iTECH: The Best Lane Boosts the Bottom Line

Technology Helps Carriers Determine Which Routes Will Maximize Their Profits

 
By Mindy Long, Contributing Writer
 
This article appears in the Aug./Sept. 2011 issue of iTECH, published in the Aug. 1 print edition of Transport Topics. It is online here. 
 
Trucking companies are finding that not all freight lanes are created equal financially. So, many of them are turning to software products — packages that include everything from mapping technology to detailed cost analysis — to help them choose the routes that will most boost their bottom lines.
 
Take Mark Stein, director of operations for Central Freight Lines, for instance. He said that for the Waco, Texas-based less-than-truckload carrier, which ranks No. 92 on the Transport Topics Top 100 list of the largest U.S. and Canadian for-hire fleets, the type of shipments and strong terminal-to-terminal combinations factor heavily into what makes a strong lane. So does balance within the network.
 
“Adding additional freight in a specific lane may be profitable, but if it places your network out of balance, you can increase your cost on all freight in that lane,” Stein said. “In converse, adding something that may not seem profitable may balance it out and make everything profitable.”
 
The technology draws on everything from a fleet’s historical data to its specific customer information and allows carriers to find statistics on revenue and expense per lane, per customer and even by load type or day of the week.

 
The software packages build on route optimization functionality not only to identify the most efficient path to a delivery but also to provide programs powered by complex algorithms that draw on mountains of data — such as profit and loss statements, dispatch reports, driver dwell times and equipment expenses.


 
The technology then crunches the numbers and produces detailed reports that allow carriers to drill down to specifics and help them price their loads, eliminate hiccups and find the right balance for their networks.
 
MinStar Transport Inc.’s Jody Farley is the technology manager of the Eagan, Minn., carrier. She began using software to help analyze her fleet’s profitability and realized that Iowa provided the travel lanes that best improved her company’s bottom line.
 
“We’re finding that some lanes are more profitable than we thought, and Iowa is really profitable for us,” Farley said.
 
Additionally, by crunching the numbers, she said, she learned that MinStar’s double-deck trailers — with two levels inside each dry van — are the most profitable.
 
What works for one company, however, does not necessarily work for another.
 
“It isn’t always black and white,” said Mark Kubine, vice president of marketing for McLeod Software, Birmingham, Ala. “It may be I’m not profitable on this lane when I’m hauling this guy’s freight. The real work is for the customers to take the analytics and take a hard and serious look at where they make money and where they can do the best job.”
 
MinStar is a McLeod customer.
 
Jeff Friesel, director of business development for Gordon Trucking, Pacific, Wash., looks closely at freight on Interstate 5 between Seattle and Los Angeles — both southbound and northbound freight on the route is desirable for the truckload carrier — and the type of shipper and freight, which is key for the company, which ranks No. 64 on the TT 100 for-hire list.
 
“If it is a grocery distribution [customer] and you have to get a service to get the product off the trailer, that is going to slow you down, versus being able to drop the trailer and pick up another one,” Friesel said.
 
Friesel uses TMW Systems’ Netwise software to review data from region to region, market area to market area and city to city. He also can use Netwise’s market rate index information to see the lane averages that TMW provides.
 
Netwise also helps fleets find the right balance for their networks and determine a load’s yield, said David McKinney, vice president of professional services at Beachwood, Ohio-based TMW.
 
“The yield takes into account how the truck got at the origin, how it is going to leave the destination and the margin on the load,” he said. “If you’re an asset-based business, there is more to your profitability than just the margin on any given load.”
 
Gary Short Jr., vice president of Go-To Transport, Bay City, Mich., uses the software to examine yield and margin.
 
“You can have a load that is really bad margin but really good yield because there is a good load before and after it. Now we can get a pulse of that,” he said.
 
Central Freight’s Stein relies on costing software from Transportation Costing Group. Ken Manning, president of TCG, said carriers use the software to create a specific cost for every load or shipment. Carriers can look at individual customers, commodities, day of the week or month of the year to identify patterns.
 
“They might find the freight they move for a certain manufacturer is pretty profitable during most months, but the last two weeks of each fiscal quarter, their volume ramps up and it overwhelms their capacity and screws up their traffic distribution,” Manning said.
 
Having this level of detail in hand can give carriers “ah-ha” moments, said Randy Seals, customer advocate for McLeod Software.
 
“It gives you the profit of any lane, state, customer, tractor or trailer,” he said. “In summary mode, you might say you don’t want to go to Texas, but when you drill down, you might learn you want to go to Houston but not to Dallas.”
 
Seals likened the reports to a coach’s playbook.
 
“On Sunday Night Football, you see the coach running back and forth with his playbook. It doesn’t mean he will call [plays from the book], because something may have changed, but he has it there,” Seals said. “Load by load, you have to be able to make decisions that will affect your bottom line.”
 
The detailed data also can serve as a starting point for carriers renegotiating contracts and open a dialogue. Sales representatives for Central Freight have shared data on costs associated with an account, time spent on deliveries and pickups and weight per shipment.
 
“It allows shippers to understand what their true costs are to us. There are things the shipper may not be aware of,” Stein said.
 
For example, through the software, Stein identified numbers that were out of line for a particular shipper. After a little digging, he discovered a local shipping facility “had changed the shipments and increased the less-dense freight, which was only supposed to account for 35% of the shipments,” he said. “We went back to them and explained what was going on, and they fixed it.”
 
Go-To Transport’s Short shares concrete data with shippers when discussing costs.
 
“It is no longer just, ‘I am losing money.’ It is nice to have the tools to take back to customers to show how good or bad their velocity really is,” he said.
 
The software made Short realize the true price of a trailer pool for a shipper.
 
“We bid on a specific piece of business, and they bid the lane at 20 trailers in the whole loop, but it turned out to be 40 trailers in the loop. What I could do is take the data and say at 20 trailers I make X, at 30 trailers I break even, at 40 trailers I’m upside down and I can’t do it,” Short said.
 
Short isn’t afraid to walk away from business that isn’t a good fit.
 
“It brings great clarity to the gray in your network,” he said. “All of a sudden, we’re not so in love with customers we used to be in love with.”
 
However, it isn’t always about dropping a customer. The software allows carriers to pinpoint what isn’t working so they can identify ways to fix any problems.
 
Hiccups such as a customer that detains drivers at the consignee desk too long or a certain dispatcher who puts in too many deadhead miles become visible with the software, McLeod’s Seals said.
 
“If you’re not looking for that type of information, it can hide from you,” he said. “If we can eliminate some of these ineffective movements and decrease the time on the load, you can make a marginal load profitable.”
 
Short added, “I can see the dwell times of customers, and I can see what customers our drivers sit at. I can take that data back to the customer and say, ‘I love the lane, but I hate the wait time.’ ”
Even if certain loads aren’t as profitable, there are times when Stein has disregarded the numbers to keep a customer happy.
 
“Maybe 80% of the freight a customer gives you is in your powerhouse alley, but they may have freight going to remote areas that aren’t strong in terms of profit. You may accept that,” he explained. “We can look at the balance of the business to see what we can do to make the whole book of business acceptable to both parties.”
 
Indeed, for any software program to work, the data keyed into the system have to be accurate.
“If they fat-finger a gate-in or gate-out time, it can make your whole lane look unprofitable, said Short, referring to a term for hitting the wrong key on a computer keyboard. “Everybody has to be on their ‘A’ game in regards to data.”
 
But so far, said McLeod’s Kubine, only about 100 fleets have signed on to crunch those numbers with his company’s product.
 
“It is still a relatively small percentage of companies who jump into these analytics, but it is picking up pace,” Kubine said.
 
The investment paid off for MinStar, Farley said, by uncovering revenue the fleet was missing.
 
“We saw that our costs were way out of line to our revenue for one lane, so we looked closer and we found $6,500 over a short period of missed stop charges,” she said. “We didn’t notice it until we
ran the lane revenue analysis.”
 
Software manufacturer Qualcomm Inc. did not respond to requests for comment.