Never Measured, Never Improved
That which doesn't get measured, never gets
improved.
In life these words can be extremely valuable to all who heed them. In business, anyone who does not heed them shalt surely fail. It doesn't matter what business you are in, you must be constantly measuring everything at all times, no matter how small the importance may seem. If it is costing you money, either directly or indirectly through lost business, then you better first identify it, track it, then be on a constant lookout for ways to improve it.
In trucking there are many things you must track and improve constantly if you intend to succeed. Fuel expense, phone bills, maintenance and tires to name just a few.
Most of you don't know this but since September 9th of 1998 I have been the operations manager at a updated 8\7\00 a company I am much better off not being associated with anymore.
Now lest any of you think that this title means I'm one of those desk jockeys who sits around playing solitaire on the computer and thinking of ways to make myself appear important when the drivers come in, let me give you a brief run down on just some of my duties.
When a computer goes down it is my job to fix it; or find the cheapest way to get it fixed. If a dispatcher is sick or on vacation, I'm a dispatcher. If we are busy and short on drivers, I'm a truck driver. If a trailer in our yard needs transloaded and everyone else is too busy, I'm a fork-lift operator. I'll never forget the look on one drivers' face when he came in to have a container lifted off of a chassis and found me running the fork-lift in a suit and tie. I'm also a salesman, web master, file clerk and don't forget receptionist when the phones are busy.
One of my most important jobs according to the 3 women who work with me is mouse chaser. On the occasional circumstance that some wily field mouse slips past Tiger, the guard cat, and happens to be spotted by any of the women in the office, then it is my job to protect and escort these women to and from various places throughout the building. These places include but are not limited to, the bathroom, the water cooler and even the copy machine until such time as I can prove beyond all shadow of doubt that said mouse has been sought out and destroyed.
"It's okay ladies I got him."
"Are you sure?!?!"
"Yup! Here it is right here."
"NOOO!!!! I don't want to seeeee it! UGHHH!"
"Okay but I got him, so could you please go to the bathroom by yourself next time?"
"Are you sure you got him?"
Personally I think the mice are cute and I can't think of one time in my life when I saw on the news that some poor billing clerk was being life flighted to the hospital from a random act of mouse attack but, what do I know? After all, they do have those "Icky tales and beady little eyes!"
My second most important job is tracking operating expenses and finding ways to reduce those costs.
Here is an example. Our phone bills normally run around $2,000.00 per month with faxes and calls. By researching this a bit we found that our long distance provider was not only charging us approximately $2.5 cents per minute more than they were supposed to but they were also charging us for a couple of phone lines that were not even ours. Now you may think that we should have caught that on the very first bill but when your phone bill is normally 20 or 30 pages long it is easy to miss some of the details.
Here is another example. Approximately 30% of our gross revenue comes from local intermodal work. For a long time we were about 70% company owned trucks and approximately 90% of the local work was done by company trucks and drivers.
Now if you have company drivers working for you then you already know this but for those of you who don't, let me tell you that employees are very expensive. First you have their wages, then you have things like matching social security funds, workman's compensation and unemployment insurance, drug screens, physicals, uniforms, the list can seem endless at times. On top of that you have to hire another employee just to make sure the drivers get paid the right amount and that the various taxes and insurance premiums are paid to the correct places at the correct times.
If you have company drivers you also have company trucks so in addition to employee expenses and liabilities, you have truck payments, liability insurance, cargo insurance, highway use and fuel taxes, maintenance, repairs and tires to pay for, among other things.
It is not hard to see that if you have an hourly employee who likes to hang around at various places to visit with friends, then you've got big problems. To give you an idea of how big, here is a partial, ball park breakdown of one weeks' expenses.
Driver, $13.00 per hour at 60 hours per week............$780.00
Approximate employer matched social security tax.........$78.00
2 weeks vacation per year = 1.5 hours accrued per week...$19.50
Company paid portion of medical insurance................$56.25
Total without counting workman's comp., unemployment, etc.etc..$933.75
This means that if these were the only expenses you have to pay, this driver would have to generate $16.00 per hour for every hour he works just to earn enough revenue to keep himself working. The actual numbers are higher.
On top of that let's say that you have a truck payment of about $295.00 per week. Now without counting fuel, oil, tires, maintenance, repairs and various taxes and insurance, this driver needs to be generating $21.00 per hour in revenue just to pay himself and the truck payment.
Bottom line we figured that our local, hourly drivers needed to be averaging $30.00 per hour in gross revenue just for us to break even. What we found by dividing each drivers' total weekly revenue by the hours they worked was that only one driver was consistently profitable. Most averaged just under the break even mark and some were consistently in the teens; even the low teens at that.
After comparing their numbers to those of some of the owner operators it was quickly obvious that the owner operators were consistently averaging double gross revenue over the company trucks. Some were even tripling our drivers production.
Well, we are not foolish enough to believe that the majority of hourly employees will ever match the owner operators in generated revenue but we knew we had to do something fast. Our first attempt was just to call all the drivers into a meeting and let them see the numbers for themselves. They had numerous explanations for their low numbers. The main one being that dispatch was only giving them the low paying moves that the owner operators refused to do. (We are a non forced dispatch company.) When I showed them on paper that the owner operators were doing the exact same moves only faster it became so silent that I could hear one of the causes for my number one job gnawing a new entry way into his tiny estate.
After several minutes of me silently waiting for an answer and contemplating methods for the upcoming wild mouse safari, our number one driver suggested that a commission based pay system might motivate all of them to push a little harder. I took that idea to the president and he liked it. We spent the next few days working numbers and negotiating. When everyone agreed we changed the pay system.
It didn't work. The low producers improved a little but still didn't make expenses and the high producers just plain didn't like it. On top of that it made the payroll people slightly difficult to deal with during that time. "Okay ma'am. Just drop the calculator and back slowly away. No one has to get hurt here."
Our next step was to call another meeting with all of the local company drivers. We told them that we understood their frustration but that we had to solve this problem quickly and it meant all of our jobs if we didn't. We finally agreed that if they would do everything in their power to become profitable, then we would put them back on hourly wages, plus if they generated $35.00 per hour for the week, we would give them a $.50 cent per hour incentive bonus on top of their wage.
The following week we started posting each drivers' revenue for the previous week on the board where all of them could see it. We hadn't realized it would do this but it put them in competition immediately and the results were phenomenal. Even the lowest producers were getting into bonus range and a couple of them made it a few times. This lasted for all of a month. I don't know if they got bored with it or what but as quickly as they had risen they began to fall. Eventually right to the starting point.
When we started hearing that the low producers were hanging out at the truck stops and rail yards visiting with each other again we'd finally had enough. Immediately we started getting rid of all but 3 of the company trucks and we encouraged all but 3 of the company drivers to find jobs with one of our competitors. The 3 drivers we kept we also gave raises to make sure they wouldn't follow the others. Now we figure all we need to do is find that competitor a few more drivers just like the ones we sent him and he will no longer be a competitor in few months.
The bottom line is we have never been as profitable as we are now. There is still things that need fixing but that is a never ending battle. The moral of this story is the same as the title, That Which Doesn't Get Measured, Never Gets Improved. This holds whether you have 1 truck or 1000 trucks. You've got to watch the numbers.
Now you'll have to excuse me. I hear a scratching sound on one of the baseboards and I don't have time to provide escort services today. TIGER!!!! You're Fired!!!!
Until next time....