Posted 4/29/2013 12:00 am
Updated 10 months ago
Carriers know they should be more efficient and work smarter, not harder. But sometimes they confuse increasing revenue with maximizing profits. Want to maximize profits instead of just increase revenue? Any carrier, of any size, can by using these six steps.
Step one: Get smart.
Use technology to give your business an edge. The right equipment will provide cash and movement reports so you can stay on top of your business; it also will offer real-time updates on maintenance issues and driver performance. Technology is the one area where you do not want to save a buck. Months from now, you’ll hardly remember if you spent a little more than necessary, but you’ll kick yourself many times if you didn’t spend enough — especially if your competitors have capabilities you don’t.
Step two: Get tough.
Institute a fuel program, and then monitor it. Are you relying on your local or regional fuel salesperson to give you the best deal? How do you know what the best deals are? Cost plus? Retail minus? Better of? Bob Joiner of StrategEZ Fuel Network Solutions says carriers should contact fuel vendors regularly and negotiate the best prices possible. Deals shouldn’t stay in place year after year. Carriers then should track transactions to measure the results and make sure drivers are fueling at stops that are in the network. Many smaller carriers can’t afford a full-time fuel manager and assign this responsibility to another staff member, often the safety director. Safety directors have too important a job to ask them to take on this extra duty.
Step three: Get lean.
Make sure you aren’t wasting miles or keeping equipment you don’t need. Review your rates and your lanes in detail so you know where your trucks are going and so your customer service reps know what you need to turn a profit. When your customer asks you to do more, ask yourself if that request would force you outside your standard routes. Maybe you should consider passing on the business.
Jimmy Starr, owner of Woodfield Trucking, based in Camden, reduced his company’s fleets by 20 units about a year ago and now has 102 units. It was just too expensive to pay for trucks he wasn’t using and too hard to find qualified drivers to keep them moving. If the right business comes along, he’ll grow the fleet again, but he’s comfortable where he is.
Another place to look when trimming your company is excess staff. We’ve found that a carrier needs one non-driving employee, including owners, for every seven drivers. If your company is way over the mark, review your processes and make sure you are not paying people just to shuffle paper around. In reviewing the operations of a particular company, we found that very few loads were being booked during the morning hours, and then right before the end of the day, several loads miraculously would be entered into the system. We concluded the company had too many dispatchers. The company removed two and never missed a beat.
Step four: Get green — and by green, I mean more fuel-efficient.
Gabe Stephens, owner of CC Jones Trucking of North Little Rock, says his owner-operators spend up to $1,500 more a month on fuel using their older trucks than his company spends with newer trucks. One owner-operator got rid of his gas guzzler and is paying for his new rig with the difference in fuel costs alone.
To really save money, move the speedometer back to 62 miles per hour. A carrier driving 12 million miles a year that improves its fuel mileage from 5 to 6 miles per gallon would save, at $4 a gallon, $1.6 million a year. Stephens said, “I told somebody the other day, ‘When’s the last time you were on the interstate driving 65 to 70 miles an hour and you had a truck pass you?’ he said. “If you think about it, it hardly happens anymore.”
Worried that you’ll lose drivers by doing that? Share some of those fuel savings with them. Bulkley Trucking of Sulphur Springs, Texas, gives drivers incentives to improve their mileage. The company’s driver of the year averaged 9.1 miles per gallon and was awarded a Ford F-150 pickup truck in response. Thanks in part to its fuel efficiencies, the company’s profits and fleet size are increasing.
Step five: Get better maintenance processes.
Don’t skimp on maintenance — at all. Little things can cause big problems. And review your use of shop personnel. This sometimes is a black hole where money goes in but nothing comes out. Accountability is the only way to stop the flow. Implement a repair order system, and if you already have one, make sure it is working as intended. Get shop reports weekly on equipment that needs to be repaired or is up for preventive maintenance, and have a person in management approve all repair and maintenance before it is performed. Check your production on your shifts, especially if you are running two of them. It could be that you need only one.
Step six: Get a second opinion.
CPAs who really know the trucking industry can do more than balance your books and file your tax returns. They can help you save on all kinds of expenses. They also can provide projections if you want to expand your business, cut back or trade equipment. If leasing or purchasing is a question, let your CPA help you figure out the best approach based on your current tax and cash flow situation. Work with your CPA to make sure you are presenting your financial statements to your creditors in the best possible light.
Jeff Lovelady is a senior partner and an expert analyst on accounting strategies specific to the trucking industry at Bell & Co. of North Little Rock.