Flex Capacitor
It’s tough to say – and even harder to hear, but the challenges small and medium-sized transportation businesses face today are increasingly complicated. Pick your poison:
Freight rate volatility, e-Commerce growth, pick-up and delivery expectations, Federal and States compliance, and financial concerns. If not managed properly, any one of these can threaten the health of your company.
In this complex environment, outstanding service is vital. And successful small businesses must “flex” their capacities to deliver that service. Flex capacity fills the gaps between what you can offer companies and what they request during surges. Below, I will briefly explore three ways that small transportation businesses can flex to meet client demands. Look for future posts that discuss each in greater detail.
Three ways to flex
First, intelligent asset acquisition and usage – trucks, trailers, warehouses, and land for yard use. Asset acquisition must be the most carefully scrutinized type of capacity construct. It requires detailed research, timely investment, and full knowledge of your business plan and potential growth objectives. Additionally, trucks and trailers, as the primary basis for your business transactions, have a host of cost elements to consider, including depreciation and replacement. Plan wisely before investing.
Second, broker your transactions to a company possessing the necessary capacity. This requires a significant change in mindset. You are now the middleman. You offer companies a commissionable expectation, which can be used to leverage future transactions and grow the business. Financials can be managed through a single accounting and invoice point – with appropriate markups. You will need to be nimble and creative, constantly assessing the needs of all involved.
There will be pressure from the client, and often carrier-broker relationships erode. Clients may be convenience shoppers, needing brokered simplification to streamline their transportation purchasing process. But consider that temporary. Things change rapidly and client typically demands cost-cutting in the supply chain.
Ultimately, success depends on your company’s collaborative capacity. To avoid problems, pursue solid and enforceable agreements that detail the relationship between each of the parties. Handshakes are important but formal agreements allow you to plan and grow with confidence.
Third, Captured Asset Management Program (CAMP). This is intelligent usage of others’ assets. An asset gains value when used for the purpose for which it was intended. Barring that, an asset may as well be a paperweight. No usage, no value. The more usage, the more value. And, the more efficient the usage, the more potential value per usage.
Once an asset has been utilized within your affiliated network, a conscious effort should be made to keep it there, moving from point to point, gaining revenue and margin. This is not a “Field of Dreams”— build it first then they will come. Rather, CAMP allows successful managers to supervise the usage of others’ assets and keep costs contained. Small companies can then utilize these assets across a broad portfolio of clients that have vastly different shipping needs.
Take Away
As a small business owner, I found augmenting a baseline of owned assets with “captured” equipment satisfies client demands and generates beneficial long-term relationships. The mix will depend on your company’s specific strengths and client demands.
Flexing capacity can effectively manage your client’s expectations and get you heading Back to the Future you envisioned for your company, and avoiding common problems faced by logistics companies.