Should Trucking Companies Reconsider Their Current Truck Utilization Model?
Over a year ago, my team and I took on a study here at the Advanced Technology Development Center at Georgia Tech to find out why certain things in the trucking industry are the way they are.
Let’s first look at the fact that trucking companies, for the most part, lease and pay insurance/permits for their trucks to be covered 100% of the time – yet, only use that same equipment less than 45% of the time.
That works well for restaurant equipment and some other industries, however; for the life of me, I cannot understand how such a business model went on for so long in trucking. Could you imagine the airline industry with such arrangements? Every single airline company would have gone out of business overnight.
Southwest Airlines became quite famous in 1972, when VP of Ground Operations, Mr. Bill Franklin decided to create a new standard, where any of the 3 planes they had at the time never spent more than ten minutes at the gate. He understood 2 important principals: 1) the basic idea of untethering the pilot from the plane and 2) that the second biggest revenue-maker, after the pilot, was the equipment itself. Mr. Franklin was able to see that the pilot has a limit to his or her hours of service, whereas the plane has at least twice that amount.
Back to trucking. . .
In a very similar manner, there are currently in place strict drive-time limitations for professional truck drivers. New industry mandates state that drivers are legally allowed 11 hours of driving time, which means he or she can only drive 45% of the day and simply do paperwork and rest for the remaining 13 hours or 55% of the time.
By the Numbers:
A long-haul truck with a solo driver represents ~$275k in annual gross revenue for a company. Assuming this truck logs 110k miles annually at $2.5 per mile. (These numbers may vary based on different factors.)
Now, these numbers are based on a 45% utilization of the equipment by a solo driver. One of the root causes is obvious. The current model tethered the driver to the equipment, which means since the driver is required to have 13 hours of idling time, this automatically holds the equipment on the same restrictive schedule.
Solution #1. The most obvious, yet most expensive decision, is to have full-time team-drivers on every load. In present times, this is proving to be nearly impossible to accomplish due to driver shortage – however our research has located a few companies who are making this choice work for them.
Solution #2. Running an On-Demand team. Meaning, utilize a solo driver with the option to pick up an on-demand relay driver, operating similar to running in a team relay race. Imagine – instead of passing a baton to another athlete, the truck driver passes the key to another relay trucker.
I will dive into Solution 2, (the On-Demand Relay Teams) in my follow-up blog (HoS) – “Use ’em or Lose ’em”