Owning and operating a trucking company involves taking on significant risks. To protect your business's bottom line and increase its profitability, it is essential to take proactive steps to manage financial risks. In the transportation industry, your company needs to identify risks and potential solutions.
According to Rutgers Business School the top risks currently facing trucking companies are:
• Driver shortages and retention
• Not enough trucks
• Increased repair costs
• High preventative maintenance costs
Adopting smart strategies to address each of these risks can help protect trucking companies. Let’s take a look first at under-utilization of a company’s fleet. A trucking company might have enough trucks in its fleet to transport goods and drive profits, but if the trucks are under-utilized, the company's profits can take a hit. To help prevent issues such as deadhead miles and trucks sitting idle, trucking companies might choose to work with freight brokers. A good freight broker works with both shippers and carriers to arrange the transport of goods and can plan routes in such a way that deadhead miles are kept at a minimum. Working with a freight broker should also help ensure prompt payment for the loads that are transported. If a freight broker fails to pay the carrier on time, the company can file a claim against the freight broker bond to secure payment for what it is owed.
Driver shortage and retention: A trucking business needs to have a team of good drivers that can be relied on to transport the shipments the company is contracted to deliver. Unfortunately, the trucking industry is facing a huge shortage of truck drivers as many drivers have started to retire. Trucking businesses can take several steps to attract truck drivers and retain those they currently employ:
• Increase base pay rates
• Focus recruitment efforts on women, minorities and immigrants
• Provide strong benefits packages, including employer-provided medical insurance, 401(k) plans, paid time-off, short- and long-term disability and others
• Increase family-friendly policies and provide plenty of home-time opportunities
• Create a workplace culture that values safety
Becoming creative in the recruitment of prospective truck drivers and then taking steps to create a culture that focuses on and values safety can make a trucking company much more attractive for drivers. When drivers feel valued, they are much likelier to remain working for a company instead of leaving to go elsewhere.
Lack of trucks: Having more drivers than trucks can be good for a trucking company's bottom line. However, if the company doesn't have enough trucks to keep the flow of goods moving, it can harm profit margins. At the same time, trucks have become increasingly expensive, making it difficult for companies to purchase new trucks to expand their fleets. One option that companies might consider is to lease trucks instead of buying them. When a company leases vehicles for its fleet, it can help expand the number of trucks that it can put on the road while minimizing large capital expenditures.
High repair and preventative maintenance costs: Spare parts for trucks have become increasingly expensive, and delays in the shipment of spare parts can leave a trucking company with idle trucks and drivers. Companies can help reduce this issue by investing more money in preventative maintenance schedules. Maintaining the trucks in your fleet and ensuring they remain in good repair can help prevent expensive breakdowns and excessive idle time.
However, preventative maintenance costs have also increased because of the lack of service providers. Companies can establish in-house preventative maintenance programs to ensure their fleets are regularly maintained and kept in good working condition.
Adopting smart strategies to manage financial risks is critical for trucking companies of all sizes. By taking time to identify the risks your company faces in the current transportation industry environment, you can figure out and implement solutions to address potential issues before they become large problems. Being proactive in the management of the risks your company might face can help protect your company's bottom line and ensure your trucks can keep rolling.