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manager talks with driving staff in warehouse

Fleet Management Starts With the Fundamentals

August 28, 2019

The trucking industry has come a long way in the past two decades. An industry that was once considered slow to adapt to the future has not only embraced the future, it has consistently made moves to push the industry and in some cases the world forward. Trucking and logistics are considered the backbone of our nation and for good reason. Out of necessity they have consistently found ways to make business more efficient in every way possible, and the good news is we all benefit from their strategies. Fleet efficiencies make their own companies stronger while reducing waste of time and money for vendors and partners aligned with the tasks.

While technology is adding to better business practices, before fleet management can implement technology to help in fleet financial management, it first needs to address certain fundamental strategies. Those strategies include understanding and tracking money spent, educating employees while providing responsibilities, and sticking with what you know best and letting the experts do what you don’t.

3 Simple Ways Fleet Management Is Cutting Costs

Track and budget
1. Track and budget

Before you can cut expenses, you must understand where your money is going.

“You need to be able to tell every time you dispatch that truck whether you’ve made money—based on your company’s expenses, not your neighbor’s.”

— Andy Ahern of Ahern & Associates, a transportation management consulting firm in Phoenix

Smaller trucking companies, especially, don’t have a really good handle on their finances, he says. “They hire an accountant who does a P&L [profit and loss statement] for them once a year, but they don’t know their operating ratio or their debt ratio. 

“I don’t care if it’s ten trucks or a thousand trucks, you need to get a P&L within five to seven working days at the close of each month and start looking at it.”

— Andy Ahern

Keeping track of what you are bringing in can be just as important as noting what you are spending. In some cases when cash flow is slow to come, fleet management is turning to freight factoring to address the issue. Because factoring benefits are paid by the invoices the fleet is bringing in, it is critical to have a clear understanding of what those invoices entail. Partners like Fleet One Factoring can aid in managing those invoices and analyzing vendor credibility, as well as provide the resources to maintain efficient operations.

Educate employees—and make them accountable
2. Educate employeesand make them accountable

Joe White, CEO of Georgia-based Cost Down Consulting, points out that dispatchers/driver managers make hundreds of decisions a day that affect variable costs yet very few know their variable costs per mile or how those decisions affect the bottom line.

White points out that a typical driver manager is running the equivalent of a million-dollar business with 40 employeesone with very thin profit margins. If you were to buy a standalone company like that, you likely would hire a business-savvy president or general manager to run it. Yet many dispatchers are former drivers, and often an existing driver manager is the one who trains them, so they’re locked into the same paradigms and inefficiencies. 

“Think of them as general manager or president of their own business, then think about the tools and training you need to provide them.”

— Joe White, CEO of Georgia-based Cost Down Consulting

He cites the example of a $50 million company he worked with that had maintenance costs way out of line. After the company offered the maintenance director ten percent of whatever costs he could cut as a bonus, he saved half a million dollars in operating costs in six months. The maintenance director got a $50,000 bonus and his company had $450,000 fall to the bottom line.

efficient outsourcing
3. Outsource

Trucking companies should always focus on their core business, but many smaller companies are afraid to outsource things in which they have little expertise, such as human resource issues. 

One example of efficient outsourcing is using a professional employer organization. PEOs allow an employer to outsource employee management tasks such as employee benefits (including health insurance), payroll and workers’ compensation, recruiting, risk/safety management, and training and development. It does this by hiring a client company’s employees, thus becoming their employer of record for tax and insurance purposes. 

PEO Advantage, one such firm that works with the trucking industry, guarantees clients a minimum of 25% in cost reduction. Another is PeopLease Corp. in Charleston, South Carolina, which specializes in trucking. 

Alternatively, smaller carriers may want to team up with a larger company in a partnership program in which you haul under their authority. Ahern offers Sargent Trucking in Mars Hill, Maine, as an example. Founded by former owner-operators, Sargent will act as the back office for a small carrier, handling billing, collecting, and cargo and liability insurance. It offers partners fast payment and will even advance a portion of the load.

Payment leader WEX is another company that many fleet managers are depending on for multiple resources. WEX is an expert in managing fleet financials because they are experts in trucking and in financials. Their services provide ways to cut costs and even drive revenue. Whether you want to reduce overall fuel management expenses or manage driver behavior with GPS tracking, WEX can help. WEX Fleet Cards, also offered through Fleet One Factoring, give you control over fleet expenses and make fueling and maintenance easier for your drivers.

So while the trucking industry and in particular fleet financial management are keen to adopt the newest technology to help control spending and create efficiencies, they must first address certain fundamentals so they can make better use of what tech has to offer.






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