Cost reduction in the trucking industry

Cost reduction in the trucking industry

Cost reduction in the trucking industry

Director, USA at Procura Consulting

 

Operating costs are on the increase

According to the American Transportation Research Institute (ATRI), the cost of operating a truck increased by 6.2% from 2016 to 2017.

The increase can be attributed:

• Increased pay and benefits, due to a shortage of drivers and technicians
• Higher material prices, due to tariffs or the threat of tariffs
• New regulations, specifically the electronic logging device (ELD) mandate
• Tolls
• Permits and licenses

These areas are generally considered non-addressable in terms of cost reduction. However, there are strategic sourcing opportunities that can be executed to reduce or at least mitigate costs.

 

Leverage Buying Power

Most organizations, if not all, work with owner/operators, franchises, and/or a network of affiliates.

This presents an opportunity to create a consortium and leverage collective buying power to achieve improved pricing, rebates, and contract terms. A few examples that can be addressed include:

• Fuel
• Tires
• Engine oil and lubricants
• Tractor and trailer parts
• Repair and maintenance
• Truck stops
• Truck wash

In addition, truck stops are able provide perks to the drivers, such as discounts on food and preferred overnight parking.

As simple as this may sound, this helps with driver retention, especially with the current driver shortage.

 

Review Aftermarket Alternatives

Whether it be truck parts, shop supplies, or safety equipment, alternatives may exist and should be considered.

Many distributors carry aftermarket alternatives or even in-house brands and can help with crossing and identifying opportunities. For truck parts, organizations may be hesitant to consider aftermarket parts. However, there could be appetite to start with exterior parts such as headlights, mirrors, and door handles.

 

Leverage Manufacturers

Even though truck parts may be purchased through a distributor, there is opportunity leverage the manufacturer. Including the manufacturer and the distributor in discussions can help establish improved terms.

In addition, some manufacturers may offer rebates paid by the manufacturer itself to incentivize standardization and usage. Common categories include filters, wheel end kits, and engine oil.

Overall, it is beneficial for an organization to leverage its network and supplier base to help realize results.