Making Your Miles Count: Choosing A Trucking Company (Overview)
The second book in the Making Your Miles Count series was published in 2015. Nearly a third of the book deals with every aspect of fuel costs. One of the first steps in controlling net fuel costs is the clear understanding of Fuel Taxes. Too many operators misunderstand the importance of knowing the impact of fuel taxes. The bottom line is fuel taxes must be completely removed from the calculations of controllable fuel cost issues. In other words remove the fuel tax from the pump price so as to compare the BASE PRICE of fuel you are considering to purchase. If you owned a truck that miraculously consumed zero diesel fuel (a wonderful concept) it would make zero difference on your net fuel tax cost. For some people playing the fuel tax “game” is very important, however it is an exercise in futility… it moves cash/liability from one pocket to another but makes no difference to your wealth building. The activity is a complete waste of time. There are many issues surrounding net fuel costs, the first is fuel consumption, then fuel cost issues. Consumption has a greater impact than costs. Typically carriers make better fuel purchases while operators have better fuel consumption averages. Operators enjoy the freedom of fueling where they desire, which is usually not the most economical. Understanding where fuel is cheapest is not a static science, prices fluctuate seasonally, cyclically and randomly across the North American markets. It’s a management issue that each operator must understand and embrace.
Comparing carrier contracts is a science that few operators have used. The method of choosing a carrier is almost always on the word or observation of a friend. I remember one client who spent four months preparing to leave a carrier on the testimony of a friend. Then after finally making the change he met his friend at a truck stop only to find out they were no longer at the company he just moved to. He obviously trusted the guys word too much and/or didn’t keep in touch with him. Another client moved to a carrier because he saw an acquaintance purchase a new truck, SUV and boat. He made the assumption that the money must be awesome, not considering the probability that their acquaintance was demonstrating their flare for excessive debt.
Charting and comparing carrier contracts is only a part of the research an operator must do to make a sound choice in truck placement. Half way through my research I realized that providing a contract does not mean the carrier will honor it. In fact, from a legal point of view, most contracts are designed to expose and clarify the liability of the operator and not nearly so much the obligations and responsibilities of the carrier (if at all). After reading hundreds of contracts my estimation is that the average carrier contract focuses 80% on operator liabilities and obligations and only 20% of carrier responsibilities. With little to no clear obligations and responsibilities a carrier can “legally” get away with an awful lot of wing clipping. I charted 13 different carriers over a 16 year span in my research. It clearly over laid the highest paying contract with the lowest and all the contracts between them. What the charts DON’T show is the relative corresponding turnover of those contracts. When operators view the chart they immediately ask who the highest paying carrier is, thinking that financial remuneration is the primary or only criteria for an educated choice. I then ask the operator what he thinks the annual turnover is at the highest paying carrier. The assumption is that it is low, but in reality it is in excess of 80%. I point out a contract slightly above mid-way through the range, that carrier has annual turnover 8-12%. The highest paying carrier is not always the best carrier for two reasons. They may not honor their contract or the work required is too hard/difficult for the operator to sustain. Operators usually choose to leave a carrier for reasons unrelated to pay.
The book also deals with many related issues beyond lease operators. It touches on being and owner operator (running percentage). The difference between lease operator and owner operator is much larger than the gap between a company driver and a lease operator. To be a successful owner operator (running percentage) requires a deep understanding of freight rates, lanes, cycles and carrier customers. It is easier to move from a percentage operator to owning your own running rights (becoming your own carrier) than a lease operator to an owner operator. The amount of critical information for success jumps exponentially.
There are several fundamental lessons derived from the 16 year study comparisons. The research answers questions such as: do operators make more money after deregulation became entrenched or before? Do operators make more money than company drivers? If so, how and where do they make it?