Over the last year, there has been a visible increase in the number of trucking fleets shutting down, owing in part to the sliding spot market prices and a general economic downturn, leaving thousands of drivers jobless. However, it is not just market conditions that contribute to such a fiasco. The back-office is instrumental to the economic well-being of the company and its fleet, and botched management of trucking operations could eventually lead to financial ruin.
“I think the ageing driver population will play a significant role in the stress faced by the trucking industry in the future. The average age of an owner-operator is over 55 years today, and a majority of the small carriers are getting crushed with regulations, increasing truck costs and a general lack of adapting to technological changes that can help them gain an edge in the business,” said Drew Jahnke, director of sales at Oversize, an over-dimensional load regulation and costs calculation platform.
Jahnke explained that attracting the younger generation to work in the trucking sector is proving to be difficult, as unemployment figures are at a record low, with people opting to work in a less taxing environment. “However, this doesn’t mean that companies will go out of business. It means that the progressive and technologically aware drivers will make more money, while the rest might go out of business if they don’t adapt,” he said.
With the level of fragmentation in the U.S. trucking ecosystem, the small fleets need to run their operations as lean as they possibly can. And for this, the fleet management will have to diligently account for the incoming cash flow and the money it spends on operations.
“Most of the small businesses have little idea on what’s coming in and what’s going out. This spells trouble because eventually they run out of money and do not know why,” said Jahnke. “They aren’t accounting for what they need per mile to break even and don’t calculate their net profit after running a load, but instead they are in a hurry to grab the next load.”
Small companies also have several single point-of-failures on the operations end, as businesses revolve around a few individuals who control and know everything within the company. Such businesses will fail or find it hard to get back up if such key people quit, making it essential to put systems and processes in place that ensure continuous functioning of trucking operations.
“It takes a while for carriers to create new solutions, as the long hours at work every day forces them to indefinitely push the thought of planning for the future. Most small companies don’t have an on-boarding process for new drivers, which is a problem as they are bewildered at the chaos surrounding a trucker’s everyday life,” said Jahnke.
He pointed out that some fleets lack a long-term perspective on their business, and they tend to focus their efforts on the “grab and move” loads that they get for the day. Such a mindset leads to carriers picking the first load they land, instead of analyzing the market to see the best load they could pick up, in the context of time and money.
“If you don’t have the money to buy more trucks, you have to pull better freight. If you want to pull better freight, you have to analyze more shipments and do it fast,” said Jahnke.
Technology can be an advantage, as automation of redundant processes will save precious man-hours that could be spent productively, coursing out a future roadmap for scaling up fleet operations.
“Technology can expedite basic functions like quoting, passing information and data entry. Removing these tasks that clog up daily operations will let the team work on growing the business,” said Jahnke. “You only get paid for what you move, and it means that automating all these redundant tasks is the fastest way to gain better margins for your company.”
Mike McGeehan
Excellent article. Highlights the “real” world issues facing freight companies.