A key issue for fleets has always been how to make money while differentiating themselves from the competition.
The problem is that every trucking company large and small comes to the table with roughly the same resource set: trucks, trailers, experienced drivers to haul freight, tracking and tracing systems so shippers know where the freight is, and the ability to meet on-time metrics so shippers can plan their supply chains to the nth degree. That breadth of similarity among carriers has made trucking more of a commodity than ever before. As a result, pricing ends up as the only variable, a path that leads to lower revenues and smaller, if not outright nonexistent profits.
For a fleet to successfully combat that trend in these harsh economic times not only requires a lot of information, it also requires information that's unique and more refined than that of its competitors. It's about gleaning data from across a carrier's enterprise — from dispatch, maintenance, accounting, etc. — then slicing and dicing it in different ways to see if there are unrealized opportunities to cut costs, generate new business and/or increase profits.
David Wangler, president and CEO of TMW Systems, notes that sometimes the type of insight generated by regrouping and analyzing data in this manner can lead to interesting paradoxes, ones that work out, however, in the carrier's favor. “Typically, [trucking] companies thrived for years by putting as many trucks on the road as possible and working to keep every truck on the road every day. Unfortunately, declining freight volumes mean that more and more of those road miles are empty and unpaid miles,” he explains.
In one carrier's case, data compiled by TMW software calculated revenue and costs associated with all the fleet's freight movements, then mixed and matched those numbers in different ways to discern how reshuffling loads, and even eliminating some of them, could impact profitability.
“By eliminating just 3% of the least profitable loads from their freight network, then assigning the right resources to the remaining movements, the carrier increased revenue per mile and overall margins, moving less freight and running fewer trucks,” Wangler says. “Most importantly, the total profit earned by the carrier increased by 5% in real dollars. In the end, doing less work could actually make them more money.”
Without the proper information, though, that change could never have happened. “Running a sustainable trucking operation these days requires tracking and adjusting strategy and tactics according to certain metrics — but they need to be the right metrics,” Wangler stresses. “This is a crucial step in helping fleets restructure their business operations for a more sustainable future.”
Unearthing the data necessary to provide the insight carriers need for more effective management of their business is what today's enterprise technology should do, explains Duff Swain, president of consulting firm Trincon Group.
“Carriers need to look forward and use technology to manage their own businesses better,” he says.
“The dynamic forces affecting this [trucking] market must be accepted — they are things we cannot change. So carriers must find a way to live with them or take advantage of them.”
Swain believes that when financial times are troubled, it becomes increasingly important to manage businesses more efficiently.
“Many trucking companies have been unwilling to embrace the impact of technology on the industry,” Swain says. “To be successful in today's environment, managers must examine the entire transportation and warehousing process and learn to use technology to manage that process.
“Employing the use of new technology tools will allow a company to identify trends and strengths and then enhance or alter services offered to maximize profitability,” he continues. “Proactive leadership in this area involves intensive analysis. Rather than fearing this new technology, ownership and top management must embrace it.”
The same technology which allows carriers to generate payroll, process data or invoice customers also provides information that can help identify trends, monitor activity or discover untapped markets. “Using data this way, as a management tool, increases your chances for success,” notes Swain.
It's also about looking at data in a “multi-dimensional” fashion, adds Don Prentice, database administrator for McLeod Software. “It's not about just looking at the big picture of your operation, but looking at it the way you need to see it,” he explains.
“Gathering all the data generated by your operation, be it from accounting, operations, etc., and then looking at it from an enterprise level in different ways allows you to make better strategic decisions based on trends you may not even have known were there,” Prentice stresses.
How can fleets unlock the full potential of the data coursing through their many departments? One way is to write their own customized reports, something that systems of yesteryear didn't do.
“That's our thrust with enterprise management today: teaching fleets how to write their own codes to pull out the data sets they want into report formats they design,” Prentice notes. “We're teaching them how to do it so they are in control of the data situation, instead of having them explain to us what they want and going back and forth over data sets and report formats for a month or two.”
According to McLeod Software, the key is teaching fleets how to extract specific data sets and collate that data off to the side so the generation of these specific reports doesn't slow down the computing speed of the entire network. These reports also incorporate specific “triggers” to pull data from the requested areas of the carrier's operation at set times during the day, week or month, so the managers are always looking at updated reports.
“Let me stress that it's not real-time analysis,” says Prentice. “This data is being extracted and put together for longer-term trend analysis. Maybe you're looking at freight lane volumes and comparing that to data from your brokerage and warehousing operations to search for customers common to all those areas. You're putting all of that into a ‘cube’ so you can rotate it and look at it from different standpoints. This allows you to ask questions of the data that maybe you didn't even know you needed to ask.”
TMW's Wangler suggests that this type of analysis doesn't mean that the numbers themselves in standard reports or metrics are wrong; it's that they oftentimes just don't tell the whole story independent of one another.
“Freight, by its very nature, exists in a codependent environment [as] the delivery of one load creates open capacity to accept another,” he says. “Good trucking operations try to minimize the empty miles and the time between these subsequent loads, but geography and freight density conspire against this. A true picture of profitability has to consider truck movements before and after any individual load as well.”
Wangler notes that manufacturers and retailers are still cutting back on inventories. They are trying to catch up with lower demand while also modifying supply chains to decrease haul length, removing complexity and reducing costs. “In basic terms, the amount of freight moving across North America's roadways is much less than it was just twelve months ago,” Wangler explains. “As a result … too many trucks are still chasing too little freight. Shippers are taking the opportunity to play carriers against one another in multiple rounds of bidding, eliminating many of the hard-won rate increases of the past few years,” he says.
Thus, the opportunities for profitable freight movement have fallen drastically. As an industry, trucking needs to find different ways to adapt to this trend. “In order to sustain our businesses in this new environment, we'll have to become more cost-effective, more nimble and more competitive to make a profit moving the freight that is available,” says Wangler. “Growth may no longer mean doing more of the same things that we did before; it's more likely to mean reconfiguring our businesses to do new things in new ways. The term rightsizing may have new relevance for our strategic thinking these days.”
By taking full advantage of your software capabilities, though, rightsizing may not be as difficult as it sounds.