Freight network engineering improves carrier profitability by measuring the yield of loads, lanes, and customers within the full network and using that evidence to change pricing and operations.
Trucking is a business of pennies. With operating ratios near the line between profit and loss, cutting isolated costs or hauling more freight may not be enough.
Taking a More Strategic Approach
Freight network engineering uses mathematics to quantify strengths, weaknesses, and opportunities. The analysis gives leaders the conviction to change loads, lanes, customers, and operating practices.
From January 2016 through June 2017, KSMTA clients outperformed two market benchmarks. Their linehaul rate per loaded mile rose 2.6%, while the Stephens TL Rate Index declined 1.5% and the TMW Market Rate Index declined 3.8%.
The objective is to maximize yield. Yield combines revenue, variable and direct costs, and time within the carrier's network.
Yield and operating ratio are strongly related: as yield improves, the operating ratio improves, and the reverse is also true.
The Right Tools and Attitude
Successful implementation requires executive support and daily sponsorship among sales, marketing, and operations. Leaders must model and reinforce a yield-based culture.
Advanced load-optimization software is also important because irregular-route operations contain many interacting factors. The system should extract dispatch and other database information, incorporate market-rate data, and calculate yields and pricing scenarios.
The Netwise example cited in the article ranked top and bottom performers by operating area and reported detailed margin, yield, revenue, and utilization information.
Network maps could display cost, load distribution, yield variance, margin variance, and desired or undesired flows by customer and lane.
Making Smarter Decisions
Once the carrier can isolate its most and least profitable loads, lanes, and customers, it can act on network weaknesses, eliminate unprofitable business, and change ineffective operating practices.
Irregular-route truckload networks are dynamic and complex, so continuous improvement is essential. Small improvements in repeated decisions can turn pennies into meaningful profit.