Grow Your Fleet or Increase Your Margins?

If I was to ask any trucking company this simple question I would expect or hope to expect to get the same answer from all of them. If, in the next twelve months you have only two options available to you: first you can expend capital and increase debt to grow your fleet by 10%; or you can concentrate all your efforts on ensuring that you are maximizing your operating ratio to its fullest, which will require next to no expenditure other than your time and effort. Which of these two options would you choose?

Some might say that they do both on an ongoing basis, which to a large degree most fleets would believe is close to the truth. But how do you know that? What is your benchmark? To what standard do you compare to ensure you are doing the right things right and getting the best in class available results?

Let’s consider TCAinGauge. By now, most of the industry has heard or is aware of this new offering which is an online benchmarking management tool. It might look like a time consuming, highly technical platform that adds value to those carriers with a high-level expertise and with the people who gain familiarity with the service. So you think, the big carriers have an advantage, right? And to be honest, to capitalize on the offering to its fullest extent one would need to spend resources of people’s time that might already be taxed to the limit. But that being said, allocating time to this effort pales in comparison to investing in additional rolling stock when you’re not confident that your operating margin is where it should be.

What if in an hour of your time you could know how your fleet compares to carriers based in your geographical area, in your sector and of your size with expenses related to fuel cost, insurance cost, maintenance cost, driver expense and the whale of them all; operating ratio? If you were to find out that you were not best in class on all or any of these comparable, let alone the other sixty that are available to carriers subscribing to TCAInGauge, wouldn’t you have to put your growth plans on hold until you were?

If this offering were available when I ran a motor carrier, a couple of questions would come to mind for me. First, am I threatening the future of my company by putting hard won capital or available credit in harm’s way when I know there is competition out there that are making better returns than I am? Is this more important if they are in my own backyard? Secondly, exactly how much money am I leaving on the table because I am out of market on any of the items listed above? Should I concentrate on getting my house in order before I concentrate on growth? In other words, am I just spinning my wheels here? A third might be, how long before the carriers with higher margins start focusing on my customer base?

So here is a formula, as simple as it can be, to know where you stand. Simply do these calculations and submit them.

Fuel Cost

Formula: (Fuel Expense Total) / (Freight Revenue Linehaul Total + Accessorial Revenue Total)

Insurance Cost

Formula: (Insurance Expense Total) / (Freight Revenue Linehaul Total + Accessorial Revenue Total)

Maintenance Expense

Formula: (Maintenance Expense Total) / (Freight Revenue Linehaul Total + Accessorial Revenue Total)

Driver Expense

Formula: (Salaries, Wages & Benefits Total) / (Total Miles Driven Total)

Operating Ratio

Formula: (Freight Revenue Linehaul Total + Accessorial Revenue Total – Operating Profit Total) / (Freight Revenue Linehaul Total + Accessorial Revenue Total)

There are sixty other formulas you can compare yourself to. You can see them at https://tcaingauge.com/metrics/. I’ll give you one formula answer for free that many carriers are interested in; the average aged, accounts receivable for the InGauge subscriber carrier base across the board is 42 days. How do you compare?

So, would you spend a couple of hundred dollars a month to know exactly how and where you stack up to the competition? Would you do this to gain the confidence that would come from knowing exactly how efficient you are in the marketplace and to also gain access to the latest management tools, education, strategy and goal setting platform which is specific to truckload, quarter load segments? Now investing in growth would make much more sense because you know you are not lagging behind those carriers that would love to grab your customers.

The knowledge that would excite me the most is to know my competitions average cost of insurance compared to mine. What great information to have when entering negotiations with your insurance provider and agent. What about your fuel expense? Are you in market; is your supplier giving you the right discount or are you missing the boat on some other item related to fuel expense? In the vast knowledge library there is a section solely dedicated to fuel management.

But I ramble. At the crutch of this is the simple basic principle of comparing ones cost in the market to yours and focusing ones efforts where the greatest return can be garnered for the effort given. Another simple fact is that people gravitate to what they are good at and what they’re comfortable with. This might leave a lot of margin floating in the wind and it is also reasonable to think that many business owners work so hard on running their business that working on the business revenue becomes secondary.

Almost every other sector of business uses benchmarking to give them guidance about major business decisions and to enhance their bottom line. Most business sectors have results of larger operating ratios than trucking has experienced over the years. I wonder why?

Now trucking might be a little late to the game but here we are. Here’s your chance to experience what most other business sectors rely on to ensure success. It is now available to you so don’t be left behind!

Safe Trucking

Ray J. Haight
Co-founder
tcaingauge.co