Typical Costs Associated With Owning A Trucking Company

Being your own boss, whether it be through owning and operating your own tractor trailer or by owning your own business, is fun, but not without hard work. No matter what venture you decide to start and invest in, many moving parts must be put into place before you can consider your operation a true success.

The same goes for trucking, and when we refer to moving parts in this industry, the statement is literal. Everyone who works in trucking or has investigated the costs associated with owning a big rig or starting a trucking company knows that it requires quite a lot of initial capital. But before we get into money, there is something even more important you must consider; indeed, some would say is the most important: Your name.

What Makes a Good Trucking Company Name?

First, pat yourself on the back and give yourself some congratulations. You have decided to go into business for yourself and take control over your professional destiny by starting a trucking company. But now what to name it?

In any business, choosing the right name will be one of the most important decisions you will make. A company’s name is more than just an identifier; it is a critical part of your overall business and marketing strategy. Yet coming up with a good one is not a simple task.

Consider the following when evaluating what your trucking company’s name should be:

  • Your business goals.
  • The company’s formation, whether LLC, limited partnership, or otherwise.
  • What the company logo may be and how a visualized image will fit in with your intended name.
  • Your home state’s law governing names that sound “too similar. Don’t hesitate to check the U.S. Patent and Trademark Office’s trademark search tool.
  • Unique names that will let you stand out from the pack. Something like Thompson or Smith Trucking might be less appealing than more creative options.

From location to family name or even something uniquely special to you, the name of your trucking company will shape its future. But so will the dollar signs.

What It Will Cost

Just to illustrate the point, let’s look at some interesting facts someone who is interested in becoming an owner-operator might want to know:

  • A single fill-up amounts to the same fuel capacity as 18 mid-size passenger cars.
  • The average number of miles a long-haul trucker clocks is 100,000 to 110,000 per year, which equates to circling the Earth nearly five times.
  • The average purchase cost of a big rig runs around the same as a 10-cylinder Audi R8 supercar: approximately $185,000.
  • Average lifetime truck costs represent 66% of spend, whereas truck driver costs make up the other 34%, with fuel making up the largest of the vehicle expenses and truck driver health and wellness making up the largest of those expenses.
  • The expense is broken down to anywhere between $115,000 to $135,000 for the tractor and $35,000 to $65,000 for a new trailer.
  • Repairs and maintenance issues, from air lines and hoses to wiring and alternators, can run up to $15,000 per year.

The way you pay for your truck, both upfront and over the – pun intended – long haul is driven by the condition, make, and model of the vehicle. While the price we mentioned above for a new tractor can seem eye watering, things like looking to higher mileage used vehicles or making a higher initial down payment can help mitigate the cost.

The high cost of equipment leaves little room for surprise freight costs. Of course, other factors play into how much individuals or entities charge or spend on moving goods, but the cost of ownership surely plays a part.

Even more, analysts think that the trucking industry is looking at an uphill climb when it comes to lowering operating costs. Whether you look at additional costs related to the ELD mandate or those associated with raising truck driver pay and offering greater recruiting and retention bonuses.

With fuel costs on the rise in an unstable geo-political environment, truckers and trucking companies shouldn’t expect to find relief at the gas pump. And those looking to insurance to help lighten the load will be disappointed to see the direction insurance costs are going in.

Evaluating Trucking Insurance Costs

Next to fuel, one of the biggest costs owner-operators and trucking companies must budget for is insurance. And while the cost of tractor trailer insurance ultimately falls upon on many variables depending on operator or company, those costs have been on the rise.

Before one sits down to talk to an insurance agent, it would be wise to consider some of the industry averages. Here are some of the numbers associated with overall tractor trailer insurance costs:

  • Owner-operator who is leased to a motor carrier can typically get a comprehensive policy for between $2,500 and $5,000 a year, depending on the vehicle and application.
  • New authorities are typically looking at anywhere between $10,000 and $16,000 a year. While rates are higher in the first year, they generally drop as the years go by, especially if the fleet is operating safely and has a good record backing them up.

Rates also vary depending on the level of insurance the entity wants to invest in. The more level of coverage a policy has, the more expensive it will be. Some typical policy averages include:

  • Primary Liability: $4,500 – $5,000.
  • General Liability: $300 – $600.
  • Umbrella Coverage: $300 – $500.
  • Physical Damage: $2,500 – $3,000.
  • Bobtail Coverage: $300 – $400.
  • Un- or Underinsured Motorist: $75 – $100.

The overall cost of your insurance is determined through a risk assessment analysis the insurance company completes before they issue your policy. They want to know the statistical likelihood you may cost them money down the road.

Your risk assessment will be made using the following factors:

  • Your driving record and time and experience behind the wheel.
  • Where you will be operating the vehicle.
  • Where the vehicle is based out of.
  • Factors such as age, credit rating and MVR report.
  • What your truck is worth.
  • Whether your policy is bundled or individual
  • What time and duration of payment plan you opt for.

Fortunately, there are ways to lower your cost of insurance.

How to Minimize Insurance Costs

They say it never hurts to ask, right? The same can be said for your insurance premium. All you need to do is simply ask your insurance company if they offer any coverage discounts for anything from installing safety equipment to maintaining a clean operating record. If you have a good relationship with your agent, you shouldn’t be afraid to ask for discounts.

You may also be eligible for a lower premium if you pay yearly, as opposed to monthly installments. Sure, not everyone will be able to drop $7,000 in a yearly insurance premium, but if you can, why not?

Finally, consider a higher deductible. For those that consider a low premium the most important factor, paying a higher deductible may not be such a bad idea. Just remember that higher deductibles mean higher out-of-pocket expenses should you get into an accident.

In the end, make sure to shop around. It isn’t a bad idea to request a few quotes from different insurance agents. They want to earn your business and will not hesitate to give you an honest figure regarding what you may need to pay.

Other Costs Associated with Operating a Trucking Company

Beyond equipment, fuel, insurance and individual truck driver costs, other factors that you must consider include those mandated by the federal or your state governments. From licensing fees to use tax and other permits, here are some examples of other expenses you must consider:

  • Formation and registration documents, which include DOT & MC numbers, BOC-3, UCR, and others: $1,000 – $1,500 (depending on jurisdiction).
  • Apportioned plates per truck: $500 – $3,000.
  • Heavy vehicle use tax: $150 – $500.
  • Ancillary state or regionally specific permits: $500 – $1,000.

You will also need to get your trucking authority, which is essentially the process you must go through to comply with the requirements of the state you are operating in.

There are also fixed costs associated with operating a truck or trucking fleet. These costs will be the same every month. If you are running a multi-vehicle operation, they will include payroll, health insurance, equipment insurance, and more. Long-haul operators have a higher average cost per mile due to the nature of their business. So, the type of trucking company you want to operate will have to factor into your financial decisions.

Although a lot of these numbers and costs may seem large and prohibitive, becoming an owner-operator or sitting at the helm of a successful trucking operation is an accessible and rewarding career. Once you have achieved your goal of earning your living in the supply chain, you will sit down and examine your trucking company’s operating ratio with a smile. So, what are you waiting for? Sit down, put pencil to paper (or fingers to the keyboard) and start planning for you future as a successful trucking entrepreneur.

How Trucking Companies Develop A Strong Fuel Economy Culture

Getting the most out of your miles per gallon is about more than just the trucks you buy and the accessories you slap on them. For a motor carrier to get the most out of their fuel efficiency, they must build into their operation a culture of saving fuel and driving responsibly.

The decision to boost fuel economy must be one committed to by everyone within the company – even departments that may not have anything directly to do with fuel savings. When you have trucking companies comparing numbers at industry events, it can be quite glaring when one carrier is averaging 9 mpg while others are coming in at 6 mpg.

In order to properly shift to a true fuel saving company culture, motor carriers must be willing to ditch the sacred cows. If a fleet is still operating using a long-standing (but ineffective) strategy, they are basically flushing money down the toilet. So, what might some of those practices be?

As any motor carrier knows, one of the quickest and easiest ways to improve fuel economy is to cut excess weight off of company vehicles. It is critical that trucking companies properly evaluate whether the specs they are choosing for their trucks actually include equipment they need.

How to Trim the Fat

One example of this would be block heaters, which come standard on many trucks. If a motor carrier is not operating in conditions that require block heaters, having it included on the truck merely adds unnecessary weight. The same fuel saving considerations should be made for the fuel tank.

Most fleets automatically spec a 250- to 300-gallon fuel tanks, yet if many of them took a note of fleet fuel use averages, they would see that they likely aren’t coming close to capacity. In the end, if the fleet doesn’t need the fuel, there is no real point carrying it around, adding extra weight, and decreasing overall fuel savings.

If fleets can make reasonable cuts and lighten the load their vehicles have to carry, they will inevitably come out ahead and increase their overall fleetwide fuel economy. It may also be wise to have another look at 6×2 axle configurations.

Of course, paying extra attention to fuel economy and ensuring they are making the right spec decisions for fuel saving reasons takes time and effort. But few good things are easy, especially in the beginning. It is critically important that motor carriers build these concepts into their culture and business efforts from the very beginning.

Ordering for Maximum Fuel Economy

Fleets who want to achieve maximum fuel economy potential must order equipment from the very beginning from the standpoint of achieving maximum fuel economy. Of course, the specifications must also meet the fleet’s practical requirements, but provided there is an open line of communication down the chain and employees understand the methodologies behind decisions, it shouldn’t be hard to get full fleetwide buy-in.

As positive results become known, the feedback loop becomes complete. By utilizing a systems and process improvement approach to fuel economy testing, spec’ing, and proving new technology, motor carriers can realize real and substantiated fuel savings.

It is also important to always keep one finger on the pulse of what OEMs are up to. By staying aware of the new technologies and spec’ing applications down the line, fleet managers reinforce the “fuel savings first” principle.

Take some of the new Mack semi-trucks as one example. If motor carriers aren’t paying attention, they may have missed that the new production designs are being released with a ‘wave’ piston design and turbo system that – when combined with the automated manual drivetrain – provide up to 10% more fuel savings than their predecessors in normal use.

Once a fleet makes the choice to move to a vehicle that uses an integrated drivetrain and advanced engine design, down-the-chain purchases based on optimized fuel economy come faster and easier. As the savings compound over time, a look back will reveal that adjusting purchasing decisions to focus on fuel economy is a no-brainer.

Over time, it will become easier to figure out which actions are contributing to a better fuel economy bottom line. Factors such as ambient and seasonal temperatures will become obvious as fuel efficiency fluctuates. For this reason, it is important that fleets who are testing equipment test them over quarters to account for the seasonal and ambient temperature changes. It is a slow process and may be immediately off-putting, but it will lead to big benefits in the long-run.

Finally, it is important that motor carriers don’t try to do too many things at once when either evaluating or testing a new technology. While large fleets have a lot of capital to throw at a problem, not every operator is in that position. It is critical they start with vehicle components and technologies that are within the company budget.

Global Forces and Oil Prices

Remember 2007? It was a rough year. Fuel prices across the country went through the roof with dizzying speed thanks to geopolitical issues and the oncoming of the Great Recession. Immediately following the crash, a huge number of cash-poor fleets immediately went out of business.

While the situation eventually stabilized, oil prices dropped, the economy improved, and fleets began to get back on their feet. Still, it appeared they would climb again at some point, it was only a question of how and when. We may be right now seeing the day that they once again start to rise.

With the global economy doing well, the OPEC cartel has kept production low as a way to drive up prices. Combine that with the summer driving season and market analysts had already been predicting averages climbing northward of $3 a gallon. Now that the geopolitical situation has worsened, with a scrapping of the Iran nuclear deal and tensions with North Korea, we could see that price climb even higher.

Fleets must make sure they are proactively focusing on fuel savings if for nothing else than to be prepared should the price of oil suddenly go through the roof. Fortunately, there are quick ways to get more out of fuel without having to make big capital investments or make drastic changes.

Top Three Fuel-Saving Factors

In times of plentiful, cheap fuel, the value-proposition in trucking gleams. Fuel efficiency makes business sense because every penny saved on fuel goes straight to the bottom line. The question is: What are top fleets doing to realize big fuel savings?

First, aerodynamics are hugely important. Even something as simple as not keeping a truck clean will have a negative impact on that vehicle’s fuel efficiency. The ability to guide the flow of air around a heavy-duty Class 8 commercial motor vehicle has been an industry game changer.

To put it into simple numbers, an operator can see up to 15% greater fuel efficiency just by putting a cap on the roof of the truck. Still, even this requires careful consideration. Does the cap match the height of the trailers being used?

Even more, some aerodynamic accessories counteract, rather than compliment, each other. The last thing a fleet wants to do is incorrectly mount a not-inexpensive device to their vehicle while furthering a decrease in fuel efficiency.

Some truckers even manage to find less manufactured ways of increasing fuel economy. We’ve all heard the story about the trucker who took a power saw to a set of mud flaps because they were sticking out too far and causing unnecessary drag. While this may be somewhat of a parable, it is no less true. Cutting down a set of mud flaps is not a bad solution. The point is, whatever can be done to get the most fuel savings should be done.

Fifth-Wheel Gaps and Dirt, Oh My

Other fuel saving tactics include relocated or recessed license plates and plated rain gutters. Consider the vehicle’s wheelbase. A long wheelbase pulling a reefer and leaving a huge gap between the cab and the trailer is going to create a lot of unnecessary drag.

Fifth wheel gaps are one of the most common sources of drag on heavy-duty commercial motor vehicles. Fleets who want to set a gold standard in fuel savings should aim for a 16 to 20-inch gap. One of the oft-overlooked aspects of a slim fifth-wheel gap is the reduction in dirt accumulation on the cab.

Dirt accumulation is important. Although dead bugs and dirt may seem small and inconsequential, it creates unnecessary drag on the vehicle, especially since it can easily be eliminated during pre- and post-trip inspections.

What is the most important takeaway? Fuel efficiency is an evolving process. Motor carriers must stay on top of new fuel savings trends and make educated decisions about what actions they should take. They should pay attention to everything, create a culture of fuel efficiency, challenge longstanding principles, and learn innovative new ways to achieve even greater fuel savings and a fatter bottom line.

Trailers Go High Tech

Although connected tractors have been all the talk, integrated trailer networking systems are no longer a thing of science fiction. Trucks communicate wirelessly with fleet managers from halfway across the country, so why can’t trailers? One would think it would be an easy matter, but trailer technology adoption has lagged that of tractors.

But if you ask OEMs responsible for building all that hauls our freight, they will tell you they are taking a hard look at how to connect trailers up with the rest of the vehicle and make them a truly cohesive unit. How can the flow of information be improved to create a greater sense regarding the state of the trailer or the cargo it hauls?

There are a lot of minds behind the push for smarter trailers. They believe trailers need to evolve beyond dumb boxes that merely provide the receptacle by which freight is transported. And there is some logic to this argument.

Where the Change is Coming

The push to make trailer and body communication more thorough and actionable is driven by a safety imperative. As fleets spec safety systems for everything from rollover control to advanced braking systems, trailers are not getting left out of the mix.

Systems integration is at the front of every safety technology OEM working in the marketplace today. Trucking companies require reliable solutions that can be integrated with current technologies. When data needs to be crunched and synchronized for responses to everything from roadway hazards to inspections, trailers must be considered.

Still, there is room for improvement between communication links between tractor and trailer. If the industry is going to move towards an automated future, which includes the implementation of vehicle-to-vehicle (V2V) technology, automated systems must be able to identify things like trailer presence, length, weight, and other factors.

One place where this kind of implementation has gathered legs is in Europe, where they already require direct communication between the trailer and the truck driver. Could we soon see a day where a trailer has its own direct computational link to the tractor’s CAN bus? How soon might the implementation of trailer talking to tractor come to pass? With wireless systems and computational power advancing at an incredible rate, this day may be coming sooner than later.

OEMs Get to Work

Trailer OEMs have been working for decades on preparing for the automation eventuality. Finding ways for the trailer and tractor to relay information back and forth is the holy grail for trailer designers trying to implement technological solutions into their equipment.

One of the problems OEMs have run into is interoperability between systems. Motor carriers generally spec their safety and other technological systems from different providers. When they are trying to get pieces of equipment talking to each other, all while gathering actionable data, system interoperability is extremely important.

Some think there will be a leap in the evolution of the trailer and it will start with the communication and monitoring systems. Eventually, we may also see a reduction in the flow of interfaces connecting the systems, thus relieving technicians of numerous headaches trying to administer them.

Just look at it from the perspective of the truck driver. There are so many systems they already must work with, having one central location where all the necessary information is stored and accessible is key to them getting the job done safely and effectively.

Everything from the temperature in the reefer to the tire pressure, the last thing a busy truck driver focused on safety wants is a myriad of competing interfaces all vying for attention. Will the next evolution in these technologies represent a far cleaner interface with higher levels of system interoperability?

Consider the Functions

The imperative for smart trailer technology comes from the variety of functions that trailers fill. Trailers and trailer bodies are built for so many applications, it seems that technological integration is logically the next step.

Applications include smart lighting systems, hybrid braking systems, and movement-detecting auto liftgates that help keep truck drivers safe when the lift is in action. Combining the efforts of each of the systems involved in tractor trailer functionality opens the way to a broader set of capabilities.

The platform designed to handle all the data and calculations must be both robust and scalable. How will the information be displayed to the end user, whether it be the truck driver or fleet technician? Companies are already being formed specifically to answer these questions with technological solutions.

The answer may lie in open-source efforts so that technology companies manufacturing these solutions can use their own proprietary technology to communicate with each other. In some cases, this eliminates the need for the trailer to relay the information back to the tractor’s CAN bus.

Motor carriers utilizing technologies like these might be able to locate a specific trailer in the yard at a simple click of a button on a back-office desktop or yard tablet. Pre-trip inspections can also be performed to make sure the trailer is ready for the road, all without taking from the truck driver’s allotted hours of service limit.

While on the road, cargo-specific information, fault codes, unexpected events and more can all be monitored from home base and from within the cab. Combining the power of smart trailer technology with already-available telematics systems allows fleets a new way to track their vital assets.

By taking a long-term look at the needs and benefits of trailer intelligence, fleets are provided with better options, from cargo-specific information, weights, axle load distributions, brake issues, tire pressure, and much more. The smart trailer informs where truck drivers and dispatchers need it to.

Once these advanced capabilities are combined with current diagnostic systems in a total interoperable and efficient manner, fleets will suffer less CSA-related faults or failures and increase overall truck driver productivity and satisfaction. In the age of the never-ending truck driver employment shortage, fleets need solutions like these. Fleets can prolong equipment life and increase service interval levels by having more information on the status of their trailers.

Phillips Ups the Ante

If one company has stepped in and accelerated the rate of change for smart trailer adoption, it is Phillips, who’s Connect Technologies department made big strides around smart trailer development. They have created an agnostic software solution that consolidates smart-trailer sensors – no matter the supplier – into one central integrated hub.

They have also built in a singular data set so that alerts sent to the truck drivers are understandable, readable and uniform. Phillips hopes to partner with many different sensor OEMs to integrate technologies, find ways to capture customizable fleet information on a centralized dashboard and so much more.

The problem that Phillips has identified remains the same. Fleets generally have all these capabilities spread around different manufacturers and software solutions. With all the data channels built under different communication platforms, Phillips aims to simplify the hierarchy of data, allowing motor carriers to better utilize the information for improved fleet performance.

The downfall of a flood of new resources built around smart technologies is the disparate data plan and network of communication. Opportunity knocked when they discovered a way to consolidate the sensors on tractor and trailer to get an accurate, up-to-the-second look at the trailer’s performance.

Partnering Up and Selling the Tech

To make sure they are not tackling this problem in a vacuum, Phillips has already formed sixteen partnerships with OEMs who make smart trailer components. The challenge has been convincing company owners that the best way to move forward is to create a platform that everyone can work on so that motor carriers and owner-operators can make educated decisions on the solution they want to implement for their business.

There is a compelling reason for these owners to participate in the process. Phillips has developed some truly compelling solutions. Their Sensor Distribution Model (SDM) acts as the central hub through which all the data flows. It includes an internal mode specifically designed to interface with popular sensor platforms, such as Fleet Complete and TrailerNet.

Their Sensor Interface Board can be installed to function either wired or wirelessly and is designed to be the universal translator that allows sensor data to be seamlessly sent across the network to each other, distilled into actionable information and then provided to either the truck driver, dispatcher, or other interested party.

They have even considered the physical electrical harnessing that allows the wires to be configured in a safe and effective way. With so many innovations packed into the trailer, from door lock and unlock features to trailer lockdown mechanisms that cut the airflow to the brakes, Phillips is forging ahead.

How trucking companies, from OEMs to fleets themselves, embrace technologies like the ones Phillips is developing, remains to be seen. Technology has the capability to make trucking safer and more efficient, yielding benefits for everyone involved in the global supply chain.

Trailer Series: Tires And High-Tech Innovations

Fleet productivity is important. Indeed, it is one of the founding pillars of a successful trucking business. Motor carriers and owner-operators are constantly looking for new ways to reduce costs and raise uptime. While fleet technicians focus on the conditions of their tractor tires, what are they doing about their trailer tires?

Did you know that tires are one of the top ten expenses in the trucking industry? Lower your expenses by maintaining tire pressure and life-cycle. You can save many thousands of dollars each year by ensuring your tires are neither underinflated or overinflated, mismatched, or damaged. It is important that you come to an informed decision when you are spec’ing both trailers tires, and tire pressure management systems.

The Number One Trailer Breakdown Problem

Ask any fleet manager and they won’t need a statistic to tell you that the number one reason trailers fail is because of tire issues. As a matter of fact, 48 percent of road calls are the result of blown tires or other tire related issues. Yet, mismatched duals account for a decent share of problems as well.

In fact, the North American Council for Freight Efficiency (NACFE) came to some alarming findings where trailer tire operation is concerned. One in five trailers are operating with tires that are over-inflated by at least 20 pounds per square inch. Even worse, three percent of all trailers operate with four or more tires under-inflated. As if that weren’t bad enough, another three percent are operating with tires that are under-inflated by at least 50 pounds per square inch or more.

Statistics put together by the Technology & Maintenance Council’s Tire & Wheel Study Group also revealed some startling numbers. Nearly a fourth of all tires surveyed were over-inflated by more than 20 psi. In the truckload sector, nearly seven percent of all tires were under-inflated by 20 psi or more. In this category, underinflation of this type can be very dangerous.

So, what’s the problem? Why is over-inflation such a persistent issue within the trucking industry? Over-inflation isn’t always the problem of truck drivers or maintenance technicians putting too much air in the tires. Generally speaking, over-inflation is the result of elevated tire operating temperatures and an increased amount of ambient air temperature around the tire’s sphere of operation.

Always consider that the TMC RP 235 explicitly states that tire pressure can rise by 10 to 15 percent when ambient temperatures are high. Tires are manufactured to function within specified parameters during normal use and warming situations.

Examining Over-Inflation

Elevated tire temperatures do not bleed off at the same rate as natural air loss. When diffusion is taken into account, psi only drops around 1 to 2 per month. This is when over-inflation becomes a problem. Over-inflated tires are more susceptible to tread surface cutting, punctures and other impact breaks.

Fleets must also be aware of a tire’s footprints. When over-inflation occurs, it changes the physical nature of the tire itself. Irregular wear patterns are generally the cause of over-inflation, whether the changes be on the shoulder ribs of the trailer tires or otherwise, edges of over-inflated tires pull away from the ground and make harder impacts when they skip across road imperfections. Different types of scuffing merely aggravates irregular wear. What happens when irregular wear becomes a persistent problem? You could lose up to 15 percent of your tire life.

Mismatched Duals Are a Problem

Trailer tires that are arranged in a dual configuration are meant to share the load equally between each other. It is critical that they are both same size and diameter, as well as have the same tread pattern. Although the rules say you are generally okay if they are within around 5 psi of each tire, the reality of that situation can be quite different.

Studies show that most of the time, nearly a fourth of all trailer tires had mismatched air pressure where a pressure difference was greater than 5 psi. The problem is exacerbated with dual setups. Mismatched duals is not always easy to spot. Yet, within a short period, mismatched duals of varying pressures can create major irregular wear pattern problems.

When you combine different psi levels with mismatched duals, say even of the tiniest circumference, the results are dramatic. A tire generally completes around 450 – 500 revolutions per mile. If one tire is smaller than the other, it will seemingly drag against the pavement and rapid irregular wear will result.

The larger tire will also show problems, as it bears the brunt of the load and develops internal damage from breaking force. Height problems combined with braking force problems can lead to a dangerous combination. It is extremely important that dual tires are neither mismatched nor suffering from inflation issues.

Common Tire Problem Associations

When you look at the real-world consequences of mismatched tires operating at problem tire pressure, it has a significant and immediate impact on the fleet or owner-operator. Just take downtime expense as one example.

Consider how many road calls are made because of tire problems. Now think about the average out-of-pocket cost associated with a tire-related rescue. Most estimates put it at around $800 – $1,000. That is no small amount of money.

When you consider unforeseen problems, such as distance, late freight fees, a hit to your reputation or a disappointed client – the costs rise dramatically. If a tire-related incident results in a major accident, injury, or fatality, you are also looking at huge insurance costs and potential litigation expenses.

In the case that there isn’t a major road failure or accident, mismatched tires or tires suffering inflation problems also cause a reduction in fuel economy. Up to 30 to 40 percent of the fuel used in running a large truck is used in overcoming the rolling resistance of the tire contact with the road. Increased heat creates increased fuel consumption and further compounds the problem.

Most fleet technicians will tell you that running a tire under-inflated by even 10 psi can decrease fuel economy by 1.5 percent or more. If you add up the numbers, that equates to nearly $500 per tractor-trailer per year in unnecessary fuel use.

Not only do under-inflated tires cause a problem for your bottom line, if you are going through a roadside inspection and have tire inflation issues, you could get hit with a BASIC violation. A flat tire alone is an eight-point deduction, while an under-inflated tire is a three-point deduction. When a tire inspector notices damage, it is usually the result of inflation problems.

Consider Greenhouse Gas Phase 2

It is important for all fleets, for many reasons, to consider Greenhouse Gas Phase 2 Regulations, but especially when it comes to tires. These regulations have renewed the focus on technology as being an effective method for improving fuel efficiency and reducing emissions. When fully phased in, fuel savings would be nearly half-a-million barrels per day in less than twenty years.

While the regulation itself is very large and can be difficult to wade through, the requirements where trailers are concerned is quite succinct and easy to understand. They say that all full and partial-aero box vans must meet a specific standard, whether it be through the use of low-rolling resistance tires, aerodynamics, tire pressure systems or other technologies. These standards apply to both reefer and dry-van varieties. Liquid and gas tanks, straight flatbeds, or non-aero box vans must meet the standard.

The fact is this: There are important considerations to be made when tire inflation is considered. Fleet managers and owner-operators must overcome the struggle to get a handle on proper tire inflation and dual mismatching. Making sure the right amount of air is in the tire at the right time is critical to saving on unnecessary tire expense and tire pressure issues.

The Front Line

Your front line of defense against tire problems is your truck drivers. They complete the pre- and post-trip inspections, do a visual inspection of all tires, and should be regularly checking tire pressure.

The next stop will be your shop technicians. They spend a lot of time examining your equipment, it is vital that they can quickly spot tire pressure or mismatch problems. Are they properly trained in spotting problems when they arise?

Finally, it is important to consider tire pressure monitoring systems for your operation. These systems provide a direct measurement of pressure and even sometimes the temperature of a tire. If there is a problem, generally an alert light will appear on the dash and alert the truck driver that there is a problem with the tires. Even better, these monitoring systems can be used on both tractor and trailer.

While you pay a lot of attention to the rubber that drives your tractors, you can never leave out what your trailers drive on. Without them, your freight goes nowhere. Always consider inflation and tire matching when training your truck drivers, technicians, and anyone else who is responsible for keeping an eye on your equipment.

What Should You Expect When Deciding On A Freight Factoring Solution

First, the common question: What is factoring? Factoring is financial transaction is a type of debtor finance where a business sells invoices, or accounts receivables, to a third party. This third party is called the “factoring” company. Businesses choose to factor their invoices to free up cash they are wait for a shipper to pay on.

There are many terms that explain factoring and many different types of factoring. Forms of this type of asset-based lending have been around for a long time and exist to provide cash-flow solutions for companies who need money in a pinch. For the trucking industry, however, there is only one that counts: Freight factoring.

One thing to note, however, is that freight factoring is not the same as “invoice discounting.” Invoice discounting involves a form of borrowing that uses the assets related to the invoice as collateral on the loan.

There are generally three parties directly involved in a freight factoring situation, with one being the factoring agency themselves, the party that sells the receivable (or invoice), and the debtor with the responsibility to pay the financial liability (usually the shipper or receiver). The invoice itself is considered a financial asset. When the party that sells it passes it on to the factoring agency, they generally take on the responsibility associated with collecting on the financial asset.

The deal is sweetened by the selling party, who generally sells the invoice at a discount or with an associated fee to get the cash they need. This part of the transaction provides the incentive for the deal. Factoring is used in many industries, from manufacturing to trucking.

There are essentially four distinct aspects to the factoring transaction:

  1. Includes the fee or discounted price paid to the factor.
  2. Any interest included by the factoring agency in exchange for the liquid asset.
  3. Any related bad debt expense associated with receivables that remain in place or uncollectable by the factoring agency.
  4. Any assumed credit risk, holdback receivables, or any other amounts required to cover unpaid or other types of merchandise returns. The factor’s profit can be gleaned from the difference between what it paid for the accounts receivable and the money it receives from the debtor party.

Factoring is used as a method to obtain cash. Whether it be to finance to equipment purchases or cover an existing cash gap, the factoring method can be quite popular. But the question or most companies who are considering factoring as an option is what they can expect when they choose to factor.

What to Expect from a Freight Factoring Provider

Not all freight factoring providers are created equal. They often provide different terms depending on the company. For those looking for really good factoring terms, there are specific items to look for.

First, does the factoring offer free credit checks or provide their own self-funding? These are important to relieving the burden on the party selling the invoice. Flat rate fees on invoices that have already been billed are also quite convenient. Low fees of around 2% can save a motor carrier big on the receivables they want to factor. Fleets should also be able to rely on fast and reliable funding, as well as both recourse and non-recourse factoring options.

Even better, does the factoring agency offer no monthly minimum volume fees? Companies that have been in the business for a long time often offer free online account management options through web portals, many times with always-on 24/7 access. Even better, some factoring companies provide load board access, fuel card discounts, and mobile app technologies with image capture abilities so that motor carriers they partner with can send invoice images digitally.

Freight factoring companies that go above and beyond won’t leave trucking companies to merely fend for themselves. They should offer highly experienced account executives to help manage your account. Furthermore, their low, competitive rates should be paired with same-day or next-day funding. When a trucking company needs their money in a pinch the factoring company should be able to come through.

They should also sweeten the deal with no long-term contracts or termination fees. Trust between parties is essential in any business relationship. When it comes to collecting on the accounts receivable, does the factoring company utilize professional collections options?

The Expected Process When Factoring

When a trucking company first reaches out to the factoring provider, they should reach a knowledgeable sales team ready to answer all their questions and address any perceived or unperceived needs. They should be able to go into great depth on how freight factoring works and be fully prepared for any “what if” scenarios.

Can they come through with paperwork and account management options? You can also glean a lot from what a factoring company has to offer through their application, both what is on it and the overall process. Once you have signed up, it is important that they put you in touch with a personal account executive.

Freight factoring companies will generally encourage their clients to complete a credit check on each of their customers so that they can get up-to-date information on who they should do business with. After all, the freight factoring provider wants to take on as little risk as possible, and so should the trucking company in question.

The factoring entity should also provide options to send either the proof of delivery (POD) or bill of lading (BOL). Your account management contact should be able to enter and scan invoices or provide you with a way to get them over digitally. When it comes to getting you your money, whether it is same-day or next-day, it is important that they offer many different options, whether it be via ACH, wire transfer, a physical check or a direct deposit.

One of the most important aspects of freight factoring is how the factoring agency treats your customers. If you want to keep your clients happy and coming back, it is important they are treated well, even when they owe money. Will your freight factoring partner treat your customers with respect? It is critical that they do so.

When they collect on your invoices, it frees your company up to do what it does best, which is keep vehicles on the roads and keep freight moving. A solid freight factoring company will have build a reputation and good relationships with brokers, shippers, and freight forwarders across the country. They should be a preferred factoring provider, even with those they are trying to collect from.

There is a term for collecting accounts receivables in a respectful way: Soft collections. You want your freight factoring partner to deal with your customers in a professional, courteous, and non-threatening way. Factoring agencies should provide debtors with different ways to get their invoices paid. When payments are made easier and faster, everyone wins.

The Many Reasons Fleets Utilize Factoring

The reasons motor carriers may use freight factoring are many. The most common reason is because new or small trucking companies may not qualify for traditional bank loans to cover their expenses while they wait to get paid. While freight factoring companies look at credit as a factor when doing business with a motor carrier, it is not the only factor.

Freight factoring companies collect directly from brokers and shippers, so it is your client’s credit they care more about than yours. So, if your fleet has less-than-stellar credit, that is generally okay in the eyes of the freight factoring provider.

Many companies may also have large freight invoices. With such a large amount of cash flow outstanding, freight factoring agencies can help make up the difference. When the money comes in right away, there are less impacts to the bottom line.

Another consideration lies in many fleets’ inability to collect or provide credit services. Small fleets and owner-operators likely do not have large back office teams. When clients pay late or don’t pay at all it can be a time-consuming and expensive issue. Collections work isn’t easy and often requires a large operation to follow through on the necessary steps. If your company doesn’t have the infrastructure to do so, a freight factoring company provides the answer.

Finally, factoring agencies often offer discounts for small trucking providers. It can be hard for small operators to get big fuel discounts or other types of breaks on every-day trucking items and equipment. Good freight factoring companies can offer more than just ways to cover your cash flow needs, they can also offer savings on everything from fuel to tires and truck maintenance.

The fact is, there are many different factoring companies and providers that can provide you not just with the cash you need to keep your operation running, but with lots of other side benefits as well. So, what are you waiting for? If you are looking for a solid freight factoring partner, keep these considerations in mind and then start your search.