Trucking companies ride on a very narrow margin of error. With nearly unpredictable fuel costs, repair and maintenance expenses, insurance premiums, and the never-ending need for equipment, a trucking company’s income can evaporate quickly.
Shipping rates will always be competitive, so maintaining your bottom line is essential. How can you keep your prices low in the volatile trucking industry? It’s never easy. But with the right approach, it’s always possible.
You can’t reach your destination without knowing where you are. Before you can begin planning for cost-reduction measures, you need to take a hard look at your current operating costs:
You might not be a detailed person by nature, but if you want to succeed in the trucking industry, you need to track each and every penny.
You must use a budget to know exactly where your money is going, and then you can start a plan to address the biggest issues. Once you know where the money is headed, start by addressing the areas that would save you the most money, then work your way down.
According to a report from the American Transportation Research Institute, “fuel now consistently represents the largest share of total average marginal cost for motor carriers.” In other words, trucking companies spend more on fuel than on any other area of expenses. This means that most companies could significantly reduce costs by enhancing fuel efficiency.
There are many steps you can take, and most of them boil down to proper training for your team. Make sure your drivers understand the importance of efficiency by emphasizing proper tire pressure, acceleration rates and idling times.
You should reexamine your routes to see if there is a chance for more efficient route organization, and conduct vehicle inspections with a trained professional to see if there are cost-saving opportunities.
You’re in the trucking business. You’re not a marketing firm. You’re not an accountant’s office. You’re not a recruiting service. It’s always important to stick to your core competency and not let your business become too spread out, especially if you are a smaller trucking company.
It’s understandable that you may not want to give up control for certain aspects of the business, but when it comes to specific tasks, other people can simply do it better. Many trucking companies use invoice factoring to handle their back office and collections services, for example, while also getting needed financing.
Look at it this way: if the task applies to any business, it’s a strong candidate for outsourcing. For example, dispatching applies directly to the transportation industry, but practically every corner of the market needs human resources, accounting, and IT services.
Don’t go overboard with outsourcing. If you are outsourcing many tasks, take a look at what can be brought back under your roof.
There are numerous services that trucking companies outsource at a significant price that could be worked in house. Some services that you could consider roping back into your office include lead generation. These services can be costly and, when done improperly, may not bring the right type of lead, customer surveys, and organizational or administrative tasks.
Much of this will require training and diligence on your part so that your employees are equipped and capable to handle these tasks.
By investing in safety, you are making significant changes to reduce the cost of insurance and reduce potential workers’ compensation claims. Obviously, this is a long-term plan, as the time and energy you invest in safety will pay off over the next few years, not necessarily immediately. However, companies that invest in safety, whether by improving safety procedures, giving safety bonuses, or simply emphasizing safety in meetings, stand on a much stronger financial footing for years to come.
Long-term cost savings for your company is just one of the many reasons why you should implement a meticulous safety agenda at your trucking company.
Scale Funding is an invoice factoring company serving businesses across the United States. For more information on factoring, call (800) 707-4845 for a free, no-obligation consultation and quote.