[Infographic] What’s eating your profits and how to use market volatility to stop it

Jason VanoverFreight Market Blog, Infographics

(Graphics created by Emily Ricks)

Carriers frequently find themselves frustrated when costs eat away at their profits and they have limited pricing visibility. As reported by Supply Chain Game Changer, “certainly there are many factors that can cause a company to apply intense pressure on the supply chain and other functions, to reduce their costs.  Financial losses or declining profitability certainly make cost-cutting a priority. A poor or negative cash position can cause executives to look at how to reduce expenses to survive. And competitive pressures and benchmarking results will also add to the need to reduce costs and/or be more productive.” However, with proper knowledge and utilization of market volatility, carriers can bend these troubles in a way that benefits them. Market volatility insight presents value to carriers that learn to recognize how trends lead to challenges and why those challenges represent opportunities for improvement. 

Top cost centers for trucking carriers

The potential for market volatility makes cost centers more worrisome for trucking carriers. Some of the top costs within trucking include fuel costs, outsourced brokerage payments, supplier costs, idle time, insurance and more. These trucking costs all present an ongoing concern for carriers, and unless carriers are prepared, they will lose sight of the bigger picture. At the same time, seeing the changes within these cost contributors, such as the sudden decline of available loads within a market, can help a carrier recognize the issue and divert assets to avoid unnecessary empty backhauls. That’s the whole point, but the value of market volatility insights continues to grow through other use cases too. 

Maximize visibility into actual trucking costs

One of the keys to curbing these rising costs is to maximize the visibility of operations through active benchmarking and capturing real-time data about actual expenses. Carriers should be aware of which costs are affecting their company profitability the most. For instance, another key to increasing profit margins and lowering costs is to monitor drivers’ turnover rate and the percentage of revenue paid to brokers, among other leading freight KPIs. Increasing driver compensation and moving toward a more appealing work environment can result in long-term employees who bolster the company’s quality and reduce the costs of hiring for carriers. In essence, gathering data into all costs through visibility improvements can go a long way in helping a carrier stay profitable.

Avoid empty backhauls with optimized asset allocation

Avoiding empty backhauls helps carriers maximize their profits. Through proper knowledge of market volatility, carriers can optimize their asset allocation to avoid unnecessary and expensive empty backhauls. This is done when carriers send trucks to areas where the market provides a higher chance of getting a backhaul load. Meanwhile, there may be times when an empty backhaul is inevitable. However, carriers can again stay strategic by reducing the amount of waste associated with empty backhauls on a per-mile basis. Using freight metrics, a tool such as SONAR’s Lane Scorecard helps provide carriers with accurate and detailed information regarding market volatility and which lanes have a surplus or absence of available loads and assets.

Use technology to make strategic decisions

The use of technology has proven to benefit carriers in making strategic decisions. Market volatility is promptly named, so carriers should be sure to utilize the right technology to keep track of it. Beneficial technology for carriers appears in many forms, but it is bolstered with the inclusion of a diverse carrier network. For instance, working with more brokerages, asset-lite trucking companies, or even owner-operators can effectively increase carriers’ ability to outsource capacity, allowing the original carrier to fulfill its obligations to shippers. Regardless, these technology-driven processes enable carriers to make the best decisions to improve profitability and effectively preempt market volatility

Accept tendered loads that possess competitive pricing

Additionally, market volatility insights can be utilized to make better decisions regarding carrier rates. Using freight indices assists significantly in finding the most appropriate pricing ranges. Such indices offer information regarding maintenance expenses, empty mile percentages, operating ratios, and many other opportunities to lower freight spend through proactive pricing strategies. And in combination with predictive rating tools, carriers can make a better decision on which loads are the most competitive (read “lucrative”).

Use analytics to measure the performance of your network partners continuously

Since profitability depends on overall productivity, improvements within the network will naturally lend themselves to improved profit margins. However, it all depends on seeing the changes within the performance of all partners. For instance, extensive delays while attempting to pick up a load for a given market may result in fewer loads picked up. If lane volatility rises too suddenly, such as a sudden drain of capacity due to increased demand from ocean imports, carriers will be scrambling to find a solution. By continually measuring different partners’ performance within any given network, including their typical expectations for pick up, delivery and more, carriers can boost their profits and improve their decision-making. And in turn, that amounts to figuring out when to award shipper-of-choice status, which loads to accept and when to simply say “no” to a tendered load.

Gain insight into market volatility with freight data at your fingertips

Market volatility insights are essential for carrier managers who want to understand their current strategic position and maximize profitability across the enterprise. With the right technology and assistance, profit margins will increase while customer service levels rise in tandem. Get started by requesting a FreightWaves SONAR demo today, or simply click the button below.