Robust analysis tools help fleets identify and refuse unprofitable business
After Central Pennsylvania Transportation analyzed the volume of a top customer, the Lancaster-based company determined that some lanes were unprofitable and no longer could be serviced unless rates increased by more than 100 percent.
“When you look at everything, sometimes you are spending money just to keep the business,” says Thorny Embly, vice president of the 90-truck carrier. “If we are keeping trucks moving and making a small amount of profit, we are willing to hold the rate, but we are no longer willing to lose money.”
During the recession, CPT – like most carriers – knowingly lost money in some lanes to keep its assets moving and retain customer goodwill. No carrier enters into agreements to lose money, but things seldom happen according to plan – especially when freight is soft.
With freight volumes improving today, most carriers are in no hurry to add capacity. Instead, fleet executives are identifying their unprofitable and low-margin business and negotiating with customers for better rates and freight selection.
The latest technology gives fleet managers and executives the ability to analyze multiple dimensions of their business and, more importantly, make the necessary changes to improve profitability while they have the upper hand.
Digging deeper
The traditional approach of analyzing costs and revenues on a per-mile basis allows fleets to compare their own driver pay, fuel, revenue and other key indicators to those of the marketplace.
PCS Software’s Express dispatch and accounting system has various financial reports to measure all direct and indirect costs – such as administration and overhead – on a per-mile basis. Even items like advertising budgets, uniforms, rent and other overhead can be measured constantly by the mile. “Essentially, you can see cost per mile for anything that you have established an expense account for, right on the P&L,” says Sean VanDyck, PCS Software sales manager.
Business profitability is also a function of time – not just miles. What is the impact to profitability of a bad appointment time, traffic congestion, poor utilization of driver hours and layovers?
During the height of the recession in 2009, cost containment became the top initiative for RT&T Enterprises. Management analyzed every line item on the company’s profit-and-loss reports and benchmarked costs and revenues on a per-mile basis. In mid-2009, RT&T purchased the Profitability Analysis module from McLeod Software to gain a deeper understanding of its business. The new module provided the carrier with a new metric called “load velocity.”
“We never had the ability to tie to velocity to see how many hours were invested, for instance, in a regional versus an over-the-road shipment,” says Todd Collins, president of the East Dubuque, Ill.-based company.
