Syleconomics November 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:

  • Overview of October, 2011 Activity (demand, supply and rate-per-mile data)
  • Why are Sylectus members outperforming non-Sylectus members?
  • 86% of Sylectus subscribers view the technology as a “Revenue Generator”! See why!
  • Lots of charts showing a continued strong freight demand and a continued weak truck supply side.
    • Below is a summary of transportation industry numbers from our databases.

      October 2011 exceeded the same period last year, which is almost 2 years of “year over year” growth on a monthly basis.  That is the good news.  The “neutral news” is that October (with the same number of business days as September) was slightly below September in terms of trips, miles and revenues.

      While there are valid reasons to be cautious of the freight economy, the “no growth” demand environment is not concerning providing trucking companies don’t cave into price reduction wars. There is still a shortage of trucks and drivers in the market, so demand for equipment is still relatively strong and should buoy prices even in a softening market.  As you can see by the “rate per mile” data in the charts below, pricing is stable and 3rd quarter freight trends were materially better than the last 3 years.

      While economic growth in North America slowly trudges along, it is becoming clear that the U.S. will avoid a double-dip recession and trucking, with it’s capacity shortage, can outperform the macro economy.  In fact, if the economy takes off (low probability, but still possible), there will not be enough trucks and drivers to haul the freight.

      We are seeing the following within the Sylectus subscriber base:

      • Rate per mile has reached a plateau and has remained relatively constant since April-May of this year.
      • Lack of capacity (trucks and drivers) is resulting in more “truck searches” and “load postings” on the Sylectus private network exchange.  Again, an indication that the Sylectus network is being tapped more frequently to support the strong demand.
      • Sylectus subscribers continue to report strong financial results.
        • From a “year over year” perspective, October 2011 was a great month for some of our subscribers who posted record load counts and record revenue.  Trip counts were up 9% while revenues were ahead over 22%.  This continues the trend where carriers are demanding and getting a higher rate-per-mile compared to 2010.

          From a “month over month” perspective, October 2011 was slightly below September 2011.   Although this slight dip is not good news, it should not be a significant red flag since the start of September was pushed a bit higher by the effects of the Hurricane season.

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

            October 2011 vs.
          October 2010
          October 2011 vs.
          September 2011
          Business Days 21 vs 21 21 vs 21
          Trip Count +9% -4%
          Total Miles +12% -2%
          Average Length of Haul +8% +1%
          Total Revenue +22% -2%
          Linehaul Revenue +20% -1%
          Fuel Revenue +60% -5%
          Accessorial Revenue +16% -1%
          Total Revenue / Mile +10% +1%
          Linehaul Revenue / Mile +7% +1%

          My Syleconomics commentary ...

          Why are Sylectus members outperforming non-Sylectus Members?

          I attended the annual meeting for “Transportation Club of Detroit” a few weeks back.  While standing with a group of Sylectus members at the cocktail hour, one of the senior members of a very large, international logistics company asked me this question:

             “Why are Sylectus subscribers so much busier than non-Sylectus subscribers?”

          His observation: His job is to build and nurture carrier relationships with quality carriers around North America that haul freight for this logistics company.  He noted that Sylectus member carriers had less capacity to provide him and demanded a higher rate per mile than non-Sylectus members.  Although he preferred to deal with the Sylectus members due to the quality and customer service offered (we have an integration between the Sylectus system and their operational system), he could not always get the capacity needed.

          Fortunately, the Sylectus subscribers standing in our little group chimed in with some of the reasons:

          • Sylectus comes with a built-in base of customers. Many of the trucking companies in the network also broker their excess freight to other members in the network.  The Sylectus network business relationships are so strong and the technology is so tightly integrated, that it becomes easier and more profitable to deal with the internal network.
          • Belonging to the Sylectus network provides “flexible fleet” to Sylectus subscribers. They can better manage their fluctuating load demands by reaching into the Sylectus network to cover loads where they do not have their own capacity nearby.  As a result, they don’t need to hire/retain excess fleet and probably don’t have as much excess fleet available as non-Sylectus subscribers.
          • Belonging to the Sylectus network means that their available fleet is automatically seen by over 500 other like-minded carriers. So the logistics company is competing with many other entities for their available fleet.
          • For the most part, receiving payment from other Sylectus members was faster than dealing with large logistics companies.

          It’s great when our Sylectus customers answer the questions for us!

          Sylectus technology is a Revenue Generator!

          However, the best answer came from one of our customers later that evening. He simply said that he perceives the Sylectus technology to be a revenue generator for his business.  Effectively, it makes him more money that it costs him!

          To determine if other Sylectus companies thought the same way, we conducted a survey of our customers and asked them if our technology was a revenue generator or not.  Here are the results:

          • 86% of subscribers say the Sylectus software is a revenue generator (makes them more money than it costs them to have the technology)
          • 10% of subscribers say the Sylectus software is a revenue neutral (makes them about the same money as it costs them to have the technology)
          • 4% of subscribers say the Sylectus software is a cost center (costs them more money to have the technology than it makes them)

          We then asked our customers to tell us what would happen if they were to un-subscribe from the Sylectus network?

          Here are a few of the responses:

          • Our business would suffer greatly, sales would drop and I don’t believe there is a more economical way to book track and dispatch freight and trucks.
          • We would shut down.
          • It would make it difficult to provide full, comprehensive logistics support to our customers.
          • We would survive but it would hurt
          • It would put us behind the competition.
          • Very destructive results.
          • Unsubscribing to Sylectus would decrease growth opportunities.
          • Greatly reduce the amount of our revenue.
          • Sales Revenue would drop
          • Would bring us down to our competitors level.
          • If we were to ever unsubscribe to Sylectus, we would be set back 10 years...Our Bottom Line would shrink, customers would revolt ... and well, let’s just say it ain't gonna happen!
          • Don't plan on leaving Sylectus - it is a perfect fit for my company
          • Without it, a lot of people working for us would be unemployed!
          • Life in an expedite environment would be much more difficult to manage. We would see a significant loss in revenues.
          • Huge step backwards
          • I don't want to think about it
          • Immediate slow down
          • More time tracing shipments
          • We wouldn't be able to cover 25% of the freight that we are covering now.
          • It would hurt our expedite division substantially.
          • Our company would not exist.
          • We would do more work for less money.
          • Revert back to a slow, almost manual carrier selection process.
          • Like rolling the dice or spinning the chamber.
          • We would have to work harder to stay connected to our partner carriers
          • Tremendous backward move!
          • Would affect business partnerships and we would lose important interfaces.
          • If we were to unsubscribe to the Sylectus software would negatively impact our top line and even more so, our bottom line. Internally, our operational staff would be much less efficient. Without Sylectus we would also appear much less professional to our customers. We could not compete with the larger trucking companies.
          • I think it would have a strong negative effect on our ability to transact as much and as efficiently with the other carriers using the software.
          • Revenue and service to our customers would take a hit.
          • It would raise our costs when trying to find an expedited carrier.
          • WHAT----R----U----CRAZY??????
          • Loss of business.
          • We would not have the ability to move expedited freight in the lanes we operate within.
          • Sourcing capacity would become difficult and inefficient- like the old days
          • Only reason we'd unsubscribe, would be to quit doing what we do in the transportation industry!
          • My business would literally fail without the technology and network.
          • Extreme hardship
          • A Serious Decline in Business.
          • Immediate loss of capacity and the ability to give our customers options
          • income will slow down
          • We would struggle to service our customers in a timely manner and we'd lose the competitive edge due to the on-line tracking technology we have because of Sylectus
          • We would have to go back to the old ways and say no to customers with shipments outside our coverage area.
          • Potentially reduce our sales growth and customer coverage by 50%
          • We would be out of business.
          • We would lose business and valued partnerships
          • Our business would die.

          Don't forget to build your network of trusted trucking companies

          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.  The next Sylectus event is in Orlando, February 10-12, 2011.  Click here to see more details and register!

          NINTH ANNUAL
          SYLECTUS Conference
          Kissimmee, Florida!
          “February 10-12, 2012!"
          Register Today!
          To register, click HERE!

          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:

          1. Balance your business (raise rates and cull your questionable customers);

          2. Build/enhance/nurture your network of Alliance partners;

          3. Focus on freight that pays/delivers the best return;

          4. Build your strong team;

          5. Keep your debt low;

          6. 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, line-haul 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).

          • Accessorial revenue per mile

          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:

          So what does this chart tell us?

          1. 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.
          2. The Demand (loads) chart is tracking better than 2007. 2010 was a record year for carriers and 2011 has started strong.
          3. 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.
          4. 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

          1. Turn every load opportunity into an order
          2. Turn every order into repeat business
          3. 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).

          It just keeps getting better ... and the best is yet to come!