An Introduction to Transport Cost Modeling
Many businesses with larger fleets are likely to have financial control systems, rate structures, and systems for costing jobs. While this may be a common practice for larger operations, this is by no means the industry standard. Many trucking firms still rely on inaccurate or incomplete data to make critical business decisions. Such businesses often find it difficult for managers and customers to identify where improvements and savings can be made. The goal of cost models is to make it easier to identify where these improvements and savings can be made.
What is Cost Modeling?
Simply put, a cost model for trucking seeks to identify and document all of the costs associated with any specific trucking transaction and is one of the keys to a profitable operation. Using a transport cost model will help you to do a few things.
Improve operational effectiveness
Through an effective cost model, your business can run efficiently. This saves you time and money in the long run and makes your company more productive overall. With improved effectiveness, the performance and profitability of your business will thrive as well.
Develop a robust pricing structure
When you come up with a solid pricing structure that your stakeholders (customers, employees, shareholders, etc.) will understand, you effectively have the entire company on the same page. With a comprehensive cost model, you can see insights into your current business. A trucking cost model also provides the foundation for data mining and business intelligence.
The Benefits of a Trucking Cost Model
A transport cost model allows you to provide a price for a job that bears a direct relationship to the costs involved. It uses current costs rather than historic ones and enables you to understand the true cost of your operation down to individual vehicles in the fleet. It does so in a variety of ways.
Pricing structure based on true costs
A cost model lets you structure pricing based on what the cost is currently. This gives you flexibility in your pricing structure, as well as transparency in prices.
Tighter control of operating costs
When you utilize effective cost modeling, you have a better handle on all operating costs. This allows your business to run smoother, and keep all expenses under control.
Informed business decisions
When you have all costs documented and planned, you can make better business decisions. This is simply because you know where you’ve been and where you’re going.
Improved business performance
Since cost modeling can play a key role in making your company profitable, it inadvertently improves your overall business as well.
Better utilization of resources
Since you can easily identify areas of improvement with this type of planning, you can better utilize your resources to make your trucking company as efficient as possible.
Your company will look better professionally and in general with a solid, constructed cost model.
A transport cost model gives you an advantage over competition simply by running your business in an efficient and cost effective manner.
How Do I Start Creating a Transport Cost Model?
If you don’t know where to begin when assembling a trucking cost model, Trincon is here to help. Among our many helpful resources, our white paper, “An Introduction to Cost Modeling: Why it Matters to Your Business,” goes into great detail on the benefits of using transport costing models, and also breaks down how to price a job using a cost mode. So, if you’re wondering where to start, we have you covered. Our white papers are available for free, so you can start improving your operational effectiveness right away!