The 12 Traits of Highly Profitable Trucking Companies: Maintenance Excellence – Digging Out of the Deepest, Darkest Hole in Trucking
KSM Transport Advisors (KSMTA) has worked with over 200 trucking companies since our inception. Our primary service focuses on guiding trucking company leaders in understanding their freight network and determining strategies to improve the density, velocity, and ultimately the profitability in their geographic footprint. In delivering this service, the KSMTA team has observed and documented 12 key traits of highly profitable trucking companies.
This article is part of a series highlighting the key traits and focuses on trait number nine of 12.
“The 12 Traits of Highly Profitable Trucking Companies” series has struck a chord with professionals in the industry. The summary observations provided are based on a respected and elite group of carriers who we’ve been privileged to work with and examine over the years. Boiling it down to only 12 traits might be a disservice to these companies, because they exhibit a myriad of traits that make them successful.
How the 12 Traits Were Identified
The process to identify the model companies for our observations started with a group of over 50 truckload carriers, of which we assigned “traits” to each one. This method allowed us to tabulate the frequency of occurrence of the most common traits. Combining this with our understanding of their company cultures, we narrowed our list down to four ideal carriers to emulate. Although these companies are not identified by name, their reputations are so well-respected in the industry that many readers are also familiar with the key attributes of these role model carriers.
Out of all the traits, what are the most important, and where should carriers start? This is a great question and, although there is no specific order to the 12 traits list, we believe the most foundational trait is financial and operational transparency, followed by network discipline, and then maintenance excellence.
Crucial Insights: Maintenance Costs in Trucking Operations
In our experience, we view maintenance as the deepest, darkest hole of lost profits in any trucking operation. Holding tractor age constant among benchmark respondents, the range of performance for maintenance cost per mile (all parts, labor, and shop overhead expenses) for a dry van operator can range between $0.14 to almost $0.40 per total mile. This dramatic range of results is a key reason we recommend a deep dive on a carrier’s freight network and their maintenance operations to get to the root of profitability issues.
It’s a common belief that strong maintenance performance is inextricably linked to the tribal and technical knowledge of the shop manager or maintenance VP. A great foundation for maintenance excellence may have been set by the original owner, who had the key advantage of being mechanically inclined. It’s true that at some point in your journey toward maintenance excellence, it’s important to engage a leader that has strong technical skills while also having valuable leadership and training skills. However, once that knowledge is translated to create strategy and structured processes, the need to always have a maintenance all-star onboard diminishes over time.
Accelerating Toward Maintenance Excellence
Just like software development, no other department in a trucking operation is more dependent on proper documentation. As such, your organization must be willing to document, document, document. With the exponential growth of sensors and the Internet of Things (IoT) in trucking, it’s impossible to achieve a high degree of success in maintenance without an industry-proven and validated maintenance software application.
Establishing a Cost Baseline
It’s critically important to have the proper general ledger (GL) accounts setup to capture maintenance expenses in the appropriate bucket and map these accounts to proper categories and repair order/codes in the maintenance software. A recommendation is to segment all maintenance labor and overhead into its own department, with the underlying goal of this exercise serving comparability purposes. This includes a relative share of the organization’s facilities expenses. At the GL level, capture owner-operator repairs and related revenue items separately from company-owned expenses.
For the specific cost categories, it is important to balance granularity and practicality when tracking maintenance expenses at the GL level. A good maintenance software should be able to perform a deep dive from a reporting perspective, such as stratifying expenses by age of equipment, make, model, and even precise specs. At the GL level, segment tractor versus trailer repairs, tire expenses (material and labor), and have a category of GL accounts meant to capture all non-allocated labor and expenses (general shop labor and overhead). Additionally, create accounts dedicated to warranty repair orders as well as the credits received by OEMs for these repairs. Having consistent awareness on warranty tracking and cost re-capture are a best practice of any high-performing maintenance operation.
Building on categorization, for carriers with multiple maintenance facilities, it’s a best practice to establish the same GL accounts for each location. This provides internal benchmarking capabilities for both financial and operational metrics related to proficiency, efficiency, and productivity.
Establishing Repair Stances
It’s easy to confuse “stances” with “standard operating procedures.” They are very similar, but stances go one step further by explaining the “why.” A proper repair stance will explain the reason and strategy that the carrier is employing for a specific repair guideline and process. If the objective of the process is clear, there will be a higher rate of compliance with the stance. Some examples of repair stances include:
- Preventative Maintenance (PM) Program: Create an expectation within the maintenance department that preventive maintenance is of the highest priority. When you review world class fleets’ maintenance practices, you’ll observe efforts targeted at moving them toward a PM-to-PM philosophy. Complete the most comprehensive PM inspections possible. Shop leaders should focus on execution of the PM service and attempt to capture all the equipment’s maintenance needs while in the shop to help reduce subsequent visits between PM services. Use detailed PM checklists and implement repair stances to achieve this maintenance philosophy.
- Cost Management: Discuss whether the company should invest in high-quality parts and repairs that might be more expensive upfront but could reduce long-term repair costs or opt for cost-effective solutions that may require more frequent repairs. An example of this stance could be to utilize recaps instead of virgin tires.
- Downtime Management: How should companies manage downtime during repairs? This includes whether backup vehicles or rental arrangements are available, and pinpoints other strategies to minimize the impact of repairs on operations.
Setting Appropriate PM Intervals and Compliance Intervals
Establish PM service interval windows after reviewing industry guidelines and discussing optimal timeframes with dealer partners and peers. In order to gauge on-time PM performance, a carrier should establish a window that defines what is considered “on time.” For example, if the carrier wants to have their tractors serviced every 30,000 miles, a service window might outline that tractor PM service performed between 28,000 and 31,000 miles is considered “on time.” Like any other KPI, exception reporting should be established to deal with those PMs that fall outside the established intervals and assign accountability to the appropriate team leader. This may include automatically placing a truck out of service if the PM interval limit has been exceeded by a significant number of miles.
Proximity and Convenience Can Be Maintenance Killers
A common reason why a stance or PM interval is not explicitly followed is that the tractor was already at the terminal and the crew decided to address the repair or PM immediately instead of waiting for the scheduled maintenance window. Having a tractor or trailer “in the area” is not a good reason to ignore stances. If the correct maintenance intervals have been established, there should be enough mileage wiggle room built in to handle PM and minor repairs the next time around. Further, unit productivity of both the tractor and the shop will continue to erode each time these exceptions occur.
Maintenance Needs a Seat at the Executive Table
Similar to trait 5 about the importance of centralized pricing, if you’re lucky enough to have a strong leader in maintenance, they should have a seat at the executive table. Doing so demonstrates the critical importance of maintenance to the long-term viability of the business and ensures that the proper resources are provided to the maintenance group. Too often, maintenance is considered an after-thought or a cost of doing business. Using credible benchmarks, a clear connection can be drawn between maintenance focus and cost performance, ultimately resulting in a competitive advantage and higher-than-average margins.
Be Relentless on Parts Inventory Management
Think of every part purchased for future repairs as a declining annuity. As soon as it’s received, the future value of it begins to rapidly decline. Depending on the type of part and the year, make, and model of your current fleet, the part could become obsolete in months, not years. Utilizing your maintenance software’s parts inventory management module is critical to understanding the parts inventory trends, including how quickly inventory is turning over. An additional benefit of establishing proper tracking and control of inventory is that it forces technicians to slow down and understand the options on-hand prior to ordering something new.
An efficient inventory management system also helps carriers understand what may be happening if parts expenses get out of control. A common first thought is that there may be a theft issue, but with the proper controls in place, that concern can be eliminated as a potential cause of cost escalation.
Taking Control of Maintenance Costs: Options for Improvement
The above are only a handful of suggested strategies and tactics that can be implemented to improve operational and cost performance in your maintenance program. If you need assistance getting back on track, KSMTA offers a Quality of Maintenance (QoM) assessment, which includes a two- to five-day site visit by one of our highly trained maintenance engineers. This assessment results in a 25-50 page report, which establishes performance against credible benchmarks, along with 8-15 recommendations in the form of observations and corrective actions including stances utilized by some of the leading maintenance operations in North America.
Our next article in The 12 Traits of Highly Profitable Trucking Companies series will highlight the key trait of how “Investing in Safety Pays Dividends.”
To learn more or discuss any of the ideas shared above, please contact a KSMTA advisor or complete this form.
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