Your most valuable asset truly is the collection of drivers who move your freight. Yet few carriers know which drivers make them money. You probably treat all drivers and operators the same, but there is a huge difference in productivity and work habits from the best drivers to the worst.
Most trucking companies have the information necessary to develop a profit-and-loss statement by driver. You just need to allocate costs to the tractor as if it were a stand-alone business.
The table on this page represents a simple P&L statement by driver for a truckload van carrier. It compares the individual’s performance to a standard – typically the fleet’s average performance.
Many items, such as payroll or revenue by tractor, are easy to allocate. Others, such as insurance cost, are difficult. In the latter cases, simply assume the driver operates at the standard level.
Don’t penalize or inflate drivers due to factors beyond their control. For example, there are wide differences in operating costs due to the age and model of tractor. Here the standard cost could be for that particular type of tractor.
Finally, you need to allocate fixed costs. The best approach is to do so on a per-tractor basis for the period of time involved. Because a driver does not select the tractor or trailers he operates, use the standard costs.
The example shows a driver who operates more profitably than the fleet’s average driver, even though he ran fewer miles. This driver hauled more short freight with higher revenues from accessorial charges, such as stop offs, than the average. Most carriers think their most profitable drivers are those with high mileage. In reality, it is usually the driver who is willing to haul all types of freight.
These are the kinds of insights you can gain by performing this analysis on a regular basis. The best way is to list tractor profitability from best to worst. Then analyze the reasons for drivers being at the top or the bottom.
In doing so, you will quickly identify who are the moneymakers. These are the drivers who you must pay attention to. Make a point to talk with them on a regular basis. If you don’t, chances are you will never hear from them. Good drivers typically go quietly about their jobs until they get fed up and quit.
Track the profitability of new hires closely. When turnover is high, many managers refuse to invest in building relationships with drivers they don’t believe will be around too long. When you are fortunate enough to hire a top performer, make sure someone develops a relationship with him.
Consider tracking turnover by driver profitably. Obviously, you want the majority of turnover to occur with poor profit performers. If the poor performers are staying and the goods ones leaving, something is significantly wrong.
Don’t be surprised to find that you would be better off parking or selling some trucks than to continue operating with current drivers. Poor-performing drivers are usually poor performers in everything they do.
Every poor performer replaced by a driver who is average or better represents a significant improvement in profitability. The supply of drivers relative to available positions is fairly good today, so it’s an excellent time to weed the bottom performers out of your fleet.
David Goodson is a management consultant specializing in the transportation industry. E-mail [email protected].
