How Carriers improve Freight Profitability Analysis with Costing Technology
Authored by SMC³ on July 22, 2020
In the current environment, freight transportation providers are paying very close attention to the market because their capabilities are fluctuating drastically each day. The supply and demand equation is swinging back and forth, and lane balance has shifted with little warning.
Truckload and LTL carriers can gain an accurate measure of freight profitability by relying on the latest technology products. SMC³, with its Cost Intelligence System (CIS), is leveraging carrier driver, tractor and trailer data to apply accurate cost and profitability analyses. SMC³’s Vice President of Cost Systems Bill Shults will discuss CIS, and how freight profitability should be measured to properly account for balance and empty miles, in a webinar sponsored by TCA’s Truckload Academy.
Lane imbalance is, of course, nothing new. Moving truckload freight into Florida is a prime example of this fact; there will always be more freight routing into Florida than returning. There’s nothing a carrier can do about that. Carriers should account for this when they are analyzing loads that go into Florida, where the rates are high. Without using a CIS accounting approach, all of that freight would seem extremely profitable. And all the freight coming out of Florida would look unprofitable.
“You really can’t separate two such loads,” Shults said. “And the overall question becomes, when looking at those two loads, are you making money or are you losing money? You can’t look at one load in a vacuum. You have to look at everything a driver does.”
SMC³’s CIS develops and delivers a model of each carrier’s operations and service areas directly from their own financial data, mapped to SMC³’s unit cost categories, so that ongoing updating can be performed quickly and efficiently. The solution provides motor carriers with a unique tool that allows them to quickly, efficiently and accurately derive cost and profitability information from their operations.
“Identifying the round trips that move individual loads, and allocating costs on that basis, is really the key to accurate profitability metrics,” Shults said.
By using each carrier’s actual financial and operating data, the SMC³ technology solution shows carriers the true cost of the freight they move. The result is a unique set of data points – not a costing average. Carriers also use the activity-based freight costing model for deep operational analysis.
“Historically, many carriers haven’t been allocating costs according to these methods,” he said. “For every carrier we’ve talked with about CIS, this has been a new concept. We want carriers to know what it costs them to move loads and not have to rely on market rates, which may not be profitable for their operation.”
Freight is still moving, and people are still working, but the current market challenges haven’t gone away. It has never been more important to accurately calculate carrier profitability at the load level than during times of rapidly changing market fundamentals.
Register for the TCA’s Truckload Academy webinar on dealing with balance and empty miles in freight profitability analysis on July 23 at 1 p.m. Eastern. The session also includes Mike Sanders, director of pricing for Averitt Express.