How do some carriers do it? According to the American Trucking Associations, the top 20 general freight truckload carriers with less than $50 million in annual revenue maintain operating ratios in the 93 to 94 percent range and, as a group, achieve net profits of around 3 percent.
One thing is certain. These results didn’t just happen. You can bet these carriers benchmark their operations either against past performance or against other top performers in their segments. Their entire companies probably strive to beat those benchmarks.
Benchmarking is not an ordinary cost-cutting tool. It’s more a way of life – and survival. Approximately 10,000 carriers with five or more power units have failed in the past four years. How many do you think were avid practitioners of benchmarking? Perhaps a handful ran good operations but just had particularly bad luck. You can bet that most operated their company without clear objectives in mind.
Benchmarking resources abound. You can use the quarterly and annual reports of publicly traded trucking companies, information compiled by credit lending institutions or financial data submitted to the Department of Transportation. Another resource is “Twenty from the Top,” a benchmarking guide to the operations of for-hire truckload carriers published by ATA. These stats are compiled from DOT filings and other benchmarking studies.
In 2000 and 2001, the latest benchmarking data available, general freight truckload carriers with revenues less than $50 million on average had $156,000 to $162,000 in operating expenses per power unit, according to ATA. In those years, they averaged 116,100 and 123,600 miles per power unit. That means their total costs per mile were $1.34 per mile in 2001, and $1.31 in 2002.
So what were major categories in cents per mile? Salaries, wages and fringe benefits were 40.1 cents and 38.3 cents per mile in 2000 and 2001, respectively. Equipment rents and purchased transportation (including owner-operators) totaled 32.6 and 38.6 cents per mile in those years.
Depreciation and amortization held steady each year at 9.1 and 9.2 cents per mile. Combined, these three costs – salaries and depreciation for company-owned trucks, and purchased transportation for leased trucks – were 81.8 and 86.1 cents per mile in 2000 and 2001.
