How did Groendyke maximize profitability, customer service with SMC³’s costing model?
Authored by SMC³ on June 20, 2018
Groendyke Transport’s drivers haul a significant amount of goods for their customers, but the truckload carrier recently ran into difficultly when it tried to establish the profitability of each client. They wanted to know what shipments, transported through their 30 terminals, represented “good freight” and which loads in the supply chain were unprofitable.
Using the Truckload Cost Intelligence System (TL/CIS), an activity-based freight costing model from SMC³ that lets carriers analyze transportation costs at the shipment level, Groendyke Transport established an operating ratio for each customer.
By using each carrier’s actual operating data, the SMC³ technology solution shows carriers the true cost of the freight they move on a daily basis. The result is a unique set of data points – not a costing average.
“Costing each load by location, equipment type and other variables requires balance,” said Colin Abernathy, Groendyke’s director of performance and business analytics. “TL/CIS is the looking glass that gives us the vision we need to see what’s happening in our operation and to identify cost and operational issues that impact profitability.”
With a decentralized P&L model, Groendyke Transport requires data and reports so individual terminal operators can see how their business impacts the profitability of lanes and loads.
“We were applying a shoot-from-the-hip approach,” Abernathy said. “We used native, institutional knowledge, and different methods at each terminal, without any cost analysis or pricing standards. Looking at customers and lanes for specific profitability was less precise because of this practice.”
A recent Groendyke customer in Tulsa, Oklahoma, needed to make a delivery in Colorado, and this job was priced by Groendyke based on the assumption that its Tulsa location would handle the majority of that customer’s freight. In the end, other terminals were also involved. This poor operational decision resulted in a different operational and cost basis than what was assumed when quoting rates.
“We realized that our non-standard way of rating loads without any documentation was impacting profitability,” Abernathy stated. “We were interested in finding a tool to help identify and see our true costs and move toward a standardized way of pricing by looking for issues in our current cost and operations management procedures.”
Aaron Harmon, the carrier’s vice president of performance and business analytics, added: “Being well informed by data can also help customers be more productive. Instead of hauling a load 200 miles and returning empty, we can find additional volume without adding cost.”
With each load costed using all of the variables established in TL/CIS solution, Groendyke Transport has been able to determine rates based on profitability. Today, the carrier is using SMC³’s freight costing tool for pricing and to quote new business, but also to improve customer service.
“Our customers have responded favorably to being well informed by the data in TL/CIS, and it has helped them in the long run,” Harmon said. “It allows us to work together to explore additional business from an existing customer without adding cost, and that makes their operation more productive.”
SMC³’s Truckload Cost Intelligence System, a comprehensive cost and profitability solution for carriers, is designed to provide a number of tools based on baseline data generated at the individual load level. To learn more, read the Groendyke case study here and contact a sales representative today at firstname.lastname@example.org or call 1-800-845-8090.