Syleconomics October 2011 Edition

Syleconomics (noun) ... "The economic analysis of various business indicators from the Sylectus transportation management system (TMS). A monthly review of what has happened and some suggestions on how to improve your business situation in the transportation world."

In this newsletter ... you will find:

6 Strategies To Grow Your Business
Why Cloud Computing will dominate Transportation Management Software
It's not the Economy, it's shortage of capacity that's fueling growth
How Sylectus subscribers are getting the best linehaul rates since 2005
3 Practices That Increase Revenues NOW

Below is a summary of transportation industry numbers from our databases.

On the surface, it would seem that September business was about the same as August since the raw numbers (loads, miles and revenues) were roughly equal for the two months. However, August had 2 more business days (23 vs. 21) compared to September, so there was 10% more opportunity in August than September. If we simply look at “activity per business day”, then September 2011 was about 8% to 9% better than August 2011.

From a “year over year” perspective, September 2011 was a great month for most of our subscribers who posted record load counts and record revenue. Trip counts were up 14% while revenues were ahead over 31%. This continues the trend where carriers are demanding and getting a higher rate-per-mile compared to 2010.

The lack of capacity is showing up in several of the charts (below). We continue to see record truck searches and load postings, up almost 100% from the same time last year. We suspect our customers could make more money if they could find more trucks.

Below is a table that summarizes the month-to-month changes across the entire Sylectus customer base.

	September 2011 vs. September 2010	September 2011 vs. August 2011
Business Days	21 vs 21	21 vs 23
Trip Count	+14%	-4%
Total Miles	+19%	No Change
Average Length of Haul	+4%	+4%
Total Revenue	+31%	No Change
Linehaul Revenue	+30%	+1%
Fuel Revenue	+81%	-1%
Accessorial Revenue	+11%	No Change
Total Revenue / Mile	+10%	No Change
Linehaul Revenue / Mile	+8%	+1%

My Syleconomics commentary ...

Why are companies outsourcing to the cloud to gain efficiencies?

I visited a prospective customer last week to demonstrate how our software could generate more revenue for their business. After demonstrating our software, he made a comment I often hear:

“Where were you a few years ago when I bought “XYZ” dispatch software?”

His dilemma: He had purchased a client-server Transportation Management Software (TMS) package four years ago for a significant amount of money. He had to buy a server, server software, database software, TMS software and other components. Then he had to spend for specialist to install and configure the hardware and maintain it going forward. Every time XYZ provided an upgrade, he would pay for upgrade services. Every time there was a problem, it cost them money to get it fixed. Every time they wanted a change to the software, it cost him “lots of money” to get it modified, and even if he paid the money, the modifications were often delivered very late, and non-functional. They had spent hundreds of thousands of dollars and thousands of people hours getting the software package working and then maintaining it. It is now four years later and he is now faced with the expense of upgrading his hardware and software platforms since his installed base is obsolete. He is even contemplating adding a technology headcount to his staff to manage this technology platform for him. The technology is becoming an expensive part of his cost of doing business. All he wants to do is run a trucking company, not be a technology expert.

When I explained to him how quickly I can convert his operation to our TMS, he was amazed. Since we are cloud based, we install, maintain, support and upgrade the hardware, operating system software, database software and supporting software. We provide all the updates to the software on a regular basis. The technology is available anywhere he has internet access. All he has to do is run his trucking business. Sylectus takes care of the rest of the technology issues. Sylectus is his technology department. Furthermore, the way we have integrated other members using our software (Virtual Fleet), it became apparent that our software was actually a revenue generator, not a cost center.

Sylectus has been doing this for 10 years. However, it has only been over the past three years where industry is realizing the power of cloud technologies like Sylectus

Here are some quotes about Cloud technologies:

“The cloud is the end of client/server computing as we know it. CIOs who resist cloud models fear losing control of IT, but that is the wrong approach.”
-Mark Forman, former US Government CIO

“The basis of cloud computing is not really new. What is new is the breadth and scale of the offerings combined with the speed and the level of adoption in the commercial and government sectors. With Dell and Verizon beginning to restructure their businesses around this new phenomenon, you know it is headed for wide-scale adoption by businesses globally.”
-Joseph Puglisi, co-founder — The Cloud Computing Consortium

In the past six months, several brand name technology behemoths made “bet the farm” decisions to re align their businesses and thrive in the post client-server world. Why? Because cloud computing and innovative, cost-effective mobile computers are no longer “early adopter” options; they have reached critical mass.

All transportation business owners should be asking themselves how they can use TMS cloud technology as a revenue generator.

The transportation industry is perfectly positioned to benefit from cloud technology. Sylectus has proven that small to medium sized businesses have realized significant gains by using our integrated technology. Not only is Sylectus a top-notch TMS, it comes with a built-in, integrated, list of customers (other carriers excess freight) and capacity (other carriers excess trucks).

If you are still not convinced, Sylectus welcomes you to talk to any of our AlliancePro subscribers and ask them to compare the Sylectus TMS software solution to any other TMS solution on the market. Our AlliancePro subscribers are our best sales people.

Before making that decision about XYZ dispatch software, let us show you how the Sylectus technology can help grow your business.

The coming months will see swings in shipper demands. The Sylectus Alliance offers your business “variable capacity”. The alliance is a collection of hundreds of trucking companies and thousands of trucks across the continent. The smart members of the Alliance build strong, TRUSTING business relationships with other Alliance members. These business relationships help each member survive the bad times (recessions) and quickly grow during the good times (quick access to quality, trusted, available trucks). Even smarter carriers subscribe to the Sylectus AlliancePro software with Virtual Fleet that automatically and seamlessly integrates you with thousands of trucks, hundreds of qualified dispatchers and a continent wide sales force. Attend the Sylectus and TEANA (www.teana.org) network events to build and nurture your business relationships within the Alliance.

Six Strategies to Grow Your Business

Business is good right now. Shippers in certain geographic areas are willing to pay great rates to get their products shipped. Now would be a great time to:

Balance your business (raise rates and cull your questionable customers);
Build/enhance/nurture your network of Alliance partners;
Focus on freight that pays/delivers the best return;
Build your strong team;
Keep your debt low;
Invest in the best technology to drive your business forward (oh … another shameless plug). If any of you want to find the best technology, we invite you to ask any of our AlliancePro customers about our award winning dispatch, billing, payroll, imaging, fleet management (and much more) software.

Now … the charts!

Supply/Demand Analysis

2010 was the best year ever for many Sylectus customers and 2011 is shaping up to surpass 2010. We see a particularly strong increase in our long-term customer base (customers with us for at least 5 years). The long-term customers have such a strong, well-established, trusted network within the Sylectus Alliance, that they have been able to leverage the Alliance capacity into higher business volumes.

Our SUPPLY-DEMAND index (below) is comprised of a subset of our customers that have been on our system for a minimum of 5 years. The BLUE line is the normalized load count (DEMAND) and the GREEN line is the normalized fleet count (SUPPLY) for the companies in the index. The RED line is the DOW JONES INDEX normalized the same way as the DEMAND and SUPPLY chart.

What is driving this success of our customers is not a strong, rebounding economy, but rather a continued and prolonged shortage of capacity. The “Bubba Gump Shrimp” effect that I discussed in the October, 2010 issue of Syleconomics.

Looking Forward

Chart Analysis

If you look at the table below … you will see that Linehaul revenue per mile in 2008 was in the $1.50 to $1.60 per mile. In 2009 the Linehaul revenue per mile has slipped as low as $1.25 before rebounding to the mid $1.40 range. 2010 has rebounded and ended the year nicely, and 2011 has started as the strongest months ever, even surpassing the 2008 high months that were affected by the high price of fuel.

The following data / chart shows 2005, 2006, 2007, 2008, 2009, 2010 and 2011 in terms of total revenue per mile, linehaul revenue per mile, accessorial revenue per mile and fuel revenue per mile.

Total revenue per milee is a combination of:

linehaul revenue per mile
accessorial revenue per mile
fuel revenue per mile

The three charts below show Revenue per Mile for the past 7 years. We the show 3 charts of:

Total Revenue per mile (numbers include line haul, accessorial and fuel)
Just "Line haul" revenue per mile (rates are well above last year’s values and they also exceed seasonal values).
Just Fuel revenue per mile (rates have stabilized since the 2008 fuel spike).

Sylectus Index

Sylectus created a graph to try and compare how the “Load Index” (Demand) and “Truck Count Index” (Supply) compares with the “Dow Jones Index”.

The “Load Index” (Demand) is the combined load counts of a subset of our customers normalized to an index value. A value of 1.0 is normal. A value of 1.2 is 20% above normal. A value of 80 is 20% below normal. We started recording the index on November 1, 2006, so we have over 5 years of data in the index now.

The “Truck Index” (Supply) is the combined fleet counts of a subset of the same “load index” customers normalized to an index value. A value of 1.0 is normal. A value of 1.2 is 20% above normal. A value of 80 is 20% below normal. We started recording the index on November 1, 2006, so we have over 5 years of data in the index now.

We took the closing value of the Dow Jones Industrial Average (DJIA) and used the same process to normalize the data (we did this by using the same “measurement period” for calculating the normalization value). Just like the “Load Index” and “Truck Index”, the “normalized DJIA” will have a value of 1.0 being normal and value of 1.2 is 20% above normal (etc.).

Below you will find the two normalized indexes charted from November 1, 2006 through to current date. The BLUE LINE is the “Load Index” (Demand), the GREEN LINE is the “Truck Index” (Supply) and the RED LINE is the “normalized DJIA”

Sources:

"Sylectus Expedite Index" – Summary of data from Sylectus companies.
"Dow Jones Industrial Average" – database of Dow Jones closing values.

So what does this chart tell us?

Supply of trucks (capacity) continues to lag below demand, but it is slowly creeping back up. This is reflected in an improved rate per mile.
The Demand (loads) chart is tracking better than 2007. 2010 was a record year for carriers and 2011 has started strong.
Although both graphs tend to TREND in tandem, the DJIA tends to be lower than the Load Index for most data points but tracks the capacity graph very closely. The survivors of the recession (Bubba Gump Shrimp story mentioned in the October 2010 Syleconomics) are reaping the benefits of the business volume uptick.
The “supply” side of the equation took a dip in January, which will put upward pressure on pricing.

Load Index – 2007-2011

Below you will find the same 2007, 2008, 2009, 2010 and 2011 numbers used in the first graph, except the data is shown year-over-year. 2010 was a good year for trucking. 2011 is starting out strong.

Consider the following graph which shows the daily “Load Index” for January 2007 through to current 2011.

The “Load Index” is the combined load counts of a subset of our customers normalized to an index value. A value of 1.0 is normal. A value of 1.2 is 20% above normal. A value of 80 is 20% below normal.

The green line shows the 2007 index value, the orange line shows the 2008 index value, the blue line shows the 2009 index value, the purple line tracks 2010 and the gold line tracks 2011 (so far).

Truck Searches – 2007-2011

Below you find the same 2007, 2008, 2009 and 2010 numbers for the number of TRUCK SEARCHES done on the system. 2011 is showing encouraging numbers as the number of daily truck searches average over 11,000 per day.

The green line shows the 2007 index value, the orange line shows the 2008 index value, the blue line shows the 2009 index value, the purple line tracks 2010 and the gold line tracks 2011 (so far).

(Y axis = Number of Truck Searches done per business day)

Load Posting – 2007-2011

Below you will find the same 2007, 2008, 2009, 2010 and 2011 numbers for the number of LOAD POSTINGS done on Sylectus Load Board. 2011 is showing encouraging numbers as the recent number of daily load postings average over 700 per day. It continues to track / exceed previous years values.

The green line shows the 2007 index value, the orange line shows the 2008 index value, the blue line shows the 2009 index value, the purple line tracks 2010 and the gold line tracks 2011 (so far).

(Y axis = Number of Loads Posted per business day)

You still need to remind your operations staff to become "creative" when presented with load opportunities. Get them to try to use our software solution to::

3 Practices That Increase Revenue

Turn every load opportunity into an order
Turn every order into repeat business
Keep your drivers happy.

Working together as a team (Alliance) can help weather any seasonal economic slowness and take advantage of the seasonal busier times (never saying "no" to a customer).

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