Opinion: Improving Carrier Profits
By Doug Sartain
President
Shipmate Logistics
This Opinion Piece appears in the April 6 print edition of Transport Topics. Click here to subscribe today.
Increasing operating costs, declining revenues and tighter budgets have forced less-than-truckload carriers, private fleets and small-parcel carriers to eliminate unnecessary expenses — once they figure out which expenses those are.
A good place for these carriers to look for cost-cutting potential is excess pickup-and-delivery miles. Jettisoning nonessential miles will significantly lower the three largest variable expenses found on a trucking company’s profit and loss statement — labor, fuel and equipment.
Cutting miles begins with efficient inbound planning. A simple exercise to evaluate route planning is to look at the P&D routes from the previous day. Take a map of the service territory, lay a clear piece of plexiglass over it and use grease pencils in different colors representing the various drivers to label deliveries and pickups in the order they were run. Review the results for efficiency, productivity and opportunities for improvement and ask these questions:
• Are the right drivers planned on the appropriate routes?
• Are inbound linehaul arrival times causing an increase in local P&D miles?
• How many stops are scheduled on each P&D route?
• Are the routes productive and loaded to capacity?
• Can the P&D routes closest to the terminal be broken up and deliveries loaded onto other drivers passing through that area?
• Were the drivers routed using an inefficient and outdated “core-zone” plan, in which the driver takes the truck to a geographical area and performs pickups and deliveries all day in a circular fashion? Or were they planned on a “straight-line” route, which reduces miles?
• Measure the distance, i.e., the stem miles, from the terminal to the first stop and from the last stop to the terminal. How many P&D stops are located on the perimeter of the service territory?
• Could an off-route stop be delivered another day?
• Were appointment deliveries scheduled efficiently?
• How many times did a P&D driver backtrack or travel on or near the same roadway several times?
• Look for planned overlapping on deliveries and pickups between the multiple P&D routes. How many times did drivers cross each other during the day?
• Where are the bulk of deliveries and pickups located?
• Are the P&D routes balanced by deliveries and pickups?
• Did the driver stop for lunch en route to another stop?
• Were pickups made before the deliveries were completely finished?
• When deliveries were completed, did the driver make pickups in the same area or travel across town to pick up a load because it was the only one available at the time?
• Were deliveries and pickups made based on closing times, or were they made in geographical order?
• Were the pickups ready when the driver was closest to the pickup location?
The only time LTL, private fleet and parcel carriers make money in the P&D operation is when the trailer door is up and the driver is either taking revenue off or loading revenue onto the trailer. All other time spent is a variable cost, so measure the total “door-down” time rather than the total work time for each driver and decrease the percentage. It’s not surprising to find drivers who spend 75% or more of their day with the trailer door down.
Because customers located on the highway are rare, try to minimize highway miles. Check how often a P&D driver traveling on the highway passes a stop handled by another P&D driver but located right off an exit. There may be opportunities to make the “highway route” more productive or eliminate an entire P&D route closer to the facility by giving those stops to P&D drivers passing by on the highway.
When daily P&D routes have been critiqued, focus on reducing miles traveled, involving the entire operations and sales staff in the process — planners, dispatchers, drivers, dockworkers, sales reps and any other employees who might contribute useful information. Involving everyone makes them more receptive to productive change.
Before actually changing P&D routes, establish benchmarks and key performance indicators — such as total daily miles, miles per route, stops per hour, number of daily P&D routes and percentage of miles driven with the trailer door down. Remember to consider the fluctuation in daily business levels when evaluating key performance indicators. Create metric goals that support cutting miles and/or time.
Decision-makers should review mileage results daily and be held accountable. It’s also helpful to determine the cost per mile and then convert mileage cuts into real savings. For example, using $3.50 as the cost per mile and 10 routes, saving just 25 miles per route results in a daily savings of $875 or nearly $250,000 annually.
The concept of improving profits by reducing miles also can apply to any sales force. The fewer miles a sales rep travels, the more time available to make additional calls. And more sales calls will result in more sales.
Shipmate Logistics, Cleveland, Ohio, is a transportation consulting firm.
