Trucking isn’t a career for the faint of heart. Truckers and owner-operators need to maximize their profits at every turn to make it in this demanding industry. This industry requires grit, determination, and innovation. It’s not enough to be persistent or dedicated—you also need to be agile because things are changing quickly. With fuel prices skyrocketing and fierce competition lurking around every bend, increasing profit margins is more important than ever.
Why is it so crucial to boost profits?
For starters, building and maintaining a business is all about financial stability. Trucking is a costly business, and it takes a lot of resources to keep a fleet running—even a small fleet. Increasing trucking company profit margin means carriers and owner-operators can generate more revenue, pay off debts, and reinvest in their business for future growth.
Plus, unexpected expenses can pop up at any moment, making it essential to build up a cushion of extra profits. Accidents, breakdowns, and other unforeseen events can quickly wipe out gains. Increasing margins allow truckers to weather these storms and stay on the road to success.
If you can increase trucking profit margins by reducing operating costs, you can also offer better rates to your customers. When profits are tight, offering discounts or negotiating lower rates is hard, which can lead to lost business. By increasing profits, truckers can be more flexible with their pricing, attract more customers, and grow their business.
And let’s not forget about the quality of life.
Trucking is a demanding job that can take a toll on mental and physical health. By boosting profits, truckers and owner-operators can enjoy a better quality of life, spend time with loved ones, and pursue their passions off the road.
So, if you’re ready to take your trucking game to the next level, it’s time to focus on increasing those profit margins! Keep reading to learn more.
What’s Behind Falling Rates?
Truck rates are declining, which is not good news for anyone. If truckers cannot make a profitable living, they may leave the industry, causing a reduction in capacity and potential supply chain disruptions—and ultimately impacting the economy. The American Trucking Association (ATA) reports that the number of commercial truck drivers is expected to drop from 78,000 in 2022 to 64,000 in 2023. And the shortage is expected to continue to balloon over the next decade. With many drivers reaching retirement age, not enough new drivers are attracted to the competitive industry and rugged trucker lifestyle.
According to a recent report by Supply Chain Dive, trucking rates were noticeably low in 2022 and are expected to fall even further in 2023:
“Falling spot rates were evident throughout 2022, though the drop was greater than analysts projected. Ken Adamo, DAT chief of analytics, told Supply Chain Dive his organization originally thought rates would fall between 15% and 20% in 2022, but the actual decline was closer to between 25% and 30% YoY.”
There are a number of reasons rates are dropping.
Inflation has been on the rise lately, which means higher costs across the board. As shippers and brokers grapple with increased costs for fuel, wages, and other expenses, they’re less likely to offer premium rates to carriers. Despite the rising cost of expenses, FreightWaves notes rates are nearing the rock-bottom prices of the 2019 freight market crash.
And inflation has caused consumers to slow their spend. Reduced demand for shipping services means there’s simply not as much money—or gigs—to go around.
That all comes after the spike in demand and the backlog of freight caused by the pandemic. During the height of the pandemic, shippers and owner-operators were scrambling to keep up. They invested heavily in excess capacity to meet the surge in demand. But as volumes fall, more trailers are left sitting idle.
These factors have contributed to a rate crisis in the trucking industry. As rates fall, carriers are left scrambling to make ends meet.
It’s a tough time to be a trucker, which is exactly why we invest in offering cutting-edge solutions for logistics companies. By staying informed and adaptable, you can weather the storm and come out on top.
5 Innovative Strategies to Increase Cash Flow
Logistics companies need to think outside the box and implement innovative strategies to stay ahead of the competition and increase their profit margins. Owner-operators and truckers are finding creative ways to increase their cash flow and improve their bottom line.
Truckers can thrive in an increasingly competitive industry with challenging market conditions by staying proactive and constantly looking for ways to improve. Here are five ways carriers can reduce costs, increase efficiency, and differentiate themselves from the competition.
1. Use Technology to Streamline Operations
Advanced technology makes it possible to streamline your operations and reduce inefficiencies more than ever. This includes everything from GPS tracking to automated dispatching to digital document management. Truckers already use technology to streamline operations by utilizing electronic logging devices (ELDs) to track hours of service and comply with federal regulations. Additionally, adopting digital payment and invoicing systems to help simplify and speed up payment processes can improve your cash flow and reduce administrative tasks.
2. Optimize Route Efficiency to Save on Fuel
Another key strategy to help improve profitability is optimizing your route efficiency. Truckers can save time and money on fuel and other expenses by using software to map out the most efficient routes and avoid congestion. Work smarter, not harder. Truckers can optimize their routes using GPS and routing software to find the most efficient and shortest routes, reducing fuel consumption and costs. You can also look at factors—such as traffic, road conditions, and weather—to affect routes and improve fuel use.
3. Strengthen Relationships and Logistics Networks
Are you playing nice with others? Your relationships with other logistics players impact the deals you can make to grow as a business. You need to build strong partnerships with brokers, shippers, and other key players in the industry. You might find new opportunities to grow your business and increase profits by cultivating these relationships and collaborating closely.
4. Track Assets to Improve Utilization Rates
Idle or underused assets are a drain on your profitability. Tracking helps you analyze capacity and maximize the lifetime value of your assets. By keeping close tabs on trucks and trailers, truckers can ensure they’re being maintained properly and used to their fullest. This might involve using advanced telematics tools to monitor vehicle performance or simply keeping a close eye on maintenance schedules to prevent breakdowns and minimize downtime. Some companies use automated electric logging and utilize predictive analytics tools to help them streamline the process.
5. Improve Capacity with Trailer Sharing
Finally, offering excess capacity to brokers and power-heavy carriers as rentals through smart sharing solutions can be a great way to generate additional revenue with trailers that are otherwise sitting idle. By taking advantage of innovative rental platforms like vHub, truckers can monetize their idle trailers and generate additional cash flow while maintaining asset ownership.
Additionally, when you need to expand your own capacity quickly, you can rent on-demand trailers without making a long-term investment to purchase. vHub helps truckers and owner-operators adjust capacity quickly to get the most out of their available assets.
How To Solve Capacity & Increase Trucking Profit Margins
Are you ready to challenge your business model and grow with smart asset sharing? Truckers are turning to vHub to improve their profit margins, lower fuel costs, and reduce wasted capacity.
Through vHub’s smart trailer rental platform, truckers can rent trailers on-demand, reducing their need to own and maintain their own fleet of trailers. By renting trailers only when needed, they can lower overhead costs and reduce wasted capacity. Additionally, vHub’s technology (Badger) helps truckers optimize their routes, saving time and fuel costs. Through the platform’s advanced tracking features (Interlock), truckers can also easily monitor their assets and ensure they are used efficiently.
Utilize vHub’s marketplace to improve your bottom line and stay ahead of the competition. With vHub’s single-source trailer rental platform, you can streamline rental payments, increase route efficiency, and focus on what you do best: delivering goods safely and on time.
If you’re a trucker or logistics company looking for agile capacity and lower costs, you should request a demo from vHub. Find out how our smart trailer rental platform can help streamline your operations, optimize asset usage, and maximize trucking profit margin. The vHub demo lets you experience firsthand how our platform can benefit your business and make your operations more successful. Schedule your demo today.