By Michael Buck, President MCB Fleet Management Consulting. Mike@MCBConsulting.com; www.MCBConsulting.com
|A few weeks ago, it was reported that two of trucking’s leading economists said the industry’s recovery is well under way and should continue for at least several years. Trucking, they said, has been outperforming the economy, and conditions in the marketplace are far better than financial commentators and politicians have said.
But those same economists also cautioned prudence in the matter of keeping costs under control and warned that a serious driver shortage is developing. They also said that while fuel prices are dropping a bit, it’s still relatively expensive and equipment prices are on the rise.
Transportation is a leading, not lagging, indicator, and economic cycles and fluctuations – positive or negative – tend to have an immediate effect. In the end, your trucking operation’s success will be predicated, not on what analysts say, pro or con, or what Wall Street does tomorrow or next week but on your own strategies for controlling variable costs, executing the plan and staying firmly on course.
Keeping variable costs in check is an extremely difficult task unless you have the proper controls in place. There are six basic ways a trucking company can cut costs – and you won’t like the first five:
OK, you can’t totally cut maintenance without pulling the plug on your business, but you can put it off for as long as possible.
Take heart, though, because the sixth method is both the least traumatic and the most effective:
Technology’s role in cost control doesn’t need lengthy explanation in the age of handheld computers. And “defined processes” simply means establishing and using systematic steps, including capturing the transportation industry’s best practices, to achieve a specific end – and then making sure everyone in the company does his or her part consistently.
A defined process can be as simple as figuring out the best way to sharpen a pencil or as complex as creating and implementing the industry’s most comprehensive preventive maintenance program.
In addition to reduced costs and improved services, the results of such a program include a work environment in which every job, companywide, is performed with ease and minimal stress. That process captures the employee buy-in needed to ensure the success of the initiative and creates a loyal and fulfilled workforce eager to ensure a long-term solution through all business cycles, regardless of economic conditions.
Done properly, these processes increase the bottom line without robbing Peter to pay Paul. For example, despite popular belief to the contrary, low maintenance cost and high asset utilization can coexist.
The unfortunate reality is that the first reaction to thin profit margins is the aforementioned method No. 5 – deferring maintenance. But that inevitably equates to more-frequent breakdowns, higher costs and disastrously poor scores on the Federal Motor Carrier Safety Administration’s new Compliance, Safety, Accountability program.
Instead of overreacting and setting the company up for failure, start building a foundation that enables effective processes. Begin developing superior cost controls by using your senior leadership’s knowledge. With some quick analysis and consensus by the leadership team, the low-hanging fruit should be readily evident with a few simple questions:
With the information this analysis provides, you easily can assemble a team to develop a process for gaining control of the respective cost drivers impeding your bottom line.
Here are some tips for implementing this type of initiative – and some mistakes to avoid:
The most obvious result of turning to cross-functional teams is their immediate and positive effect on profitability. The underlying benefit, however, is their effect on camaraderie and morale throughout your organization as they reduce stress, improve productively and produce nonquantifiable, but beneficial, improvements to the bottom line – and to customer satisfaction.
Economies inevitably wax and wane, and when times are good, the next dip may be around the corner. But with reliable processes in place and a fully engaged workforce, you are prepared to weather any financial storm.