Are you wondering how much it costs your fleet vehicles to travel from point A to point B?
If you’re a fleet manager or owner looking to achieve cost efficiencies and skyrocket your fleet’s performance, you’re probably intrigued by the topic of how to calculate Cost per Mile.
This estimation is essential for trucking companies and can help you optimize your fleet to unimaginable levels.
In the following sections, we explain in detail how to calculate Cost per Mile and look at interesting facts about this KPI.
Why is calculating your fleet’s CPM critical?
Before we dive into the details to explain how to calculate Cost per Mile for trucking, it’s essential to make one statement.
In the dynamic world of fleet management, every mile counts.
If you’re a fleet manager or fleet owner, having an understanding of your company’s Cost per Mile (CPM) is nothing short of crucial.
This fleet maintenance key performance indicator is not just a number. It can, in fact, make or break the success of your fleet.
Calculating your CPM can help you identify cost-control opportunities, eliminating uncalled-for expenses. It can show you how to allocate your resources more efficiently, improving your planning for maintenance, fuel, insurance, and other costs. This piece of data also helps you fine-tune your operations for maximum efficiency.
Furthermore, a CPM analysis can enable you to indicate which vehicles are guzzling gas. As a result, you can put in place fuel-saving strategies to reduce your costs. Not to mention that it can bring to light overused and underutilized vehicles.
But to provide a guide on how to calculate trucking Cost per Mile, we’ll need to go over the different types of information you’ll need.
What data do you need to collect?
Are you ready to find out how to calculate cost per mile for your trucking company?
Before you start, ensure you have access to the following insights.
Fixed costs are the constant expenses that your business accumulates. They’re invariable and are usually monitored and tracked by software.
Here’s a list of your fleet’s fixed costs:
- Vehicle acquisition costs – The initial purchase price or lease payments for vehicles
- Insurance – Costs related to insuring your fleet, influencing premiums and deductibles
- Licensing and registration costs – Expenses associated with vehicle registrations and driver licensing
- Permits – Any costs of acquiring permits for specific types of vehicles, operations, or routes
- Rent or mortgage – Expenses linked to owning or renting facilities
- Storage of parking – Costs associated with storage facilities and parking spaces
- Depreciation – The decrease in value of your fleet vehicles over time
- Taxes – Vehicle and property tax related to your operations
- Preventive maintenance costs – Regular maintenance expenses, like oil changes and inspections
On the other hand, you’ll also need to factor in variable costs. These are the expenses that change over time.
Some of the variable costs you need to be aware of to understand how to calculate Cost per Mile include:
- Tire replacement
- Vehicle inspections
- Roadside assistance
- Toll and parking
- Reactive maintenance costs
- Other variable fleet costs
Another essential piece of information we need to mention when discussing how to calculate Cost per Mile in trucking is the total miles driven.
There are several ways you can approach data gathering regarding miles driven. One of the most outdated ones includes asking each driver how many miles they have completed in a specific time frame (for example, last week, month, or year).
Keep in mind that this method of collecting data on miles driven is not recommended due to the high risks associated. For example, drivers may have missed to register miles, or there may be miscommunication within the team.
Another more reliable way to collect miles driven is via GPS tracking devices and fleet maintenance software. In this case, the information is automatically recorded and available whenever needed.
How to calculate Cost per Mile
Now that we’ve covered all the basics around Cost per Mile, it’s time to get to the heart of this article – how to calculate Cost per Mile.
To perform the calculation, you’ll simply need to divide the total expenses by the total number of miles driven:
If you’ve never calculated your CPM before, don’t forget to select a specific timeframe. When you first get started, it’s advisable to choose a shorter period. As you continue calculating your CPM over time, you can opt for more considerable periods.
Note that it’s essential to calculate your expenses for the same time you’ve chosen for your Cost per Mile.
Remember, the Cost per Mile will differ for each company and will most likely be diverse from vehicle to vehicle. It all comes down to the type of fleet asset you are utilizing, drivers’ behavior and habits, and other factors.
Regardless, keep in mind that understanding your Cost per Mile is essential to achieving business goals. This data can help you minimize expenses and enhance your fleet’s performance.
Optimizing your CPM
Naturally, the lower your Cost per Mile, the better your cost-effectiveness.
Therefore, most fleet companies strive to reduce their CPM as much as possible. To achieve this, you’ll need to ensure the following:
When it comes to reducing Cost per Mile, one of the most guaranteed ways to achieve this mission is by utilizing fleet maintenance software and fleet management tools.
Without a doubt, fuel is among the most significant expenses of operating a fleet for any trucking company, regardless of size. And to make things even more complicated, tracking the factors that influence your Cost per Mile can be tricky.
Luckily, fleet maintenance software like Fleetpal can help take that weight off your shoulders as a fleet manager or owner. You can quickly and efficiently monitor your expenses by taking advantage of software automation. Advanced features and reporting widgets provide insight into where you’re spending most and areas that can be improved.
Apart from making the most of software, you can also focus on consistently and regularly maintaining your vehicles. For example, this could include setting up Preventive Maintenance intervals for oil and tire changes.
Running a fleet of well-maintained and good-to-go trucks will enable you to bring repair costs down to a minimum. It will also allow you to increase your vehicles’ lifespan, ultimately resulting in a healthier and adequately functioning business.
Not to mention that fewer repairs also mean less downtime, which is essential for a top-performing fleet.
Another way to optimize your Cost per Mile is to enhance the existing routes that your vehicles cover. This can help you reduce the number of miles driven overall. It can also result in substantial gas cuts.
But apart from the obvious consequences of route optimization, this method can also help eliminate traffic jams, delays, and other disruptions. As a result, your drivers can enjoy a more comfortable working experience, while your customers can have peace of mind that your services are always on time.
While there are several ways to optimize your routes, the most certain ones include the use of GPS systems. Ideally, opt for a solution that can be integrated with your fleet maintenance software. This interconnectedness will empower you to keep an eye on critical data from a single interface, resulting in time savings and data-backed decisions.
We hope the information above will illuminate any uncertainties or questions you may have around how to calculate Cost per Mile. Keep in mind that in today’s highly technological world, you don’t have to rely on manual calculations and timely forecasts.
All you have to do is understand the concept of CPM and rely on fleet maintenance software like Fleetpal for the rest. With our tool, you can access CPM data and more instantly.
Ready to find out more? Schedule a free demo with our sales team, and let us show you how Fleetpal can bring value to your business.