Improving trailer ROI requires having access to and control of all your trailer data. But with technology and data management changing as fast as it is, not to mention data flowing in from a variety of sources, how do you keep up?
Leading experts discussed key ways to do this in a webinar presented by the Truckload Carriers Association (TCA) and sponsored by Spireon. Topics included what data you need to optimize your fleet results, how to gather it and how to analyze it in a webinar presented by the Truckload Carriers Association (TCA) and sponsored by Spireon. There were some surprises.
1. Do You Know Your Operating Costs?
Chris Henry, formerly Program Manager for the TCA Profitability Program (TPP), said that surprisingly, many companies do not know their operating costs. He recommended this as a key place to start when establishing Key Performance Indicators (KPIs) for your fleet. He said these should include:
- Driver Wages & Benefits/Purchased Transportation
- Driver & Truck Associated Costs/Extra Pay
- Equipment Costs/Lease Purchase Negative Balance
- Fuel & Maintenance/OO Revenue Credit
- Insurance Costs/Trailer Accident & Incident
2. Calculate Your Gross Margin – the Right Way
Henry recommended that fleets calculate their gross margin using this formula, which gives you a more accurate picture than the traditional method:
3. Use the Golden Ratio
Henry said that the TCA TPP best practices group recommends the “Golden Ratio” of 25% for Gross Margin, 25% for admin overhead and 25% for fixed overheads.
“So, if you do the math,” Henry says, “if you achieve that golden ratio of 25, 25, 25, that ends up being an operating ratio of 87.5. That’s more in line with what carriers deserve for the risk and all the problems that you have to solve on a day to day basis. It’s kind of a soap box thing for us, but we feel that’s a more realistic and a better margin opportunity for trucking companies participating.”
How you gather and use all of this data is key, according to Henry and other experts.
“Based on my experience and my fellow TPP teammates’ experience with our members, the best performance is strongly correlated with utilizing technology with your data,” says Henry.
Want to know more about how to gather and utilize the data you need for improving trailer ROI? Get our new white paper covering the important discussion from this webinar, “Embracing Technology: Intelligence That Moves the Needle and Your Bottom Line.”