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THE ELECTRICITY OF THE 21ST CENTURY:HOW BIG DATA IS TRANSFORMING THE OVER-THE-ROAD TRUCKING INDUSTRY

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“The small guys, based on our research, typically delay a major technology investment three to five years,” Dan Murray, vice president of research for the non-profit American Transportation Research Institute, told Forbes magazine for an article on how big data is changing long-haul trucking. Murray added that after big carriers have outfitted their fleets and tested early versions of big data processing products, they usually drop their prices and, given input from early adopters, find that models are often easier to implement.

“The question is, can the small guys survive long enough to benefit from the

technology?” said Murray. The average net profit margin of general freight trucking companies expanded to 6 percent in 2017, compared with an annual average of between 2.5 and 4 percent each year since 2012, according to preliminary industry data estimates from Sageworks. Despite recent gains, however, the trucking industry is still known for its often razor-thin profit margins. “So we only invest in technology that has an almost immediate ROI,” said Murray, “as it has to have a pretty fast payback or break-even point, within 12 to 18 months.”

Small fleets should take heart knowing they will see a quick ROI after making

The software giant Oracle calls big data “the electricity of the twenty-first century—a new kind of power that transforms everything it touches in business, government and private life.” According to a recent IBM white paper on big data and analytics in travel and transportation, big data and analytics solutions can extract insights from massive amounts of current and historical data by detecting patterns, spotting correlations, and improving predictive modeling accuracy. Mining more data can help transportation companies such as those in the over-the-road trucking industry improve the accuracy of forecasting and planning models. Fleets that are currently not utilizing big data to its full capacity are missing out on this profitable and transformational journey.

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Freight Trucking Profit margins since 2012

Profit margins in 2017

2.5-4%

6%

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technological investments in services such as fleet cards and web-based tools for fuel management, fraud detection, and fuel reconciliation.

Big data companies such as WEX make the transformative shift toward a more integrated approach to utilizing big data—both in real-time and through backend analytics. WEX is a big data company that happens to process transactions at its core, and its smart fuel cards are empowering transportation companies to improve efficiency and performance, as well as generate additional revenue. Of course, big data is only as useful as the web-based analytic tools that help transform it—turning an overwhelming volume of data sets into actionable business insights.

Of the utmost utility to fleet trucking companies are web-based analytic platforms that can harness big data to help prevent unauthorized purchases; validate, audit, and improve fuel spend; gain greater transparency and visibility and improve driver performance; and evaluate how capacity is doing in the marketplace and benchmark volume against peer groups.

To learn more about how big data processing companies such as WEX are using data and analytics to drive improved business outcomes, please read on.

HARNESSING BIG DATA TO PREVENT UNAUTHORIZED PURCHASE Telematics: the branch of information technology that deals with the long-distance transmission of computerized information.*

Where fleet cards meet telematics is where the rubber meets the road in the

all-important arena of using big data to prevent fuel fraud and other unauthorized purchases. Big data processing companies such as WEX use big data to help identify purchase irregularities, trigger real-time alerts, and ultimately help owner/operators and fleet managers better manage and control the second-largest variable expense in the trucking industry: fuel spend.

Utilizing big data to help control and prevent unauthorized purchases begins with a fleet card at the pump. With real-time tracking of location and tank levels at the point of purchase, big data makes it much more difficult for a dishonest operator to fuel up their rig and then continue using their card to put fuel in their personal vehicle or into another driver’s truck in exchange for cash.

WEX’s EFS SecureFuelSM solution can catch unauthorized purchases in real-time, offering complete transparency into how a fleet is purchasing and consuming fuel—all while ensuring there is no interruption in driver operations. Here’s how it works: 1) A driver attempts to purchase fuel using an EFS fuel card; 2) SecureFuel utilizes the real-time data provided by telematics to check the truck’s location and tank level before securely authorizing a purchase; 3) data revealing truck proximity and tank reconciliation results are made available to the carrier upon the completion of the purchase.

Each year, engine computers on trucks—the Electronic Control Modules, or ECMs—become more sophisticated and integrated into all aspects of a truck’s operations. With turnkey implementation, the unprecedented protection provided by EFS SecureFuel works across more than 16,000 EFS Network truck stop locations and is one of the few solutions to leverage a truck’s ECM, avoiding the expense of additional hardware installation.

According to a 2016 research report published by Shell**, 57 percent of American fleet managers consider fuel fraud to be a big issue. Eighty-six percent believe some

FUEL FRAUD

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57%

Of American fleet managers consider fuel fraud to be a big issue

86%

Believe some of their drivers are guilty of fraud

40%

Believe that more than 10% of their drivers have engaged in fuel fraud

of their drivers are guilty of fraud, and two in five fleet managers believe more than 10 percent of their drivers have engaged in some form of fuel fraud. According to Shell, a business that takes effective action to minimize fuel fraud can enjoy a fuel cost savings of more than five percent. With fuel expenses representing 30 to 40 percent of a carrier’s cost per mile (CPM) according to the American Transportation Research Institute’s “Analysis of the Operational Costs of Trucking: 2016 Update,” a fleet can easily spend $70,000 per truck every year for diesel fuel. Obviously, containing the operational costs of fuel spend helps a fleet of any size profit and grow.

Shell’s finding that 61 percent of fleet managers say they are familiar with the latest anti-fraud tools while just 30 percent of drivers say the same also shows a technological education gap that must be addressed.

Shell U.K. Commercial Fleet Sales Manager Scott McGregor issued a statement*** explaining this dynamic: “One of the biggest problems businesses have in combating fraud is that, too often, the latest guidance and information doesn’t make its way from the office to the driver’s seat. Online card monitoring, real-time detection and preset fill-up limits can be very effective in reducing criminal behavior. But to really win the battle,

businesses must also invest the necessary time and resources into training staff on how to be smarter about fraud protection on the ground.”

Once fuel fraud prevention technologies are in place, the next step in capturing the power of big data to improve business outcomes in the over-the-road trucking industry involves using a fuel reconciliation tool to validate, audit, and improve fuel spend.

HARNESSING BIG DATA TO VALIDATE, AUDIT, AND IMPROVE FUEL SPEND Most large fleets are already benefiting from the purchasing power of fuel cards, but market penetration is still lower among smaller fleets. Smaller fleets could actually stand to gain the most from the uptick in profits provided by negotiated fuel discounts and the remote oversight provided by big data that allows for skillful fraud detection and reduction.

Truckers are among the most mobile workforces in the world, and with fuel expenses representing 30 to 40 percent of a carrier’s CPM, fuel cards that collect point-of-purchase data in real-time to

validate, audit, and improve fuel spend will soon be essential to the majority of fleets, regardless of size.

According to an article by Susan Hodges on fuel card advancements in Transport Topics, trucking companies today are doing much more with fuel cards than purchasing diesel. “As card issuers deploy technology to connect new services to their cards, fleets are using them to better control fuel spending, gather data on their operations and even book hotel reservations,” Hodges wrote. “Increasingly, fuel services are accessible on mobile apps and limited only by a fleet’s needs and, to an extent, by its creditworthiness.”

Fuel cards also offer comprehensive user-friendly electronic fuel reconciliation that allows a trucking company to leverage its transaction data to take control of its fuel spend—the second-largest variable industry expense. By standing at the intersection of big data and payments, companies such as WEX—a leading provider of fuel cards for corporate and fleet payment solutions—are able to deliver a completely connected view of a fleet’s payments operations with direct real-time integration into a company’s existing transportation management system.

WEX’s essential EFS Online Fuel Audit and Reconciliation web-based tool leverages big data to provide Key Performance Indicator (KPI) tracking and purchase

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Shell’s finding that 72% of fleet managers say they feel informed about the latest developments in fraudulent activity while just 44% of drivers feel the same shows a knowledge gap that must be addressed.***

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reporting, along with real-time and historical pricing analysis to take control of fuel spend. By utilizing innovative payments platforms that provide powerful real-time reporting and analysis, owner/operators and fleet managers can save valuable time when auditing and reconciling fuel spend to ensure their fleet is receiving its negotiated discounts.

Many trucking companies are using fuel cards primarily as a data-collection tool and to direct-bill with vendors, but there’s even more to leverage from a fuel card’s valuable transaction data. An owner/operator or fleet manager who is shopping for an electronic fuel reconciliation tool should look closely at what a fuel card has to offer and ask themselves the following questions: 1) Is the tool web-based? 2) Does the fuel card offer discount reconciliation? 3) Does the card offer individual transaction verification? 4) Does the card offer mobile fuel price discovery and optimization for a workforce that is constantly on the move? 5) Is full purchase reporting included? 6) Does the card provide KPI tracking? 7) How about driver compliance reporting? 8) Does the fuel card offer benchmarking and competitive analysis?

If the answer to all of these questions is “yes,” then a trucking company can anticipate significant improvements in fuel spend as soon as electronic fuel reconciliation is fully integrated within their operations. Having saved valuable

time drawing on big data for auditing and reconciling fuel spend, an owner/operator or fleet manager can now set their sights on gaining greater visibility into their operations to improve driver performance.

HARNESSING BIG DATA TO GAIN GREATER TRANSPARENCY AND IMPROVE DRIVER PERFORMANCE Essential fuel card services such as WEX’s EFS Online Fuel Audit and Reconciliation tool can not only be leveraged to decrease fuel spend and generate additional revenue through both real-time and backend analytics, but also can play a critical role in improving driver performance.

“Everybody is capturing data in some way today. Even five years ago, that wasn’t the case,” Brian Larwig, general manager of analytic and decision support systems for TMW Systems, told Transport Topics. “Fleets start by wanting better visibility into the metrics they already know, such as cost per mile, revenue and basic load information. Then you evolve as you go to a deeper understanding of metrics that tell the true story of your performance.”

As the old business adage goes, if you don’t measure it, you can’t improve it. KPI tracking allows fleet managers to see the forest

through the trees amid massive amounts of data sets, including all of the information flowing from engine computers (ECMs), equipment sensors, mobile communication units, and accounting systems. All of these data sets are feeding into increasingly sophisticated KPIs.

Empowered by the growing movement in trucking toward data-driven decision making, many fleet managers are looking at data collected from multiple sources and relying on web-based analytic platforms to help transform streams of reports and numbers into meaningful information that can drive improved performance.

“We look at loaded revenue per mile, net revenue, empty and loaded miles, miles per week per truck, revenue per day, revenue per hour, delay time at certain customers and transit time,” said Dwight Basset, senior vice president of finance at Boyd Bros. Transportation Inc., adding that KPIs on loaded revenue per mile, deadhead, and yield make the most significant difference to his company’s bottom line.

Basset is not alone. Many owners/operators and fleet managers are now closely monitoring their operations through metrics such as deadhead, equipment utilization, driver turnover, cost per mile, and on-time delivery percentage, Basset told Transport Topics. “The impressive part is, we can get the data so quickly now where it used to be a laborious task.”

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By utilizing innovative payments platforms that provide powerful real-time reporting and analysis, owner/operators and fleet managers can save valuable time when auditing and reconciling fuel spend to ensure their fleet is receiving its negotiated discounts.

© 2018 WEX Inc. All rights reserved.

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One of the challenges for fleets collecting an abundance of data is determining which data is actionable, Ben Wieson, vice president of products and support at Carrier Logistics Inc., told Transport Topics. “Fleets get more value out of the data when it is combined and packaged together, so they aren’t spending hours mining data from disparate systems,” said Wieson.

The key to data integration begins with fuel cards and then moves to web-based tools that leverage KPI tracking and purchase reporting along with real-time and historical pricing analysis. A successful fleet often leads with the business problem they would like to solve and then determines KPIs to help measure specific areas.

KPI tracking and reporting can provide drivers with accurate, actionable feedback that can improve their performance and slash a company’s fuel expenses. For example, lessons in fuel economy can be reinforced by giving drivers feedback on their own fuel consumption. WEX’s EFS Online Fuel Management and Reconciliation tool provides a streamlined way to quickly access fuel consumption metrics, enabling a fleet manager to quickly generate purchase reports, perform real-time and historical pricing analysis, and easily verify individual transactions.

A productive way to get a fleet to drive less and hence consume less fuel is to optimize routes using the GPS location

tracking function included in almost every modern fleet management package. Route optimization is an excellent example of how KPIs can be used to create big gains in fuel efficiency and drive profits.

Another critical KPI supported by big data is freight volume. Read on to find out how a revolutionary big data decision engine such as WEX’s EFS Carrier TrendSourceSM can capture the power of big data to drive improved business outcomes.

HARNESSING BIG DATA TO EVALUATE HOW CAPACITY IS DOING IN THE MARKETPLACE AND BENCHMARK VOLUME AGAINST PEER GROUPS Analytic tools can be especially useful when helping trucking companies mine and refine data to determine which information is valuable for optimizing business outcomes. WEX’s EFS Carrier TrendSourceSM leverages big data to show carriers how freight volumes are trending, and, in turn, how that correlates to their volume. Powerful tools such as Carrier TrendSource are becoming essential in the new data-driven operating environment with their ability to provide portfolio analysis to benchmark against peer groups, create actionable insights,

KPI tracking and reporting can provide drivers with accurate, actionable feedback that can improve their performance and slash a company’s fuel expenses.

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and emphasize data visualization and dashboards to spot trends and exceptions with ease across a wide variety of performance metrics.

They don’t call it “big” data for nothing. The staggering volume of numbers, charts, and graphs churned out by telematics is pushing the fleet trucking industry, like so many others, to find third-party platforms that can do the analytical heavy lifting. Programs like Carrier TrendSource are specifically designed to help fleets easily spot trends relevant to their unique business needs, offering a real-time look at purchase activities and trends so a fleet can quickly track trends month to month, week to week, and even day to day. Carrier TrendSource keeps track of multiple different performance indexes gathered from its comprehensive customer base. These indexes, in turn, can be examined as industry-wide trends or broken down by company size. For example, a 10-truck business can harness these user-friendly indexes to see how it benchmarks against other like fleets.

Knowing how a fleet is performing relative to its peers is an essential good business practice. Carrier TrendSource offers additional advantages such as realizing added security around purchase validations; helping fleet managers make

more informed decisions around their second-to-largest operating cost, fuel spend; and, in combination with a fleet card and other web-based tools, you could ensure your trucking business is receiving its negotiated discounts at in-network sites nationwide.

But having this wealth of information broken down into actionable trends is just the first step. Highly successful companies always look for the story behind the data and spot clues in the numbers. An example used by WEX, posits a scenario where a fleet manager observes that their drivers are making far more fuel stops than other companies of similar size. The fleet manager may initially think that their fleet has an issue with fuel efficiency. But, on second thought, it might occur to them that their drivers are in the habit of stopping to fuel up as a precaution when they reach half-fuel capacity, leading to multiple stops along a route. What an effective fleet manager would do next is take a look at fuel volume: Is their company actually buying more fuel or just making more stops?

If it’s a matter of fuel efficiency, the fleet can investigate and invest in driver training, new equipment or increased maintenance checks. If stops are so frequent that they affect productivity,

a conversation with drivers about why they are making those [early refueling] decisions can lead to an agreement that resolves the problem.

Telematics and engine computers that become more sophisticated with each passing year, in particular, are transforming the fortunes of large fleets. Using intelligent systems that collect data and communicate in real-time ensures that drivers are implementing the most fuel-efficient driving practices and making highways safer for everyone. “Big data has brought the potential to preserve, and possibly expand, the trucking industry’s narrow profit margins,” wrote journalist Erin Richey in an article for Forbes on how big data is changing long-haul trucking. “Experts believe it won’t be long before multi-purpose monitoring units are installed in every semi-trailer in America.”

Although big trucking companies have embraced big data in their business models, small carriers have been less enthusiastic about making the technological shift. The irony is that small carriers with thin profit margins have the most to gain from drawing on big data and analytical tools like WEX’s EFS portfolio of tools including SecureFuel, Online Fuel Audit and Reconciliation web-based tool, and Carrier TrendSource.

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Although big trucking companies have embraced big data in their business models, small carriers have been less enthusiastic about making the technological shift. The irony is that small carriers with thin profit margins have the most to gain from drawing on big data and analytical tools.

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CONCLUSION Big data has become gold for the transportation industry. Massive diverse data sets are being leveraged across the fleet trucking landscape to make faster and smarter business decisions, automate processes, improve profit margins, and ultimately gain what all businesses strive toward—a leg up over the competition. The very definition of big data sets, however, is that they are so outsized and complex that traditional data-processing software is not up to the task of dealing with them. This is where web-based processing tools have become essential.

“I have the big data,” said Chris Iveson, maintenance director of Canada’s Ontario-based Challenger Motor Freight Inc. What he doesn’t have, Iveson told Transport Topics, is “the tools to do anything with all of that data. When we create a work order, there’s so much detail in there. It’s all electronic. When I can give all of that data

to a third-party company that will analyze that data and give it back to me in a nice report and a nice analytical tool, now I’ve just created value that I didn’t have before.”

Fleets are increasingly relying on big data combined with predictive analytics for maintenance and repairs, as well as to predict when equipment in this asset-heavy industry may be in need of upgrading or replacing. “Big data is essentially of no benefit to fleets if they don’t take all of the information they have on their equipment and repairs and learn from it,” Iveson told Transport Topics.

When it comes to the infinite applications of big data, however, maintenance and repairs represent just the tip of how big data is transforming the transportation industry. Of equal utility to fleet trucking companies are WEX’s EFS SecureFuel (one of the only solutions to leverage a truck’s ECM, avoiding the need for additional

hardware installation), Online Fuel Audit and Reconciliation web-based tool, and Carrier TrendSource.

Big data is the future. But big data is a useful tool only if a company can combine access to a huge amount of relevant information with a powerful analytics engine that is fine-tuned by industry experts to accurately identify only those trends and patterns that are relevant to real-world business decisions. Without both parts of this equation in balance, a company will be forced to draw on too little information or will be confused and distracted at best by the white noise created by the countless data sets generated through telematics. Big data companies that happen to process transactions at their core, such as WEX, are uniquely positioned to provide the perfect ratio of big data to analytics to drive better business outcomes for all fleets, regardless of size.

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ABOUT WEX INC

WEX Inc. (NYSE: WEX) is a leading provider of corporate payment solutions. From its roots in fleet card payments beginning in 1983, WEX

has expanded the scope of its business into a multi-channel provider of corporate payment solutions representing approximately 11

million vehicles and offering exceptional payment security and control across a wide spectrum of business sectors. WEX serves a global

set of customers and partners through its operations around the world, with offices in the United States, Australia, New Zealand, Brazil, the

United Kingdom, Italy, France, Germany, Norway and Singapore. WEX and its subsidiaries employ more than 2,700 associates. The company

has been publicly traded since 2005, and is listed on the New York Stock Exchange under the ticker symbol “WEX.” WEX acquired EFS in July

2016, which further expanded WEX’s offerings into the OTR market bringing leading technology and best-in-class product solutions to this

segment. For more information, visit www.efsllc.com and follow EFS on Twitter at @efswex.

* Definition from Oxford Living Dictionaries, © 2018 Oxford University Press

** Shell Fraud Matters USA Report 2016 presents the results of an online survey of fleet managers and drivers conducted across eight countries in 2015 by Edelman Berland research firm

*** ”Shell Spotlights Fleet Card Fraud,” Pymnts.com, May 10, 2016