Many small fleets run on the ‘day-to-day’ plan. It’s like a pilot flying by the seat of his pants; it may get him where he needs to be—after a nail-biting, really bumpy ride—but it won’t be a flight he wants to repeat.
On any given morning in trucking, a small fleet owner/manager sets down his coffee, lists which trucks are emptying out that day and then starts searching for tonnage. This kind of ‘plan’ is almost worse than no plan at all. The probability of his trucks running half-filled, or needing to deadhead to another pickup without a really profitable load waiting, or sitting as the hours drag by, is growing painfully larger. He’s got to switch to a master plan, one that not only looks at today, but also as far into the future as possible. If he hasn’t located the return load before he accepts that first outbound load, then his small carrier is going to be hurting financially in short order. Don’t copy his mistakes.
Every mile a truck’s driven costs money, whether it’s fully loaded or not. Each time the truck’s rolling there’s money going out the stacks. So your plan must be to keep the trailer loaded and rolling in all directions. If you don’t know what or where your driver’s next load is going to be after he’s picked up his current load, you’ve completed only half your job.
Just like driving that rig down the highway, if you’re not keeping your eyes on the horizon, that’s when you get in trouble. It isn’t any different when you’re looking for loads. If you wait until your driver’s en route, or worse, until his trailer’s empty to begin the load search, that’s when you get into trouble.
Set up your lane density plan. Lane density is load planning, which keeps the truck full with profitable tonnage whenever it’s rolling, whatever direction it’s going. This means you’re looking for return tonnage while considering what you’re loading outbound. Better yet, looking two, three or more trips into the future, planning loads for each truck, so every trailer has a load assigned to it long before it’s reached its destination.
Next, figure out your route management plan. Route management keeps that loaded truck on the most direct path between pickup and delivery, minimizing distance traveled, thus saving on operational costs and driver’s hours of service. The idea that a straight line is the shortest distance between two points really works here.
Match your loads so as the truck commences its pickups and deliveries, it deviates very little from the straight line. When your driver has to stray from the line to pick up or deliver, the rates you charge that shipper reflect the time and distance required out of route. Again, every mile a truck is driven costs money, loaded or not.
Once a load’s delivered, both the number of days from that delivery date and the number of miles required to complete the next trip all belong to this new load. Those days and miles will have to be figured into the costs of the next load too.
Make your planning a little easier:
- Look for tonnage before you need it.
- Don’t look for loads at the last minute.
- Always plan two to three loads ahead for each truck.
- Think multi-directional, on outbound and return.
- Don’t send any truck out without a return plan.
Setting up dedicated routes which meet requirements of both your lane density and route management plan will take time and effort on your part; probably lots of coffee and sandwich lunches at your desk. But remind yourself you’re also planning for better profits. And isn’t that why you own and manage your carrier?
Now, please understand ‘dedicated routes’ doesn’t mean focus all your efforts and only accept freight from one customer. A single customer shouldn’t represent any more than 20-25% of your accounts receivable.
This is one of the most difficult success principles to which a small business owner must adhere, and is even more challenging for the micro-motor carrier or single truck owner. Many trucking companies begin because the owner has an established relationship with one particular shipper. Often this primary shipper represents 100% of the outbound freight a new carrier has. This, depending on the carrier’s freight lane and number of legs within the lane, can represent 40% or more of the trucking company’s total revenue. In some instances where the carrier is hauling both outbound and inbound for the same company, that percentage of revenue dependence can be 100%.
“How is this a problem?” some may ask. You have consistent revenue and one company to invoice. You have the ease of dealing with fewer people and a better opportunity to provide the highest quality customer service to one customer. Good reasons for the ‘all eggs in one basket’ approach.
However, here’s the catch: What happens if this single customer has a slowdown in freight? Labor disputes, a weather event, new owners who want the brother-in-law’s trucking company to haul the freight. Or it might be something as subtle as a change in management strategy and the small carrier’s freight is suddenly reduced, or worse, no longer available.
The more shippers and specific freight brokers a truck owner has established, the more consistent and stable the trucking company’s revenue.
Think in terms of the law of averages. Say your primary outbound customer represents 25% of your total annual revenue. You have a secondary outbound customer who represents 15% of that total, and a freight broker you can rely on for another 15%. In addition, a couple of smaller brokers combined provide another 15%. Add a quality loadboard to this mix for another 15% for both outbound and inbound freight, and two additional brokers for inbound freight representing the remaining 15%. Now you’ve spread your risk over eight different entities, and if any of them reduces revenue and/or available loads, you have seven other established hauling relationships to find replacement freight and income.
Your goal is to have established freight sources ready to fill a revenue void regardless of the cause leading to the loss of one.
Having multiple baskets, instead of just lots of eggs, with dedicated routes for your freight is key to managing your small carrier and making it successful and profitable.