Efficiency vs. Max Production

My grandfather was a warehouseman.  My father and my uncle were warehousemen. My brothers were warehousemen. My cousins were warehousemen. In a trucking family, discussions are probably about the trucking industry. In my family we talked about warehousing and distribution. I was the youngest. It was my role to shut up and listen. I could ask a question, but that was about it. I was there to learn.

One of the lessons that I learned was the 70% rule. As many a youngster I thought profitability was about maximizing productivity. They taught me that the net profit was more important than the gross earnings. Warehouses operate most efficiently at about 70% of capacity. Anything over that decreases efficiency. A product that was moved once may now have to be moved again so that you can put newer stock behind it. The fewer times a product is moved the more profitable the warehouse.

If you tighten up the spaces you risk damage. The warehouse that I worked in handled liquor. The product was distributed on standard 40 x 48 pallets. That is the standard pallet and is 13.2 square feet and has 4 way entry. The easiest entry is from the front. Turning pallets to save space makes handling more difficult. A truckload was 18 pallets. We could safely stack 3 pallets high. We set up our rows to be about 28 feet long and 4 feet wide. Then we taped off about 6 inches between the rows. That allowed for overhang. We could safely, easily and profitably move pallets out of these rows.

Then we got a new warehouse manager. He wanted to increase the gross by putting the stacks closer together. We tried to explain to him why we did it the way we were doing it. It was his belief that if we tightened up on the existing accounts that we could get another account into the same space. He was right. We could fit more product into the same space. The problem was that increased handling costs outweighed the increase in revenue.

The percentage changes from industry to industry or even within the industry. The principle remains the same. If a NASCAR driver ran at 70% of capacity he would get lapped, probably within the first 5 laps. By the same token if he does not modify his aversion to risk at the start of the race he many not finish the race. Even in warehousing if a product is going to be warehoused and not moved for a long period of time the percentage of capacity can increase.

The same principles apply to trucking. If you have a one day run and need to drive 11 hours to make the run, you are taking a risk. If you miss your appointment, you may lose a day of productivity or a customer. If you budget a 10 hour drive for one day, you have less risk of missing your appointment.  On a longer run, you can run a higher percentage of your max. On a one day 10 hour run you might run the risk of delay due to weather, traffic, or construction. On a 3 day 30 hour run your risk lessens. The smart driver will try to push on toward the 11 hour mark on the first 2 days and leave maybe 9 hours for the last day. Thus avoiding the urge to speed up and increase fuel costs.

Each of our operations is different. I can’t or won’t tell you how to run yours. We all want to increase our net profit. That doesn’t change from my operation to yours. It is each of us to decide how to maximize our profitability.  Just remember when increasing your gross revenues to ask yourself is this going to make me more profitable?

Comments (4)

Jeff Clark

Jeff Clark of Kewaunee, WI has been driving a truck for 24 years. He has been an owner operator for 11 years.

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Linda-I take my 30 minute break between 5.5 and 8 hours. for a solo driver that flexibility is almost built in. It gives me the flexibility while protecting production.

September 07, 2013 9:21:32 AM

This is exactly what I focus on a lot of the time I am running. I happen to take some runs that most consider cheaper, but take into account that they are light and drop/hook as well. This allows me to not only save fuel, but because of the preload and drop at the consignee, allows me to get onto another load faster than the other drivers still waiting to live unload. This is where I favor the option of the $150 drop and hook load that goes fifteen miles, versus the $200 load that goes 30 miles and is live on one end or the other (or both ends). Increasing net profit is something that takes serious consideration and weighing of options all the time in our industry!

July 09, 2013 21:16:32 PM

That is how I feel about getting away from the truck. It does relax me.

July 09, 2013 5:48:02 AM

Your article made me stop and think about our operation. The 1/2 break was giving me some heartburn wondering how to make the most of this time and also when to take the break. I first tried to stretch it out and take the break near the 8 hour mark and was very close to a violation. Now when my day starts I plan ahead of where I want to stop without stretching my time to max. I have found this new break to actually be refreshing and a time to relax. When I worked at the courthouse we used breaks the same way it was a chance to get away from our desks and give our minds a break.

July 09, 2013 3:56:29 AM