Regarding freight distribution and delivery, the focus naturally gravitates more toward the shippers and carriers handling the business side. And while that is important, it’s also crucial to consider the drivers responsible for getting the goods from their point of origin to their destination. Many factors are affecting driver profitability and, consequently, trucking company profit margin at a time when the driver shortage shows no sign of easing. In fact, the American Trucking Association predicts the driver shortage will increase to a staggering 160,000 or more by 2030. Here are a few factors impacting trucking company profit and how to overcome them.
Higher-Than-Average Fuel Costs
Above-average fuel costs have become commonplace in spring and early summer 2022. According to the Energy Information Agency, the on-highway diesel price for July 11, 2022, was more than $2.00 per gallon higher than a year ago in every U.S. market. Those above-average costs are likely to remain as the country endures what’s shaping up to be a summer of drought and continued high customer demand. In turn, drivers have less wiggle room to absorb delays in getting paid.
Extended Drive Times
Longer shipments, such as deliveries via long-haul trucking or shorter hauls that encounter delays due to road construction or traffic congestion, require more fuel and incur more expenses. By using logistics and real-time data, companies can provide optimized routes for truckers that are fuel-efficient and can help cut drive time leading to a higher trucking company profit margin.
Highway Rules and Regulations
Fees, taxes, licensing, and other regulations can factor into the shipping cost. Options like outsourcing deliveries to other trucking companies that aren’t affected by specific rules put forth by the government are good for profit sharing and a healthy way to keep the supply chain going smoothly.
Vehicle Maintenance and Upkeep
Maintenance, repair work, and safety regulations can get expensive for large fleets. Dividing large shipments across numerous vehicles that travel shorter distances with a lighter load is one way to reduce excessive wear and tear on trucks.
Delivery Delay and Disruptions
Delays and missed deliveries can result in returns, claims, and lost profits. With technological advances, companies can track deliveries in real-time and keep tabs on where shipments are at all times, and they can make in-transit adjustments as needed to help ensure cargo arrives on time.
Traffic Congestions and Delays
Local traffic, road work, and other delays can extend delivery times and add to costs. A 3PL partner can help calculate alternative routes that avoid traffic congestion and road construction, increasing the likelihood of on-time deliveries.
Disasters, emergency shutdowns, and weather damages can increase shipping costs since delivery dates will likely be pushed back. However, using real-time data from 3PL companies can help shippers strategize better routes that will help maintain or even increase the trucking company’s profit.
Outdated Communication Methods
Communication is a vital part of the supply chain industry. Companies need to employ strategies like push notifications, alerts, and instant messaging to let their employers and customers know where their delivery is at all times.
Equipment Rental Expenses
Some loads require special tools and equipment that add to delivery and shipping costs. Equipment like reefer trucks or forklifts can be rented out but can cause the cost of shipping and lower the trucking company’s profit. Using a freight reefer truck or one with a flatbed already pre-installed is better to save money on rentals.
Poor Back-Office Management
Lack of office management can lead to mismanagement of records and introduce errors. Having essential documents strewn around the office is a small but impactful issue that can cut the trucking company’s profit margin. But now, technological advances allow companies to digitize and create electronic documents that freight management parties can access through the web or mobile devices. Truckers have access to shipment documents, licenses, and permits at all times; if authorities ask to see them, truckers can just pull the docs up on their smartphones.
Slow Payment and Poor Cashflow
How much trucking companies make is determined by how fast they make deliveries and how well they handle cash flow and trucker payments. Most companies pay truckers by delivery. But these rates aren’t fixed as they will change with each delivery. But giving truckers hourly pay will keep rates predictable and automated, so drivers are not concerned about not getting their money on time.
Boost Trucking Company Profit Per Truck With AMX Logistics
At AMX Logistics, we are on the truckers’ side and are always looking for ways to increase the trucking company’s profit margin. As the market continues to evolve, companies must adapt accordingly. AMX logistics provides state-of-the-art technologies, real-time visibility and data, and other resources that enable shippers, carriers, and drivers to do their jobs efficiently. Connect with AMX Logistics to learn more about how you can increase your profit margin.