How To Calculate Cost Per Mile in Trucking

Cost per mile is an important and valuable Key Performance Indicator (KPI) for trucking and logistics companies that measures the overall cost of operating your commercial fleet per mile driven, and includes key financial factors like fuel, maintenance, and insurance. Having a better understanding of how to calculate cost per mile in trucking and how it can impact your day-to-day business is important to the success of trucking and freight companies. 

With this breakdown of cost per mile metrics and Frequently Asked Questions (FAQs) created by TransPlus, you can gain a better understanding of this all-too-important metric.

Guide to Transportation and Logistics Industry Cost Per Mile 

The math behind cost per mile is relatively simple.

To calculate cost per mile, you must determine your company’s total operational costs for a set period of time — whether per month, per quarter, or per year — and divide that total by the number of miles driven in that same timeframe. It is important that when calculating total operational costs, all fixed and variable costs are included in the equation to provide a more accurate number.

‍Cost Per Mile = Total Operational Costs / Total Miles Driven

What Are Fixed vs. Variable Costs?

To get an accurate cost per mile, you need to categorize your spending and operational costs into two categories — fixed and variable costs. Fixed costs are those that remain constant regardless of whether your trucks are on the road or parked, like insurance premiums, truck payments, permits, and office overhead costs. By comparison, variable costs fluctuate based on mileage and activity. When you examine the transportation and logistics industry, fuel and driver wages consistently rank as the highest operating costs for most companies.

• Most Common Fixed Costs: Equipment financing, insurance, licenses, property taxes, and administrative salaries.‍
• Most Common Variable Costs: Fuel, maintenance and repairs, tires, tolls, and driver per-diem or mileage-based pay.

What Is a Good or Average Cost Per Mile in Logistics?

The next question that many logistics companies have when they explore cost per mile calculations is — what is a good cost per mile?

The ideal cost per mile will vary significantly based on fleet size, region, and specialized equipment. In the United States, the average cost to operate a heavy-duty commercial truck currently hovers between $1.70 and $2.50 USD per mile. For freight carriers operating in Canada, higher fuel taxes and exchange rates push these averages higher, with current estimates sitting between $2.50 and $3.00 CAD per mile.

The smaller fleets will often see higher cost per mile metrics that can sometimes exceed $2.25 USD / $2.85 CAD — because they can lack the finances to purchase fuel and parts at lower bulk rates. By comparison, larger enterprise-level fleets will often target a goal of $1.60 to $1.85 USD per mile by leveraging economies of scale and implementing more complex asset management strategies.

5 Strategies to Reduce Cost Per Mile

Where does your company’s cost per mile stand? Is it a little higher than you would like to see? Don’t be alarmed — there are strategies and tools you can adopt to reduce your cost per mile metrics. Driving down your cost per mile can require a combination of behavioral changes, mechanical diligence, and digital transformation.

By focusing on these five strategies, freight carriers can improve profit margins:

1. Improve Fuel Efficiency

Fuel is a critical variable cost for trucking companies and even small adjustments can make a huge impact. Implementing low-rolling-resistance tires or installing aerodynamic fairings can save thousands of dollars each year by improving fuel efficiency. For example — a fleet that reduces idle time by just 10% across a fleet of 50 trucks can see a massive drop in monthly fuel costs.

2. Improve Route Optimization

Every empty mile is a lost opportunity to increase profits. Using advanced route optimization software helps drivers avoid high-traffic corridors and construction zones that lead to excessive fuel burn and wasted time. With advanced route optimization tools, the real-world applications include backhaul planning, where software ensures a truck is rarely on the road without a billable load.

3. Keep Up with Regular Maintenance

Preventive maintenance prevents the catastrophic failure of equipment. Replacing a $100 sensor during a scheduled check is far cheaper than a $5,000 emergency roadside repair and the required tow. Regular oil changes and tire rotations extend the life of your most expensive assets and reduce emergency maintenance costs.

4. Increased Use of Assets

Your cost per mile drops when your fixed costs are spread over more miles. By improving the turn time at the dock and reducing dwell time, you can help ensure your trucks are moving more hours of the day and improving asset utilization. A truck that sits at a loading dock or in a parking lot for 5 hours waiting for a lumper is a truck that is driving up your fixed cost percentage, and by extension increasing your cost per mile.

5. Employ the Right TMS

A comprehensive Transportation Management System (TMS) acts as the central nervous system for your data, providing real-time visibility into your spending cost per mile metrics. TransPlus TMS offers specialized tools like automated fuel tax reporting and integrated dispatching that eliminate manual errors and highlight exactly where your money is going. By centralizing your operations, TransPlus helps you identify low-margin lanes and optimize your fleet’s performance in real-time.

READ MORE: Top 5 Ways a TMS Reduces Cost Per Mile in Trucking 

Learning how to successfully calculate your cost per mile in trucking is the difference between a fleet that just survives and one that thrives. By understanding your fixed and variable costs, and implementing smart operational strategies, you put your business in a better position to succeed.

Are you ready to see how data-driven insights can lower your costs? Contact TransPlus today for a demo of TransPlus TMS and find out how our innovative solutions can help you master your metrics!