We start with the premise that a driver can save $10,000 a year by slowing down his or her speed from 75 miles per hour to 65. We then set out to determine whether this would be worth it and to calculate sound, concrete numbers to back up our assumptions.
Slowing down speed when rates are low and depressed is a common practice in transportation generally (e.g., ocean tankers) to pad the bottom line and effectively reduce industry capacity.
The latest detailed figures we had for operating cost per mile by detailed line item were from the American Transport Research Institute (ATRI) in 2018. We used these figures to calculate how many more miles a driver would need to drive to drop the entire $10,000 in incremental profit to the bottom line.
Converting 2018 operating cost per mile into dollar-based expenses
What we found was that to actually drop the $10,000 in savings to the bottom line, he or she would need to drive an extra approximately 27,500 miles or 90 miles per day. Therefore, it is possible and quite doable, but the question is whether a carrier or an owner-operator views these sacrifices as worth it.
Our basic calculations and assumptions were as follows:
We had to complete the following steps to arrive at our conclusion:
- Convert the fuel cost back into total dollars by assuming the average truck drives 100,000 miles per year at a cost of $0.433 per mile. This gave us an annual fuel budget of $43,300.
- Divide the $10,000 by the annual fuel cost of $43,300 to arrive at an annual fuel savings of 23%. We then reduce the fuel cost per mile accordingly by 23% to arrive at a new fuel operating cost per mile of $0.33 (or $0.10 per mile in incremental savings).
- Then, because putting more miles on your truck is not free, we assumed that maintenance cost per mile, tire expenditures and tolls increased by the same 23% (we acknowledge this is not a perfect system but believe this exercise to be more art than science). Doing so increased our new maintenance cost per mile to $0.21 (from $0.17, an increase of $0.04 per mile), our new tire expense to $0.05 (from $0.04, an increase of $0.01 per mile) and our tolls expense to $0.04 per mile (from $0.03, an increase of $0.01 per mile).
- Other assumptions we made: A driver drives 333 miles per day for 300 days per year (100,000 miles per year, six days a week for 50 weeks per year) and a carrier is paid $2 per mile including fuel.
- Assuming nothing else changes, this totals a new all-in operating cost per mile of $1.78 compared to $1.82 (the ATRI average in 2018) or a per-mile operating cost savings of $0.04 per mile.
- Subtracting the new all-in operating cost per mile of $1.78 from our rate per mile of $2 (what we are paid including fuel) results in $0.22 per mile in operating profit compared to $0.18 when the driver was driving 75 mph instead of 65 mph. This corresponds to an operating ratio (OR) of 89%.
- Lastly, we show how a driver must increase his or her mileage by 27,512 miles in a year (or about 92 miles per day) to drop the full $10,000 in fuel savings to his or her bottom line (see incremental $10,000 in profit highlighted in green in the second chart below). The resulting $27,900 is equivalent to unlevered pretax income and assumes this is an owner-operator who owns 100% of the company and gets paid $75,997 in wages per year.
Conclusion: Is your time or your wallet worth more to you?
Is it worth it to slow down your speed to 65 mph to save on fuel if you are an owner-operator or to place governors on your fleet if you are a larger carrier? The answer is it depends on your personal preference.
For an owner-operator and sole proprietor, saving $10,000 in fuel means you will be paid $103,897 in combined wages and unlevered pretax income in our case study but that will require you to drive 127,512 miles per year (or about 425 miles per day for 300 days).
This is just a theoretical example but it has potentially profound implications that are at least worth considering because $10,000 in incremental profits (from roughly $17,900 to $27,900 in the example above) equates to more than a 55% increase in operating profit per truck. If you are a larger fleet with hundreds or thousands of trucks, this would appear to show that slowing down speed can make a meaningful difference.
Driving an extra approximately 27,000 miles per year (or 90 miles per day) per driver is hard work but definitely achievable assuming you as a driver consistently run under the hours of service (HOS) limitations of 11 hours per day. Furthermore, this example is directionally accurate and is not an “all-or-nothing” consideration in a down market — slowing down your speed by less than 10 mph will still save money but you will have to drive more miles to bank the savings and increase your bottom line. The question is: Is it worth it to you?
MrBigR504
My truck can do 125mph (1996 W900L 3406e Cat 500hp) but i keep her at 67 or 68mph. Anything less and I’m going to sleep!
Noble1
Now let’s go a little step further using my example above along with the primitive mentality in trucking to cut costs and I’ll use a realistic run in Canada between Montreal & Toronto(336.5 miles) which is very close to the 333 mile example .
Since speed is being reduced forcefully , They need to make up for that loss in loads transported per week . We know that the more miles we put on that truck , the lower the cost per mile .
So they’ll cram two drivers in the truck as a team and they’ll cut their wages by doing so , but it will appear as if they are earning more per day due to the truck running more miles ……. Rather than pay each driver ie: 46 cents + per mile driving in separate trucks , they’ll squeeze in two drivers in one truck at .50 cents per mile divided among themselves . Now they both get .25 per mile running 24 hrs per day(1,332 miles) . So each driver will actually make $26.64 for an extra shift cramped in a vehicle at the cost of their privacy , and it will cost a little less to run the truck with 2 drivers 24hrs a day while doubling the loads hauled per week , but they’ll be burning the drivers in this example to recoup and cut costs .
At first an employed driver being paid .46 per mile x 666 miles per day for one shift and earning $306.36 gross for driving 10.5 hours per day at an average speed of 68mph and working 1.5 hours on duty(inspections ,trailer switch & fueling ) grossing approximately $24.5 per hour of actual time worked in a perfect day of 12 hours on duty .
Now due to speed limitations the same driver would need to drive 12.5 hours to achieve 666 miles and work 1.5 hours for a total of 14 hours on actual duty aside from not resting well in the bunk while another driver is driving . In Canada with a mandatory 2 hour break per driver OUT OF THE CAB released from responsibility within a 24 hour day period aside from 8 mandatory hours in the bunk and or out of the cab off duty , the driver will be “awake” and on the “job” for 16 hours in the day .
And now with a team of 2 running 24 hours a day , each driver will make approximately $333 , for the extra time the truck rolls . An extra pittance of $26 at the cost of their comfort , privacy , and safety .
Rather than have a driver obtain a little more rest in a stopped truck , the driver will not rest well since the truck will now be rolling while the driver “attempts” to sleep and it will increase the risk of the driver in the bunk because while the truck is moving that driver is at the mercy of the second driver who will be just as unrested , and the one in the bunk is much more vulnerable if a collision were to occur .
Now rather than losing 2 loads per week per driver . They’ll stuff in 2 drivers as a team and rather than move 10 loads with one truck per week , They’ll move 18 at a lower cost . Some won’t have a choice since they’ll be competing with TECCL(Trickster Extra Capacity Carrier Lobbyer ) and they’ll need to cut the rate per mile while attempting to compete and remain profitable and or to survive .
And where does that eventually lead us ? Right where we currently are with low rates and overworked tired drivers for peanut wages with a decrease in safety . And the “geniuses” who lead the trucking industry down to this point believe that by better training they’ll increase safety ? Better training helps in certain circumstances not in all as my example describes . They’re overworking drivers in order to remain “competitive” and now are electronically clocking them due to major carrier ,OO and driver abuse .
The major carriers come up with these ideas to gain market share and transfer wealth from the little carriers and OO’s pockets to their pockets . And in their attempt to do so , not only do they lobby to reduce speed , they lobby for immigration programs and under pay foreigners while undertraining them . Then eventually that can of worms erupts and all of a sudden “truck drivers” & immigrants are painted as dangerous and cutting rates and pay driver inc style ? So it becomes a competitive game of tit for tat .
And who gets squeezed through all this primitive BS mentality of doing things ? The “drivers” . And that leads to a driver lack of interest , increased danger , and increased collisions AND MORE REGULATIONS .
This leads to driver shortages during certain periods and at certain carriers . It has literally come to a point where a driver needs to weigh if the “risk” ,effort , and time is worth the peanut salary . But the new drivers are being pitched a whole different story .
The new recruits are being told about yearly gross salaries of X amount per year that look good in “theory” . But those salaries are based on living behind the wheel in a perfect world on the road with no life .
The new recruits are naïve and ignorant about what really goes on inside the industry and what effects them every single day . Rather , they’re being pitched that they’ll be paid to travel the country and see beautiful scenery’s while listening to their favorite music behind the freedom of the wheel on the open road . Freedom ??? You’re being watched and constantly followed and squeezed with ignorant unprofessional road users on a daily bases ! And major carriers literally want to put a camera in your face to record your every move ! How is that for freedom ? You no longer have the reasonable flexibility that once existed because the genius major carriers abused it , and forced the abuse upon their drivers !
And we haven’t mentioned time lost at scales and or in “safety” blitzes . In a “safety” blitz you can easily lose up to an hour or more while scheduled to be on time at a delivery point . If you’re late you can face fines and really screw up your weekly schedule . And that’s besides not being paid for loss of time due to regulations , if you’re paid by the mile !
In reality constantly being on the road increases risk of collision , all it takes is a split second of inattention or an “error” by you or another and you can literally end up either 6 feet under or incarcerated . That’s aside from potential issue occurrence with the vehicle such as a blow out on a steer tire and break downs .
In the end all these regulations to supposedly increase safety are actually diminishing safety , reduce wages/income , increases road stress and collisions , and decreases driver interest . There is no cure for stupidity and that includes greed .
So while they rant about driver shortages , they are doing everything to cause driver lack of interest and work towards eventually replacing drivers with autonomous vehicles .
Now in an attempt to end this never ending comment to explain my perspective ,
The major carrier war keeps on squeezing rates , smaller carriers , and driver wages through their never ending lobbying tactics to cut costs and remain competitive , as well as the public putting pressure on government to end carrier & driver abuse . This leaves smaller carriers and OO’s with diminishing choices . Either they become extremely creative and start thinking out of the box or shut down and become employees . By becoming major carrier employees they have an option to unionize and squeeze the major carriers into collective bargaining for higher wages and benefits . However, this comes at a cost of independence and “freedom” .
And recently we have had the unpleasant experience to witness what occurs when corporations abusively squeeze labourers as we have seen with the CN strike and the AB5 legislation .
Furthermore , if we take a look at the CTA in Canada and look at some of their demands , while they have lobbied for speed limiters in Ontario and since its application , collisions have increased in that province . Recently on Ontario’s major highway , speed for vehicles aside from heavy vehicles have been increased by 6.2 mph/10km/h ( to 110km/h-68mph from 100km/h-62mph!) That increase in speed has been applied during statistics clearly demonstrate that most collisions are caused by and occur among vehicles other than heavy commercial trucks .
Where is the ” emission” reduction rant and road safety propaganda in that increased speed decision in the province of Ontario in Canada ???
This leads to conclude that the trucking industry has discriminating regulations which are enforced on a minority group under the guise of “safety” .
In my humble opinion ………….
Noble1
From my perspective in transportation “time” is an extremely important factor .
Using your example above and my perspective according to time , it may demonstrate what I mean .
So I’ll use your 333 mile example and add on my perspective .
Let’s assume that from point A to point B it equals 333 miles one way long haul full truck load . Let’s also assume that at an average speed of 68 mph that trip will take between approximately 5 and 5.25 hours of driving time . That’s one load that by using your $2 rate equals to $666.00 gross .
Using the USA HOS , a driver has time to pick up another load at point B and bring it back to point A which equals to another 333 miles and again at 68 mph . And we’ll call it a day . That equals to $1, 332 in gross earnings using your $2 per mile example for the equivalent of between approximately 10 and 10.5 hours driving time .
Again using the HOS , the driver can haul 10 loads in the week right ? So the equivalence of $6,660.00 at $2 per mile gross . I’m keeping this simple , but even another load could be squeezed in and still remain legal according to HOS regulations .
However , now we want to slow that driver down to approximately an average speed between 53mph to 56.3 mph by regulating it at 65 mph . Because believe me the driver won’t be averaging more than that amount of miles per hour if we regulate his speed at 65 mph , unless the route is perfect and flat with no traffic and no stops along the way , no traffic lights , nothing .
At 53mph on average those 666 miles will take between approximately 12 and 12.5 hours rather than 10 to 10.5 hours . That’s $1,332.00 less per week which equals to $66,600 less per 50 weeks just by increasing time by 2 hours more per day by reducing speed in my example .
That means if we reduce the speed we will also reduce the amount of loads by one out of 10 average transported loads in that week according to the example above .
Therefore using your example to earn an extra $10k gross per year through a reduction in speed to save on fuel while increasing the amount of mileage appears to make sense until you add in the time factor ,include the amount of loads deliverable within that time factor according to the amount of miles driven in that time to a destination .
Now if you have all kinds of runs and a thousand trucks , then your example makes sense to a certain extent . This explains why some carriers within certain provinces in Canada “lobbied” for speed limiter legislation . They had to remain competitive and to do so they had to level the playing field while wanting to save on fuel . On the other hand , why don’t these big carriers simply hedge and trade fuel contracts to reduce their costs and increase their profits ???
Speed limitations also have their caveats . When attempting to pass a slower vehicle it takes a lot more time . This causes traffic to accumulate and bottle up behind a speed limited vehicle and decreases road safety in the process . It also is extremely dangerous if while passing at a blocked speed on a highway ,ie: 65 mph and an unfortunate sudden blow out occurred on a steer tire . You need to have a little leeway and the capacity to increase your speed to regain control and steer prudently before allowing the vehicle to slow down .
A fraction of a second is all it takes to take a life if the necessary tools are not available to avoid and or help avoid such an outcome . Speed limiters on heavy trucks on public roads are a safety hazard . That being said , a “driver” is a whole different story .
In conlusion :
-Carriers can decrease their operating ratio tremendously by hedging and trading . There’s no need to force others to reduce their speed through carrier lobbying trickery simply because “some” want to save on fuel the dinosaur way .
-Let’s keep in mind that even though less dramatic , automobiles according to statistics get into collisions a lot more than heavy trucks do ,and more often than not automobiles are the cause when a collision occurs between an automobile and heavy truck .
-Lastly , according to my example there are no more miles to add on to the 333 miles from point A to Point B and back(666 miles) to remain profitable , and reducing speed reduces the amount of loads achievable within daily HOS , and thus decreases profits by a lot more than the 10K saved for reducing speed and adding 92 miles per day on a yearly basis .
Leave speed alone ,time and increase loads , hedge and trade instead to reduce operating ratio …….
Aside from all the above , great article !
In my humble opinion ………….
Noble1
Quote:
“That means if we reduce the speed we will also reduce the amount of loads by one out of 10 average transported loads in that week according to the example above . ”
Correction : -2 loads (1 roundhouse trip reduction = -666 miles ) = -$1,332 .00 x 50 weeks = -$66,600.00
MrBigR504
Show off!
Noble1
Show off ??? You must have misunderstood and thus misinterpreted .
There’s nothing pretentious in my comment(s) . It’s simply knowledge , logic , and math applied within a certain realistic context .
To make it simple . Major carriers are lobbying nonsense through manipulative trickery(deception) to gain market share . They have capacity . By squeezing YOU out of x amount of loads and losing market share through hocus pocus regulations , it favors them monetarily .
Then out of the blue we have so called “Hedge Fund brains” appear and “attempt” to explain how you can save $10k per year on a truck by reducing your speed but by also adding more miles to your day which adds up to a 2 hour loss per day AND according to my true factual life scenario example his hypothesis diminishes the amount of loads you can haul and thus negatively affects your bottom line tremendously . In doing so based on the example given , the author attempts to make you believe according to his ASSUMPTIONS that you just increased your gross profit by a whopping 58% due to reducing speed and adding more miles ! ROTFLMAO !
However , by replying with a TRUE CASE SCENARIO based on REALITY , the author’s “hypothesis” has been proven to be flawed , costly , and REFUTED !
I wasn’t blindly impressed by the so called calculations and ASSUMPTIONS used .
That being said , since it was an example written up by an analyst that was at a high net worth wealth “advisory firm” and he holding a major in finance , I expected something a little more sophisticated as an example to save on fuel without a “hypothesis” on reducing speed and adding more miles for a measly $10k at the cost of just shy from an 85% loss ($66600.00 – 84.985% = $9,999.99) based on a real case scenario in my example using the author’s numbers .
Perhaps my “expectations” were a little high based on his prior positions and his certification . None-the-less , I proved my point by refuting his .
However, if you want ” pretentious ” , I’ll accommodate you . These so called financial major’s are my competition . In this case there wasn’t much competition ,lol . He’s offering you a potential increase of 10K based on a hypothesis and I’m suggesting 6.66 times more than that amount on a real case scenario based on FACT in 50 weeks ($10,000 x 666% =$66,600 ! AND also to reduce your fuel costs by trading fuel contracts on the public market hedge fund style through the use of leverage . He’s offering you kindergarten and I’m suggesting University without reducing your speed , without adding more miles , and without losing TIME !
That being said , I took the opportunity to score a point against my competition . I should have omitted doing so and just kept my mouth shut, but the opportunity was just to darn enticing , LOL !
So the choice is either : Hypothesis leading to a hypothetic +$10K
or
Fact + $66,600k PLUS reducing fuel costs through sophisticated trading techniques which would actually eliminate fuel costs AND turn the cost into an extra profit which would impact the bottom line even further in the green/black .
Now imagine that being done through and for a “Truck Driver Alliance” BY THE ALLIANCE , not for major carriers aka the “competition” (wink) . The “Alliance” would literally wipe out the competition . And wiping them out can be done by simply refusing to drive for them . Better yet , we could obtain them for pennies on the dollar if our cards are played right .
Most abuse drivers . Drivers can simply show them the proverbial middle finger and say : ” We forgive but we certainly will never forget . Keep your peanut wages , drive your own trucks , or go ahead and automate them . We’re done with you . We decided that rather than cater to your needs and increase your wealth along the way for the little we receive in return , we’ve decided we’ll compete with you and reap all the financial benefits ourselves for ourselves shared equally among ourselves . WE NO LONGER NEED YOU . We thank you , however, we’re “laying” you off due to our desire to cut costs and increase our profits . We need to make decisions that cater to the wellbeing and in the best interest of our shareholders , LOL” !
That’s why I have been advocating that if truck drivers wisen up a little they could position themselves to become the “ultimate” carrier , the truck designer and manufacturer , eventually shippers and , producers , own their own mutual and bank etc . The sky is the limit in creating THEIR major conglomerate . Rome wasn’t built in one day , however, it was built and became a major empire in the process ! Its demise could have been prevented had it been managed differently .
Furthermore , the major’s are listed on stock exchanges rendering them even more vulnerable , LOL ! But that’s a whole different story .
Seriously though , I’m far from being the “show off” type . I’m extremely humble and recognize that I am far from perfect . I’m simply a spiritual being going through a human experience on this planet , nothing less and nothing more .
Isn’t that what we all are ? Energy beings in its purest form ? Your physical body is simply made of atoms . What does an atom contain ? Your imagination is unlimited and infinite . Your mind however is extremely vulnerable and this is what you need to guard very closely . Don’t allow anyone make you believe in limitations nor manipulate your mind .
Be and act like the “Gods” you truly are and abstain yourselves from behaving like animals among yourselves . We haven’t tried that yet . What do we have to lose ? Give it a try (wink) .
In my humble opinion ………..
Andrew
I appreciated the level of detail and the time you put into this one. Well-researched and informative. Thanks!