While minimalism may be a term best known in home decor, the concept is familiar in the supply chain. “How can we do more with less?” To address this question, business owners must understand how to calculate truck utilization and use fleet management metrics to inform decisions for their company’s success and stability. Although growing a financially sound small trucking fleet is part of the American dream independent lifestyle, it is nearly impossible without data from KPI fleet management to act as a compass toward a company’s long-term goals. Among the countless data processing options available, owner-operators must consider six major components when prioritizing efficiency as a company.
1. Review Utilization & Costs
When pursuing how to calculate truck utilization and costs, owner-operators need to collect baseline data to create averages to work off of. When KPIs are collected, they can be connected to make a complete picture of business performance.
Calculating Revenue and Costs
As a fleet manager learns how to calculate truck utilization, revenue and cost per mile or truck are the first data points to collect to understand the efficiency of a fleet. While each KPI has different purposes, it’s important to note that calculating truck revenue reveals non-profitable time for the truck, such as empty miles or downtime, which guides efficiency measures. Meanwhile, cost per mile provides essential data such as profit margins for previous loads to guide bidding on future loads. Here are basic calculations to collect on a fleet utilization log:
- Monthly revenue divided by the number of trucks in the fleet = Revenue Per Truck
- Monthly revenue divided by miles driven fleetwide = Revenue Per Mile
- Total transportation expenses per month divided by the number of trucks in the fleet = Cost Per Truck
- Total transportation expenses per month divided by the total number of miles driven = Cost Per Mile
On February 18, 2022, the US Energy Information Administration published that the national average on-highway diesel price is $5.101, which is $1.977 over the average cost of one year prior. With fuel costs hanging at an all-time high, owner-operators must seek ways to manage and control trucking fuel costs while carefully monitoring current usage to identify potential issues. Perhaps a vehicle is underperforming, or a driver makes choices that increase fuel usage. Collecting data for this aspect of fleet management metrics is best done automatically through API integration to the ELD or TMS that forwards to the fleet utilization log.
Within KPI fleet management, yield moves beyond the base revenue and cost calculations to reveal whether the existing business functions are entirely optimized. By measuring multiple performance indicators per load, such as margin, efficiency, expenses, income, and value to the operation, business owners can learn what margins per load per day to expect. Although no precise calculation results in yield, it provides a strategy option to identify drivers, lanes, or any other underperforming logistical measure.
Vehicle and Trailer Utilization Rates
Learning how to calculate truck utilization starts with knowing the mileage capacity of a total fleet and comparing it to the actual mileage driven within a set time frame. These fleet utilization metrics provide blatant data to reveal potential versus reality regarding capacity utilization. The vehicle utilization formula is as follows:
- All miles driven by the fleet divided by the number of drivers = A Driver’s Average Miles
- A driver’s average miles multiplied by the number of vehicles in the fleet = The Company’s Mileage Capacity
- All miles driven by the fleet divided by the company’s mileage capacity = Vehicle Utilization Rate
If the point of fleet utilization meaning is still unclear, ultimately, this formula identifies capacity excess to guide the decision-making to maximize operational costs and efficiency.
Additional Reasons to Calculate Fleet Utilization Rate
- LTL Capacity Utilized – LTL fleet managers who know how to calculate truck utilization get to discover the lost revenue within unused space that spurs better choices of trailer utilization and who to haul freight for.
- Recurring Delays – KPI fleet management data can reveal the lost costs of every delay through detention and dwell time, allowing managers the insight to arrange better contracts and routes.
- Wasted Miles – Assessing deadhead trips provides fleet managers with a high-level view to discover and correct trucks or lanes routinely returning empty.
2. Assess Maintenance and Repair Costs
Complete operational efficiency is more than just a vehicle utilization formula. It’s also the careful assessment of the costs associated with running a fleet smoothly. Below are five aspects to consider when building KPIs as an owner-operator.
- Daily Vehicle Inspection Reports – Although DVIRs are mandatory for federal compliance, they are also an excellent source indicator of overall vehicle health to guide future maintenance and repair costs based on past patterns.
- Factory Suggested Maintenance Schedule – Owner-operators can extend the lifespan of their trucks and trailers by sticking to the factory suggested preventive schedule of the vehicle to save long-term on unexpected costs and increase overall ROI.
- Diagnostic Trouble Codes – Regardless of the preventive maintenance aforementioned, DTCs will occur, and it’s vital to track them for fleet utilization rates that can notify owners of recurring repair costs.
- Delays Due to Repairs – Owner-operators can make the best service provider choices for their vehicle repairs by tracking the amount of time a vehicle is in the shop to determine if the technicians are underperforming.
- In-House Maintenance Productivity – While in-house repairs may be the cheapest upfront, it’s important to monitor time and cost efficiencies to reveal if this is an area that an owner-operator could improve through training or outsourcing.
3. Evaluate Equipment Management & Investment
When starting a trucking company, the first question is often, “What type of truck and trailer should I buy? Is leasing a better option for me?” These questions center on the importance of equipment management which is another important area to bring into the KPIs of a novice or experienced trucking company.
When pursuing how to calculate truck utilization with KPIs, owner-operators must perform an equipment audit to gather information that is more detailed than a routine inspection. This data can identify any pieces of equipment that truckers must upgrade to improve efficiency. Sometimes this can result in the expensive decision to replace the entire vehicle. Although truckers should get paid quickly in every circumstance, this need is especially vital when excessive fuel consumption and repair demands reveal the need for an upgraded truck. The total cost of ownership (TCO) is one way to calculate fleet management metrics to drive budgeting and planning in leasing or purchasing a vehicle. Unlike how to calculate truck utilization, there is no established formula for TCO; essential factors to include in the equation are driver costs, vehicle payments, fuel, insurance, tires, permits, and OTR costs such as tolls.
4. Evaluate Safety & Compliance
According to trial lawyers Arnold and Itkin, the average cost of basic health and property damage from the average truck accident totals $334,892. In multiple-trailer crashes, that number triples, and if there is a fatality, the lawyers say the average cost is over $7 million. With this in mind, owner-operators must ensure they abide by safety guidelines already in place and be diligent in areas outside of those guidelines to score well when working on how to calculate truck utilization.
Hours of service (HOS) are often among the most disputed regulations. Even if there is no crash, violations still result in lost hours on the road and diminished profits. Beyond compliant regulations, owner-operators can utilize GPS and telematics to track speeding, harsh acceleration, deceleration, and other risky behaviors resulting in collisions. These safety fleet utilization metrics can protect the driver, fleet, and profits that truckers otherwise lose in accidents or traffic stops.
5. Optimize A Growing Workforce
While many owner-operators today might be just focused on how to find loads, others are hiring their first or first few drivers, which brings a lot more to the fleet utilization meaning. By learning how to calculate truck utilization, owner-operators can identify employee out-of-route miles or patterns in inefficiency to better manage drivers, schedules, and routes. To help measure a driver’s productivity, divide the prospective route mileage by the actual miles driven. Although this may seem overbearing, a vital element of employee satisfaction is the employee’s understanding of employer expectations. New fleet owners benefit from routinely checking in with employees on workplace conditions and concerns because a happy employee is a productive one.
6. Improve Customer Experience
Grasping how to calculate truck utilization is only the beginning of the advantages that properly tracked KPIs can bring. Owner-operators can start routine check-ins to solve any customer issues before their customer loyalty is on the line. One necessary KPI calculation in this realm is to determine the retention rate per period by subtracting new customers from the amount that the period ended with, divided by the number of customers the period started with, and multiplying that total by 100.
Year-over-year revenue is another vital aspect of business building KPIs that connect with customer experience. Although some customers may prefer the traditional payment windows up to three months from the date of delivery, new methods such as invoice factoring provide truckers with the ability to give the customers what they want while getting paid faster. Maintaining cash flow is essential to the customer experience, especially when damage claims get filed. By tracking these claims, owner-operators gain a conversation starter with customers to proactively address packing or loading procedures to maximize future profits.
Factoring with BasicBlock Gives You Time to Perfect How to Calculate Truck Utilization
The potential areas to track KPIs are genuinely endless. Regardless, to move forward with efficiency strategies and protect the American dream found in the freedom of self-employment, owner-operators must first have the time to make it all happen. By utilizing a freight factoring company, owner-operators get freed from following up on invoices and have the immediate cash flow to purchase software and integrations to get actionable KPI data today. BasicBlock is a factoring provider that prioritizes transparency and real customer support to get truckers back on the road for the next freight pickup. To learn more about how freight factoring can free you up to optimize your business, get started with BasicBlock today.