Trucking businesses generate a lot of data, and somewhere in that data is the information fleet managers need to understand why a load, lane or customer is or isn’t profitable. What it takes to manage expenses and set rates effectively is a comprehensive understanding of costs that can be enabled by an advanced, customized data analysis solution.
According to Ken Manning, president, Transportation Costing Group (TCG), “Cost modeling systems determine exact expenses for each activity and just as importantly, what drives those costs. To provide accurate data that helps you make informed decisions about your business, effective activity-based costing solutions use shipment level information for every load and the environment in which it is hauled. They avoid averages by using data from accounting, dispatch, freight bills and other parts of an operation to reveal true shipment profitability.”
He goes on to say that accounting for differences is a key attribute of any effective costing solution. Every shipment is different because unit costs vary by location, time and other criteria. Virtually every LTL shipment is a unique combination of weight, pieces, density, origin and destination, susceptibility to loss and damage, handling requirements, and other factors that make averages meaningless. Importantly, the same LTL freight that goes in a full trailer will cost you less to haul than the same freight in a half-empty trailer because of more effective capacity utilization.
Likewise, while evaluating the profitability of truckload shipments seems simple, truckload service is much more than a linehaul move from one point to another. Loading and unloading, in-transit stops, backhaul and empty mileage implications, varying driver pay scales, and other factors make the tasks of accounting for shipment cost variances, pricing and other operational decisions complex. Like LTL freight, truckloads move in a network, but each network differs as to the balance, empty miles, backhauls and revenue quality. Because of this, the entire trip must be utilized in the costing process.
“TCG’s truckload and LTL Cost Information Systems [CIS] solutions provide customized, advanced data analysis capabilities and profitability forecasting tools,” Manning says. “LTL/CIS uses costs and data directly from your general ledger and enterprise management systems for each terminal. LTL/CIS develops the cost of moving individual loads, of making specific trips and of handling entire customers on a historical or prospective basis by using financial and traffic records. Today, that process is being augmented by data that can be captured digitally from telematics systems. The quality of data has improved as well, which means more specificity, better pricing of freight and better productivity are possible.
“With the right data analysis tools you can drill down into costs, sort data and ask questions about revenue and expenses before making decisions that impact profitability. You can explore scenarios using, ‘What if?’ analyses and yes/no decision points. By employing customized cost analysis solutions that are integrated with existing applications, you can get an accurate picture of your business, eliminate uncertainty and make decisions that will help your business grow.”
