Syleconomics September 2010

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."

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

August 2010 treated the Sylectus subscribers well. In fact, the summer has been spectacular with many Sylectus subscribers reporting record months. Business volumes (loads counts) are the highest we have seen since we started to record our index four years ago. We did, however, see a slight decrease in rate per mile from July to August.

August 2010 volumes (trip counts) jump 36% above August 2009.
August 2010 revenues were a whopping 62% above August 2009.
Of significant note is that the “rate per mile” for linehaul dropped from the July high.
With the increased business volumes and tight capacity, we are surprised to see the rate per mile take a decrease. It makes you wonder if there is unwarranted rate discounting happening.

Consider the graph below which looks at a “normalized” load index for the past 4 years. The first nine months of 2010 (the purple line) exceeds the 2007 and 2008 numbers for the same time period. Furthermore, the first few days of September are showing demand to continue to outstrip capacity. Combine increased demand (loads) with limited supply (available trucks) and we find it odd that the rate per mile dropped in August.

My Syleconomics commentary ...

2010 continues to be the best year ever for many Sylectus customers. Not only are sales strong, but prices have also rebounded nicely to provide reasonable profitability. What is driving this success is not a strong, rebounding economy, but rather a continued and prolonged shortage of capacity. When capacity is tight, it requires only a small increase in demand to push business volumes (and rates) up.

By the way, an interesting economic statistic came out last week. Retail “dollar” sales were DOWN in June, but retail “volume” sales were UP. This means more merchandise was moved in June than prior months, but the price-per-unit was “lower”. Trucks don’t move money. They move goods. So the June retail numbers were good in the sense that more retail merchandise is moving.

Sylectus summarizes industry data to create both DEMAND (shipment counts) and SUPPLY (fleet counts) indexes. Here is a combined DEMAND (Green) / SUPPLY (Blue) chart for the past 4 years. It is obvious here that demand is over 20% above normal, while capacity continues to be mired around 20% below normal!

Why are companies in our Sylectus index experiencing such strong business volumes when the economy has not yet fully recovered?

Fundamental supply-demand economics. Capacity has not rebounded as quickly as supply when we came out of the recession last year.
Trucking companies and drivers got out of the business last year leaving the stronger companies (survivors) the ability to take on more business as business volumes increased.
The trucking companies that make up this index are long-term Sylectus subscribers with a keen understanding of how the Alliance works. They have established solid, trusted relationships with other Sylectus subscribers and are able to leverage the flexible capacity of the Sylectus Alliance to quickly react to increases in business volumes.
The trucking companies in the alliance subscribe to many of the Sylectus dispatch-billing-settlement productivity tools reduce their costs and grow their sales. This competitive advantage has allowed them to grow faster, improve their customer service and manage costs better.

Strategies to survive a potential 2nd downturn:

What if there is a 2nd recession? How should companies prepare to survive it?

Build strong business alliances. The survivors of the last recession relied on each other to help get through the tough times. There is strength in numbers (and diversity). It is never too late to diversify your relationships within the Sylectus Alliance.
Stay on top of your cash flow. Be vigilant at collecting your money for the services you perform. Don’t let customers get too far behind on payments. Build up your war chest.
Invest in technology that can improve your productivity, improve your customer service, reduce your costs and “lock in” your customers.
Invest in your people. Do you have the right mix of energetic, creative, dedicated people who want to take your business higher? Get them trained for the job and support them.
Prepare for CSA 2010. This single piece of legislation could cripple unprepared trucking companies. If your company is ready, you could see a significant increase in business (even in a down economy) as shippers gravitate towards the compliant carriers.
Review your pricing strategy. Too many carriers are quick to drop their rates to non profitable levels. Right now, many carriers are getting a good rate for their services.
Keep your costs in check. Buy the products and services you need to run your business. Now is not the time to be purchasing those sports tickets.

Looking Forward

We continue to see strong volume numbers for the first few days of September. Everything continues to point to a positive 2^nd half of 2010. The only negative number coming out of August was the rate-per-mile reduction.

August 2010 Analysis

In terms of August 2010 vs. July 2010 – business volumes were up 14% over July. Unlike prior years, July 2010 was a good month, so the August numbers are also good numbers.

In terms of “raw” comparisons between August 2010 to July 2010 …

Orders were up 14%
Billable miles were up 13%
Billable revenue was up 7%
Linehaul revenue was up 7%
Linehaul rate per mile was down 7 cents per mile (August over July)

In terms of July August vs. August 2009 – Business numbers are above last year, and, in fact, significantly higher than last year.

Orders were up 36%
Billable miles were up 47%
Billable revenue was up 62%
Linehaul revenue was up 59%
Fuel revenue was up 82%

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 now has moved ahead of most prior years!

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

The three charts below show Revenue per Mile for the past 6 years. We the show 3 charts of:

Total Revenue per mile (includes line haul, accessorial and fuel)
Line haul revenue per mile (rates are well above last year values and exceeding seasonal values).)
Just Fuel revenue per mile (rates have stabilized since the 2008 fuel spike)

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 3 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 3 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 data. 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) is well below demand. This is reflected in an improved rate per mile over 2009.
The Demand (loads) chart is tracking better than 2007. If this tracking continues, the latter part of 2010 should be a record year for carriers.
Although both graphs tend to TREND in tandem, the DJIA tends to be lower that Load Index for most data points. The survivors of the recession are reaping the benefits of the business volume uptick.

Over the past 20 months, the Demand Index has outperformed the DJIA by a significant amount. This can be explained as the “power of the Alliance” allowing companies to react better to economic fluctuations.

Load Index – 2007-2010

Below you will find same 2007, 2008, 2009 and 2010 numbers used in the first graph, except the data is shown year-over-year. 2010 is starting out similar to a “normal” year and is trending very close (or better) than 2007. 2010 is shaping up to be a good year in trucking.

Consider the following graph which shows the daily “Load Index” for January 2007 to current 2010.

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 and the purple line tracks 2010 (so far).

Truck Searches – 2007-2010

Below you will find same 2007, 2008, 2009 and 2010 numbers for the number of TRUCK SEARCHES done on the system. 2010 is showing encouraging numbers as the number of daily truck searches average over 10,000 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 and the purple line tracks 2010 (so far).

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

Load Posting – 2007-2010

Below you will find same 2007, 2008 2009 and 2010 numbers for the number of LOAD POSTINGS done on Sylectus Load Board. 2010 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 and the purple line tracks 2010 (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 the our software solution to::

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).

How to keep busy???

First ... make sure your dispatchers are creative with load opportunities. Try not to turn down any reasonable load opportunity. Use the resources of the Alliance to move that freight if your own trucks cannot cover the freight. This keeps your customer calling you and you keep the alliance working. Also ... the other alliance members will keep your trucks moving for the same reason (share the love!!).

Second ... make sure you keep your truck postings current. There are thousands of users on the Alliance system that could potentially see your truck and move it for you - as long as the truck information is kept current! Those of you using our integrated Qualcomm or GPSPhone interface know that your truck locations are always current. But those of you manually updating your truck locations risk missing good business opportunities if your available truck locations are wrong.

Third ... turn your dispatchers into an internal sales force! If times are slow, your dispatch area is not as busy. So convert that "down time" into productive, pro-active, person-to-person marketing time. The following two suggestions will keep YOUR COMPANY NAME on the "top of mind" of all your customers. How? First ensure that you use the Sylectus e-mail system to email your truck availability to as many customers as possible. This keeps them aware of your available equipment. Second, try to pro-actively find back haul loads for your drivers by calling customers directly. Generate a list of your customers in the area of your selected truck and start making calls (for those of you on Alliance Pro, use the backhaul assistant tool). Your customers may not have a load immediately, but they might have a load in 2 hours. By generating the truck-availability-emails and by making the solicitation calls, you will keep YOUR name on the top of THEIR mind. When a load does become available, you want them thinking about YOUR company first! The cost (risk) of this program is minimal. The potential benefits are huge.

Fourth ... if you are an AlliancePro subscriber, take advantage of the various AlliancePro tools (backhaul assistant, load board, bid board, virtual fleet, automatic emails, customer track and trace, etc.) to creatively say "Yes" to your customers and to keep your trucks moving with paying freight!

Fifth ... build those inter-company relationships with other Alliance companies. Sharing loads and trucks is built around trust. Build that trust level, nurture that trust level and mend strained or broken relationships. You never know when you will need each other.

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