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Main Subject - Maximizing Profit in the Trucking Industry
The trucking industry is no longer as simple as it once was. Because of deregulation and changes in the marketplace, companies now experience tremendous operating pressure. Revenue may be growing rapidly without a corresponding increase in profitability. Senior management wonders, “What is wrong and what can I do about it?”
All companies reach a point where they can either move forward to profitability o
All companies reach a point where they can either move forward to profitability o
According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product
r wallow in stagnation. If a company’s performance is stagnant, it’s because problems have become too complex for senior management to see and understand—what I call the Barrier of Complexity. As a result, symptoms are treated and the real problems go unresolved.
In the trucking industry, you know all too well what those problems are:
--Increased operating costs due to competitive pressures and customer
In the trucking industry, you know all too well what those problems are:
--Increased operating costs due to competitive pressures and customer
; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.
Examples of combination products may in
Examples of combination products may in
demands.
--Rising capital investment and reinvestment costs.
--An acute driver shortage.
--Rising insurance costs.
--Rising wages and benefits for your employees.
--Rising fuel costs (enough said).
LTL companies often react to these problems instead of managing them because they’re measuring productivity in outmoded ways.
For example, most companies still use Operating Ratio to m
--Rising capital investment and reinvestment costs.
--An acute driver shortage.
--Rising insurance costs.
--Rising wages and benefits for your employees.
--Rising fuel costs (enough said).
LTL companies often react to these problems instead of managing them because they’re measuring productivity in outmoded ways.
For example, most companies still use Operating Ratio to m
lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.
asure shipment profitability and make pricing decisions. But is a 105 operating ratio on a shipment a “true” 105? That shipment could generate $5 or $75 of profit. You know which one I’d pick. But do you always know how much the contribution each shipment will generate?
If you don’t, you’re operating blind. And operating blind in today’s environment will lose you money. A trucking company is only as
If you don’t, you’re operating blind. And operating blind in today’s environment will lose you money. A trucking company is only as
here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe
strong as its terminals. Effective Management Systems helps you see and understand what’s happening at the terminal level—we have the software and technology to diagnose problems based on accurate information and to help you develop strategies to maximize profit.
Here’s how.
--Accurately measuring and understanding productive output. As a manager, you don’t just want to pay by the hour—you want to pay f
Here’s how.
--Accurately measuring and understanding productive output. As a manager, you don’t just want to pay by the hour—you want to pay f
d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.
Combination pro
Combination pro
or the productive output during that hour.
Many companies base their accounting systems on actual cost. But almost every company EMS has worked with has been at least 30% inefficient (or carrying 30% excess capacity). When you use actual costs, you’re passing your inefficiencies on to the customer with price increases, and in a free market environment that becomes harder and harder to do.
--Using capacit
Many companies base their accounting systems on actual cost. But almost every company EMS has worked with has been at least 30% inefficient (or carrying 30% excess capacity). When you use actual costs, you’re passing your inefficiencies on to the customer with price increases, and in a free market environment that becomes harder and harder to do.
--Using capacit
ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc
efficiently. With inefficiencies built in to your accounting system, your company doesn’t know the true quality of the revenue because the inefficiencies are masking that. As a result, many trucking companies don’t know their true capacity, turn away business, and as a result growth is stunted. Much more market share is available to most companies than they realize.
--Utilizing a productivity/capacity ma
--Utilizing a productivity/capacity ma
easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi
nagement system with engineered standards. Such a system allows you to manage capacity and productivity at the terminal level on a daily basis.
All companies have three containers—fixed cost, variable cost, and revenue. The key to running a profitable company is managing the relationship of variable cost to revenue. But if variable cost is not separated out from fixed cost—if you cannot see it—then you h
All companies have three containers—fixed cost, variable cost, and revenue. The key to running a profitable company is managing the relationship of variable cost to revenue. But if variable cost is not separated out from fixed cost—if you cannot see it—then you h
nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically
ave no way of managing productivity and capacity in an effective, profitable way. And most traditional, full-costing accounting methods keep variable costs hidden.
Fixed cost remains relatively the same whether any business is handled or not. Take depreciation as an example—the bank doesn’t care if you move that piece of equipment or if you’d had 50 more shipments in a given day. All they want is their p
Fixed cost remains relatively the same whether any business is handled or not. Take depreciation as an example—the bank doesn’t care if you move that piece of equipment or if you’d had 50 more shipments in a given day. All they want is their p
and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ
yment each period.
In contrast, variable cost is just that—variable. Each shipment has some level of variable cost associated with it because each shipment uses time and capacity—wages and benefits for drivers, mechanics, and dockworkers, fuel costs, equipment costs, maintenance, etc.
Fixed cost is where you make your investments, but you pay for those investments by managing the relationship of variable
In contrast, variable cost is just that—variable. Each shipment has some level of variable cost associated with it because each shipment uses time and capacity—wages and benefits for drivers, mechanics, and dockworkers, fuel costs, equipment costs, maintenance, etc.
Fixed cost is where you make your investments, but you pay for those investments by managing the relationship of variable
ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi
cost to revenue—i.e., by measuring, understanding, and managing productivity.
In the trucking industry, fixed costs generally comprise 25-30% of each revenue dollar and variable costs 60 to 70% of each revenue dollar, yet the primary concern on the terminal P&L statement seems to be the proper allocation of fixed cost to revenue. Go figure!
Using the traditional P&L statement as a management tool at the
In the trucking industry, fixed costs generally comprise 25-30% of each revenue dollar and variable costs 60 to 70% of each revenue dollar, yet the primary concern on the terminal P&L statement seems to be the proper allocation of fixed cost to revenue. Go figure!
Using the traditional P&L statement as a management tool at the
ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.
Following aspects would a
Following aspects would a
terminal level is inefficient. Companies hit the Barrier of Complexity because they use one method to measure productivity and another method to measure cost. The two have no relevance to each other because they can’t help you align the two key areas that drive growth and profitability—sales and operations.
Let’s talk work measurement. There are five ways standard times can be determined:
1. Motion an
Let’s talk work measurement. There are five ways standard times can be determined:
1. Motion an
dd to the challenges in developing combination products:
Which markets to tap where the combination products can do fairly well?
Which combination prod
Which markets to tap where the combination products can do fairly well?
Which combination prod
lysis.
2. Time study.
3. Work sampling.
4. Historical times.
5. Estimates.
The first three are work measurement tools, the last two are not. Historical times (or actual times from clock/payroll systems and activity data) and estimates may be adequate for seldom-performed tasks. But for routine, high occurrence, cost-consuming tasks, historical times perpetuate inefficiencies and estimat
2. Time study.
3. Work sampling.
4. Historical times.
5. Estimates.
The first three are work measurement tools, the last two are not. Historical times (or actual times from clock/payroll systems and activity data) and estimates may be adequate for seldom-performed tasks. But for routine, high occurrence, cost-consuming tasks, historical times perpetuate inefficiencies and estimat
cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin
es can be grossly in error. Yet the majority of carriers today still use incomplete productivity measurements—stops per hour, pounds per man-hour, wages as a percent of revenue, shipments per hour, etc. Then they use an accounting-based, full-costing methodology based on actual costs to make decisions that drive business levels.
More than ever, a carrier’s business is becoming National Account/3PL driven
More than ever, a carrier’s business is becoming National Account/3PL driven
tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
What would be the developing cost?
How to tackle the risks encountered during combination product developmen
. As we all know, that business is generally acquired at a reduced price, sometimes substantially so. The carrot? At the reduced price you get a higher volume of business. The tradeoff? You sacrifice quality of revenue for quantity. Carriers bring that business on board under the assumption that it will provide contribution.
The terminal begins to see an increase in shipment count and revenue. The ter
The terminal begins to see an increase in shipment count and revenue. The ter
t?
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel
inal manager asks for another driver and more equipment to handle the increased business. Revenue is up, all right, but so are variable costs, and therefore profits remain stagnant or decline despite the revenue increase. Throwing equipment and people at the problem doesn’t solve it, but only fuels the vicious cycle.
Again, every carrier EMS has worked with has had at least 30% excess capacity. The key to
Again, every carrier EMS has worked with has had at least 30% excess capacity. The key to
ping new procedures for reviewing their safety, efficacy and quality.
Professional from academic institutions, pharmaceutical industries, health care indust
Professional from academic institutions, pharmaceutical industries, health care indust
profit growth is growing outbound revenue in the right places, managing capacity at a higher level on a daily basis, and absorbing increased shipments with the capacity you already have in place. Generating additional business at no additional cost is the key to building operating leverage.
And the only way to do that is to use macro-productivity measures and engineered standards to break through the Barr
And the only way to do that is to use macro-productivity measures and engineered standards to break through the Barr
y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products
ier of Complexity by truly understanding costs and productivity. Which method provides the best opportunity to manage growth more effectively and bring alignment to sales and operations? Managing total cost and guessing at contribution levels? Or separating out fixed cost from total cost, and then managing variable cost and revenue by knowing the level of contribution?
The EMS system uses the same standa
The EMS system uses the same standa
.
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de
ds on the costing side as the productivity side, bringing alignment to sales and operations. We’ve had great success in helping trucking companies improve profitability by providing them with the following tools:
--P&D Module Detail Report analyzes the productivity of every P&D driver by terminal, to identify inefficiencies so you can grow revenue without adding additional labor cost and equipment.
--Det
--P&D Module Detail Report analyzes the productivity of every P&D driver by terminal, to identify inefficiencies so you can grow revenue without adding additional labor cost and equipment.
--Det
elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.
Companies that provide selfless information through particip
Companies that provide selfless information through particip
ermining Fixed Cost Per Terminal/Standard vs. Full Costing Methodology, so you can manage variable costs in relation to revenue.
--Lane Summary Data.
--Dock Efficiency Report, which helps identify inefficiencies in dock loading, enabling you to shift drivers from dock work to hauling freight on the street.
--Trailer Utilization Report.
These are the methods you can use to break the Barrier of Complexity
--Lane Summary Data.
--Dock Efficiency Report, which helps identify inefficiencies in dock loading, enabling you to shift drivers from dock work to hauling freight on the street.
--Trailer Utilization Report.
These are the methods you can use to break the Barrier of Complexity
tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products
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