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With the return to normal after the post-COVID rebound, the softening in consumer demand, and the return of inventory levels in the supply chain, many economists are predicting a downturn in the economy. In the transportation industry a downturn has two direct impacts. First, as the demand for service drops, so do the number of loads available. Second, as a result of the first, the prices shippers are willing to pay drops.

Watch and reduce costs

Whenever a downturn is on the horizon, the first step is to take a close look at costs. Are there expenses that can be reduced or eliminated? To know this will require an extensive look at where money is being spent. The bottom line here is to locate unnecessary spending, so when reductions are necessary you have a plan to reduce costs.

Take a closer look at fuel economy

Fuel is the number two cost at a motor carrier, behind wages and benefits. If you want to look at reducing costs, improving fuel mileage is something that must be considered. If your fleet average is 100,000 miles per vehicle per year, you will be eliminating $3,000 dollars per year in cost for every 0.25 miles per gallon improvement in fuel mileage. Reducing the fleet speed, improving aerodynamics, and working with drivers on driving techniques and idle reduction are quick ways to improve fuel mileage.

Delay/slow purchases

Another way to address costs and improve the company’s preparations for a downturn is to delay or slow major purchases. This will put the company in a better “cash on hand” position. This can then provide a cushion during a downturn.

Consider slowing the trade cycle

Related to slowing purchasing, a carrier can also slow the trade cycle. However, this is a double-edged sword. It can help with the company’s cash situation, but it will lead to higher spending on maintenance. For example, if a carrier’s current trade cycle is based on trading vehicles before an engine rebuild is necessary, extending the trade cycle would lead to engine rebuilds. Because rebuilds are an expensive maintenance activity this change requires careful consideration.

Consider how to keep your drivers

During a downturn, many carriers end up losing their good drivers. Consider this: When the economy rebounds (as it always does), the carriers that kept their drivers are best positioned to jump on opportunities. The key here is to adjust your operation so you can keep your good drivers.

Look for customers and customer actions that are costing you money and try to correct them

Every carrier has customers that are costing them money, either directly or indirectly. Common ways customers cost a carrier money are loading and unloading delays, cargo claims due to misloads, and irritating your drivers so badly they end up quitting. Fixing this involves coming up with solutions, such as trailer drops, improved cargo securement and loading protocols, more structured loading and unloading times , or quitting these customers.

Key to remember: If you prepare now and execute well, when a downturn arrives, you’ll be well positioned for the day when economic conditions improve.