Speed is important in business. Companies that can deliver their products the next day instead of next week – or develop a new product in three months vs. three years – lap their competition. In trucking, managers often associate speed with unsafe driving or poor fuel economy. But speed in the business sense is essential for making money in trucking and retaining drivers and owner-operators.
Understand the chart on this page and you will learn the key to making money in trucking. The chart plots the break-even point for a typical trucking company. Due to fixed costs, every trucking company starts a month off with a huge potential loss. As revenue comes in day by day, much of it goes to pay variable, or rolling, costs – either owner-operator pay or driver wages, fuel, tires and maintenance. Only when revenue exceeds variable costs does any money go toward paying overhead – and you only show a profit after you cover overhead.
The chart highlights a point often lost on trucking company owners. With slim margins, most carriers don’t make any money until the last few days of the month. If a carrier only makes money during the last four days of a month, for example, letting a truck sit for a single day costs 25 percent of that truck’s profit opportunity for the month.
Drivers and owner-operators face the same problem. They too have fixed costs, like rent or mortgages, utilities and car payments. Owner-operators have the added burden of tractor payments. Sitting a day or two makes a big difference.
The point is, it’s in the best interest of trucking companies and drivers to haul as many loads as possible each month. Making money requires a “high velocity” dispatch operation focused on maximizing revenue each day. Here are four important steps toward improving dispatch velocity:
1. Push back at customers. Too many carriers let their customers dedicate the freight they haul and when they haul it. Shippers realize that some loads are tough sells and gladly send them to dispatchers who treat them like they’re always right. Pushover carriers end up hauling too many poor-utilization loads, such as a 700-mile haul that picks up today and delivers the day after tomorrow.
There is give and take with every customer, but carriers should start out trying to get the best possible schedule. When they do haul a poor load, they should try to get a commitment for better freight down the road.
2. Resolve problems quickly. Correcting drivers’ problems with pay and other matters is crucial. Lingering conflicts add to the long list of worries for the dispatcher. It’s also difficult to get drivers to do something out of the ordinary when they aren’t convinced they were paid properly the last time. Try to resolve drivers’ problems within 24 hours. To do so, you may need to give dispatchers authority to solve problems like pay disputes.
3. Get critical information quicker. Dispatchers are flooded with information, some routine and some critical. But many carriers make little effort to help dispatchers get critical information quickly. Instead of an automated answering system, have a live person answer the phone so you can determine whether the call represents truly critical information.
4. Pay attention to detail. Are your databases up to date? Pull up records on 20 customers and audit whether you have complete and accurate information. Most dispatchers like to “run and gun,” filling in only minimal information. That’s understandable, but then they lose countless hours because they can’t rely on their information systems for things like directions and security policies. Clean up the poor information you have on file now, starting with your largest customer. Then establish procedures to ensure that new information is accurate.
You might only have three or four days to make a profit each month. Make the most of every hour.
DAVID GOODSON is a management consultant specializing in the transportation industry. E-mail dgoodson@eTrucker.com.