Transportation business has seen growth like never before because of the emerging trends in commercial goods and product supply. Heading a dynamic business, like transportation, is not simple. It requires a lot of planning of the business and on the operational level.
There are many categories within the transportation business although the basic workflow remains the same. You can adapt your operations strategy to be specific to your transportation category. Adjusting your operations strategy should happen periodically after data is gathered over time.
Key Challenges for Transportation Businesses
Cash Flow
Transportation businesses must wait more than 60-90 days to get paid post-shipping. This restricts the business from making dynamic decisions that require cash.
Driver Retention
The transportation industry is facing a huge demand and supply gap for drivers. This causes an increase in salary which affects your cash flow.
Safety
Road accidents are at an all-time high and this has a huge effect on the transportation industry. This is also another reason for driver shortage.
Fuel
Currently diesel prices are low, yet it is a top priority for fleet agencies to save as much as possible on fuel.
Infrastructure
The quality of highways in the United States are not ranked highly and vary from state to state. This leads to high chances of road accidents as drivers might lose control of the vehicles on bumpy and slippery roads.
Overcoming Challenges by Mapping Your Operations Process
A successful transportation business will have an ever-evolving operational workflow. You can map your operations based on the customer journey to not miss any vital steps. The operations involved in a typical transport business are:
Booking
A car rental or a trucking business, the booking of the vehicle is the start of your whole process. For a commercial vehicle business, booking can be for import, export or loose-loaded cargo purposes. Cross-verify the availability of vehicles and drivers before taking any bookings. Software like BrokersPro can be helpful in organizing and scheduling all your bookings.
Vehicle Preparation
Check the quantity of the goods to be delivered and the distance to be traveled before allocating the vehicle. Once you have decided on the vehicle, have a quality run before hitting the road. This will decrease the probability of breakdowns mid-delivery.
You should also double check if your driver is carrying with him or her the Goods Receipt (GR). The Goods Receipt is issued by the warehouse or shipping terminal/port to acknowledge the items that are being transported is abided by the customary terms and conditions laid by the government.
Dispatch
When the vehicle is ready for dispatch, ensure that you are ready with the freight bill. This will include:
- Your invoice to the shipper for all the charges incurred during transportation.
- Details of the goods that are carried, including the; origin, weight, consignee and destination.
During the time of booking, you can confirm with your client if they want to make their payments upfront or post-delivery. Carry the freight bill if they want to pay during delivery.
Another document to carry during dispatch is the free on board (FOB) document. This document will be a mutually accepted agreement by both parties on who will bear the transportation costs. This includes diesel costs and goods damage.
Fleet Management
Monitor your vehicle during the length of the entire trip. There are many GPS and fleet monitoring software that you can install to get better insight into where your vehicles are in real-time. These types of software also give additional information, such as; weather on route and speed alerts. Lastly, assign well-qualified employees to fleet monitoring duties.
Billing
Any business is successful only when the pricing for the customer reflects the service the business has provided. Consider the following criteria before generating your bill:
- The weight of the goods.
- Density of the shipment. This can be calculated by dividing the total weight of goods to total cubic feet occupied in the vehicle.
- Freight classification: There are 18 classes ranging from 50 to 500. Denser freight that is easy to manage and hard to damage is ranked under the lower class.
- Distance to cover. If the delivery crosses state borders, include any state taxes you will have to pay. Similarly, the charges will be higher if the delivery doesn’t fall into your boundaries. In that situation, the goods will be transferred to another carrier.
- Base rates. Check on the Absolute Minimum Charges (AMC) a transportation company will charge before providing discounts for your customers.
Invoicing
Though billing and invoicing are similar, there are some additional points to note when you generate an invoice for your customers.
- Generate your invoice with a letterhead and your company’s logo. You might already be doing this, but if not; it shows professionalism and increases trust in your company. Make sure the words ‘Invoice’ or ‘Bill’ is displayed prominently on the top.
- Invoice reference numbers helps you to track the invoice for payment. This is a unique number that is easy for both parties to use when there are delayed or overdue payments.
- Include your contact information in your invoice. Have a full-time employee who can respond to all of your client’s queries when they contact you. Payment related queries should be an equal priority to customer related issues. It will directly impact your financial records.
- Mention the invoice date. Include information on overdue costs in red if there any.
- Give an overview of the work that was completed; goods details, distance covered, pickup and drop locations, date of booking and the date of delivery.
- Give your customers a heads up on the payment methods that are accepted by your company. This can avoid confusion and ensure prompt payment.
Accounting
After payments, the process becomes internal. Accounting is an important process that has to be monitored with care and diligence. Improper accounting may lead to direct losses. You can outsource your accounting to a professional accounting firm if you need to. However, if your company is fast-growing then it is advisable to have an in-house accountant. There are also many accounting software that you can use to aid your accounting process.
The basic sections to include in your accounts are:
- Receivables or invoice amounts
- Financial statements (balance sheet, income statement)
- Employee salary and driver pay
- Vehicle maintenance
- Fuel and fuel tax
- Overhead expenses
You can customize the accounting categories as your business requirements change.
Fleet Maintenance
Your vehicles are the key investments for your business. The number of vehicles you own typically determine the size category of your company. It is also important to make sure that they are all maintained well.
Here’s how:
- Have an individual maintenance calendar set for your vehicles. Your spend will be balanced if the vehicles are serviced at different times of the year.
- Create a maintenance checklist that is customized to your fleet.
- Clean your vehicles and do a basic service at least weekly once.
- Have training sessions for your drivers on how to handle the vehicles to extend their lifetime.
- Make sure the license for your vehicles are not expired and renew them immediately if they are.
Risk Management
An uncertainty in accomplishing your business’ objectives is typically called a risk. There are many factors that can cause a risk to your business.
- Inefficient business workflow
- Economic conditions
- Natural and man-made disasters
- Unstable financial conditions
- Statutory compliance
- Occupational health and safety risks
Other than risks for your business, transportation business also have risks to the drivers. Minimize fatal accidents and risks to your drivers by giving them enough break between every trip. Tiredness is one of the main reasons for accidents.
Maintain your vehicles and run a diagnostic check for your vehicles periodically. Additionally, teach your drivers first aid and equip them with a medical kit that can help them during minor accidents.
Be sure to provide insurance to all of your drivers. There are many insurance packages specific to professional drivers and you can choose one of them that best fits your business.
Using a Transportation Management System (TMS)
Implementing the above processes is very difficult and inefficient when done manually. Transportation Management System (TMS) was introduced to automate most of the processes only in the logistics phase of the supply chain.
This platform enables businesses to manage and optimize daily operations. There are many transportation tools that you can use to increase the productivity of business operations.
The main aim of TMS is to reduce costs, gain real-time process visibility and improve shipping efficiency. TMS can benefit your business by:
- Managing transportation demand in conjunction with inventory management and supplier relationship management.
- Minimizing invoice error by automating payment and audits.
- Track and monitor the lifecycle of your delivery in real time.
- Provide transport intelligence through extensive reports and insights.
Management Principles for Operations Improvement
Automated process and good employees are not the only criteria that can make your business successful. Here are some proven management principles that can help your transportation business:
Six Sigma
Transportation plays a vital role in the supply chain management for any business. Businesses count on you to be responsible that the process runs smoothly. Incorporation of Six Sigma can help to:
- Reduce pollution
- Minimize cost
- Reduce process time
- Improve customer satisfaction
- Increase profits
Six Sigma concepts that can help your business are:
- Understand the process completely. Often, transportation is a piece of a larger process. Make sure you understand your client’s business model entirely. This will give you a clear understanding of your job and how critical on-time delivery or the safety of goods are to them.
- Reduce waste and time. As a transportation company, you should be aware of the pollution that is being caused by your vehicles. Create a plan/route for your deliveries that will help in reducing fuel use and time spent.
- Collaborate with your team. Run your business process with your team and ask for a commitment to it. This will increase their efficiency and loyalty to your business and help you get feedback and you should use it.
- Make your efforts scientific. Data is the biggest asset you can have, and you share it to make business decisions.
Total Quality Management (TQM) Process
Put your customer first. Total Quality Management is a process that reduces errors, streamlines supply chain management and ultimately improves customers experience. The main principles of TQM are
- Customer determines the level of quality. No amount of quality check is of value if the customer is not satisfied.
- All employees should be working towards a common goal. Employees are the pillars of any organization and when empowered they can take your business to great heights.
- All the activities in a business should be process-centered. The quality of a business is determined by the requirements received and the end service delivered.
- Integrate your system within your organization for a smooth process.
Kaizen Principles
One of the most famous concepts of TQM is the Kaizen principle. The basis of the Kaizen principle is to improve quality of processes and the performance of an organization. Kaizen principles that are applicable for the transportation industry are:
- Processes have to be standardized and repeated.
- Determine success through data.
- Innovating new and better ways to achieve success
- Respond to changes and adapt to them.
Running a transportation business is challenging. It is a lot of responsibility too. One glitch in your process might affect a bigger system and result in huge losses to your business. If you are starting your transportation business, be aware of all operations and plan how you can optimize them in an efficient way. The process evolves with the business, so it is best to start off with a well-thought-out plan. This will help to stabilize the business quickly without incurring a lot of losses. Also, make it a habit to constantly watch out for industry trends. Creating dynamic operations is what will make a long-sustaining successful business.
