Early this year, a recession loomed. Anxiety was pervasive: across the media, articles, podcasts, news stories, and videos asked when the recession would kick in, how bad it would be, and for how long we would be living with it. In mid-January the U.S. hit its debt ceiling, and conflict unfolded over the next several months over how to best alleviate a potential crisis. This further exacerbated fears that a recession was incoming. Recent news about a coming recession in China has further inflamed anxiety about a potential hit to the global economy.
In the wake of all this fretting, it seems the economy is performing well, the market is rallying, and recession fears have abated. The inflation rate has been steadily decreasing over the last several months. As Reid Epstein put it in a September 2 column in the New York Times, “A strong economy is on track to dodge the recession many had feared.” However, while 157,000 new jobs were added to the economy in August, the labor market is said to be softening and unemployment has risen this month to 3.8%.
It’s easy to feel whiplash following the media path of 2023 economic reportage. Welcome to the first article in a six-part series that provides guidance on how to sustain your business through the unpredictable economic highs and lows in our collective future.
How your trucking business can survive and even thrive in economic highs and lows
What does all this economic news mean to you and the well-being of your trucking business? Through every unexpected shift in forecast – whether it be a global recession, rising inflation rates, or low unemployment impacting your ability to hire and retain drivers – you need to know that your business is going to prevail.
Here are three tips for how to manage your trucking business in such a way that you are protected from market shifts:
Tip # 1: Reduce employee hours spent on fuel tax reporting and lean on your fleet card provider to compile that data for you
As any fleet manager is aware, there are a variety of tax implications that come with overseeing a fleet of vehicles. Beyond the usual income tax and business taxes that your business pays annually, fleets have responsibilities in fuel tax reporting, particularly if your drivers are crossing state lines while on the job. When you partner with a fleet card company, the data provided to you can make this burdensome set of tasks feel a whole lot lighter.
With a fuel card, customers are provided with spending breakdowns to help assist with tax reporting. These reports include all the necessary details to easily see a state-by-state breakdown of the number of gallons of fuel purchased. Those reports can be generated on demand or they can be scheduled and pushed to fleet managers with whatever is the desired frequency: reports can be run on demand, daily, weekly, monthly, quarterly, or annually.
GPS navigation tools like Geotab or Verizon Connect provide data that helps you track the roads your fleet has traveled. Most GPS tools can also provide a state-by-state breakdown of mileage. This would include a record of what routes were taken through each state, which would meet the reporting requirements of IFTA. The GPS systems typically have that road-tracking side of IFTA covered and fleet card providers typically have the fuel purchase side of the data.
A combination of GPS data and data from your fleet card company can provide the ideal scenario when you’re looking at IFTA fuel tax reporting. Third-party systems compile everything you need for IFTA reporting into one handy package. The reporting engine pulls all the necessary fuel data – even if your fleet is not not using that particular fuel card – your fleet card provider can pull GPS data from any provider, and generate a report that can be easily entered into your quarterly report. Partnering with a fleet card provider to ease the burden of fuel tax reporting is one way to build efficiencies and ensure your business is ready for whatever turns the market might take.
Tip # 2: Reduce fraud and increase security to help keep your business solvent and even help you grow your business
Fuel card programs offer increased security and reduce the threat of unauthorized purchases, thereby decreasing overall spend. Fuel card programs also give you visibility into valuable fuel purchasing metrics and enable you to collect data that your fleet managers can use to improve operations. By using a fuel card, the money you save can be put toward other valuable business expenses.
On the most basic level, managers can track usage patterns and monitor unusual activity. Implementing fraud prevention tools can reduce the risk of unauthorized purchases. As a fleet manager, you can set clear policies outlining how your employees can best use your fuel card program. For example, if you notice a driver consistently purchasing fuel outside of designated fueling stations or during non-business hours, you can take action to curb that behavior with customizable purchase limits. Monitoring suspicious activity on fuel card transactions can significantly reduce your operational costs. You can identify and prevent fraudulent activity before it even becomes a problem.
Tip # 3: Taking advantage of savings network programs provides and cuts down on costs beyond fuel
Savings network programs offered by fleet card providers introduce different cost savings opportunities for your business beyond fuel, and you get them simply because you signed up for a fleet fuel card. One way you can take advantage of those cost savings is the deep discounts some of these programs offers in tire purchases. With these types of savings programs, you join a large network of truck tire manufacturers – with most major tire brands – allowing you to purchase tires at discounted prices at dealerships nationwide. These discounts can provide an annual savings of $960 or more and range from $40-$100 or more USD per tire.*
Trucking company benefits of following these three steps
Although fleet management is complex, innovative technologies and trusted fleet card partners can help you simplify the business of running your business. The best fuel cards provide all the essential tools that trucking companies need to operate efficiently.
For trucking business owners and managers, the unpredictability of the economy can make it difficult to plan ahead. Additionally, there is always going to be incentive to efficiently manage business costs since financial challenges can strike at any time. Cost-saving measures not only maximize operational capacity and increase profits, they also ensure that businesses can persevere no matter the current economic uncertainty or future market trends.
Recession-proofing tactics in the trucking industry
Cost-saving measures are beneficial to any trucking company, no matter its size or market share of the industry. Many well-regarded trucking companies have implemented cost-saving measures to increase profits and optimize business operations. For example, Werner Enterprises, a transportation and logistics company, recently pursued cost-saving opportunities in fuel efficiency and driver recruiting to realize about $34 million in annualized savings. UPS reduced fuel consumption by optimizing routes and investing in fuel-efficient vehicles. These measures resulted in cost savings of over $400 million for UPS in 2020.
Unfortunately, not every trucking company has managed to survive the challenges of running a business. In early August, Yellow (formerly YRC Worldwide), one of the largest trucking companies in the U.S., filed for bankruptcy. Yellow experienced deeply-rooted financial struggles and an ongoing dispute with the International Brotherhood of Teamsters. Yellow had paid very little principle on the $700 million federal government loan it received during COVID and racked up interest charges along the way. Additionally, up until last year, Yellow was enmeshed in a lawsuit filed by the U.S. Department of Justice for which they reached an agreement to pay the government $6.8 million in early 2022. These factors all led to Yellow’s demise. Partnering with a fuel card company that has the kinds of tools and support we outlined above will help keep your operations in order and help you avoid costly errors that Yellow experienced leading up to the company’s bankruptcy.
Inefficient cost management has adverse effects for any business, especially in the trucking industry where operational expenses tend on the higher side. Reducing costs for a commercial fleet business increases the likelihood of long-term profitability and sustainability.
Maximize your trucking company’s operational efficiency with a fleet card
Fuel consumption is the top operational expense for trucking companies, with some estimates putting fuel at about 31% to 44% of total operating costs. When optimizing a business and implementing cost-saving measures, every dollar saved from your fuel budget goes directly toward company profits.
There are a variety of ways to reduce fuel costs and mitigate unnecessary expenses, including optimizing vehicle routes, maximizing vehicle loads, and driving more fuel-efficient vehicles.
Creating a plan to achieve operational efficiency is critical for cost management. While such a plan may sound difficult to implement, fleet cards offer a simple and streamlined solution. A fleet card program will provide your trucking company with tools that improve your bottom line and make it easier to run your business. By adopting a fuel card program for your trucking company, you can take full control of the amount of money you spend on your fleet and point your business toward long-term success.
WEX is a leading, global fintech solutions provider, simplifying payments and back-end business processes in the fleet management, benefits management, and corporate payments areas. To learn more, please visit the company’s About WEX page.
New York Times
Federal Motor Carrier Safety Administration
Bureau of Labor Statistics
The New York Times
*Tire discounts will vary and are determined by individual tire sellers depending on various factors outside of your fleet management specialists’ control such as time of year, location, size of fleet, and type of tire purchased.