Syleconomics February 2012 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:

  • The best January results ever, and the reasons why.
  • Lots and lots of data showing why our AlliancePro customers average 20% annual growth for the last 6 years (that's right, 20% growth)
  • Hot off the press, 32 candid customer quotes regarding last weekend's 2012 Sylectus User Conference.
  • 5 SMART ways to grow your business.
    • Below is a summary of transportation industry numbers from our databases.

      On the surface, it would seem that January business was quite a bit better than December, but January has two more business days than December, so January was a slower month than December.  January is traditionally a slow month anyway.

      There are two very positive figures coming out of the January numbers.  First, January 2012 shows slightly stronger than January 2011.  Second, the rate per mile for January 2012 is the strongest rate we have seen since we started recording our data 8 years ago.  If this rate structure holds through February, it will be a very good first quarter.

        January 2012 vs.
      January 2011
      January 2012 vs.
      December 2011
      Business Days 21 vs 21 21 vs 19
      Trip Count +8% +3%
      Total Miles +6% +3%
      Average Length of Haul -2% No Change
      Total Revenue +12% -3%
      Linehaul Revenue +11% -2%
      Fuel Revenue +35% -3%
      Accessorial Revenue +6% -4%
      Total Revenue / Mile +6% -5%
      Linehaul Revenue / Mile +4% -5%

      My Syleconomics commentary ...

      What is the value of a Transportation Network?

      Whenever we promote our Virtual Fleet (VF) and Pro versions of our software, people ask “what value will I get”? We explain the traditional value statements (improved productivity, better customer service, reduced costs, greater efficiencies, etc.), but we also tell them that their business will grow.

      Their immediate response is “How can my software provider help my business grow?” and “How much will it grow?”

      I will answer both questions.

      “How can my software provider help my business grow?”

      About 7 years ago I was sitting in a restaurant with Mike Winslett, owner of DTH Expeditors from Atlanta, explaining the Pro version of our software product and how it worked.  Customer management, Order Entry, Billing, Payroll, Satellite tracking, Imaging, Virtual Fleet and other great modules.  I then mentioned that there were 60 (at that time 60) members in the Alliance.  Mike looked up at me and said: “You mean the software comes with 60 built in customers?”

      Well … yes!  I never really thought about it that way, but the Sylectus Alliance comes with built in customers.  And now, 7 years later, it comes with over 560 built in customers.  What TMS can offer you built in customers? Only Sylectus.

      Furthermore, what TMS organizes and hosts multiple networking events per year so you can foster, enhance and grow your business with other members of the network? Only Sylectus.

      Of course, we always promote the concept of “Always saying yes” to your customers because you have access to about 10,000 trucks across North America (U.S., Canada and Mexico). The more you say “yes” to your customers, the more business your customers give you.

      If you use the Sylectus Alliance tool properly, it will grow your business.  But by how much?

      “How much will my business grow?”

      For years, new subscribers to the software would ask “how much will my business grow if I move up to the Pro level?”  My answer was always to consult with other Pro subscribers and they would explain the benefits of Virtual Fleet (VF) and how they preferred to work with other carriers at the Pro or VF level.

      At our recent conference this past weekend in Orlando, Mike Salas from CDI explained it to a potential Pro customer like this:

      “I do a truck search and I see two trucks 10 miles from my pick up location.  One truck is at the Connect level, one is at the Pro level.  I give it to the Pro level carrier first.  Always! No questions asked! Why? Because it’s easy!  I push a button and they get the load into their system and I can track their truck in real time, just as if it were on one of my own trucks.”

      But now we can prove the value of being on the Pro version of the software.  For the past 6 years, at our annual user conference, Sylectus has been handing out an award for the highest “year over year revenue growth company” at the Pro level.  I went back over the past 6 years and analyzed the “year over year growth” for all our Pro customers and found that, on average, for the past 6 years, they have grown about 20% per year.  Wow!

      To validate this figure, I then reviewed the “Top 100 for hire carriers growth numbers” as published by Transport Topics for the past 6 years.  Transport Topics does not have 2011 data (it will be published in January 2013), so we cannot compare the Sylectus Pro customers growth in 2011 against the Transport Topics data. But we can compare for 2006 through 2010.  Transport Topics also has revenue data on one of the major Expediters, so we can compare the Pro companies to the major Expeditor.

      Here is the chart and the graph of the data.

      (*) Source: Transport Topics Top 100 For-Hire Carriers

      What does this tell us?

      • On average, Sylectus companies grew about 20% per year over the past 6 years.  This compares with about 2% annual growth for the “Transport Topics top 100 for hire carriers” and about 5.6% annual growth for a major expediter.
      • Sylectus companies consistently outperformed the market.
      • Sylectus companies consistently outperformed the transport topics top 100 for hire carriers
      • Sylectus companies consistently outperformed one of the largest expediters.

      “Will it really grow that much?”

      Remember that the number is an average.  Some of our customers do better than the average, some do worse than the average.

      The amount of growth you will actually experience depends on you, the subscriber.  The more you

      • embrace the network,
      • grow and enhance your relationships with other good companies within the network,
      • train your people how to use the network,
      • continue to do quality, ethical work within the network,

      then your business will grow.

      There are some companies that “sign up” to the system and just assume business will start flowing.  It rarely works that easy.  You need to establish a strong, long-lasting trust relationship with your network members.  Attending our regular networking events is a great way to get started.  Our annual user conference (this past weekend in Orlando) saw over 220 of our customers spend several days networking and growing their business relationships.  Here are just a few of the quotes from the many satisfied attendees:

      • Excellent and a great opportunity for so many small businesses to lean new ways of doing business. Great for small business.
      • Informative, great delegates with lots of knowledge and forward thinking people who think outside the box and know how to solve problems.
      • It was an amazing opportunity to meet so many people at once that you may never get to meet. Speakers were great, I learned so much more about the system and what more I could be using.
      • This is the best networking opportunity there is with other, quality, expediting companies.
      • New opportunities for 2012 were lost if you did not attend.
      • If you are in the Alliance, you are missing out on growing your business by not attending.
      • It is an excellent opportunity to build relationships with partner carriers.
      • It was worth it to meet the people you work with on a daily basis and build lasting relationships!
      • Good opportunity to develop partner carrier relationships
      • The conference is a great opportunity to meet and network with a large number of customers and vendors in one location. The sessions are informative, but most importantly you are given the opportunity to forge alliances and even patch up or clarify old issues. Nothing can beat face to face interaction, especially down the road if you have a problem or issue; it is much easier to deal with someone that you have met previously.
      • The absolute best way to meet and connect with fellow Alliance users
      • It’s a way to meet industry peers and share ideas while marketing your services.
      • The Sylectus conference is a venue that you cannot miss. Existing partnerships grow stronger and new ones form. It truly is a priceless meeting. Just think how much time and money you would spend traveling to each company to network.
      • You missed one great sales call.
      • The best way to get to know the people you work with and the only way to meet everyone else that can help you grow your business.
      • Best team networking event there is.
      • Great way to network and develop long term relationships with other members within the alliance
      • I finally looked at the eyes to a person that I often talk on the phone. Shook hands with our vendors. Upgraded our relationships with them.
      • I think the thing that surprised me the most was that it was less like a software conference than an alliance of people getting together to exchange ideas.
      • It is the only place you can renew old friendships, create new friendships, Catch up on technological updates and learn about new regulations all in one weekend.
      • An event you must attend in order to get the most power out of the software and the user alliance.
      • I would say that it was the biggest sales call I ever made, one venue to get that kind of relationship building time is priceless.
      • Another great opportunity to network with current and future customers and partners. Invaluable for anyone that wants to build their business on a solid foundation.
      • The conference is a great way to meet your peers and continue to build and maintain long, lasting relationships in business and friendship.
      • If you spend your time wisely you are able to develop relationships that may help you in the future. The conference gives you the time to do so.
      • These events are the best networking tool around. They give you the opportunity to meet new carriers, and development better relationships with the ones you have met over the years. Where else can you meet with so many business partners at one time
      • Amazing! So many chances to make connections with companies that otherwise may never have happened.
      • Great way to put a face with a name.
      • The conference is an outstanding professional networking opportunity.
      • If I had not attended I would have missed VALUABLE networking, missed REVENUE opportunities, and missed IMPORTANT industry information.
      • The relationships that are made in just a few days reap rewards for your business for years. Well worth the money.
      • An extremely useful tool for networking and also provides a better understanding of how much value you can get from the AlliancePro
      • It was my best conference for connections. Great networking.
      • Great Value. Biggest sales call of the year.
      • An excellent networking and information exchange event that is a "do not miss". Add it to your professional agenda.
      • I Promises you I will N E V E R miss a Sylectus Conference.
      • Great opportunity to network, really learn the various services that Sylectus provides and a refresher on system capabilities.
      • If you have not attended a user conference and would like to grow your business, I can't think of a better return on investment. The relationships formed will continue to grow our company for many years to come. I am already looking forward to Las Vegas next year!
      • For me, it was really great to finally put a face to the name!! Made a bunch of contacts with people we currently do business with. Finally, I met a company who we had at length conversations of possibly merging our two companies together. I would just tell someone who did not attend to make sure they fit into their schedule next year. It is a must do business function.
      • This was a great networking and learning event, it was a good use of my time. It is always important to visit with and thank the companies you work with on a daily basis. I think anyone that is a part of the Alliance would find value in this and gain more knowledge from the group.
      What will the smart transportation companies do?
      1. Review your pricing policies and strategies to ensure your rate increases remain pricing-competitive, yet have sufficient margin to increase driver pay to retain drivers.
      2. Look to the Sylectus Alliance to forge strong partnerships with other Alliance carriers.  This will provide you with the flexible capacity to still say “yes” to your customer, even though you may not have your own truck available.
      3. 3. Network with your Sylectus Alliance partners.  A great way to meet over 100 of these intelligent, forward thinking, progressive, growing companies is to attend our user group meetings.  Watch for our announcement about our June event.
      4. Develop innovative new driver retention programs and tools. For Sylectus Alliance Pro subscribers, consider getting the Fleet Vision module that allows drivers to see their pay sheets online and submit paperwork online.
      5. Invest in technologies that will reduce your costs and improve your customer service and/or driver retention. If you are not using the Sylectus Alliance Pro software, ask us for a demo. Better yet, ask our Alliance Pro customers how the technology works.
      What is the impact of these market forces on Sylectus?

      2012 is well ahead of 2011 already as many companies have reached out to us asking to move up to Alliance Pro.  What’s holding you back?

      Now … the charts!

      Supply/Demand Analysis

      2011 was the best year ever for many Sylectus customers and 2012 is starting out to surpass 2011.  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 6 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.

      Chart Analysis

      If you look at the table below … you will see that Line-haul revenue per mile in 2008 was in the $1.50 to $1.60 per mile. In 2009 the Line-haul revenue per mile has slipped as low as $1.25 before rebounding to the mid $1.40 range.  2011 has rebounded and ended the year nicely, and 2012 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, 2011 and 2012 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 8 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 December 1, 2006, so we have over 6 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 December 1, 2006, so we have over 6 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 December 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 and has stagnated over the past 12 months.  This is reflected in an improved rate per mile.
      2. The Demand (loads) chart is tracking better than 2007.  2010 and 2011 were great rides and 2012 is starting off ahead of the same period last year.
      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 are reaping the benefits of the business volume uptick.
      4. The “supply” side of the equation continues to struggle to increase, which puts upward pressure on pricing.

      Load Index – 2007-2012

      Below you will find the same 2007, 2008, 2009, 2010, 2011 and 2012 numbers used in the first graph, except the data is shown year-over-year.  2011 was a good year for trucking.

      Consider the following graph which shows the daily “Load Index” for January 2007 through to current 2012. 

      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, the gold line tracks 2011 and the turquois line tracks the 2012 number so far.

      Truck Searches – 2007-2012

      Below you find the same 2007 through 2012 numbers for the number of TRUCK SEARCHES done on the system. 2011 was a very strong year for truck searches.

      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, the gold line tracks 2011 and the turquois line tracks the 2012 number so far.

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

      Load Posting – 2007-2012

      Below you find the same 2007 through 2012 numbers for the number of LOAD POSTINGS done on Sylectus Load Board.  2011 was a very strong year for load postings on the private Alliance load board.

      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, the gold line tracks 2011 and the turquois line tracks the 2012 number 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::

      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!