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Truck Fleet Costs
Trucking Fleet Cost Analysis
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Trucking Fleet Cost Analysis involves the detailed evaluation of variable and fixed costs, and how they determine rate structures. Load profitability is determined by not only the actual costs of fuel, driver, tires, parts, and insurance, but by administrative, debt service, facilities and salaries of management that are assigned on a daily basis. These fixed costs make up the burden assigned to each operating unit, per day.
Without the identification of how much each unit needs to absorb of the time defined costs, how can a load be determined to be profitable? Can you determine what the backhaul rate needs to be by factoring in deadhead, empty miles, and the amount of time it takes to make the turn? Can you determine your profitability by changing the mix of owner operators and company units?
There is a way to determine if a load is profitable by analyzing the time it takes to make the delivery, unload, deadhead to the next load, load, deliver that load, and unload. It is called Activity Based Costing, and it can make you a sandwich (at least tell you how). In fact, by properly arranging your chart of accounts, you can have an immediate trial balance-not waiting for next month to see how fleet profitability is affected by 3 loads delivered today. Contact us to initiate a discussion on how we can help you with this process. We are not restricted to asset or non-asset based fleets, as many times non-power asset based fleets have trailers that owner operators pull, have a Brokerage operation, and have a few of their own trucks.
The Activity Based Costing systems supply management with a powerful:
- Dispatch Tool: Determine the cost or profitability of the effect of “Hours of Service” on specific shipments.
- Sales Tool: Measure the profit in pricing against actual or projected costs of operation.
- Operations Tool: Determine the standards and measure the profit effects of increased productivity.
- Management Planning Tool: Forecast revenue, variable and fixed expense, and profit.
Plan for Profit
Activity Based Costing allows you to measure both variable and fixed costs based on distance and time. As a result, asset utilization is improved and the true costs of individual loads and shipping lanes, giving you the information you need to make essential adjustments, optimize productivity, and save money. Common in the manufacturing industry, this is the optimum way to organize and determine operations strategies by determining “What If” scenarios prior to making important decisions.
You can use your accounting system as a management tool to:
- Define operational costs, including the cost/profit of a truck, traffic lane or customer
- Measure profitability of existing or new pricing
- Identify problems in operating costs, productivity, or pricing
- Measure the profit effect of operational decisions such as increasing or decreasing fleet size or changing the ratio of company versus contractor trucks.
Activity Based Costing System
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Businesses can’t plan for service or profitable revenue until they truly understand their costs.
While operating statements and M.I.S. reports give you some information—you need a more powerful tool to fully understand the impact of time and distance on operations.
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By measuring the cost effects of both time and distance, the profitability of pricing, the impact of using company, contractors, and more. We will show you how to use the information you gain to transform your business into a true profit center.
Contact Buchanan Trucking Consultants today. And learn more about how our Activity Based Costing System can help you measure the cost or profit of any truck, lane, or customer.
I don’t want to suggest that voodoo from a clever Beancounter spreadsheet should tell you how to run your company, but before you settle on the whopping 2% net before tax profit, might I suggest that you consider that information is what drives operational efficiency, or should.
The reality of today’s economy dictates that fleets need to think in terms of cost, margin,, and revenue per truck. By developing a statistical approach, the fleet can identify the types of customers in specific lanes of traffic. Today’s Truckload fleet can position themselves to be in a stronger position once the turnaround comes.
Get an objective review that leads to measurable results
Profitability and Situational Analyses
Buchanan Trucking Consultants understands the best practices that make transportation companies profitable and successful. By taking an in-depth look at your company, we can help you identify strengths and weakness and use the strengths to correct the weaknesses. We can find ways to improve management accountability- and we can create solutions that transform your company’s abilities and core competencies into greater profit and ROI. |
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