Home > Forum > What Is The Operating Ratio In Trucking And Why To Most Larger Fleets Watch This Number?
Sep 05, 2024 at 02:14 PM CST
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Posted by a private BulkLoads.com member.
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Posted by a private BulkLoads.com member.
In trucking, profitability isn't just about how much you earn—it's about how efficiently you run your operation. That’s where the Operating Ratio (OR) comes in. OR is a simple formula that measures operating expenses as a percentage of revenue. It’s how much of every dollar you earn goes toward covering your costs: Operating Ratio = (Operating Expenses ÷ Revenue) x 100 If you’re running at an OR of 90%, it means 90 cents of every dollar goes to running the business, leaving 10 cents as profit. Large trucking companies live by this metric, and anything under 95% is considered healthy. Why OR Matters in TruckingThe lower your OR, the better. An OR under 100% means you’re profitable; over 100%, and you’re losing money. Large trucking companies use the OR to monitor costs and find areas to tighten up. For them, it's about maintaining profitability, especially in a volatile market where fuel, wages, and maintenance costs fluctuate constantly. Here’s why the OR is important:
While OR is a valuable tool, it's not everything. Focusing only on cutting costs can hurt service quality or burn out your drivers. OR should be one part of your strategy, not the whole picture. Final ThoughtsFor trucking companies, especially the big players, the operating ratio is key to understanding profitability. It shows how well you're managing your costs compared to what you're earning. But remember, don’t let it be the only thing you look at—customer service and driver retention matter just as much in the long run. God bless, Jared |
Replied on Fri, Sep 06, 2024 at 03:31 PM CST
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Posted by a private BulkLoads.com member.
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Posted by a private BulkLoads.com member.
Very interesting post. I've always calculated profit per mile and per day. I can see the benefit to knowing your return on what you put in. Great post.
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Replied on Thu, Sep 26, 2024 at 09:37 AM CST
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Posted by a private BulkLoads.com member.
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Posted by a private BulkLoads.com member.
Thank you so much for the wisdom. New to this however Im determined to pave the way fro my children. |