In the continued craziness of the current economy, labor is a pain point. With more and more products being shipped and delivered, from HelloFresh to Amazon to DoorDash, people who are willing to drive have a lot of prospects. Add in a requirement for a current CDL license, and there’s an even smaller pool of applicants to consider, but these are the people the LBM industry relies on to deliver.
The default reaction to sales growth, and its complimentary expanded delivery requirements, is typically to hire more people and buy more equipment.
Efficiency, however, creates more capacity. One consideration, often overlooked, is the efficiency of the current fleet. There are multiple different efficiency factors that companies can track and improve that optimize fleet utilization, and the first step in these types of improvement projects is to measure performance. We simply can’t improve what we don’t measure. Here are four metrics to start tracking to improve fleet efficiency: (X) per journey, (X) per order, credit as a percentage of sales, and average truck turnaround time.
“X” per journey (dollars, board feet, pounds): Every time a truck leaves the yard unfilled to its capacity, opportunity is left behind. Ideally, scheduling trucks based on pounds allows for the truck/trailer combination or cubing out the area available in the loading zone to give the greatest return.
“X” per order (dollars, board feet, pounds): It’s one thing to fill a truck, but it’s another to have it filled with smaller orders that require multiple stops. Going to the same frame job eight times is a loss when the materials transported could have fit into two larger deliveries. Tracking this metric will facilitate trucking more effectively. Tracking this “per customer” identifies the higher cost-to-serve customers and tracking it “per sales rep” identifies the ones who are inefficiently using the fleet. Step one is tracking, and step two is identifying the outliers to rein in.
Credit as a percentage of sales: The most expensive service that businesses in our industry offer is credit pickups. Looking only at the trucking aspect—it’s loaded at the yard, unloaded on site, reloaded on site, and unloaded again at the yard—all while getting back to zero sales dollars. Tracking this metric as a whole, then down to the salesperson level, will unearth faulty estimating and poor planning processes. These can both be costing the business a lot of profit as well as holding back improvements to capacity that are possible without adding any people or equipment.
Truck turnaround time: You’re only making money when your truck tires are moving. Any time those tires are sitting in the yard, opportunity is wasted. There are specific companies in our industry that have worked on this, and they average under 20 minutes to unload credits, fully load the truck, and get back on the road. I’d bet that the overall industry averages are closer to an hour on turns. If this metric isn’t under 20 minutes, or the average is an unknown, making progress here deserves to be high on any company’s priority list.
Tracking these should not be a big task. Work with your ERP provider to set up these metrics on a dashboard. Truck turnaround time is a little more involved, but basic journey start and stop times are easily and automatically tracked. Once you begin to review these metrics, look for the outliers on a daily and weekly basis and start there. The biggest gains come at the beginning of lean projects, as the most obvious issues stick out like sore thumbs. If the company improves the least efficient 10% of utilization, it will capture over 50% of the improvement.
Here’s the thing: If you’re like me, once you’re on the other side of this tracking, you’ll lose sleep thinking about how easy it was to fix those issues and how you should have done it sooner. Instead of allowing yourself to focus on how much was lost, be sure to start tallying how much gain is ahead.
Shane Soule consults with LBM and component companies to increase productivity and profits, and improve the experience for both customers and team members. Reach Shane at firstname.lastname@example.org