Planning for freight rates and business cost changes can help boost profits when expanding and maintain sustainability during compression.
Logistics is a volatile industry impacted by many factors including regulatory (language proficiency, ELDs), economic (tariffs and global supply chains), and deep competition. These variables drive volatility both on the volume and cost side of logistics business and results in periods of tremendous profitability and periods of extreme financial challenges.
It’s the challenge of management to stress test their business and have short- and long-term plans to manage this volatility, including capitalizing on peaks and stabilizing troughs. Keys to planning include understanding:
- Your company’s financial picture
- Key metrics impacting financials results
- Baseline data to measure against
- Having strong relationships with key advisors such as bankers, attorneys, insurance brokers, and CPAs to assist in planning and execution
How transportation and logistics companies should plan for volatility
Volatility is common in freight, and while rates are typically elastic and fluctuate frequently based on demand, costs are generally more stable over time and difficult to reduce. Planning for changes in rates and costs can help you boost profits when expanding and maintain sustainability during periods of compression.
Factors to consider:
- Who are your competitors and is your driver pay competitive?
- What is the cost of recruitment and training?
- What is your fleet capacity?
- What is your rate/mile breakeven point?
- What is your fixed overhead and gross profit needed to cover it?
- What is your current working capital and cash runway?
How CLA can help with volatility in transportation and logistics
CLA’s client accounting and advisory services can help create projections and forecasts to:
- Develop short- and long-term plans and scenario analysis
- Create metrics and reporting that help you understand impacts
- Provide insight into how to bid and price lanes for profitability