Moving Words – Reduction
Written by Timothy Brady.
“The problem with a cost reduction strategy is that there is a finite limit. You can only get to zero.” – Eliyahu Goldratt (Israeli business management guru)
One of the greatest challenges facing any business is how to reduce costs without sacrificing service and quality. With a bit of effort, fortitude, and an ounce or two of tenacity, a business owner can turn this into an opportunity for more revenue and greater profits.
To begin the process, you must look at the way you’re currently operating your trucks. It is imperative that you decrease fuel consumption as quickly as possible. An argument can be brought that ‘time is money and miles driven takes time, so the faster my trucks go, the more money I can generate.’ While this sounds good in theory, in real world application it doesn’t work. All it will do is put you into the hammer lane to eventual financial failure, because the energy expended exceeds the energy required to accomplish a particular task.
In trucker-speak, this means when the cost per gallon of fuel reaches a certain plateau and above, the fuel required to attain a greater truck speed exceeds the costs required to make a profit. In other words, “Speed Kills Profits.” Dropping your cruising speed between 55 mph-60 mph will save you thousands of dollars each year.
Add to this a diligent maintenance program with emphasis on cutting resistance and friction: everything from greasing at proper intervals; correctly scheduled oil changes, overhead service, correct tire pressure and alignment; rear axles, transmission, frame, and suspension maintenance. As I stated in Driven 4 Profits ‘An Owner/Operator’s Guide to Keeping More of the Money You Earn’ (Brady and Klatzkin, E.A., Write Up The Road Publishing, 2003): “This machine (your truck), like all machines, has maintenance requirements that Will Not Be Denied! If they are ignored, there will be a significant price to pay for that arrogance. The truck driver and owner of the truck are the ones who are ultimately accountable for the results of the P.M. Schedule Program. The person or persons responsible for ignoring those maintenance requirements is responsible for any subsequent and catastrophic failures that result and the financial consequences. Remember, a mechanical failure of a maintenance-ignored truck will occur at the most inconvenient geographical and financial location. This statement is more true today than at any other time in my trucking career.”
And you can do other things to improve your bottom line when it comes to reducing fuel consumption:
- Cut your idling.
- The obvious point here is, if your drivers or you aren’t in the truck—turn the engine off.
- Consider a good arctic sleeping bag, 12v electric blankets, and carry those charcoal/sawdust base 8-hour warming packets.
- Look into installing an APU.
- Investigate any new fuel-saving technology.
- Don’t run truck engines if you or your drivers are in the truck and the outside temperature is between 50° and 75.
- Shop for your fuel way before you need it. You should subscribe to a fuel optimization program. Check the major truck stop internet sites each day before your drivers begin driving to see what fuel is costing along your route and plan a purchasing strategy for that day. With the wild up-and-down fluctuations in fuel prices today, this is necessary. You may need to adjust your plan each day.
- Purchase fuel based on the state pre-fuel tax price. Purchasing fuel based on the pre-tax price saves money in the real world cost of fuel. (All state fuel taxes are based on the number of miles you drive in a particular state. If you purchase more fuel in a state than needed for the miles driven within that state, the taxes you overpaid for that state are credited to your IFTA tax account and applied to other states where you didn’t purchase enough fuel to cover the miles driven within that state.)
- Plan your route of travel with the least number of obstacles that slow your truck down or stops it along the way (traffic lights, turns, mountains, construction, large cities with near-gridlock, rush hours, etc.).
- Convince other movers to conserve their fuel! The more people who are conserving fuel the lower the price will be, due to the laws of supply and demand.
One lesson we learned from the 2008 recession is that we can cut costs where we didn’t think it was possible. One word of caution: be sure as you cut costs, you don’t sacrifice quality of service. Quality customer service is what will maintain your shipper and account base, and this is your revenue foundation from which you expand your business We can’t control the price of fuel, but we can use what we purchase wisely.
“Sometimes it’s more difficult to achieve a 10% cost reduction than it is to tell people they have to achieve 50%. Small incremental steps block your view of doing something fundamentally different.” – Eckhard Pfeiffer (German businessman who served as President and CEO of Compaq 1991-1999)
