October 12, 2022

The 1%: Understanding Trailer Utilization 

By: Jessica Smith

It’s safe to say that ROI is a crucial factor in any educated business decision – especially in transportation. Fleets want to know that their investments are worth the financial commitment. But what they don’t know is that the “seemingly smart” investment of a new trailer might in fact cost them money. 

Trailer utilization is often overlooked as a major player in a fleet’s ROI. Lack of proper utilization can result in superfluous trips made, extra money wasted on fuel, unnecessary “wear and tear” on your trailer, and significantly slower trailer turn time. If a fleet can improve the way it uses its current inventory, it could reduce its trailer inventory by anywhere between 1 and 20%. Although that percentage seems relatively small, if you look at a fleet with 10,000 trailers, 1% would eliminate the need for 100 trailers. That’s 100 trailers stuck in the drop yard and ultimately, generating no revenue. If that didn’t drive the point home, the current market price of a trailer is now $40,000 on average. So the 100 trailers sitting in your drop yard cost your operation $4 million – just to sit there and depreciate. 

Once you can properly assess your fleet capacity, you may realize that you only need 80 percent of the trailers you currently have. Maybe you can haul 10% more freight with the same amount of trailers you already have. So that 1% could really be 20%, adding more than $1,000 per year in additional revenue on each trailer. The numbers don’t lie. Fleet capacity matters!

Remember: More loads with the same trailers = more revenue.

In a separate scenario, let’s assume a fleet has 2 loads to transport that day. With 1 trailer, the fleet can haul 1 load. But with 2 trailers, the fleet can haul 1 load – or 2 loads. With the ability to fully understand its total trailer capacity from the inside-out, the fleet can increase its efficiency and utilization, hauling 5 loads in 3 trailers rather than 5 loads in 6 trailers.

In the same scenario, a fleet that sends trucks looking for empty or healthy trailers is burning excess deadhead (unpaid) miles, which can result in millions of unnecessary miles annually. Let’s not forget the cost of fuel for those millions of miles or the maintenance costs that the wear and tear will inevitably incur.

So with all this information, how can you better understand your trailer, increase your operational efficiency, and truly master trailer utilization? 

The implementation of sensors, gateways, and smart technology on trailers is changing the way fleets manage their most valuable assets. Sensors like Phillips Connect’s CargoVision™ can provide a real-time glimpse inside the trailer, offering a volumetric view that predicts how full a trailer is and even suggests the time it will take to unload. Unlike other cargo sensors, this camera is mounted in the rear and is forward-facing to offer the fleet managers an unobstructed view of the load. 

Phillips Connect takes it one step further with its detention scheduler tool in the Connect1™ user interface. With this, carriers can put in detention schedules based on a specific geofence category or other attributes. Phillips Connect’s model looks at entry time, when the clock starts, the number of free days, and if detention should end when the trailer goes from loaded to empty on an inbound trailer, outbound trailer, or both. It also allows for a graduated charging schedule (ex. Day 1 = $20, Day 2 = $20, Day 3 = $50, etc.). The Connect1™ detention scheduler is customizable and can be accessed from anywhere and at any time. Our customers’ goal is to not bill detention, but to rather help their own customers increase trailer turn time – because hauling freight means generating revenue.

Nussbaum, a very distinguished Phillips Connect partner, places significant importance on its drivers because finding a trailer in the right status can make or break the fleet’s productivity. During the Phillips Connect ROI exercise, Nussbaum assumed $100 of extra detention per trailer per year over a 10-year period. In the model, the assumption was made that detention would yield $1M over those 10 years. Its overall ROI assumptions yielded an expected ROI percentage of 653.30% with the payback period of 0.38 years.

In 19 months (January 2021 – July 2022), actual billable detention on just one customer was recognized at $363K using the Connect1™ platform. When annualizing Nussbaum’s customer example over the 10-year model, it would collect more than $2M in detention, taking its original ROI assumptions from 653.30% to 718.20% – and reducing its payback period from 0.38 years to 0.34 years. Now imagine applying the Connect1 detention model across your entire fleet. That’s the power of trailer utilization.

Don’t get stuck in the drop yard. Visit https://www.phillips-connect.com to learn how Phillips Connect can increase your ROI today.