Despite an employment squeeze and an ongoing uptick in the economy, it’s no secret that today’s fleets are operating with the thinnest of margins. Should it be a surprise then that a recent survey of fleet executives shows a little pessimism?
A number of fleet earnings reports are pointing to a somewhat challenging business environment as we move from the third quarter into the fourth. Still, will we see an increase in overall GDP growth over the next few months? No doubt, there has been somewhat of a softening of fleet’s overall operating metrics.
What’s Up with Utilization?
While we aren’t looking at dark days ahead, we could be seeing a slight downturn in utilization, while seeing a slight uptick in the number of parked vehicles waiting to be used. Of course, we aren’t anywhere near where we were during the great recession.
The fact is, during this time last year, the percentage of parked tractors and trailers was below two percent. Today it is at around five percent. It’s likely that last year the driver shortage impacted the number of trucks on the road.
Now, the trucks are parked for a different reason. The attitude is more of a, “Well, why use it if I don’t need it.” While some fleets are continuing to add capacity overall the number doing so is down from this time last year.
For many large fleets, they simply need more freight in order to handle current capacity. This lack of product to fill capacity is sure to trickle down from the big guys to the smaller fleets. And as freight softens, don’t expect more trucks and trailers to be ordered.
So does this all spell doom and gloom for the trucking industry? Likely not, and there are a good number of reasons why, not the least of which including finding profit where there previously had been none.
Using Procurement to Generate Profit
Are you running at a thinner-than-normal profit margin? If so, you aren’t alone. Yet, you may also be missing out on a valuable profit-generating opportunity. What we’re talking about is procurement.
The fact is, if you manage your procurement process effectively, you can have a significant impact on your profitability. Do you know what is purchased, who purchases it and how it is purchased? If you don’t have a laser focus on your entire procurement process, you are missing out.
There are a number of reasons why procurement efforts generally fall short. The large majority of companies that meet these criteria do so simply because they don’t have a procurement process in place. Others don’t even know if their company has a process in place to begin with. Finally, you have a percentage who either outsource it or leave it as a back-office function.
The inability of a fleet to track where their purchases are coming and going from can have a big impact on their bottom line. In many cases, those responsible for purchases that support fleet operations don’t know the best way to make those purchases.
It’s About More than Office Supplies
While the majority of missing procurement spending falls in the area of items like office supplies and cleaning products, don’t think procurement mistakes can’t be made for big-ticket purchases like tractors and trailers. You need to do a comprehensive cost analysis to discover any hidden costs.
The key to ensuring you aren’t making procurement mistakes that negatively impact the bottom line is to include operations and the fleet shop in your purchasing decisions. Make sure you have a point person to handle purchasing and good policies in place to keep everyone accountable.
Whether you are making a large or small purchase, keep a close eye on your procurement spending and watch your profits expand.