2017 and 2018 were successful years for many of you in the trucking industry.
One fueling factor behind this success was the aggressive focus on same or next-day delivery services by companies like Walmart and Amazon, setting higher expectations and demand for truckers.
Growth in both manufacturing and construction also contributed largely to the 2017 and 2018 successes, so much so that it generated a nearly 48,000 driver deficit!
2019, on the other hand, has been showing signs that the boom might just be over.
As large corporations are bringing their delivery services in-house, and what appears to be a slowing economy is becoming more evident, the weakened demand is being felt throughout the trucking industry.
Are independent truckers doomed? No, they’re just in for a hell of a wakeup call.
In my opinion, the only way to combat the shift in demand and recession-proof your organization is to manage by the numbers, micro-manage your cost-per-mile, improve your retention efforts with a pay-for-performance plan, and roll up your sleeves and get out from behind your desk.
Micro-Managing Your Cost-Per-Mile
Calculating an accurate cost-per-mile isn’t as simple as just knowing your fuel costs and how much you need to pay your drivers. What I see all too often are owners who do a rudimentary calculation and then neglect many of the associated costs.
Worst yet, they don’t maintain or update their cost-per-mile, and ultimately let it go, leaving it to spiral out of control. I cannot stress the importance of updating your cost-per-mile tracker on a weekly basis, by the vehicle, enough!
Identify your fixed costs, which includes items like the truck itself, because regardless of how many miles you drive you’ll still end up paying the same amount for it. Other fixed costs may include:
- Collision/Comp Insurance
- Office Lease
- Health Insurance
- Permits
Your variable costs include something like fuel, where the budget increases with the more miles you drive, and fluctuates based on the cost of fuel. Other variable costs may include:
- Tires
- Vehicle Maintenance
- Repairs
- Lodging/Meals
- Taxes
If you want a more accurate cost-per-mile, I urge you to gain a better understanding of your overhead costs, and how they impact your profits!
Improve Retention With A Pay-For-Performance Plan
Pay-For-Performance is a way of saying “People should get a reasonable salary, and the preponderance of what they can earn should be based on the productivity and results of their own role, along with the overall results of the organization.”
A pay-for-performance plan for your drivers should not be tied to safety or on-time deliveries, that is their job! Driver incentives should be customized to each driver, and tied to profit.
The way I look at it is any driver you have who has been with you for one year becomes a mini profit center, and their work is a mini P&L.
The driver is the profit center, and based on what that driver produces, above and beyond some standard that you set, the profit is shared with them in some pre-agreed formula.
As Walmart and Amazon start offering starting salaries of over $90K, it’s up to you to offer a pay-for-performance plan that is so good your drivers would be crazy to leave.
Get Out From Behind Your Desk!
When you’ve put together a sales target or sales plan, and you have reps out in the field representing you, make sure they’re achieving what you want on the timeline that you set.
That means getting out from behind your desk, and getting your hands dirty, because there is no better representation of your business than you.
You will provide more value by shaking hands with prospective and current clients, than any of your salespeople.
It’s a much better use of your time than parking your butt behind a chair, and keeps you front and center!
There’s no doubt the trucking industry is feeling the impacts of a shifting demand, and possible recession, but you should be used to the cyclical nature of this business. By constantly measuring your cost-per-mile, managing by the numbers, improving your retention efforts, and getting out from behind your desk, you’ll be taking the proactive steps necessary to reducing any negative impact on your business (and your profits)!
If you’re a trucker who’s feeling the effects of decreased demand, or feel uncertain of how your business will survive a recession, our trucking consultants can help. Call 800-743-0410 to speak with one now, or fill out the form below to get started.
