We’ve all heard plenty of bad news lately. Declining freight volumes. Trucking company failures. Layoffs. Well, here’s a surprise: Some carriers are doing just fine. In fact, they’re optimistic about the future.
These are not just giant carriers, either. Small and mid-size truck lines are also profitable, even in this tough economy. If you’re reading this newsletter, odds are that you’re one of those success stories. Give yourself a pat on the back, and consider yourself successful for surviving today’s challenges. Then get ready to position yourself for growth when the market recovers.
To prepare for the future, trucking companies should focus on two equally important areas, according to Donald Broughton, a transportation industry analyst and Managing Director of Avondale Partners. (See related article: “Economic Outlook for Freight,” in this issue.) Broughton refers to the two key areas as the financial and operational “balance sheets.”
Here’s Broughton’s two-pronged approach:
- Prudent financial management:
a. Retire debt, but don’t cancel borrowing capacity.
b. Manage cash flows by pursuing accounts receivable and testing their collectability.
c. Accrue funds to cover accidents, bad debts and other contingencies.
- Operational efficiency:
a. Keep the average age of the fleet relatively new.
b. Improve flexibility in driver recruiting, training and hiring, to raise overall standards.
c. Invest in technology that improves asset utilization and saves labor hours.
Compared to financial management, operational efficiency is “less understood and appreciated,” Broughton said, “but it can be even more valuable to a trucker when demand does start to grow again.”
Asset management is a critical component of operational efficiency, according to Broughton. Idle trucks and deadhead miles further erode thin profit margins, or worse, lead to operating losses that dry up cash flows and destroy credit. By deploying trucks and trailers wisely now, carriers maximize the value of their assets and position their companies for growth when the economy rebounds.
Large carriers typically take advantage of the latest tools. But many small and mid-sized carriers are unaware that some of the best technologies are surprisingly affordable. For example, TransCore provides satellite-based asset tracking and communication systems that support asset management and provide the accurate, timely data you need to deploy your tractors and trailers profitably.
Most carriers are aware of the role of asset tracking in recovering lost or stolen trailers, and everyone has a horror story. By preventing one or two such losses, the system pays for itself in less than a year.
"The main reason we bought [tracking] four or five years ago, we had some issues with pilferage,” said Rick Cobb of Sunco Carriers. “Sometimes, someone would take a trailer, and there have been several instances that we’ve recovered stolen or misplaced equipment. [Then] we can send an address to local law enforcement to recover,” he said.
Cobb, who is Regional Vice President of the regional carrier based in Conley, GA, was quick to point out the return on investment in trailer tracking, especially for costly reefers: “If you can recover a $50,000 asset, [the system] doesn’t take long to pay for itself."
Missing or stolen dry vans cost Brown Trucking about $15,000 each, even when they were recovered, because of lost revenue, depreciation and use by other companies. “Before satellite [tracking] we lost four permanently,” said Kevin Slaughter, Brown’s Vice President of Operations for the Lithonia, GA-based carrier. “Since then, we’ve recovered everything we tracked, sometimes in time to recover the goods, too. We even caught a couple [of thieves] in the act while they were driving down the road,” Slaughter said.
Trailer tracking also helps carriers to optimize tractor-to-trailer ratios. "Once you start tracking, you realize how many of your assets are not being used properly," Slaughter said. "If your [trailer-to-tractor ratio] is 1-to-1, you're probably okay,” he continued. “If you’re 5-to-1, you have a nightmare without satellites." Slaughter used data from TransCore’s trailer tracking to pare Brown’s fleet of vans by 13%, from 3,000 to 2,600 units, and to re-allocate hundreds of the remaining trailers to more profitable uses.
Asset tracking helps to streamline dispatch and save labor, as well. “If you have 100 trailers, you’d better be tracking them,” Slaughter advised. For larger fleets, automated tracking is critical. “When we got to 600 trailers we had a full-time person just tracking trailers,” Slaughter said. When we hit 1,000, it was a two-person job to provide barely accurate data. It was a mess.”
Mid-sized and smaller fleets also benefit from tracking. Before installing TransCore’s tracking and communications system, two dispatchers at Joe Tex Xpress spent hours on the phone every day, calling the Mount Vernon, TX-based fleet’s 50 drivers. “Tracking and tracing was so time-consuming. It was horrible,” recalled dispatcher Ryan Gay. (See related story: “Joe Tex Accelerates OTR Asset Management,” in this issue.)
With the satellite-based in-cab communications system, Gay gets accurate truck location reports. “Now we just click a button, and we know exactly where our trucks are and what they’re doing,” he said. “We can address problems right away, instead of talking to each driver first.”
In addition, tracking helps carriers to improve customer service, enhance competitiveness, and create additional revenue opportunities such as detention billing.
If you’re looking to optimize assets, TransCore’s tracking and communications solutions can show where all your assets are and how they’re performing — whether the asset is a truck, trailer, driver or dispatcher.
Bad times come and go. Good companies survive – by seeing exactly the changes they need to make now, in order to thrive as the economy picks up.