How To Kill Deadhead Miles And Keep Your Operation Alive

Posted on April 27, 2011 by LCT Staff - Also by this author - About the author

ABOUT PHOTO: President and CEO of Global Ground Automation, Gregg Tuccillo, says operators need to be more aware of the costs of goods relative to the service they provide.

SUMMARY: Technology such as automated dispatch and fuel-surcharge management can improve a company’s efficiency and retain profit, and make operators grateful for fewer deadheads.

Secaucus, N.J. -- With the price of fuel at or above $4 a gallon and aggressively closing-in on $5, operators need to do more than just implement or raise fuel surcharges to offset the damage to their bottom-line; they need to meticulously re-examine each and every aspect of their operations and maximize efficiency.

Even the smallest adjustments can make a big difference.

For example, there is a concept in boxing called kinetic linking. The idea is that each tiny movement -- from the foot to the knee to the hip to the shoulder – should be synced together and all the unnecessary, excess movement eliminated, so that maximum efficacy is achieved with the same or less effort. This concept can and should be applied to business.

For a better idea of how kinetic linking works, check out THIS VIDEO OF THE ANATOMY OF A PUNCH HERE.

Gregg Tuccillo, President and CEO of GLOBAL GROUND AUTOMATION (GGA), a REARDEN COMMERCE company, says that operators who wish to be more efficient need to understand how big of a component fuel costs are of their base rate.

“By our estimates, fuel accounts for 10% of total ride cost if it’s at the $2.50 per gallon level. At $4, fuel is 16% of the total ride cost, and if an operator is running at a 6% profit margin, then all the profit is being taken away.” This knowledge is essential to avoiding profit loss.

To offset the increase in fuel expenses, operators need to do two things: Become more efficient as it relates to their management of deadhead miles, and implement fuel surcharges that are proportional to the increased costs. Deadhead miles are the miles that do not generate any revenue, such as driving around between trips or going back to the office after a run. Operators can calculate deadhead miles by taking the total miles driven, determining what percentage are live, revenue-generating miles, and the balance are the deadheads.

One way to minimize deadhead miles is through automating dispatch. Human dispatchers are faced with many vectors and variables, such as vehicle types, driver schedules, driver locations in relation to pick-up locations, etc., and automation is a great way to improve upon managing these variables. Automated dispatch uses an algorithm that considers all these factors to decide how best to deploy vehicles and roll trips, which also allows operators to be more confident in booking last-minute requests since calculations are done quickly and automatically.

While many operators already use GPS to monitor vehicle and trip activity, Tuccillo believes that not many are using the technology to make dispatch decisions. “Using GPS with traffic overlays can help calculate travel time, which is different from distance, and automated dispatch can tap into real-time traffic updates to provide chauffeurs with the most efficient routes,” Tuccillo says. “Automating dispatch can lower deadhead miles 10-20% and improve overall dispatcher efficiency.”

However, this does not mean that automated dispatch can totally replace a human dispatcher. Tuccillo says it can cover at a minimum 50% of dispatch solutions, and upwards of 80-85%.

The next step to offsetting fuel costs is through the fuel surcharge. Global Ground Automation is planning to implement in its Voyager Reserve suite a fuel surcharge management function. It will monitor live vs. dead miles, understand what the baseline fuel costs are per mile, calculate the fleet’s average miles per gallon (based off weekly inputs of a benchmark fuel price), determine what the appropriate fuel surcharge should be, and then automatically insert it into the rates that are quoted.

“Operators need to be much more aware of the costs of goods relative to the service they provide,” Tuccillo says. “They need tools in place that can give them the timing required to adjust so that there isn’t lost profit.”

Automated dispatch requires the installation of hardware in the vehicles to communicate back to the dispatch environment, and GGA will install the hardware at no cost to the provider. “We fund the installation out of our own pockets,” says Tuccillo. GGA then charges a transaction fee for every reservation that gets dispatched.

GLOBAL GROUND AUTOMATION is also producing GPS-enabled tablets to allow chauffeurs instant communication with the dispatch system, and their first prototype is projected for mid-June.

There will be more on maximizing efficiency through technology in future LCT coverage.

— Michael Campos, LCT assistant editor

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