A high rate of return is essential to all businesses. Companies that fail to perform well can't continue to provide services for their clients in the future, and must therefore strategize to ensure their fleets are as profitable as possible by planning the most direct route and minimizing fuel use.
But new research shows many transportation companies haven't seen the greatest returns in recent months, and many are highly concerned about what this means for their business. Transport Capital Partners' Business Expectations Survey for Q2 2013 revealed nearly half of carriers don't believe their rate of return is strong enough to justify investing in new equipment. Thus, one-third of companies polled don't plan on purchasing new equipment in the coming months. This is a factor that could lead businesses to refrain from expanding operations or replace aging vehicles.
"Higher equipment costs in recent years, combined with the lower utilization resulting from new HOS rules, will continue to make adequate returns on investment a challenge," said Steven Dutro, a partner with Transport Capital Partners.
However, the lag in ROI may not last for long, and carriers could soon find these limited returns a thing of the past. The survey found the majority of transportation companies anticipate rates will rise in the next 12 months when compared to the previous year. Seventy-three percent of those polled assumed rates would increase over the coming year.
Little relief from accessorial charges expected
While most operations think rates will rise, fewer think they will be able to renegotiate accessorial charges, according to the research. Forty-five percent do not think it will be possible to renegotiate these costs, and the line of thought is more common among smaller carriers. While 64 percent of smaller firms held this belief, only 37 percent of larger businesses said the same.
Getting a higher ROI with route planning software
Technology can play a significant role in assisting businesses seeking to keep costs as low as possible and maximize their returns. By relying on route optimization software, companies can not only limit the time spent determining runs, but also minimize fuel spend. This can help eliminate some of the expense associated with operating a fleet and ensure operations are seeing sufficient rates of return and can continue running the company.