One of the biggest challenges facing the commercial trucking industry is to reduce fleet costs in order to survive in a struggling economy. Many trucking companies offer cost reduction targets in percentage terms to the fleet managers, and leave it to the managers to devise strategies to achieve those goals.
Companies that fail to achieve cost competitiveness find it difficult to survive because they are forced to pass on the higher costs to the customers. Customers are highly cost-conscious today and are constantly looking for ways to reduce their transportation overheads. The challenge of cost reduction becomes increasingly difficult in a situation where the truck acquisition costs and fuels costs are on the rise.
Cost efficiency can be improved in the trucking business when the fleet operates on an optimal capacity level. Devising most productive routes, using the right truck capacity for a particular route, and operating the most fuel efficient vehicles to the maximum are some of the ways to cut down operational costs per mile.
Drivers who are trained in curbing fuel wastage can contribute significantly to overall cost reduction and this is important during a down economy and/or recession. Performance based driver compensation strategies can also help bring down the employee costs of a trucking company. Deployment of sophisticated software systems to achieve optimal capacity utilization and cut down wastages is also a very effective way to focus on cost reductions.
Procurement of new trucks, equipment, and replacement parts forms a major part of the overall costs in the trucking business. A commercial trucking company should be able to club purchases in such a way that it can negotiate better procurement prices with bulk orders. Secondly, the process of procurement should involve competitive bidding in order to achieve the lowest market costs in a transparent manner.
The second aspect of the procurement process is to choose trucks that deliver superior fuel economy. An optimal balance between the initial acquisition costs and the long-term fuel economy and operations costs must be drawn while choosing new trucks for the fleet. A cost-effective procurement policy will aim at achieving the delicate balance between costs of acquisition and operational costs. The competition, as you know, is fierce, so achieving this is absolutely necessary.
Financing costs should also be viewed as a part of the acquisition costs, and the company must try to find innovative ways for cheaper financing. Trucking companies should also consider the right timing for the purchase of new trucks and sale of used trucks from the fleet. The goal must be to sell off the used trucks at the highest price and purchase new trucks when the market is at its lowest point, in order to achieve the optimal cost realization for the company.