Let's put our heads together on a project

Hey, guys, Tip here. I really enjoy reading all your posts. I hope I have given you some good advice, especially on how to find good trucking jobs.

Anyway, I'm trying to figure out why the big companies, and even the not-so-big outfits, tolerate the atrocious turnover they do. I've decided to create a fictious trucking company with 10,000 trucks to analyze and, hopefully, determine if companies have any covert motives that over-rule their common sense, common sense that should be telling them "turnover is bad".

I need some help with this little project, and I hope you guys can help me out. Let's pool our knowledge and see if my theory (companies WANT high turnover) is correct.

For starters, what is a good estimate for the amount of profit a truck brings PER DAY? 5 dollars? 10 dollars? 30 dollars?

Also, we'll need a good figure of what this fictitious outfit's daily fixed costs per truck would be.

Finally, we'd need a good figure of how many drivers quit per day.

Here's a "test run" to show you what I'm trying to do:

1. Assume the profit per day per truck is 10 bucks
10 x 10,000 = 100,000 ideally (all the trucks are running)

2. Assume its daily fixed costs per truck is: 150 bucks

3. The number of drivers that quit each day (meaning their trucks sit on the lot that day) : variable, but we'll begin at 25

So. 25 cleaned-out trucks parked per day x 150 bucks fixed cost = 3750 in opportunity cost per day. 10,000 trucks - 25 cleaned out is a pool of 9975 to cover this opportunity cost. The true number of trucks whose profit is required to cover this cost is: 3750 / 10 or around 375 trucks. This means the leftover trucks (10,000 - 25 - 375), or 9600, are breadwinners. 9600 x 10 = 96,000 in profit per day, with 4,000 in profit lost per day.

What is the "critical point", or the point when the number of breadwinners hits ZERO in this situation?

Let's see if we can find it:

75 parked trucks per day.........
75 x 150 = 11,250 in opportunity cost
10,000 - 75 = 9925 trucks moving
11,250 / 10 = 1125 trucks' profits needed to cover the fixed costs
10,000 - 75 - 1125 = 8800 trucks are breadwinners

300 parked per day.....
300 x 150 = 45,000 in opportunity cost
10,000 - 300 = 9700 trucks moving
45,000 / 10 = 4500 trucks' profits needed to cover the fixed costs
10,000 - 300 - 4500 = 5200 trucks are breadwinners

600 parked per day....
600 x 150 = 90,000 in opportunity cost
10,000 - 600 = 9400 trucks moving
90,000 / 10 = 9,000 trucks' profits to cover the fixed costs
10,000 - 600 - 9,000 = 400 trucks are breadwinners

625 parked per day.....
625 x 150 = 93,750 in opportunity cost
10,000 - 625 = 9375 trucks moving
93,750 / 10 = 9375 trucks' profits to cover the fixed costs
10,000 - 610 - 9375 = 15 trucks are bread winners

628 parked per day.....
628 x 150 = 94,200 in opportunity cost
10,000 - 628 = 9372 trucks moving
94,200 / 10 = 9420 trucks' profits to cover the fixed costs
10,000 - 628 - 9420 = -48---> No trucks are bread winners

So, when this company reaches the point of seeing around 627 of its drivers quit out of 10,000 on a particular day, it will be simply running in place. It'll be making no profit, as the profits will be used to pay the fixed costs of all the cleaned-out trucks that are not making money that day.

627/10,000 is around 6% of the fleet, btw.

I know, I know. NO company has turnover that is this atrocious, sure. However, I hope this helps us all see that only a few cleaned-out trucks in a rather large fleet can affect profits enormously.

Knowing this, why do companies tolerate high turnover? Some outfits, such as my favorite punching bag, probably have 5% of its rigs sitting idle on any given day. Obviously, my initial assumptions, such as the per-day fixed costs, are not accurate. Set me straight here, guys.

 

Thanks for the reply, Burky. Yeah, this is just an experiment I dreamt up to see how turnover affects a company's profits. My profit figure may be in the ballpark. It may not be. My "fixed cost" figure may be in the ballpark, but it may be way off as well.

If Swift has 116% turnover, they're doing better these days than they were back when I drove for them. I think it was 120-125% in the mid-90s.