A Key Performance Indicator (KPI) for trucking companies is a metric that tells the staff more about how their operations are helping or hurting their bottom line. Known as Key Performance Indicators due to their unmistakable importance to an organization’s longevity, truckers need to pay attention both to what their KPIs are and how they change over time. Advanced Commercial Capital provides factoring for companies that prefer to have timely cash flow, which is why we encourage everyone to get a handle on how they work.
Cost Per Mile
How many miles a truck drives is easy to calculate, though most truck companies will break it up into loaded and dead-head categories. The loaded miles are known as those where the truck is carrying cargo, while the dead-head category refers to the return journeys. Clearly, the cost of loaded miles can vary throughout the journey, depending on whether the truck has multiple stops. (The tail end of a journey may not carry the same costs as those at the beginning, but it will have an effect on your total profits.) Dividing miles may not always be perfectly precise, but there needs to be a solid estimation as a jumping-off point for future calculations.
Gross Profit Margins
A gross profit margin refers to how much the company makes after deducting straight costs, like wages, maintenance, and fuel. Net profit margins refer to how much the company makes after deducting all expenses, which can include anything from annual taxes to business insurance. Assessing a gross profit margin comes down to having all of the right numbers, so it’s important to think about how much is spent at any given time on standard expenses. For instance, if you service all trucks at one time during the year, you can average out the costs to get a better idea of your gross profits per month.
Driver Turnover Rate
Driver turnover can often cost companies more than they realize. It’s not merely the cost of posting a job ad or calculating the amount in wages it takes to sort through the applications, run the interview process, etc. When one driver leaves, all of their training goes with them. If they had any relationships built up along the way, those bridges may be burned too. Though an extremely important KPI for trucking companies, the full costs of turnover rates aren’t always apparent until after a company gets into financial trouble.
While you’re considering the turnover rates, you should also think about employee satisfaction as a whole. The more happy and engaged employees are, the more productive they’ll be. If you’ve noticed that workers are ‘checked out’ to a certain extent, it may be worth more to incentivize them than it is to ignore the issue.
Safety Performance
Trucks are on the road day after day, so their safety performance will have a lot to do with how much every trip will make. When it comes to safety, ‘almost’ certainly does count. The more near-misses on the road, the more likely it is that the driver will have a mishap in the near future. Truckers may feel like they’re in unwinnable situations when it comes to their livelihoods: they have to be well-rested enough to function, yet they won’t make any money if they’re not on the road.
Careless drivers may be a great way to bolster short-term revenue for all involved but, overall, it’s a losing strategy. Improving this metric may involve anything from holding a one-time defensive driving class to entirely revamping the schedules of drivers. It seems like too much effort is being put into this one KPI for trucking companies, just consider what a single lawsuit would cost.
Freight Claim
It’s impossible to prevent every potential snag on the road when it comes to cargo. Sometimes the truck tilts at just the right angle in a way that could never have been predicted. However a company settles damage or loss to goods incurred on its trucks, though freight claims can cost trucking companies quite a bit if they’re not careful. Drivers are not always diligent when it comes to loading and counting their freight, and brokers and shippers are well aware of this. Pre-trip inspections, supervised loading, official reports, photos, well-stacked freight, and better driving can all go a long way when it comes to improving this KPI for trucking companies.
Equipment Utilization
Equipment refers to your trucks, but it can also refer to any ancillary gear (e.g., dollies, straps, etc.) used to make the treks. Like many of the other KPIs listed here, there’s not always an easy way to determine the exact degree of wear and tear. For instance, if a driver is particularly hard on their brakes, this may not come to anyone’s attention until the brakes start to squeak (or, worse, when they start to lose their potency). The best way for truckers to measure this KPI is to look at their past records for spending trends. It’s likely that repair or replacement costs are worse for certain categories than others, which can give decision makers a better idea of whether the business can get more value from each asset.
KPIs and Cash Flow
Trucking companies don’t always boast the highest profit margins, but there is a good degree of wiggle room between the highs and lows. The best trucking companies are ones that operate with a keen eye on how their resources are being spent on any given day. They see not only how their short-term expenses are costing the company, but what can be done in the long-term to rein in their budget.
At Advanced Commercial Capital, our job is to get trucking companies the money they need to pay their staff, bring in new clients, and complete all maintenance on time. From fuel to insurance, we specialize in transportation factoring because we know how important it is for our clients to have someone to call. To learn more about our services, which do not include long-term contracts or setup fees, contact us today.