From regulations and equipment availability to employee relations and shipper needs, trucking professionals must possess vast knowledge to make sound business decisions. One of the most critical pieces of this knowledge for carriers is their network and the realm in which they operate.
This series will cover three vital sections of a carrier network: geography, current customers, and the market (or potential customers). The first article will discuss geography, though all three sections will offer takeaways to help you define what you have and decide what you need to improve your profitability.
The Importance of Geography to Your Network
Most carriers assume they know their network as they interact with it daily. Still, industry professionals must dive deeper into these details to understand which parts of their business are most profitable and which require more attention. A few cents per mile can be the difference between a business’s record profit or loss. Once recognized, carriers can map out ways to improve the less profitable operations and help enhance their bottom line.
Step One: Define What You Have
Most transportation companies define their geography on a state level or generically by referring to a region, such as “east of the Mississippi” or “the South.” That description suffices for a website or an initial shipper discussion, though a more granular definition is needed to define your network fully.
Three-digit zip code groupings are a logical starting point for this, as they provide an avenue to understand an area's metrics while being intuitive on a geographic level.
Then, you can look at your business’s performance on an area-to-area basis (lanes). As such, some lanes will operate well, and others may be more challenging. Knowledge is power to you and your organization; knowing what geographic lanes work smoothly in your network is key to helping improve overall network performance.
Step Two: Decide What You Need
Consider volume when deciding what you need on a geographic level. There are several paths to take: adding volume to the lanes that perform well, adding new volume to help boost poor-performing lanes, e.g., by replacing empty moves with loaded ones, or placing volumes for new areas that will positively impact current network areas. Your operations and company data will dictate what volume changes are most feasible.
Step Three: Know or No
Now that you have defined what you have and what you need, the final step is to resolve which areas to keep in your network (know them) and which areas to eliminate (no them). This comes down to your data: carriers should closely examine their geographical information to help make decisions. Underperforming areas may need to be removed, customers may need to be notified to leave specific lanes, and you may need to monitor loads to ensure they remain out of the network.
How Forvis Mazars Can Help
Through our proprietary Freight Network Navigator™, we analyze your operational and financial data to help you effectively gauge your business’s profitability from a geographic view, down to the individual customer lane and load level. Gain access to market data to help you benchmark against competitors, evaluate and accurately price new opportunities in real time, and identify the rates you need to achieve target operating goals.
Chuck Jorgenson, senior manager of Transportation & Logistics Profitability Consulting, has more than 30 years of industry leadership and experience. He consults with clients and arranges ongoing meetings to discuss their profitability analysis reports and craft action plans to help improve their operations.
Through relationship building and long-term services, Chuck and our professionals bring an industry focus combined with assurance, tax, and consulting experience to help fuel you with strategies that may drive your business forward and deliver results.
Want to know more? Contact Chuck to request a demo of the Freight Network Navigator™ and sign up to receive transportation FORsights™.