Significant savings can be achieved through route optimization. A key first step is to know your costs.
In previous articles we have talked about reducing the time and cost of route planning (January 7, 2021) by using automation that considers routes differently than a human (November 20, 2020). We have also talked about comparing savings using vehicles from your private fleet versus LTL carriers (September 16, 2020). But how do you calculate these costs and savings?
Strategic Movements uses four cost levers to optimize your savings – Cost per Use, Cost per Mile, Cost per Straight Hour, and Cost per Premium Hour.
Some costs are experienced when a vehicle is prepared for service. The Cost per Use includes activities including time required for inspection and driver preparation. These are costs you incur for the vehicle whether it makes one stop or many.
The critical cost, and where Strategic Movements will maximize savings through optimization, is the Cost per Mile. To calculate the Cost per Mile divide expenses by the total number of miles driven. The expenses you want to consider include truck payment, trailer payment, maintenance and repairs, tires, fuel and taxes, truck insurance, workers’ compensation insurance, liability and other insurance, licenses, permits, registrations, overhead, and miscellaneous fees. For long haul trucking, Cost per Mile would also include driver pay and benefits. Most of these expenses are found on the profit and loss statement.
Some costs are fixed and others are variable – the more miles driven, the more gas you need to buy. Some costs are specific to a vehicle – tires, maintenance, fuel, truck and trailer payments. Costs like overhead should be allocated to each truck. Calculate the Cost per Mile for each vehicle.
When there are more vehicles available than actually needed on any given day, Strategic Movements will choose the most cost effective vehicles.
Additional information and calculation tools can be found on the following websites:
- Motor Carrier HQ – https://www.motorcarrierhq.com/tools/calculator-2/
- Truckers Report – https://www.thetruckersreport.com/infographics/cost-of-trucking/
- Owner Operator Association – https://www.ooida.com/trucking-tools/cost-per-mile/
The Cost per Straight Hour is the fully burdened driver pay and benefits. The Cost per Premium Hour includes the overtime pay in addition to fully burdened driver pay and benefits.
Calculate these costs for each driver and each truck. Use an average in the Trip Default setup and use the specific values in the individual trips for each daily plan. Strategic Movements will consider these costs when maximizing savings by creating routes that are optimized for time and cost.
We offer a free consultation to help you compute your costs and to determine if a route optimization process is the way to achieve significant savings in both planning and actual transportation costs.
Whether you are just curious, thinking about a solution, or are ready to implement a process that will reduce transportation costs every day, sign up for the Strategic Movements News on our website and see what we can do for do.
We also have a new guide, “Reduce Your Transportation Costs With Route Optimization” available.
Click here to request your copy today.