Pinching Pennies

September 23, 2015

pennies1

In trucking, we think a lot about pennies. We charge our customers in cents per mile, and our drivers are paid in cents per mile. Sometimes, it is easy to get into the thinking that “It’s only a penny.” A penny may not seem like much, but added up over a fleet our size over the miles we run; it is a lot of money. For a driver running 120,000 miles per year a penny is $1,200. Last year, our trucks ran almost 32 million miles. Do the math … each penny spent is $320,000, and conversely each penny saved is $320,000. This highlights the truth behind Benjamin Franklin’s famous quote, “A penny saved is a penny earned.” It is the job of everyone on the ACT team to make our pennies and to save our pennies.

The largest expense in trucking is fuel. We purchase approximately 5,300,000 gallons of fuel per year. Each penny saved on a gallon of fuel represents $53,000 per year. If we save a lot of pennies that adds up to a whole lot of money, which keeps the company financially sound.

Why do you care if we are financially sound? You should. We have a lot of stakeholders that require good financial performance. Investors don’t invest just for the fun of it. Every company has investors. They expect a return. If they do not get a return, they consider putting their money elsewhere. Trucking is a capital intensive industry. Buying the trucks and trailers for a company our size requires a whole lot of money, much of which is borrowed. Lenders require periodic financial reporting. If your financials are good, they want to loan you more. If your financials are not good, they get worried. Employees require good financial performance. We all want to work for a solid company. The last recession was in 2008. Recessions occur every 6 to 10 years. We are a lot nearer to the next one, than we are to the last one. Solid financials are an advantage in a recession. Companies that are weak are very threatened by a recession. It is so important in trucking to get the hay in the barn during good times. I have seen so many trucking companies who didn’t do well in good times, fail during recessions.

fuel

Every employee is a steward of company resources. One way we can be good stewards is to save fuel. Our trucks will get 8 miles per gallon and much more if the driver drives it correctly. The difference between a driver getting 6 miles per gallon and one getting 8 miles per gallon is 5,000 gallons per year….for one truck. What is the difference between these drivers? Drivers do control mpg. Slowing down, shifting correctly, checking tire inflation, balancing the load, closing the trailer gap, refraining from idling and other tricks make all the difference in the world. Drive bobtail as if you were loaded. 5,000 gallons multiplied by 300 trucks represents a savings of 1,500,000 gallons per year. So please understand when we expect improvement if you are a low mpg driver.

Another way to save company resources is to use the fuel optimizer available to all drivers. We have fuel discounts negotiated with Pilot Flying J and Love’s throughout our operating territory. The discounts are different from stop to stop and change each day based on fuel prices. We get the better of a discount off the street sign or a price based upon costs, whichever is better. There is no way a driver can know what we pay by looking at the sign. But the computer does tell us. I had a driver in orientation ask why it sometimes asks a driver to stop for a small amount of fuel and then fill up a few hundred miles away. This is because the program is looking down your route, all the way to your destination and finding the best price. The intermediate stop is to get you just enough fuel to get you to the real savings. So far this year, we have saved an average of 40 cents per gallon. For owner operators who use the system, the savings at the pump are passed directly on to them. For one driver using the systems saves $6000 per year for that truck. 40 cents times 5.3 million gallons represents a savings of $2,120,000 per year. So you can see why we emphasize this program to drivers.

ACT truck

These are just a couple of examples of how pinching pennies can make a real difference in the company’s financial performance. We want to be a leader in the market pay in employee and driver pay. We want to continue to be a good financial performer for our investors, lenders, employee and contractors. We want to continue to be in a position to weather and take advantage even of the next recession. Your attention to pennies helps get us there.

Happy and profitable trucking!

-Tom