TruckExec

Fuel Economy Tips

 

  Guest Columnist

 

  Glen Sokolis

 

  President

  Sokolis Group

 

 

When it comes to fuel economy many companies may not know where to start. Newer hybrid fleet vehicles may initially be too costly. Fuel economy can be a fairly simple task for any company; one just has to know what to look for. Below are a few very important tips that will improve the efficiency of fuel for any vehicle.

 

Routine maintenance or preventative maintenance can greatly impact the way a vehicle runs. Each truck should be serviced according to the recommended intervals from the manufacture. This will catch any future problems and keep the vehicle running at top condition, reducing the strain on the engine when hauling. The preventative maintenance would include checks on tire pressure, brake checks, tire alignment and balance and vehicle diagnostic. Also, check for algae growth in the fuel tanks and lines that will clog and prevent fuel from flowing properly. Keeping it like new will make it run like new.

 

Reduce idling, as simple as that sounds it is so true. An idling vehicle will waste up to one gallon of fuel for every total hour. That includes warm up time, of which is unavoidable in some colder areas. A driver may make 10 stops in a day and if the truck idles 6 min at each stop, right there is almost a gallon of fuel gone. Idling could also be avoided by having electronic logs that will monitor the time a truck idles and the problem can be assessed and prevented for future trips.

 

Driver training is also one major way to get in step with fuel economy. A driver that is rough when shifting gears or drive at excessive speeds are impacting the effectiveness of all your hard thought efforts for efficiency. Simply driving the recommended and posted speed limit will help with the process. When the operator of the truck understands his actions on the road will affect the cost of fuel and thus the bottom line, driving at sensible speeds may not seem like a bad idea.

 

Fuel management is also a way to control with fuel economy. Fuel management will be sure that drivers fill up at proper locations to optimize their routes, or even set up on site fueling. Coordinating better discount prices to for fleet fuel cards too. Fuel management would also help with assessing which, if any, fuel additives would be needed and again be there to help negotiate those prices.

 

In the end fuel economy is a careful blend of the above, and when utilized at their best the savings could be great.

 

Glen Sokolis, President of the Sokolis Group, has over 20 years of fuel management experience working as both a buyer and seller of diesel fuel and gasoline. He has successfully help hundreds of companies procure billions gallon of fuel over his career.  Over the years many organizations have asked Glen to be a special guest speaker, writer or panel expert.  He has led his company to be a leader in helping companies outsource their fuel program to his company.  He can be reached at gsokolis@sokolisgroup.com or visit www.sokolisgroup.com for more information.

Lessons Learned - What the Recession can Teach Truckers

 

   Joe White

   CEO

   CostDown Consulting

 

 

 

In the video ‘Developing a Post-Recession Game Plan' I discuss specific resource and revenue planning strategies carriers should employ today that anticipate and prepare their companies for capitalizing on a healthier economy tomorrow.

During a recession, carriers shed equipment and drivers to offset falling revenues. When this current recession will end is much debated. What is not debated however is that it will end, and when it does, carriers need to be in a position to quickly increase their capacity to capitalize on increased demand and higher freight rates.

What I don't discuss in this video is a planning activity carriers should embrace after the recession has ended. That activity is called ‘Lessons Learned'.

The recession provides a great learning opportunity for those carriers that survive; particularly for those that ask themselves: "If I knew in the 1st quarter of 2008 what our economy would be like these next 18 months, what would I have done differently?"

CEOs of trucking companies looking to minimize the impact of a future recession should analyze the aspects of their operations that have provided the biggest challenge in surviving the current recession. Common areas of challenge include:

* Cash Flow
* Securing Credit
* Downsizing
* Too Much Equipment
* Shrinking Networks
* Rate Wars
* Benefit Reductions

While analyzing these challenges, think about how they could be managed differently during a strong economy so that your company will be better positioned to survive the next recession.

For example, in the case of Cash Flow a company could use strong revenues from a healthy economy to build up much larger cash reserves than what has historically been allocated. Other activities could include reducing total debt, being more aggressive with accounts receivable and keeping an ‘in-a-recession' mentality about budgets, capital expenditures and inventory levels.

The Lessons Learned exercise should involve all departments and all department heads along with a representative group of your best field managers. Use their collective experience and intelligence to identify your recessionary challenges and develop strategies to diminish their impact next time around.

Recessions are part of a normal economic cycle. It is the economy's way of shaking out the excess and keeping inflation in check. We will get out of this current recession. We will someday enter into another recession.

Carriers that understand the value of analyzing their past to improve the performance of their future will be the organizations most likely to survive the next economic downturn.

 

Post-Recession Revenue Plan

Outside of short term survival, the biggest risk to a trucking company operating in a recession is how it is positioned when freight levels return. 

 

Recessions create a magnetic-like attraction between trucking companies anxious to secure additional revenues and shippers anxious to bid their business to lock in low rates for long periods of time.  As a result, truckers looking for top line solutions to bottom line problems bid too low for too long.

Here’s the question CEOs should ask themselves that best frames the issue:  “When the economy rebounds and capacity tightens - how much available fleet will I have uncommitted to capture freight at higher rates?”

The economy and related freight levels will improve gradually and that creates a dangerous temptation – fill up all the idled trucks as soon as possible.  Success with this strategy will only keep a trucking company’s rate structure low during the anticipated upcoming boom years of under capacity and higher rated freight.  

 

The solution is to have a formal revenue plan and the fist step in developing that plan is to map existing freight businesses on a timeline that includes how many trucks are associated with each piece of business and when those contracts expire.  That will provide insight into how much capacity will be available at specific times in the future.

 

Bid new business carefully, particularly when it comes to a time commitment.  For longer term contracts, continue to bid aggressively but insist on adding a truck tonnage escalator to your annual CPI increases that kick in when freight levels exceed a certain ceiling.

 

Finally, bid out your uncommitted capacity in layers with each layer providing higher revenue per mile.  If, for example, over the next year-and-a half you forecast 175 trucks will be available, offer the first 75 at $X/mile, the next 50 at $X + 5% and so on.

 

Our economy will bounce back and when that happens, trucking capacity will be in high demand.  After months, possibly years of depressed earnings, reducing the temptation to grab as much freight as possible as quickly as possible will require a lot of discipline.  Truckers able to muster that discipline will be rewarded with years of possibly record breaking profitability thanks to the insight of their CEOs and their commitment to long term revenue planning.

 

-- Joe White -- TruckExec Publisher / CEO-CostDown Consulting

The Trucker's Lament: "I've Cut all I can Cut - What Next?"

Truckers around the county have reduced staff, cut costs and eliminated all but the most necessary of capital expenditures as they prepare for a prolonged and painful recession marked by tight credit, reduced freight and excess industry capacity.

 

Profitability as the primary operating goal has been replaced by survival as many – too many - of our industry’s once financially sound Truckers lament: “I’ve cut all I can cut – What Next?”

 

For most, the answer to that question can be found in an opportunity few Truckers have yet to capitalize on – improved employee, fleet and cost performance through development of an effective Performance Management Program.

 

Before outlining the four steps required to develop a Performance Management Program, let’s understand the targeted benefits of such a program.  Imagine the positive impact on your operations if everyone in the organization improved individual performance by an average of just ½ - 1 percent.  What would happen to your bottom line if key performance areas such as Laden Mile, Driver Productivity, MPG and Maintenance Cost per Mile all improved by just ½ - 1 percent?  That’s the mission of Performance Management, to elevate the performance of your employees in those key areas that most impact profitability.

 

A Performance Management Program is a program that uses performance goals, defined activities, performance monitoring and mentoring, and financial incentives to improve the baseline performance of employees and thereby improve bottom line results.  Put another way – you provide employees the goals, tools, direction and reward necessary to elevate their performance.

 

There are four basic steps required to develop an effective Performance Management program.

 

STEP 1 is identifying Key Performance Indicators (KPIs) and establishing individual performance goals for each.  KPIs are the areas of your operations that most impact profitability such as those listed above (Laden Mile, Driver Productivity, etc…).  

 

STEP 2 in developing a Performance Management Program is to Define the Activities employees should incorporate into their daily routines that will ensure they make their goals.  It is critical to the success of your program that the most effective activities are identified and standardized across the organization. 

 

STEP 3 is Monitoring and Mentoring.  Companies managing elevated employee performance need the ability to quickly identify who in the organization is having problems making goals so that they can provide support and coaching.

 

STEP 4 is providing Financial Incentives.  Unquestionably, employees are motivated by money and providing a reward for goal obtainment is the most effective motivational tool in a Performance Management Program.  Keep in mind, employees that make their assigned goals have improved individual performance over prior period and thereby improved bottom line results.  Financial incentives are funded from a portion of the savings goal obtainment generates.

 

Performance Management is not a new concept nor is it just for lower-level employees.  CEOs of large companies, regardless of industry, often have employment contracts that provide significant bonus opportunities for meeting specific goals.  The success of linking financial reward to goal obtainment to increase profitability has long been recognized and embraced by the business community. 

 

These same companies often integrate their Performance Management Program into their Business Plan by defining employee KPIs and making assumptions about what percentages of those goals will be met.

 

Surprisingly, most trucking companies have not established a Performance Management Program.  I say surprisingly because as an industry we are quick to embrace technology and provide driver training to increase performance and cut trucking costs but somehow have failed to recognize the huge bottom line potential of providing field management employees pay for performance opportunities.

 

Trucking in a recession is difficult yet after all of the cost cutting is done, we can’t lose sight of the fundamental fact that our day-to-day operations are run by Terminal Managers and Driver Managers.  Each one of them makes literally hundreds of decisions every week that impact the cost and profitability of our organization. 

 

Doesn’t it make sense to provide the employees that actually manage our business the goals, direction, resource support and financial incentive to help and encourage them to excel?

 

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If you would like to learn more about how Performance Management can improve the financial results of your trucking company, visit our web library and view CostDown Consulting's PowerPoint training presentation:  Bottom Line Improvements through Performance Management. 

 

--Joe White - -TruckExec Publisher/ CEO CostDown Consulting

Teamsters: Prevention and Preparation

 

With the November election placing Barack Obama in the Oval Office and increasing the Democratic majority in Congress, we are virtually guaranteed that the Employee Free Choice Act will soon become law.
 

The Employee Free Choice Act will require that if a majority of a company’s employees sign authorization cards, the company must accept the union.  Current law provides that secret ballots first be held to determine if a majority of employees want to join the union.
 

Secret ballots frequently result in ‘wins’ for the companies as individual employees are free to vote their true conscience, without fear of peer scrutiny or public scorn.  General consensus is that loss of the secret ballot will allow unions to spread rapidly throughout trucking and other key industries.

There are two strategies truckers need to develop in response to the threat of Teamster Unionization: Prevention and Preparation.

Prevention deals with the actions you take today to improve the odds that your drivers will not want to sign authorization cards.  Preparation deals with identifying and protecting critical aspects of your operations from unproductive work rules that may come as a result of unionization. A brief overview of each strategy follows.

Prevention

The good news for many trucking companies is that prevention strategies overlap ‘driver friendly’ retention strategies so some of the required actions may already be in place.  A sound Prevention Strategy focuses on countering the promises Teamsters typically make during the recruiting campaign.  A few examples include:

        
Teamsters promise higher wages: 

o        Maintain competitive wages, medical benefits, 401K contributions and bonuses.

o        Communicate often to your employees on just how competitive your compensation is.

        
Teamsters promise to protect their members:

o        Have published policies and enforce them fairly amongst all employees.

o        Provide a forum for employee complaints to be discussed and acted upon where necessary.

o        Make sure disciplinary action and discharges are investigated and administered fairly. 

o        Establish performance goals for employees that are achievable but consistent and hold everyone to the same standards.

        
Teamsters promise to favor and protect seniority:

o        Develop a system where senior drivers receive additional benefits while not jeopardizing work or earning opportunities for junior drivers.  One of the disadvantages of unions is that junior drivers are often forced into frequent layoffs and consistently receive the worst loads and equipment.

o        Offer promotional opportunities by seniority where possible such as Driver Trainers, Driver Mentors or Dispatchers.

Preparation

Regardless of how comprehensive your Prevention Strategy is, you need to prepare for the possibility that your drivers may someday vote in a union.  A Preparation Strategy is designed to identify all the areas of your operations that need protecting in the event of unionization.   Examples include:

        
Work Rules – Teamsters will want to define how loads are dispatched, how equipment is assigned, etc…

o        Look at current procedures for assigning work and equipment to identify those that must be protected.  For example, new trucks every year should go on two-shift operations to minimize after hour breakdowns and allow for managing lease constraints on odometer miles.  Therefore new trucks can only be assigned by seniority if senior drivers bid those runs.

o        Identify work rule changes that could improve productivity and make them now; before they have to be negotiated.

        
My Work – Teamsters will attempt to claim all work assigned to the company as theirs.   

o        Establish a separate (new corporate identify) brokerage company without assigned driver employees and build a history of freight being tendered directly to them and then brokered out to your company and others.

o        Keep records of load exchanges with other companies (both union and non) to benchmark and protect how much work is exchanged.

        
Eligible Members – Teamsters will want to include all your employees into their bargaining units; including dispatchers.

o        Emphasize and increase the ‘supervisory content’ of your office staff, especially in the areas of discipline and directing their work to increase the likelihood that they will not be eligible for unionization.

o        Explore outsourcing dock jobs and clerical work currently being performed by low wage employees or part timers.

o        Reexamine your owner-operator strategy.   Owner-Operators are non-employees and in theory, not subject to unionization.

        
Protected Employees – Teamsters will fight all disciplinary and discharge actions grieved by their members.

o        Once unionized, it will be hard to get rid of unproductive or unsafe drivers.  Do it now.  Replace lazy and unsafe drivers.

o        Work on a progressive discipline schedule for your company and implement it before unionization. 

When developing your Prevention and Preparation Strategies, there is one simple fact you need to keep in mind.  Unions exist because companies treated their employees unfairly and paid them poorly.  When developing your strategies, make sure you keep your drivers interests in mind.

 

-- Joe White -- TruckExec Pubisher/CEO CostDown Consulting

Improve Cash Flow

Fourth Quarter 2008 has found many trucking companies having difficulty securing credit.  Those fortunate enough to have access have found the costs of borrowing have skyrocketed.

In our industry, receipt of revenue trails expenses by 30-90 days;  a difficult challenge even in a healthy economy due to the high costs and frequent payment demands of fuel and labor. 

As a result, managing Cash Flow - cash collected vs. cash paid out in a certain period - has become a survival factor for most carriers.  Here's an outline of activities that can help carriers improve cash flow :

• REDUCE COSTS - audit operations for cost reductions.  Lowering expenses automatically improves Cash Flow.
• MANAGE WAGES - reduce and defer payroll obligations where possible.
• IMPROVE SPEED OF COLLECTIONS - Reducing the number of Days Outstanding on Collectables will get you your money sooner.
• REDUCE INVENTORY - lower inventory levels means less money sitting on the shelf.
• MANAGE ACCOUNTS PAYABLE - extending credit terms and taking advantage of discounts will also improve Cash Flow performance.

For a more detailed description of activities you can perform to improve Cash Flow, read the  Managing Cash Flow  white paper in our web library.