Trucking Companies – Do Miles Equal Profits?
By: Robert Riiska, Senior Managing Director and Juanita Schwartzkopf, Managing Director
Measuring performance in the trucking industry is critical to forecasting success – or failure. According to The Journal of Commerce Top 50 Trucking Companies list, the largest trucking companies set a revenue record in 2012. The question is – did the record revenue result in record profits?
Trucking companies typically capture data regarding the loads, drivers, miles, etc. However, how that data is compiled and used to drive performance makes the difference between success or failure in this industry.
How does a stakeholder measure performance?
Over the past five years, Focus Management Group has worked with a variety of trucking companies to improve their performance and their relationship with their lenders. Key to success has been implementing a key performance indicator (KPI) report and using the information to better manage performance.
Most trucking companies will immediately tell their stakeholders they are using KPI reports to measure performance and determine changes required to improve operating results. Focus has found that first, there is a significant range of accuracy in how data is gathered. Then, second, Focus has found that many companies track data, and file the papers or emails away – never to be used.
To successfully manage a trucking company today, utilizing a monthly and weekly KPI is critical for success. The example below is a monthly KPI sample. Please click the image to view.
This KPI report tracks operations and sales performance in key areas. This sample report is set up for monthly tracking. However, weekly tracking is ideal. The weekly tracking may be an abbreiviated version of the monthly tracking.Tracking, looking for early indicators of potential problems. Click on the image to view.
Once this monthly and weeklytracking is established, the results direct managementand stakeholders, to areas requiring further review and performance changes.
A Case Study
Recently a trucking company asked Focus to independently verify its 52 week operating plan and develop a balance sheet restructuring strategy. Upon review of the results of the weekly cash flow, it became apparent there were multiple opportunities for operating improvement. The company did not have adequate financing in place, and was rapidly losing liquidity and breaking loan covenants.
Once a KPI process was initiated, areas for operating performance were clearly revealed. This resulted in the company changing areas of its performance to help itself, while also asking the lenders to agree to a short term restructuring. Before this KPI process was initiated, departments within the trucking company readily explained away performance issues, or blamed other areas, timing, etc. All the usual excuses were used. Once the KPI process was implemented and a performance history was established, the excuses stopped and performance improvement happened.
At the same time, a weekly cash flow, including budget to actual performance monitoring, was initiated enabling the company to see how its cash was collected and spent each week. This approach provided insight into weekly and monthly cash need trends, and gave all stakeholders a cash performance measurement tool.
In this example, the lenders agreed to a short term restructuring, which allowed the company to initiate the KPI and weekly cash flow monitoring. This in turn resulted in changes which improved performance, resulting in the company being sold, and the lenders receiving a full payout. During the short term restructuring period, the lender received weekly operating performance and cash performance reporting, and was able to gauge the Company’s success in implementing the plan.
The trucking industry is full of statistics, data collection, and cash flow risks. Accurate performance tracking is key to success. But, this performance tracking must be used to manage the company, not filed away. Stakeholders should require weekly and monthly performance tracking, and use the KPI reporting process to drive the changes needed to improve performance.
To learn more about Focus’s capabilities in this industry please contact our Tampa Headquarters at (813) 281-0062.
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