"If you do what you've always done, you'll get what you've always gotten."
Tony Robbins - Business Coach
Don't have any changes planned for your trucking operations in 2011? Then I hope you were happy with your 2010 results. However, if you were not happy with last year's performance, then the most effective way you, as leader of your organization, can improve financial performance is through development and implementation of a comprehensive business plan.
Business plan development begins with an analysis that takes both a backward and forward looking approach. We look backward to learn from our mistakes and forward to anticipate market influences that might impact future operations. Savvy executives then use their backward/forward knowledge to design current day processes and controls that guarantee financial success.
Let's take a backward look first.
Which goals were you unsuccessful with in 2010? Did maintenance costs come in $0.015/mile higher than your target? Was driver productivity, on average, 215miles/week less than forecast? Were you successful in reducing driver turnover 25%, as targeted?
A careful analysis of past actual-to-goal-performance by both department and location will provide insightful details into which goals were missed and why. For example, if maintenance costs were higher, you need to identify the reasons. What was your PM compliance ratio? Is your PM schedule at the right interval? Did you use a higher than targeted percentage of outside repair vendors? Which specific maintenance costs exceeded your goals (tires, labor, parts, etc…)?
For each goal analyzed, define how well your company complied with procedures and controls (ex: PM interval) and then determine, based on actual performance, if those procedures and controls were adequate or need to be changed. This is a critical step towards improving future performance so I'll repeat and restate it: The actual-to-goal-performance analysis used in business plan development must identify all the procedures and controls you need to either redesign or better enforce.
Your backward look should also be receptive to learning from successes. It may be that one terminal's performance was 'heads and shoulders' above their goal and the performance of other terminals. What did they do to achieve such stunning success and how quickly can you implement their procedures at the other terminals?
Now for a forward look.
You now know, based on analysis of past performance, some of the procedures and controls you need to change. The next step is determining how the marketplace will be changing in 2011 and what you need to implement to accommodate those changes.
For example, in 2011 fuel prices are expected to go higher. That should prompt a review of your current fuel program to identity opportunities to reduce consumption and cost. Can you renegotiate lower network discounts with your current or an alternative network provider? What is your current idling performance and how can you reduce it? How is your tire pressure driver education program performing?
Other 2011 marketplace influencers could include higher equipment pricing, driver shortages, driver productivity issues from HOS, higher maintenance costs due to an aging fleet, etc… Also, be aware that positive future influences need to be part of your planning process. For example, our industry is expecting rates to rise due to increasing freight levels and tightening capacity. How do you best capture higher rates? Do you order equipment for delivery in 6 months? Do you not renew soon to be off-contract freight and bid that capacity elsewhere? Do you attempt to add owner-operators?
Using backward/forward analysis to develop your business plan is a lot of work. But there isn't any other planning process that provides both the internal (past company performance issues) and external (market influences) insight needed to develop effective improvement strategies.
You're not done yet.
And, the work is not over once the analysis is competed and improvement strategies developed. An implementation plan still needs to be developed which includes the requisite timelines, accountability assignments, training, report development, and financial incentives needed to support your new processes and controls.
Developing a comprehensive business plan is the most effective way to leverage both past experience and future expectations into a strategic direction that will guide your company to higher earnings. Take the time to perform the analysis and develop the plan, and your bottom line will reward you all year long.