This three-part article series delves into the vital sections of a carrier network and how each section can impact profitability. Each article offers key takeaways to help you define what you have and what you need to consider to improve your profitability. The first article focuses on the importance of geography on your business performance. This second article explores utilizing data to help guide decisions about current customers.
Knowing Your Current Customers & Their Importance to Your Network
Knowing your customers is a basic part of business; most trucking companies have this knowledge to varying degrees. Details such as rates, volumes, trailer needs, payment history, and general ease of doing business with a customer are known commodities for larger shippers. Breaking down these details to a more granular level is key to boosting your freight network and developing action plans to help improve overall network profitability.
Step One: Define What You Have
A typical trucking company knows who their “best” customers are in the network. “Best” can be defined in many ways, some quantitative (rates or quick load/unload times) and some qualitative (drivers like picking up or delivering at the facilities, long-term customers, etc.). While these factors are critical, knowing how profitable each customer is at the lane level is key to a sustainable network.
Even the most profitable customers can have poor operating lanes, and the least profitable ones can have well-performing operating lanes. That situation illustrates why it is crucial to understand the data to determine the profitability at the lane level. Ranking each customer on a lane-by-lane basis allows operations to assign capacity to more profitable lanes and assist with developing profit-centered commitment decisions.
Step Two: Decide What You Need
Rate is important but it should not be the only consideration. Getting to the pickup location and the subsequent loads and destinations after delivery are key factors for enhancing customer profitability in your network. Adjusting commitments up or down on lanes, developing new lane volumes, and replacing lower-paying broker loads with engineered contract rate targets are all actionable solutions that can help improve network profitability.
Step Three: Know or No
Knowing how customers rank compared to other options in your network, and understanding adjustments needed to improve profitability, will lead to effective conversations with your customers. These might include rate increases for the customer to retain your capacity, rate decreases to increase your capacity committed to the customer, or “horse trading” volumes on lanes. If better options are available and the customer is unwilling to negotiate, it might be time to “no” them on challenging lanes or altogether. Knowing the alternatives for a low-operating customer or lane will help give you conviction or pause in the “no.”
How Forvis Mazars Can Help
Through our proprietary Freight Network NavigatorTM tool, we can analyze your operational and financial data to help you effectively gauge your business’ 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. Our consultants can fuel you with strategies that can help you deliver improved operational results to outpace your competition and accelerate your path to sustainability.
If you have any questions about our Transportation Profitability Analysis & Network Management service or want to request a demo of Freight Network Navigator, please contact Chuck Jorgenson.