The 8 Best Operating Costs Every Trucking Company Has to Manage

Introduction

The trucking industry generates over 0 billion in annual revenue and is responsible for moving 70% of all freight in the United States. Over the past decade, the industry has seen steady growth with a 3.9% increase in revenue from 2018 to 2019. As the backbone of the supply chain, the trucking industry plays a crucial role in the economy and the operating costs of trucking are a crucial aspect of the companies that help power it.

Running a successful trucking business involves managing costs, and this post will provide in-depth insight into trucking operating expenses. We will highlight the important costs and how they impact the trucking industry. As the transportation industry continues to evolve, it is essential to effectively understand the costs associated with managing a fleet.

The costs associated with trucking can vary widely depending on the size of the business, the routes, and the type of freight the business operates with. However, some costs are unavoidable, and this post will outline the most significant expenses that trucking companies incur while operating their business.

• Fuel Expenses: Fuel costs are typically the largest expense associated with trucking. With fluctuating oil prices, managing fuel expenses can be difficult. However, investing in fuel-efficient trucks and technologies can help reduce the impact of rising fuel costs.
• Maintenance and Repairs: Maintaining a fleet of trucks is essential to keep them running safely and efficiently. Maintenance costs can include oil changes, tires, brakes, and inspections, among others. Regular inspections and preventive maintenance can help avoid potential costly breakdowns.
• Insurance Premiums: Insurance is another significant cost associated with operational trucks. Costs can vary depending on the size and type of trucks the company operates, driving driver records and routes. However, having adequate insurance coverage is essential to protect the business against potential accidents and liability issues.
• Truck payments or leasing: Buying or leasing trucks is a necessary investment for trucking companies. The cost of financing or leasing trucks will impact the bottom line of the business. However, investing in newer, reliable trucks can save on maintenance and repair costs or potential breakdowns that could lead to missed deliveries or loss of customers.
• Employee wages and benefits: Trucking companies must rely on qualified drivers to operate the trucks. Salaries and benefits, including health care, 401k contributions, and time off, are necessary costs associated with the security of company assets and customer satisfaction.
• Taxes and Licensing: Trucking companies must comply with various federal and state regulations. Licenses and authorization fees, including fuel taxes, permits and registration fees, can be an additional expense that should be factored into operating costs.
• Communication and Technology Expenses: The trucking industry relies on technology and communication to operate efficiently. GPS tracking, dispatch software, electronic logging devices, and communication systems are necessary tools that can help track fuel usage, route optimization, and maintain communication between dispatchers and pilots. However, these technologies come with costs that need to be considered.
• Tolls and Fees: Tolls and fees associated with tolls, bridges, and road usage can be additional expenses that businesses need to consider when creating pricing and shipping lane strategies.
• Depreciation and Amortization: Depreciation of assets is a required accounting expense that must be taken into account when calculating the operating costs of a business.

Operating Expenses

Trucking companies have various operating expenses that must be taken care of to maintain their business. These expenses are essential to ensure that operations run smoothly and efficiently. Here are the major operating expenses in the trucking industry:

• Fuel Expenses – This is one of the most critical expenses in the trucking industry. The cost of fuel comprises a significant portion of operating expenses.
• Maintenance and repairs – The trucking company should ensure that its equipment is up to date, and keeping it in good working order can help reduce unforeseen costs.
• Insurance premiums – As with any business, it is important to have appropriate insurance coverage to help mitigate financial risk.
• Truck payments or leasing – Trucking companies typically lease or finance their trucks, which contributes a significant portion of their operating costs.
• Employee Salaries and Benefits – Trucking companies must provide competitive salaries and benefits to attract and retain their drivers and logistics staff.
• Taxes and Licenses – Businesses must pay taxes and fees and obtain licenses to operate legally and avoid any penalties or fines.
• Communication and technology spending – Technology is essential in the trucking industry, and companies need to invest in technology, including communication tools and specialized software, to ensure efficient operations.
• Tolls and Fees – Businesses need to understand the potential costs of using highways and bridges for commercial traffic.
• Depreciation and Amortization – As trucks age and lose value, companies need to factor depreciation into their budget planning.

Overall, managing operating expenses is crucial to the success of any trucking business. Understanding these expenses and managing them effectively can help businesses stay competitive, profitable and sustainable over the long term.

Fuel expenses

Fuel expenses are one of the biggest operating costs for trucking companies. In fact, according to the American Transportation Research Institute (ATRI), it makes up about 25% of a trucking company’s total operating costs. With volatile fuel prices, it is difficult for trucking companies to maintain a stable and healthy profit margin.

In 2021, the average diesel cost in the United States is .28 per gallon. By comparison, in February 2020, the average diesel cost was around .07 per gallon. That’s an increase of about 7% in just over a year.

The increase in fuel expenditure can be attributed to several factors, including supply and demand, natural disasters, global political tension and geological disturbances. With all of these factors in play, it is difficult to predict the direction of fuel costs.

Trucking companies can implement several strategies to help minimize their fuel costs. One approach is to adopt an idle reduction policy. By reducing idling, trucking companies can help minimize fuel waste and emissions, thereby contributing positively to the environment.

Another strategy is to invest in fuel-efficient vehicles. Newer models have better fuel efficiency which can help reduce fuel consumption and overall expenses.

Trucking companies may also consider utilizing fuel discount programs offered by various fuel suppliers. These programs offer discounts and other incentives to businesses that spend more on fuel. By doing so, trucking companies can significantly reduce their fuel expenses.

• In summary, fuel expenses are an important cost component for trucking companies, and their volatility makes it difficult to forecast future expenses. However, companies can implement strategies such as reducing idling, investing in fuel-efficient vehicles, and using fuel reduction programs to minimize their fuel expenses.

Maintenance and repairs

One of the biggest operating costs for trucking companies is maintenance and repairs. In fact, maintenance and repairs are estimated to contribute about 10-15% of the overall operating cost of a trucking operation.

According to the American Transportation Research Institute (ATRI), the average cost to maintain and repair a heavy-duty commercial truck is ,000 to ,000 per year. This amount includes both preventative maintenance costs such as oil changes, tire changes and other routine services, as well as repair costs for any unexpected repairs needed throughout the year. .

The type of truck and the age of the vehicle can also affect the cost of maintenance and repairs. Older trucks will generally require more frequent and more expensive repairs, while newer trucks may have higher maintenance costs due to advanced technology and systems. Additionally, specialized trucks such as refrigerated or hazard trucks may require specific maintenance and repair procedures which can increase the overall cost.

Tracking regular maintenance and anti-delay repairs can help minimize maintenance and repair expenses. Failure to do so can lead to more frequent and costly repairs in the long run. It’s also important for trucking companies to consider factors such as fuel efficiency, driver behavior and route planning to reduce unnecessary wear and tear on the vehicle.

One way for trucking companies to control maintenance and repair costs is to implement a preventative maintenance program. This program consists of planning regular checks and maintenance services for each vehicle in the fleet. By identifying and resolving potential issues early on, businesses can avoid costly repairs down the road.

• Summary:

Maintenance and repairs are a major operating cost for trucking companies. The average cost to maintain and repair a heavy commercial truck is ,000 to ,000 per year. Tracking regular maintenance and anti-delay repairs can help minimize maintenance and repair expenses. Implementing a preventive maintenance program can help businesses identify and fix potential problems early on, ultimately saving them money in the long run.

Insurance premiums

Insurance is an important investment for trucking companies because it helps protect company assets against unexpected events. However, insurance costs can be a significant expense for trucking companies, affecting their bottom line. To better understand this cost, recent statistics in USD offer insight into the insurance premiums trucking companies should pay.

According to a recent report by the American Transportation Research Institute (ATRI), insurance premiums have become the second highest operating cost for trucking companies after driver pay. The estimated annual insurance premium cost for auto carriers of all sizes in 2019 was about ,788 per Class 8 truck, or 6.2 cents per mile.

Several factors affect the cost of insurance premiums for trucking companies. These include type of operation, loss record, fleet size, cargo carried, coverage and deductible levels among others. Additionally, the type of insurance required by law may vary by state or region, as well as the jurisdiction and compliance status of the carrier.

The ATRI report highlights that insurance costs vary widely by carrier, with the top 10% paying more than ,000 per truck per year, while the bottom 25% paying less than ,500 per truck per year. . The report also notes that insurance premiums have increased in recent years due to several factors, including increased litigation, nuclear verdicts and volatility in the insurance market.

One way trucking companies can mitigate insurance costs is by implementing safety measures and best practices that can reduce accidents and claims. For example, carriers can invest in driver training programs, safety equipment, telematics systems, and compliance management tools that can help prevent accidents and demonstrate a culture of safety for insurers. Carriers can also consider working with insurance brokers who specialize in trucking and transportation insurance and can help them identify savings opportunities.

In conclusion, insurance premiums are a significant cost to trucking companies, and understanding the factors that affect them and implementing safety measures and best practices can help carriers reduce their impact on the bottom line. . Tracking the latest statistical information about insurance premiums can also help carriers compare costs and negotiate better rates with their insurers.

Trucking operating costs: payments or leasing of trucks

Truck payments or lease fees are one of the biggest expenses for trucking companies. According to recent statistics, the average cost of a new truck is around 0,000, while the average cost of a used truck is around ,000. These costs can be a significant burden on a trucking company, especially when combined with other operational expenses such as fuel, maintenance, and insurance.

Leasing a truck is a viable alternative for many trucking companies. In most cases, leasing a truck can be more cost effective than buying one outright. The average monthly lease payment for a new truck is around ,500, while the monthly payment for a used truck is around ,000. Leasing a truck can also provide benefits such as lower maintenance costs and the ability to upgrade to newer models more frequently.

However, there are also disadvantages to renting a truck. First, trucking companies that opt for leasing might have to follow strict maintenance procedures to avoid penalty charges. Second, although leasing often results in lower monthly payments, in the long run it could cost more than buying a truck. Additionally, when leasing a truck, the truck must be returned at the end of the lease period, leaving the trucking company with no assets to sell.

Truck payments or lease fees should be taken into consideration while deciding whether to buy or lease a truck. Trucks not only help transport goods but also act as assets for businesses. If the company can afford to make monthly payments for an extended period and maintains the truck properly, buying might be a better choice because the company can also sell the truck at a later period. However, in case of immediate needs or financial constraints, rental should be considered.

• Buy a truck directly:
  • Benefits:
    • The truck becomes a company asset
    • Cheaper in the long run

  • The inconvenients:
    • High initial cost
    • Higher long-term maintenance cost

• Rent a truck:
  • Benefits:
    • Low initial cost
    • Low monthly payments
    • Truck can be upgraded more frequently
    • Reduced maintenance costs

  • The inconvenients:
    • Penalty charges for not following maintenance procedures
    • The truck must be returned at the end of the rental period
    • Higher long-term cost

In conclusion, when deciding whether to buy or lease a truck, it is important to consider both initial and ongoing costs. The ultimate decision should be based on the company’s financial situation and its long-term goals. Buying and leasing a truck has its pros and cons, choose the option that aligns with business needs and goals.

Employee salaries and benefits

When it comes to trucking operating costs, one of the biggest expenses for carriers is the salaries and benefits of their employees. In the United States, the median salary for a truck driver is ,850 per year, with a range between ,000 and ,000. However, this figure does not include the cost of benefits, such as health insurance, pension plans and paid vacations.

According to the Bureau of Labor Statistics, employers in the transportation and warehousing industry spend an average of .31 per hour on benefits for their employees. This cost includes both mandatory benefits, such as Social Security and Medicare taxes, as well as optional benefits such as health and retirement plans. In 2020, the average hourly compensation cost for a production and unsupervised employee in the transportation and warehousing industry was .06, with wages and salaries accounting for .75 of that amount and benefits making up the remaining .31.

While the cost of employee salaries and benefits can vary depending on the size and location of the carrier, it’s clearly one of the biggest expenses carriers face. As such, it is crucial for carriers to effectively manage these costs to remain competitive in the industry.

Carriers can manage these costs is to offer competitive salaries and benefits to attract and retain top talent. This includes offering login bonuses, performance-based salaries, and comprehensive health and retirement plans. By providing these benefits, carriers can reduce turnover and improve employee morale, leading to increased productivity and profitability.

Another way carriers can manage these costs is to leverage technology to streamline operations and reduce administrative burdens. For example, operators can use digital platforms to manage benefits enrollment, payroll processing, and time off requests, reducing the time and resources needed to administer these programs.

In conclusion, salaries and employee benefits are a major expense for carriers in the trucking industry. Although the cost may vary depending on the size and location of the carrier, it is crucial for carriers to effectively manage these costs to remain competitive in the market. By offering competitive salaries and benefits and leveraging technology to streamline operations, carriers can attract and retain top talent while reducing administrative costs.

Taxes and licenses

When it comes to truck operating costs, taxes and licenses constitute a large proportion. These costs are necessary to legally operate a truck and include permits, registration and taxes collected by the government. The amount of tax and license fees depends on the state, the size of the truck and the type of freight transported.

According to the latest available data, in 2020, the total taxes and license fees paid by trucking companies in the United States amounted to approximately ,500 per year. This amount includes truck registration fees, weight taxes, state-specific fees, and permits.

It should be noted that costs for taxes and licenses can vary significantly depending on the state in which you operate your trucking business. For example, in some states the annual registration fee is as low as , while in others it can be as high as ,000. Likewise, states like Oregon and New Mexico charge weight taxes, while others do not.

One way to manage taxes and licensing fees is to stay up to date on your state’s laws and regulations. It is important to know when permits are required, renewal deadlines and general compliance regulations. Additionally, working with a tax professional or commodity broker who has lived in navigating the intricacies of trucking regulations can be beneficial.

Another thing to keep in mind regarding taxes and licensing costs is that they are an inevitable aspect of trucking operations. These expenses are critical to avoiding penalties and keeping businesses compliant. Therefore, it is crucial to factor them into the overall operating costs of your trucking business.

In conclusion, taxes and licenses are significant operating costs for trucking companies. It is essential to stay up to date on your state’s laws and regulations and to work with professionals to minimize costs and ensure compliance with the law.

• Stay informed about your state’s laws and regulations.
• Work with a tax professional or freight broker who has experienced navigating trucking regulations.
• Factor taxes and licensing costs into overall operating costs.

Communication and technology expenses

Trucking operations are most successful when they manage to keep their operating costs under control. Communication and technology expenses are an important part of every trucking operation, and keeping these costs within budget is crucial. A recent report by the American Transportation Research Institute (ATRI) indicates that in 2020, communications and technology expenditures accounted for an average of 2.8% of total operating costs for the trucking industry in the United States. This amounts to approximately ,617 per truck per year.

Communication expenses include costs for telephone lines, Internet services and mobile communication devices. Technology expenses include costs for hardware, software, and maintenance. To minimize these costs, trucking companies can take advantage of modern technologies such as GPS tracking systems and fuel monitoring systems, which can help reduce fuel consumption and improve vehicle maintenance.

GPS Tracking Systems: These systems help track the location of the vehicle and can also provide information about driver behavior such as hard braking, speed or idling. This information can be used to optimize the route and save fuel consumption.

Fuel monitoring systems: These systems help monitor fuel consumption in real time, which can help reduce fuel waste and improve fuel efficiency.

Streamlining communication within the organization can also help save on communication expenses. This can be achieved by using instant messaging and video conferencing tools instead of expensive phone lines. Some trucking companies also use social media to connect with their customers and suppliers, eliminating the need for costly marketing campaigns.

Instant messaging tools: Tools like Slack, Microsoft Teams, and Google Hangouts can help with internal communication and reduce the need for phone lines.

Social Media Channels: Social media tools like Facebook and Twitter can help build brand presence and engage with customers and suppliers.

Another modern technology that has proven important to trucking companies is Transportation Management Software (TMS). TMS solutions help improve operational efficiency by automating and optimizing various aspects of the logistics process. This includes route planning, load optimization, driver scheduling and real-time tracking. According to a report by Marketsandmarket, the global TMS market is expected to reach USD 3.41 billion by 2022.

Transportation Management Software (TMS): These solutions help automate logistics processes and manage logistics operations, reducing costs and increasing efficiency.

In conclusion, communication and technology expenses are an important part of trucking operations. By taking advantage of modern technologies like GPS tracking, fuel monitoring systems, instant messaging tools, social networks and TMS solutions, trucking companies can reduce costs and optimize their operations.

Tolls and fees

Trucking companies have a wide range of costs to keep in mind, and a big expense is tolls and fees, which can quickly add up over time. In 2019, the average annual cost of tolls and fees was ,260 for commercial trucks in the United States. Given the potential for major expenses, it is essential for carriers to understand the impact of these expenses on their operations.

Tolls: The amount of money spent on tolls depends on the number of miles traveled as well as the cost of the tolls themselves. Some states charge significantly more for tolls than others, and the cost of tolls can also vary depending on the time of day the truck is traveling the toll. Carriers can use electronic toll collection systems to speed up the toll payment process and potentially get toll rate discounts, but there’s still a steep price to pay for convenience.

Weight and Distance Fees: In addition to tolls, trucking companies may encounter various other types of fees. For example, some states charge a weight fee based on the truck’s gross weight, while others charge a flat fee each time a truck enters the state. Carriers may also face additional charges when crossing state lines, such as international border fees and fees for crossing bridges, tunnels or other infrastructure. Fuel taxes are another potential expense that trucking companies need to consider in their budgets, as the cost of taxes can vary depending on the state or region where the fuel is purchased.

Impact on Operations: Although tolls and fees are a necessary part of trucking operations, they can have a significant impact on the bottom line. The cost of tolls and fees must be factored into the price charged to customers if the carrier is to remain profitable. Therefore, many carriers must balance the desire to minimize the cost of tolls and fees while delivering goods on time and efficiently. Some routes may be more expensive but offer faster delivery, while other routes may be cheaper but take longer to deliver. Carriers must calculate the total cost to determine the most profitable route for their business.

Conclusion: Tolls and fees may not be the most exciting aspect of trucking, but they are a significant expense that must be accounted for in order to maintain a sustainable and profitable trucking business. Trucking companies must find ways to balance the cost of tolls and fees with the need to deliver goods on time and efficiently. By using electronic toll collection systems, leveraging route optimization software, and factoring the cost of tolls and fees into fare calculations, carriers can help mitigate the impact of these expenses while providing valuable services to customers.

Depreciation and amortization

When it comes to calculating trucking operating costs, two important factors to consider are depreciation and amortization. Depreciation is the value that an asset loses over time due to wear and tear or obsolescence, while depreciation is the expense of capital assets such as patents or copyrights.

The American Transportation Research Institute (ATRI) released its annual survey of operating costs in the trucking industry, which highlights that depreciation is among the costliest expenses carriers face. According to ATRI, the average cost per mile for depreciation is 13 cents and the average total cost per year is about ,000. Considering that the average truck runs around 100,000 miles per year, this cost can add up quickly.

Depreciation, on the other hand, is not as important as depreciation when it comes to operating costs in the trucking industry. However, it is an expense that asset owners must take into account. ATRI estimates that the average annual depreciation cost is about ,800 per truck, which translates to about 7.2 cents per mile.

Depreciation and amortization costs may not seem as significant as fuel or maintenance at first glance, but they can have a substantial impact on a carrier’s bottom line. Ignoring the impact of depreciation and amortization on your operation’s finances can lead to unexpected expenses and potential problems with cash flow management. It is essential to plan ahead and estimate these costs accurately, as depreciation can vary depending on the type of equipment and age.

Crucially, some carriers are opting for lease and lease options to mitigate the impact of depreciation and amortization on their operating costs. By renting or leasing trucks, carriers can pay for equipment usage while avoiding the expense associated with owning and maintaining assets over the long term.

In conclusion, The calculation of depreciation and amortization costs is an integral part of trucking operating costs. Carriers should pay close attention to these expenses to avoid unexpected costs and plan ahead. Lease or rental options can also be an effective way to manage the impact of these costs on your operation’s finances.

Conclusion

The trucking industry is a vital part of the US economy, responsible for moving 0 billion in goods annually. Although the industry continues to experience steady growth, understanding the significant expenses associated with running a trucking business is critical to success.

Trucking operating costs include fuel expenses, maintenance and repairs, insurance premiums, truck payments or lease, employee salaries and benefits, taxes and licenses, communication and technology, tolls and fees, and depreciation and amortization. These expenses often vary based on factors such as company size, routes and type of freight. However, it is essential to recognize the expenses that trucking companies spend when operating their business.

Managing trucking operating expenses is necessary to stay competitive and achieve profitability. Investing in preventative maintenance, fuel-efficient trucks and modern technology can go a long way to reducing costs over time. As the trucking industry continues to evolve, it’s crucial to stay up to date on the latest trends and strategies that can help trucking companies ahead of the competition.

Overall, understanding trucking operating costs is crucial for trucking companies to remain competitive and profitable while continuing to play a crucial role in the United States economy.