By Randy Seals, McLeod Software Customer Advocate
The most frequently used word in the broker vocabulary is “margin.” Everyone is always talking about the margin between settlement costs and revenue. Without doubt, that’s important, but let’s not forget that margin isn’t profit.
Margin may tell you how much you made on a specific load or a group of loads, but your settlement costs aren’t the only costs associated with doing business. You have expenses for payroll, utilities, office equipment, software licensing, and marketing, just to name a few. Some of these may be set, but others vary. If you want to track profit, not only margin, you have to find a way to factor all of your business costs into the equation. Now you can.
A New Window into Profitability
McLeod’s Profitability Analysis module can be used by brokers to pull the lid off of profitability. This powerful software module has a long history of giving asset-based companies in-depth views of costs from every angle, but it can also be used to provide a similar level of cost visibility to brokers. You gain the ability to isolate specific cost components, so you can start evaluating and comparing your costs in an amazing variety of ways.
Depending on how you define the fields, you can look at CPL by customer, commodity, lane, length of haul, day of the week, employee, and more. Maybe you are regularly hauling both wallboard and bricks. Examining the CPL by commodity for these loads will reveal if one is much more profitable than the other. If so, you can drill down into the data to uncover the reasons. With this information in hand, you can determine which actions are needed to increase profits.
Have you considered looking at your cost per hour? The module makes this possible. Brokers may want to look at this metric in certain situations instead of rate per mile, because the time spent on the load can have a huge impact. Having access to your costs at this level of detail opens new doors for negotiation with both carriers and shippers.
By providing visibility into costs, the Profitability Analysis module reveals cost variances that are completely absent from margin data. For example, consider having a metric that tracks the time members of your staff spend covering the loads. Call it the Cost per Load Effort Variable (CPLEV).
Here’s how CPLEV can help. The orders from a customer who uses EDI may require next to no time at all, while the orders from another customer may regularly present complications that keep your staff busy for hours with almost every load. The second customer is costing you substantially more per load. This fact is lost when comparing margins, but it will jump out at you in your report on CPLEV by customer.
It’s a New Equation
Moving freight is a highly competitive business, so the companies who succeed are the ones who have found ways to improve. The more you understand your business, the better positioned you are to make the improvements that give you an advantage. McLeod Software has the tools that give you unparalleled visibility into your operations.
The Profitability Analysis module is one of those tools. No one disputes that margin still matters in the brokerage world, but margin doesn’t tell the full story. All business costs are part of the equation now. And this new equation will help you boost profits more than ever.