Best practices for fleet efficiency in the trucking industry

November 12, 2018|Jeff Simon

The trucking industry is competitive, and finding ways to enhance your processes and ensure you’re operating at the optimum level is critical. In part three of this series covering best practices in the trucking industry, we focus on fleet efficiency. You can also read part one of the series, which focuses on best practices for data measurement, and part two of the series, which focuses on DOT compliance.

It’s a lot more comfortable to just continue doing what you’ve always done for the last 20 years, but the industry is changing rapidly and those who remain stagnant will get left behind. Consider how identifying strengths and opportunities in key areas can help maximize your fleet efficiency and ultimately improve your bottom line.

Focus on continuous improvement to add value

The objective of any Lean project is to identify and minimize any nonvalue-added activity. If you have an activity the customer is not willing to pay for, it may be a candidate for elimination. There are eight forms of waste in any business:

  • Delay and waiting—when driver and truck are idle, the opportunity cost is huge
  • Over processing—too many signatures, reports or shuffling between offices creates waste
  • Motion—Paperwork flow, several trips to the copier or to the parts room all add up
  • Inventory—Excessive inventory is more expensive than the cost of an expedited delivery
  • Conveyance—Moving anything from point A to point B after delivery is waste
  • Inspection—If a job is done right the first time there is no need for an inspection
  • Defects, scrap and rework—A job that needs to be redone is waste
  • Lack of participation and innovation—Not using the talent, skills or ideas of employees is a missed opportunity

Any or all of these could be present in a typical transportation function. Processes such as detailed Value Stream Mapping, Kaizen, 5S, POUS and Kanban are just a few of the techniques used to root out the waste. In the trucking business, a detailed Fleet Assessment of the entire organization can identify hundreds of thousands of dollars in potential savings.

Look at culture to drive your organization

Owners and key managers should formally identify the company’s values and objectives. These are then translated into corporate strategies and one-to-five- or ten-year plans. From these strategies employees are hired to perform their part in the delivery of these objectives.

Give each employee a set of three to five key performance indicators (KPIs), which are measurable and can be displayed real-time, so everyone will know how their actual performance relates to their assigned expectations. Accountability and solutions are the result.

Put your customers at the center of all you do

Without awesome customer service, you may not be in business for the long term. Unfortunately, few companies actually measure how they are doing. A carrier may think that they are doing well because they have not had a driver report any late deliveries, but unless you actually ask the customer how you are doing, you may never know the real story.

Develop a customer score card to be completed by the customer. You might be surprised to know that they only rate you as average and you may be at risk to lose the account.

Find ways to maximize profits

Fleet management has several critical factors that can be a drain on any potential profits. This starts with purchase decisions. Review and compare equipment specifications on key components. Conduct ROI analysis on potential equipment add-ons and new features. When your lifetime maintenance costs are compared to the cost of a replacement, an optimum trade cycle decision can be calculated. Establish a target retiement plan and stick to it.

Miles per gallon (MPG) is usually a major concern since fuel costs represents 17%-24% of total costs. Unfortunately, MPG is a result of several interacting variables such as driver skills and performance, engine specifications and performance, gear ratio and tire size, weight, weather, geography, speed and more. Isolate and itemize as many of these variables as possible and then analyze expectations against actual performance.

Overall maintenance costs will include the average downtime data, the inventory costs and the efficiency of the mechanics. Just observe your mechanics in action and you will see wasted motion dozens of times per day.

Poor utilization of expensive equipment is an obvious drain. Why add to the fleet when we cannot use what we have? There are usually thousands of dollars in savings in the equipment and shop.

Make drivers and employees want to stay

Each turnover event can cost $5,000 to $10,000. Effective driver management will help transform each driver into a respected, productive and satisfied employee. Adopt them into your family and let them feel appreciated before they find someone else who will. Learn the keys to driver recruiting and retention.

Make time to review information management

Capturing appropriate data is a delicate balance between receiving so much information that nobody has time to look at it and not getting enough to make a good decision. Most transportation management systems are not utilized to their potential. Ask your IT department to initially focus on delivering real-time KPI scorecards to every employee every day.

Create a culture of change and improvement

Your employees should all be encouraged to submit their ideas or be invited to participate in an organized continuous improvement exercise to solve a specific department challenge or inefficiency. They can often provide specific insight that may not be readily apparent when you only have a high-level view of the issue.

Take the pulse on your financial health

Financial health is measured in several ways, but the most common macro statistic is calculated simply by subtracting average cost per mile (CPM) from average revenue per mile. The resulting number then will be your profit or margin.

Benchmarks can be used effectively to assess whether your performance is acceptable. The critical assumption is that you must capture ALL costs, not just marginal costs, and that you must ensure you are comparing the same components in these benchmark categories. Obviously, this factor also includes decisions on whether to lease versus purchase, tax strategies, succession planning, financing and investment plans, and more, but if there isn’t a profit generated there is usually little interest in making plans or changes with money you don’t have.

Next steps

Consider how these best practices can help you create an organization that is streamlined and data-driven. If you’re looking to identify and target strengths and opportunities within your fleet operation, going through a Fleet Optimization assessment may be right for you. This systematic process can help you improve cash flow, improve CSA scores and increase driver and fleet utilization. Learn more.

If you have questions regarding best practices surrounding fleet efficiency or the Fleet Optimization process, please contact us or reach out to Schenck’s Trucking & Logistics team at 800-236-2246.

Jeff Simon, MBA, trucking & logistics industry consultant, has nearly 40 years of experience in transportation management and safety. He is a nationally recognized speaker and trainer whose services help Schenck clients create safe, compliant and efficient operations.