Many trucking companies and freight brokers cannot capture their cost of purchased transportation. Some companies analyze cost one way; other companies analyze cost another way.
- Some are done very well
- Some are not done very well.
Cost analysis is not an exact science. Some software systems just assign cost to shipments, but they don’t accurately measure the cost. Some systems have numerous “bells and whistles”. However, the bottom line is the systems don’t accurately measure a company’s actual cost and profits of shipments that they transport.
There are very few programs that measure actual total cost, and even those programs don’t assign cost. In order to measure actual cost, each line item of expense, such as: driver’s pay, driver’s payroll taxes and benefits, fuel costs, repairs and maintenance on tractors and trailers, and all relevant cost should be measured separately and accurately.
Each line item should have its own unique set of cost formulas that measures the line item costs properly and independent from the other costs.
Ahern’s software program is a profitability program specifically designed for the trucking industry. For TL carriers, it can analyze:
- Revenue per mile
- Revenue per load per customer
- Operating ratio per load, per customer, per dispatch
- Fuel surcharge revenue- per mile, per mile, per customer lane.
It is tied directly into each client’s profit and loss numbers, so that it tells them exactly what they need to:
- Breakeven; and/or
- Be profitable on each dispatch.
The program is not a cost estimate or a benchmark.
- The revenue costs in each P & L are the carrier’s actual numbers.
- They include all direct and indirect overhead cost
The program can analyze:
- Individual loads
- Shipping points
- Rates for bids
- Trucks for drivers
- Company trucks
- Independent Contractors
In fact, the program will also allow you to do a “what if” scenario. Each segment can be reviewed for present and/or future loads (daily, weekly, and monthly).
Once the program is built, it can be loaded into a laptop computer and when a customer calls:
- You push one button; and
- Within 5 seconds, it provides a rate necessary to make a pre-determined profit.
For LTL carriers, it is very difficult to determine actual costs because there are drops, picks, weights, cross-docking, and line hauls.
Ahern’s program will allow an LTL carrier to analyze:
- Base rate revenues per hundred weight, per shipment and per segment
- Fuel surcharge revenues per hundred weight per shipment and per segment; and
- Compute cost and productivity separately for pick up routes, delivery routes, stops, cross docks, and line hauls.
The data also includes:
- Pounds per man hour;
- Load factors;
- Other productivity measurements.
It also has a “what if” capability for measuring the bottom line effect of any changes to rates, productivity, miles per gallon, business volume, and other items.
Again, these are not estimates or “benchmarks”. The revenues in cost are the actual numbers and include all direct, indirect, and overhead costs.
In reference to freight brokers and logistics companies. It is difficult for many freight brokers to determine their bottom line net profits on each customer. They normally have to rely on utilizing gross profit margins to determine:
- How much money they need from their customers; and
- How much money they can afford to pay their carriers.
Unfortunately, utilizing gross margins (only) can lead to errors. Ahern’s program is tied directly into an individual’s P & L statement. Therefore, it will calculate:
- The revenue that is needed from each customer to achieve a desired profit; and
- The amount that you can afford to pay a carrier while achieving the desired profit levels.
The information is presented in 3 ways
- Flat rates
- Rates per mile
- Rates per hundred rate
The program will further compute:
- Total expenses
- Bottom line profit dollars
- Profit percentage and operating ratios
- Gross margin dollars
- Gross margin percentages
- Provides a detailed listing of your actual cost
In Laymen terms, the software tracks profits as it measures the total cost of doing business. It computes the total cost of the broker operation for each load:
- Including the rates the broker pays the carrier and all direct or indirect and overhead costs
- It computes the margins the broker needs to cover these costs, plus target profits.
- It is so simple to use that it takes a few seconds to operate while on a telephone speaking to a customer/carrier.
- You push a button, and in within 5 seconds or less, you know whether you will make money or not on each dispatch.