If you manage a large logistics operation, you’ll understand the importance of using your assets effectively. Imagine how your profit margin is hurt by the constant maintenance of aging vehicles, the rate of accidents and the cost of liability coverage. Mitigating the factors that bring down your company’s bottom line will increase the profit you can realise from your assets.
Asset utilisation is easily calculated by dividing annual revenue by the total number of assets. An asset utilisation rating of one means you’re doubling your total assets. A rating of 0.50 would mean that you are making a 50% gain.
Identify events impacting the use of your assets
There are small hurdles in your business that can affect profitability. Things like driver downtime, increased detention time, driver accidents and other unpredictable events should be expected.
Here are four ways you can reduce downtime:
- Invest in preventative maintenance
Maintenance is about more than improving the performance of your vehicles. It’s also about preventing future equipment failure. Of course, sticking to a maintenance schedule is not a one-size-fits-all strategy. You should customise schedules based on equipment specifications, age, mileage or price tag. Consider investing in a Service Relationship Management (SRM) plan to streamline the process.
- Consolidate LTL shipments
When you have less than load (LTL) shipment orders, direct routes will waste fuel and impact the effective use of your assets. You can formulate a multi-stop route if the additional stops are within a reasonable distance and you’ve got a truck with capacity available. In fact, three or more LTL shipments may be bundled if the route allows it.
Of course, you must plan routes carefully to make sure expenses are not squandered. Take into consideration the out-of-route miles that will be added and the impact additional stops will have on delivery times. There may also be extra servicing stop charges if the route is considerably extended.
- Use enterprise asset management (EAM) software
There are better ways to keep track of and organise the physical assets of a large operation than pen and paper. EAM software is designed to schedule their lifecycle so that nothing gets out of line. It helps you streamline the processes of asset identification and measuring, developing work streams, and value analysis. And as it’s accessible on all devices, all employees can use it, which means efficient tracking, incident reporting, maintenance schedules, expense tracking and more.
- Downsizing and upgrades
A less complicated way of optimising your assets is to identify and cut out any waste, replacing it with essential components. Some ways you can do this are by are employee evaluations, outdated and inefficient equipment or liquidating unused high-value items, getting rid of outdated and efficient equipment and evaluating your employee structure.
A bonus point:
Supply and demand
You should also bear in mind that market demand will impact the effective use of your assets, no matter how efficient your cutbacks. In a slower economy, where demand is low, you might need to adjust your pricing either up or down to make up for decreased profits. To accommodate sudden high demand, you need to ensure you’re properly equipped with vehicles, manpower, and route plans.
Simply put – to grow your logistics operation into the perfect example of efficiency, keep an eye on profit margins and cut out the waste. Other companies refine their transportation strategies every year, so you can expect the market to become even more competitive. After formulating a new asset utilisation strategy, you may have enough growth to expand into operations that you couldn’t handle before!
At Four Business Solutions, we take our own advice! Our success is built on values like trust, teamwork and vision, and we believe that people are at the heart of any business.
To find out more about our services, simply give us a call on 0800 6250 025.