Trucking Company Profit Margins: How to Boost Profitability

Is your freight business profitable? Are you looking for ways to increase your profits? Financial success is the end goal for any business, but achieving your financial goals is easier said than done.

It can take some complex calculations of the cost-per-mile and load profitability to help you determine your profit margins and overall profitability — but implementing a Transportation Management System (TMS) can help you track important financial data and operational costs. Business owners and operators that want to learn more about trucking company profit margins and how to boost profitability may find the answers to their questions with this overview of how a TMS platform can reduce costs and improve profits.

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When you examine the profitability of your trucking and freight business, cost-per-mile and load profitability are important metrics to consider. Your average cost-per-mile will help you take a closer examination of your day-to-day costs and understand if the loads you have taken are profitable, and you can use this data to calculate your cost-per-day. This data can in turn be used to help you determine load profitability based on your average cost-per-mile and cost-per-day metrics.

Cost-per-mile is an important metric to help track profitability for trucking and freight companies. The average cost-per-mile in trucking ranges from $1.50 to $3.00 per mile and includes key expenses like fuel, driver wages, insurance, maintenance, tolls, the type of load, and other operational costs.

Total Expenses in Set Period / Miles Driven in Set Period = Cost-Per-Mile

Load profitability is an important metric to track if you hope to improve profits for your trucking company. This calculation involves direct, indirect, fixed and variable costs in addition to the projected revenue of a load with total miles driven factored into the equation. Fixed costs included in the calculations are truck payments, insurance, permits, licenses, and additional overhead costs. Variable costs include fuel costs, driver salaries, tolls, fees, dispatch fees, and more. Load profitability metrics can help you find the loads that are most profitable for your freight company.

Gross Load Revenue – Total Costs = Profit

How Does a TMS Help Reduce Operational Costs?

When you use the calculations listed above, you gain insight into your operational costs and the profitability of new loads. Armed with this information, you can choose the loads that are the most beneficial and the most profitable for your company and your drivers. A Transportation Management System provides a wealth of innovative solutions that will help you reduce your costs and drive your profits.

Here is a better look at how a TMS will reduce your costs and improve your profitability:

Reduced Operational Costs

Your operational costs are a key part of the financial puzzle for trucking and freight companies that include fuel costs, your drivers’ wages and benefits, preventative maintenance and repairs, insurance costs, and truck payments. A Transportation Management System can help you reduce and minimize your operational costs in three key areas — route optimization, load optimization, and carrier management.

TMS platforms employ route optimization to help you plan and execute the most efficient routes for your trucks by examining miles, traffic, fuel costs, and more. This helps reduce fuel costs and minimize on-road delays. Innovative load management solutions will help optimize loads to reduce empty miles, maximize capacity, and increase the profitability of each load. Many TMS platforms also provide carrier management tools to help trucking companies compare rates and find the most affordable carriers.

Reduced Administrative Labor Costs

Administrative labor is a hidden cost for trucking and freight companies. The paperwork and day-to-day tasks done behind the scenes take time and money that can be reduced with the right tools. Transportation Management Systems can automate many day-to-day aspects of a trucking business, such as scheduling, dispatching, and data entry. With the ability to automate key forms like bills of lading, invoices, and contracts, it reduces the time staff needs to spend on administrative tasks, reduces the risk of errors, and lowers administrative costs.

Increased Efficiency and Asset Utilization

The more efficient you are as a business and the more efficient you are with your load management and assets, the more profitable you will be. Finding the most efficient routes and tracking shipments in real-time allows you to set clear delivery dates and adjust routes quickly to avoid continued delays, ensuring that your cargo reaches its destination as quickly as possible. TMS platforms provide a variety of tools to help you better track your cargo, keep customers informed, and plan more efficient routes that can increase your profitability. In addition to increased efficiency, a TMS platform can help improve asset utilization with improved scheduling and dispatching that will maximize the use of your fleet.

READ MORE: How Much Does a TMS Cost?

Are you taking a closer look at trucking company profit margins and how to reduce costs? A Transportation Management System, like TenTrucks TMS may prove to be the solution and will provide innovative tools to help you reduce costs and drive long-term profits.

Contact TenTrucks today for more information on our TenTrucks TMS and dispatching services!