The trucking industry has always been challenged to be successful with very tight margins compared to many other service businesses. Historically, the truckload segment of the industry has measured itself primarily on revenue and revenue per mile. In more recent years the utilization and productivity key performance indicators (miles per truck, shipments per week, revenue per week, etc.) have become more important. Two performance keys to being successful when the margin per transaction is small is to generate as many transactions as possible over a given time period and to shorten the time it takes for each transaction; in short, maximize the margin in a given time period.
Understanding how to recognize, measure and manage the factors that affect the time component of the productivity formula is important. The current capacity constrained freight market along with the driver shortage requires improved utilization (doing more in less time) to support carrier profitability. More than five years ago, a publication by the Federal Highway Administration entitled Freight Story 2008 estimated a delay cost of $26.70 per hour for the transportation industry. Challenges such as the Hours of Service rules, increasing congestion on streets and highways, and accommodating driver quality of life needs such as time off can have a negative impact on available time; so attention needs to be directed to any area where unproductive time can be minimized.
Some of the areas affecting time to focus on include:
Pickup and Delivery Appointments
- Make them early and be aggressive
- Know your realistic estimated time of arrival
- Know the locations’ receiving hours
- Know the consequences of missing a scheduled appointment
- Drop trailers at origin or destination can improve productivity by reducing time
- Know the fixed cost per load of the trailer pool and compare that with the time saved
- Utilize drop trailers to improve efficiency; not just for shipper convenience or for storage
Deadhead (Wait or Go) Decision
- Understand the economics of deadheading immediately after unloading or waiting for a closer load
- Getting the truck back into the network sooner may be worth more than the extra deadhead will cost
Hold Shippers and Receivers Accountable
- Document arrival and departure times
- Bill to recover detention charges
- Use data for future rate negotiations
- Haul longer haul movements over weekends
- Haul shorter haul moves during the middle of the week
Time is the denominator in many productivity metrics: Miles/Revenue/Margin per Day/Week/Month. Minimize the time and you will improve your performance. Understanding the cost of time places you in a better position to negotiate rates or lost time compensation with your customers.
SEPARATE FACT FROM OPINION
At KSMTA, we can help you separate the franchise lanes from the toxic lanes.
Operating Margin | Time Management | Trucking Profitability