Organizations in different economic sectors are increasingly facing challenges emanating from the dynamic nature of the business environment. As a result, it is paramount for firms’ management teams to consider ways of enhancing their competitive advantage. To achieve this, firms have to consider a number of issues such as increasing their capacity utilization. It is also important for firms to integrate strategies that will contribute towards reduction of their operating cost.
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Some of the cost variables that firms management team should consider relate to fuel and material costs. Currently, the global rise in fuel price is affecting firms in different economic sectors. However, firms which largely depend on petroleum as their source of energy are the most affected. An example of such firms is Peregrine Trucking Company which operates within the US transport industry.
In addition to rising fuel cost, transportation companies are also facing a challenge as a result of the high rate of climate change. Environmental conscious groups are increasingly becoming concerned on the contribution of the transport sector to climate change. The transport sector is rated as one of the largest emitters of greenhouse gases (GHGs) which are the major causes of climate change (Meyer, Green, Corbett, Mas & Winebrake, 2011, p.285).
To survive in such an environment, it is critical for transportation companies to incorporate effective business models. Additionally, they have to improve their operational processes in order to deal with such external pressures. This will enable the firms operate in an environmentally friendly manner. Incorporating such measures will result in an additional financial cost. However, the long term benefits outweigh the cost.
This report is aimed at evaluating the options available to Peregrine Trucking Company in an effort to reduce its operating cost and attain a high operational efficiency.
The report takes into account the options available to Peregrine Trucking Company. Other firms in the industry are not taken into account.
Peregrine Trucking Company should consider integrating alternative sources of energy that result into minimal or no emission of greenhouse gases. Some of the alternative sources of energy that the company should take into account include compressed natural gas, propane, biofuels, ethanol, methanol and bioethanol (European Commission Enterprise and Industry Directorate-General, 2006, p.13).
To achieve this, Peregrine Trucking Company should incorporate hybrid technology. This technology will enable the firm to significantly reduce its cost of operation. This is due to the fact that the firm will be able to utilize alternative fuels which are less costly compared to petroleum based sources of energy. Additionally, adopting hybrid technology will enable the firm to operate social responsibly.
However, to achieve this, the firm will be required to replace its fleet which means that the firm will incur high financial cost. Additionally, the company would also be required to ensure that its fleet can access the alternative fuel throughout its supply chain. As a result, the firm will be required to open refilling points. To deal with this challenge, the firm’s management team should consider replacing its fleet gradually.
It is also vital for Peregrine Trucking Company to consider analyzing its capacity utilization. This will enhance the firm’s effectiveness in making replacements decisions on some of its equipments. One of the components that the management team should consider is the tires.
Peregrine Trucking Company should consider replacing its tires with fuel efficient tires. Fuel efficient tires have low rolling resistance which reduces the amount of fuel required to move a vehicle (Stein, 2006, para. 1). Currently, tire producing companies such as Goodyear, Michelin and Firestone are increasingly producing fuel efficient tires.
In its replacement effort, Peregrine Trucking Company should not only consider fuel efficient tires but also those which are environmental friendly. Some of the tires which the firm should consider include those which are made using natural materials. Considering the increase in environment consciousness amongst different groups, Peregrine Trucking Company should consider replacing its synthetic tires using those made using renewable materials and biodegradable materials such as plant rubber. (Granger, 2010, para. 1-4).
Peregrine Trucking Company should also consider incorporating a tire management program. Tire management plays a very vital role in a firm’s effort to reduce the cost of operation-per mile. This arises from the fact that firms are able to reduce uneven wear and tear on the tires. Wear and tear of the tires can have adverse effect on the performance of the trucks rig. Additionally, tire management will aid in prevention of road hazards such as road carnage that can significantly increase the cost of operation.
In its tire management program, Peregrine Trucking Company should integrate a policy requiring regular check on its fleets’ tires. Some of the issues which should be taken into account when checking the tires include ensuring that the wheels are properly inflated and aligned. This is due to the fact that poor wheel alignment may lead to an increment in the trucks total drag which reduces their efficiency. On the other hand, if the tire pressure is not balanced, the operational efficiency of the company’s fleet will be adversely affected.
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One of the ways in which the firm can ensure balance in its fleet’s tire pressure is by inflating them using nitrogen. According to Nitrogenman (2012, para. 3), nitrogen inflated tires are more effective compared to air inflated tires. This is due to the fact that nitrogen has large molecules which enable the tire to stay fully inflated for a longer period. By inflating its fleets’ wheels using nitrogen, Peregrine Trucking Company will be able to improve its operational efficiency by reducing down time associated with flat tires.
To improve its capacity utilization, Peregrine Trucking Company should incorporate strict operation rules. For example, the firm should formulate a front and back hauling schedule which the truck drivers should adhere to.
Additionally, the firm’s management team should ensure that more than 90% of its trucks’ capacity is utilized in each haul. As a result, the firm will be able to reduce the cost per ton-mile. It is also paramount for the firm’s management team to ensure that it formulates operational procedures which are in line with its strategic objectives.
Conclusion and recommendation
From the above analysis, it is evident that Peregrine Trucking Company can enhance its operational efficiency and hence its competiveness by considering the above issues. However, to ensure that its operation is not adversely affected, the firm’s management team should make these changes gradually.
Additionally, upon completion of the required adjustments, the management team should continuously evaluate their effectiveness. This will aid in undertaking the necessary improvements that will contribute towards improvement in the firm’s competitive advantage.
European Commission Enterprise and Industry Directorate-General. (2006). A competitive automotive regulatory system for the 21st century. Brussels. European Commission.
Granger, T. (2010). Goodyear develops tires made of renewable rubber.
Meyer, P., Green, E., Corbett, J., Mas, C., & Winebrake, J. (2011). Total fuel-cycle analysis of heavy-duty vehicles using biofuels and natural gas-based alternative fuels. Journal of the Air & Waste Management Association, 61(3), 285-294.
Nitrogenman. (2012). About nitrogenman. Retrieved from http://www.nitrogenman.com/about/
Stein, D. (2006). Win at the pump with the right tires. Retrieved from http://www.infocusmagazine.org/6.2/eng_tires_fuel_economy.html