Scouring for profits

PeopleNet (www.peoplenetonline.com) launched a service called the MPG Guarantee Program. Based on the company’s consulting experience with North American fleets, the program is designed to improve miles-per-gallon fuel performance by 5 to 10 percent with a money-back guarantee.

Qualcomm Enterprise Services (www.qualcomm.com/qwbs) has a new predictable pricing plan for the OmniVision platform that includes all messaging and services for daily business operations for one flat-rate price. The new pricing structure is available for enrollment until Sept. 30.

SkyBitz (www.skybitz.com) announced that J.B. Hunt Transport Services selected the SkyBitz Global Locating System (GLS) asset-tracking technology for substantially all of its trailers serving the North American continent.

Aljex Software (www.aljex.com) added Positive Pay and Direct Deposit as options in its online software. The new services help customers improve productivity and avoid losses from check fraud, the company says. Positive Pay enables banks to verify checks electronically before payment, and Direct Deposit enables payment directly to a vendor’s bank account.

Magtec Products (www.magtecproducts.com) announced that its M5K onboard safety and security device has a new Speed and Idle Management (SIM) feature. Through a communications provider, SIM enables the carrier to set and control speed thresholds and idle time remotely – all in real time.

Micronet (www.micronet.co.il) will utilize the Tele Atlas Logistics digital map database in its WinCE-based Net960-CE series mobile terminals for a new routing and navigation system.

Cost and profits are the deciding factors in assigning assets and resources to customers and shipments. Wrong assumptions are often the difference between making money or taking a loss.

Technology that ranges from spreadsheets to advanced business intelligence tools can gather and process cost and profitability information efficiently in great detail and accuracy. The most effective systems use activity-based cost (ABC) models to drill down cost and profitability measurements by each customer and cost center.

The ABC model separates costs into two categories – variable and fixed. Variable costs for each activity – i.e. shipments – are a function of distance and time. For less-than-truckload carriers, ABC models are more complex since variable costs include weight, volume and the handling difficulty of each shipment.

Fixed costs, such as overhead and depreciation, are applied to each cost center using a daily/hourly allocation called a “burden rate.”

Trincon, a consulting company, says it sells a detailed manual on how to implement ABC models for truckload carriers. The company also sells TruCosting, a PC-based cost and profitability software system that includes a spreadsheet version. While the software is offered as a standalone system, 90 percent of Trincon’s software clients also use the company’s consulting services, says Duff Swain, the company’s president.

Transportation Costing Group (TCG) says it offers a comprehensive activity-based costing model and information system for both LTL and truckload carriers. The system integrates with all the major providers of dispatch, freight billing and mobile communications systems.

TCG’s LTL Cost Information System (LTL/CIS) system tracks the profitability of each shipment (i.e. pro number) by pulling time, mileage and cost data from multiple sources. With the technology, carriers can evaluate costs and profits in a variety of ways – by freight class, customer, lane, length of haul and trips, or a combination of customers and trips in specific lanes, says Ken Manning, the company’s president.

Similarly, TCG’s Truckload Cost Information System (TL/CIS) measures the profitability of individual shipments or loads, rolled up by customer and by lane, Manning says.

When looking at an individual shipment, one mistake that truckload carriers often make is to assume that a truck magically appears at the shipment’s origin since their revenue is based on loaded miles. This assumption ignores the distance and time it takes to get a truck to the origin and the time a driver sits between load assignments, i.e. the “dwell” time.

Advanced software systems do not make this assumption.”Our truckload system reports prior and subsequent miles,” Manning says. “When costing loads, (the system) takes into account empty miles as well as balance factors in trips.” A fleet could see a decline in revenue due to the empty miles before a truck arrives at the shipment’s origin since empty miles are not covered by a fuel surcharge.

Another common mistake for truckload carriers is to not consider the freight rates and utilization you can expect once you reach the shipment’s destination. These and other factors are considered by a truly objective profitability measure known as the network value or “yield” of a load, says Ben Murphy, vice president and general manager of optimization solutions for TMW Systems.

TMW’s Netwise product uses an algorithm to find the yield of each load in a carrier’s freight network – loads that have been moved, and those being evaluated. The yield for a single load is determined from a function of four main variables – revenue, variable cost, time and network balance or “flow,” Murphy says. The Netwise product integrates with other leading dispatch systems to automatically capture the data it uses to compute yield.

Compared to conventional accounting methods, using specialized ABC costing and profitability software makes all the difference between decisions based on assumptions versus facts.