How a TMS can reduce your cost per mile
For many trucking companies, reducing cost per mile (CPM) is a top priority. With rising fuel prices and operational expenses, implementing strategies to reduce CPM is a crucial business practice. One of the most effective ways to achieving this is by implementing a Transportation Management System (TMS), which has proven to minimize fuel costs, improve fuel economy, and increase operational efficiencies. This blog will explore why implementing a TMS is a smart investment for trucking companies looking to reduce CPM.
Understanding Transportation Management Systems
First, we need to identify what a TMS is and what it does; a Transportation Management System (TMS) is a software solution designed to streamline and optimize the logistics and transportation operations of a trucking business. It is usually implemented on desktop computers, tablets, and phone apps to be used by all staff of a company. It has areas in the software for certain roles and responsibilities.
It serves as a centralized platform that automates and manages various aspects of the transportation process, including route planning, load optimization, dispatching, order tracking, and freight invoicing. With a TMS, trucking business owners can efficiently handle their fleet, drivers, and cargo while reducing costs and improving overall operational efficiency. The system provides real-time visibility into critical data, enabling informed decision-making. By leveraging a TMS, trucking business owners can enhance customer service, maximize asset utilization, lower fuel costs, improve driver productivity, and ensure regulatory compliance in their operations.
Defining Cost Per Mile (CPM)
Cost Per Mile (CPM) is a fundamental metric that holds great significance in the transportation industry. It refers to the average cost incurred for operating a vehicle per mile driven. Understanding CPM helps trucking business owners gauge the profitability and efficiency of their operations. Several factors contribute to CPM, including fuel expenses, maintenance costs, labor, and vehicle utilization.
Fuel expenses form a significant portion of CPM, as fuel prices can fluctuate and impact overall profitability.
Maintenance costs include regular servicing, repairs, and replacement of parts, which directly influence the longevity and reliability of vehicles.
Labor costs involve wages, benefits, and driver-related expenses, which are essential for ensuring skilled and reliable drivers.
Vehicle utilization, measured by the percentage of time a truck is in use, affects CPM by optimizing asset utilization and reducing idle time.
By understanding these factors and actively managing them, trucking businesses can control and reduce CPM, leading to improved profitability and operational efficiency.
How TMS helps reduce fuel costs
Improved fuel economy
With the advent of advanced technology, modern TMS platforms reduce idle time, manage fuel consumption, and minimize empty miles. Implementing a TMS ensures that the most efficient route possible is selected for each task assigned, minimizing the distance traveled and reducing fuel consumption. Improved fuel economy results in lower operational costs and is an effective way to reduce CPM.
TMS improves routing and scheduling accuracy, reducing the carrier’s downtime. Reducing the amount of time trucks spend on the road by optimized route planning, identifying the safest routes, and reducing wait times significantly lengthens the lifespan of a vehicle. TMS platforms can also monitor vehicle health and maintenance needs, ensuring that vehicles are maintained regularly, saving money on unnecessary repairs and reducing operational downtime.
Reduced labor costs and errors
TMS streamline dispatch and transportation scheduling, allowing dispatchers to manage workloads more effectively. Automated load planning, routing, and scheduling means that dispatchers need less time to manage individual loads, allowing them to concentrate on other crucial tasks, ultimately reducing labor costs. This cost-saving measure is beneficial in reducing CPM.
One key benefit is the automation of manual processes that were traditionally time-consuming and prone to errors. TMS automates tasks such as paperwork, data entry, and invoicing, eliminating the need for manual intervention and reducing administrative overheads. By digitizing and centralizing these processes, TMS enables efficient management of transportation-related documents, including bills of lading, proof of delivery, and carrier contracts.
The streamlined operations facilitated by TMS have a direct impact on overall efficiency and lower the cost per mile. Trucking companies can optimize resource allocation by efficiently assigning drivers, trucks, and routes based on real-time data and demand. This allows staff to focus on more value-added activities, such as customer service and strategic decision-making. This improved operational efficiency translates into not only reduced labor costs, but ultimately enhanced customer satisfaction as well.
Improved load utilization and optimized route planning
Empty truck miles waste fuel, contribute to vehicle emissions, and are a substantial cost for carriers. TMS track fleets in real-time, allowing them to identify the most effective loads for vehicles that would otherwise travel empty. Implementing a TMS can improve load utilization, increase revenue per transported mile, and reduce operational expenses, which can significantly lower CPM.
TMS software integrates with traffic monitoring systems to consider current traffic conditions. It helps identify potential bottlenecks or congested areas and suggests alternative routes to avoid delays. By avoiding traffic-heavy areas, trucking companies can reduce idling, resulting in reduced CPM.
Customer requirements are also given due consideration in TMS route planning. The software takes into account delivery time windows, customer preferences, and specific instructions. By aligning routes with customer requirements, TMS helps enhance customer satisfaction and reduces the risk of missed deliveries or delays. Satisfying customer demands ultimately leads to increased business and improved profitability.
In addition to optimizing route planning, TMS facilitates load consolidation, which further contributes to lowering CPM. Load consolidation involves combining multiple shipments into a single load, reducing the number of empty miles traveled by trucks. This consolidation of loads not only lowers CPM but also decreases the number of vehicles required for transportation operations, resulting in significant cost savings and improved operational efficiency.
Real time monitoring and driver behaviour
Through various integrated technologies, TMS can provide valuable insights into driver performance, including speed, idle time, and excessive braking. This real-time visibility allows trucking companies to identify areas for fuel efficiency improvement and take proactive measures to optimize driver behavior.
By monitoring driver speed, TMS helps identify instances of excessive speeding that can negatively impact fuel economy. Speeding not only increases fuel consumption but also puts safety at risk. Managers can track and analyze driver speed patterns, allowing them to provide feedback and coaching to drivers. By promoting safer driving habits through TMS, trucking companies can reduce fuel consumption, and minimize wear and tear on vehicles.
Another important aspect that TMS monitors is idle time. Excessive idling can significantly contribute to fuel wastage and increase operational costs. TMS can track and report idle time metrics, enabling trucking companies to identify drivers who have prolonged idling periods and take corrective actions. By addressing idle time, trucking companies can lower emissions, and ultimately improve their cost per mile (CPM).
A TMS can generate detailed reports and analytics that highlight trends and patterns in driver performance. By analyzing this data, trucking companies can identify opportunities for improvement, such as reducing unnecessary stops, and encouraging eco-driving techniques. TMS can also facilitate the implementation of driver incentive programs based on fuel-efficient behavior, further motivating drivers to adopt fuel-saving practices.
Conclusion
Transportation Management Systems are a reliable way for carriers to reduce their CPM. By reducing fuel consumption, optimizing routing and scheduling, improving load utilization, reducing labor, and maintenance costs and managing manual errors, a TMS can reduce operational expenses significantly. The TMS platforms offer carriers the opportunity to simultaneously increase revenue and reduce operational expenses, which ultimately leads to increased profitability. The trucking industry is continually evolving and becoming more competitive; implementing a TMS is a smart investment to keep up with modern technology, reduce operating costs and maintain a competitive edge.