With approximately 70% of U.S. goods being moved by various carriers, those who are part of the trucking industry benefit from a uniquely stable demand. However, that stability is challenged by the increasingly volatile cost of fuel. In an economy in which fuel prices have at times risen by upwards of 40% over a 6-month period, responding to increasing fuel costs is certainly a necessity. The only certainty that seems continual is the upward trend. This trend toward higher gas prices poses definite problems for truckers and transportation business owners of all shapes and sizes.
Small operators who fail to adjust to this dilemma often find putting their transportation business for sale to be their only option. On the other hand, many transportation businesses of various sizes work through rising gas prices. How do they do it? Typically, they reconfigure their cost management, implement new technology, and expand through mergers and acquisitions.
Reconfiguring Cost Management
Perhaps the most obvious way to keep higher fuel costs from cutting into your profits is to pass them on to customers. While rate increases and surcharges may mitigate the financial hit, complete elimination of the effects of high diesel prices is nearly impossible. Higher costs of manufacturing supplies and lessened consumer buying power can lead to decreasing demands for shipment due to less production of goods and decreased inventories in response to lower consumer demands.
Implementing New Technology
As is the case within many industries, technology can be a key component in attaining higher fuel efficiency. A good starting point for small carriers includes utilization of speed-monitoring devices, wind-resistance reducers, and more efficient computer-generated routes. Higher-cost solutions include green engines and GPS tracking. Another cost-saving possibility that’s still in the fledgling stages of development is the use of natural gas. However, until gas stations routinely offer natural gas, this option isn’t likely to take off quite yet.
Expanding through Consolidation
Like any financial hurdles, larger businesses can more easily absorb rising fuel costs, due to the economics involved. Transportation businesses with larger fleets may qualify for wholesale discounts and some of the above-mentioned cost-saving technologies. At the same time, industry taxes, rules, and regulations have less of an impact on the larger companies. Since most—up to 90%, according to the American Trucking Association—trucking companies have fleets of no more than 6 trucks, the recession-stormed economy has impacted the industry greatly.
Has your trucking business benefited from reconfigured cost management or new technology? As diesel prices continue to rise, even those who have survived until this point are at risk; growth through merger may be the only way for your transportation business to keep your head above the tumultuous financial waters of our times. When the time comes for you to look for a second trucking business to purchase, The Tenney Group can provide the resources you need to find just the right one to meet your needs.