industry leader who is interested in improving operational efficiency.

Chip Watkins, President, Transportation Division
Watkins Associated Industries

%%clientname% Logo

Our company, Kane is Able, had experienced significant change in our operations as the result of adjustments to the recession, as well as undergoing cultural change as the company transitions from a family-operated company to a company with non-family professional management. Additionally, we had made some management changes and I was assigned to "right the ship."

Fundamentally knowing that a strong foundation is critical to success and anecdotally experiencing a multitude of "system" issues, I hired KSM Transport Advisors (KSMTA) to complete their Systems Assessment. I felt comfortable from the start as the proposal was professional and thorough with a well-defined process and very specific deliverables.

The onsite team exceeded our expectations with a strong focus, organized methodology, and instantly apparent expert knowledge combined with industry experience on the carrier side. Our team was highly involved at the operation, administrative, and IT levels; daily briefings kept our leadership in the loop and provided short-term wins as well as made our system and use of the system world class.

Our team was in unanimous agreement that this was a great investment and I would recommend KSMTA and its Systems and Assessment to any carrier who would like to better understand how to configure their systems immediately and in to the future.

Steve Buckman, Vice President Operations
Kane is Able, Inc.

%%clientname% Logo

Bestway engaged David Roush and KSM Transport Advisors (KSMTA) to evaluate our freight network and it was a very positive experience.

KSMTA delivered exactly what they promised and more. Their entire approach was professional and designed to deliver maximum value with minimal effort on our part. They quickly understood our unique and proprietary concepts and issues and “dialed” them into their analysis and presentation. We learned more about the profitability of our customers and lanes in a day and a half with their team than we had in all the time prior to the visit.

The solutions resulting from their work were easy to understand and actionable as promised. We began immediate implementation resulting in a nice increase in our rate per mile. Our rate per mile has increased nicely as a result of this process, and our operating ratio has declined accordingly. That increase far exceeded our investment in the project.

Terry W. Croslow, COO/CFO
Bestway Express, Inc.

%%clientname% Logo

In today's highly competitive truckload industry, regulatory concerns, driver turnover issues, and a generally soft economy are impacting carriers' profitability. We turned to KSM Transport Advisors (KSMTA)'s Freight Network Assessment (FNA) to better equip ourselves to manage through these challenges. KSMTA's data-driven work products and processes support and leverage the power of the TMW IDSC Netwise® Technology.

KSMTA team members went above and beyond in helping us understand how to use advanced analysis to improve our overall operational efficiency. They analyzed every aspect of our revenue stream to allow us to close profitability gaps and find new revenue opportunities. They even provided us with an in-house analyst to manage the FNA technology until one of our own people was fully trained to do the job.

We were impressed with how well KSMTA's people understood the truckload industry. They instilled us with confidence as they guided us through the analytical process. On top of their experience, the KSMTA team members were great to work with – humble, willing to roll up their sleeves on our behalf, and completely focused on our success.

Matt Anderson, Senior Vice President, Sales & Marketing
Landair Inc.

%%clientname% Logo

Our initial goal was for KSM Transport Advisors (KSMTA) to provide an overall analysis of our entire truckload freight network, provide specific deliverables for the project, and to make recommendations for future improvements. Having worked with KSMTA on previous projects, we were very confident that they would bring the same level of enthusiasm and expertise to the network analysis project. We were not disappointed.

The team from KSMTA brought real-world industry experience and a proven track record of success to our project. Their approach is very systematic, thorough and results-driven. We continue to refine our processes and overall approach to our freight network management based on the systems and logic implemented through our engagement with KSMTA. We began to see positive results from the very beginning, and a favorable trend has continued during the six months since launching the project. I would recommend KSMTA to anyone who is interested in analyzing their freight network in order to drive improvements in yield and margin.

Danny Crooks, Vice President, Corporate Transportation
Averitt Express, Inc.

%%clientname% Logo

When our company engaged the services of KSM Transport Advisors (KSMTA) we had completed an acquisition, but we did not have the opportunity to perform an in-depth evaluation of the freight network. The initial goal was for KSMTA to provide an overall analysis of our entire truckload freight network, provide specific deliverables from the project, and to make recommendations for future improvements.

We made strategic decisions regarding certain segments of this fleet – including where to hire drivers and which markets to grow. We turned to KSMTA to provide the analysis and support to confirm our thoughts, assure this effort would be successful by providing a plan for attaining our objectives within a given timeframe, and provide follow-up measurements to report progress. They responded timely with tools and analysis that supported this effort.

We continue to refine our processes and overall approach to our freight network management based on the systems and logic implemented though our engagement with KSMTA.

I would recommend KSMTA to anyone who is interested in analyzing their freight network in order to drive improvements in yield and margin, and ultimately overall profitability.

Terry A. Wallace, President
Transco Lines, Inc.

%%clientname% Logo

I have spent 20 years helping truckload carriers all across North America with the problem of identifying which shippers and lanes at various rates and volumes make up the best freight mix; yield management. One of the most valuable lessons learned over my years is that there's both a science and an art to freight mix optimization.

Understanding the science is the easier of the two: what data do you need, what's the proper math to apply, and how do you read the resulting information? There are few commercially available yield management systems designed for the truckload industry. These systems are wonderful tools for taking vast amounts of raw information and very quickly producing objective business intelligence. The problem with these systems is that they can lack direction. Lack of direction often leads its users to a condition known as “analysis paralysis” resulting in very little realized improvements.

The art is finding the right blend of real-world transportation experience and the objective measurements to form actionable tasks. It takes many years at various positions and levels within a trucking company for an individual to gain the necessary experience needed to identify actionable opportunities presented in the analytics. Intuitively you know you can't take what a mathematical model says to do 100%; but on the flipside, you can't exclusively rely on an individual's subjective experience either.

I've seen carriers attempt yield management by applying science or art, always with less success than when both are applied. Done right, yield management will bring huge improvements to the bottom line with very little disruption to operations and sales.

Our industry is small with a very small number of yield management experts. David Roush and his team at KSM Transport Advisors (KSMTA) are truly among the best. They use software to produce objective business intelligence and possess a rare wealth of industry experience needed to guide actions. You won't find a better blend of art and science. KSMTA is a professional group passionate about what they do. I've seen their success firsthand and would recommend them to anyone and everyone.

Ben Murphy, President
BJM Advisors, LLC

 

KSMTA insights

Metrics Matter: Know Your Numbers to Improve Trucking Profitability  

As trucking consultants, we are regularly asked to help our clients benchmark their revenues, costs and productivity. Metrics are the building blocks of business planning and profitability, and minor changes in key metrics can have a significant effect on the performance and profitability of any trucking company. The transportation industry has never been more metric driven than it is today; and as a result, access to industry data is becoming more prevalent with new benchmarking endeavors covering all aspects of the business including general financial data, driver recruiting and retention statistics, maintenance and a wealth of operations statistics.

In order to properly use the information available (and to understand your own company’s information) it is important to recognize how key factors are defined and measured. For example, miles, revenue, and trucks, the building blocks of many trucking statistical elements, can each be defined in several different ways.

Mileage-based metrics typically utilize different “miles” depending on the metric. Fuel and many equipment maintenance statistics (tractor maintenance cost per mile, miles per gallon, etc.) are usually presented using odometer, hub or ECM miles. This can be confusing when comparing to fuel and maintenance costs per mile as presented in financial reports which use dispatch miles, and therefore reflect a higher cost per mile, as by definition dispatched miles are less than odometer, hub or ECM miles.  

Miles used for billing between two points may be different than miles used to pay the driver between the same two points due to routing or mileage program differences. Understanding these mileage differences is crucial when evaluating or proposing rates to shippers. Historically, the carrier has an understanding of its operating costs and quotes its prices based on the dispatched miles generated in the carrier’s TMS or dispatch system. Shippers may specify the mileage engine (Rand McNalley, PCMiler, etc.) and mileage type (short, practical, etc.) when requesting rates in bids; sometimes shippers provide their own miles. Carriers must understand the variance in the miles used by the shipper and the miles used to generate the carrier’s costs when submitting bids or quotes. Failure to do so may result in under or overpricing the freight; a 3-5% variance between the miles used for calculating operating costs and the miles used for invoicing the customer could possibly mean a 3-5% “discount” given to the customer.

The different types of revenue can also cause confusion when looking at various revenue statistics. Are fuel surcharges or other accessorial charges included in the statistic? When comparing rates among customers or to industry rate indices, fuel surcharges should be included, but when comparing rate trends over a long time period they probably should not. (For more on this issue see Paradigm Shift: Linehaul + Fuel Surcharge is the New Linehaul.)

Truck counts can vary for productivity, driver turnover and other statistics depending on whether the statistic is using total trucks, active trucks, staffed trucks or available trucks and how each of those terms is defined.

The key point is to be aware that there are differences in how various elements used to measure key performance indicators and other statistics are defined. When looking at industry statistics try to find out how the key factors are defined and use similar definitions when comparing your own statistics. This will allow you to more accurately benchmark your activities and results, and to more accurately price your freight.

If you are interested in learning more about trucking profitability metrics, contact us or visit our Carrier Profitability Assessments page to learn more about our trucking company consulting services.

.
Trucking Roundtable Highlights Driver Recruiting and Retention Trends  

In his presentation at the Trucking Owners Business Roundtable held in Nashville, Tennessee last week sponsored by Katz, Sapper & Miller, KSM Transport Advisors and Baker Donelson's Transportation Group, Gordon Klemp of The National Transportation Institute discussed company driver and owner-operator compensation and trends. 

In addition, Steve Prelipp of Prelipp Consulting discussed driver recruiting/creating a pipeline of drivers; and John Biblis of Truck Safety Advisors discussed how to hire the right drivers to improve safety, productivity and retention. Finally, Mark Baugh of Baker Donelson provided legal updates related to drivers.

A few key takeaways from the meeting include:

  • One reason drivers are exiting the truckload market: more than 50% are 45+ years in age.
  • 47% of carriers offer sign-on bonuses today compared to 12% two years ago.
  • Recruiting advertising channels have changed as media has changed. Newspaper is out. Social media is in. 
  • 100% of participants agree they have more freight than capacity (i.e. capacity crunch).
  • Data mining, target marketing, and remarketing of opportunities is critical to recruiting success.
  • Drivers are isolated employees who need and want personal communication with the company.
  • Productivity-based pay is becoming more prevalent. A short feedback cycle regarding performance is critical for success.
.
Paradigm Shift: Linehaul + Fuel Surcharge is the New Linehaul  


 

Pop quiz: A carrier has two customers that ship from Indianapolis to Dallas. Customer A pays $1.56 linehaul per mile plus FSC (fuel surcharge). Customer B pays $1.73 linehaul per mile plus FSC. Which customer has the better rate? 

Correct answer: It depends on the FSC for each customer.

The long-established truckload industry practice of using linehaul rates to compare shippers’ rates on a given lane is no longer valid and can be extremely misleading.

Each of our clients has a standard FSC; however very few of our clients’ customers utilize that standard. In today’s world, the shipper drives the FSC using one of many methodologies: shipper standard FSC, PADD-specific FSC, Breakthrough® Fuel, Zero Peg Fuel, all-in-rate, etc. Most, but not all, of these methodologies use the Department of Energy’s (DOE) National Retail Diesel Average as the source to calculate the FSC.

The standard FSC today is that there is no standard. To understand the reason for this we must take a quick look at the history of fuel surcharge in the industry. Fuel surcharge came widely into play during the early 1990s as a by-product of The Gulf War. Fuel had been consistent over a long period of time since the oil embargo of 1973; with the uncertainty of supply created by the war, fuel prices spiked to unprecedented levels and carriers and shippers searched for a means to mitigate the uncertainty of fuel cost. Truckload carriers and their customers created a FSC system with a base price based on the DOE of $1.15 or $1.20 per gallon with the carrier receiving a FSC of .01 for each .05 increase over the base (based on trucks getting then around five miles per gallon). This system was fair and bilateral as there were times when carriers were applying a negative FSC when the DOE went below the base. What was implemented as a temporary solution has become an integral part of today’s pricing landscape.

Fast-forward to today and there is no standard FSC that is applied by carriers and shippers. Carriers and shippers negotiate based upon an “all-in-rate” and push the dollars to either the linehaul or FSC buckets depending on the optics that will help finalize the deal  and make the rate appear most favorable in the eyes of (generally shipper) stakeholders.

The ability to compare rates is critical when working bids, comparing rates to indices, managing metrics and trends, or analyzing specific shippers or lanes. It is critical in all of these endeavors to compare “apples to apples.” To that end, KSM Transport Advisors has created a new metric LH+F (linehaul+ FSC) that has been implemented in all of our work products, methodologies and processes. We are encouraging our clients, and everyone with a stake in a truckload carrier, to shift their rate paradigm from linehaul to LH+F.

To learn more about trucking metrics, LH+F, or our trucking company consulting services, contact KSM Transport Advisors today.

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