You gotta have pull to make a profit in trucking.
By Timothy Brady
The silver lining is upon us;  in other words, we’re seeing improvement in all hauling sectors across the board. As I’ve reported previously, there was a huge improvement from January, 2009 to January of 2010 in the spot market freight volumes-and just as was predicted, if the freight volumes continue to grow, we would start to see increases in hauling rates.

So where’s the evidence to support this prediction? According to TransCore’s Truckload Rate Index, which provides contract-based rates from actual freight bills, hauling rates increased  from $0.03 per mile to as much as a nickel per mile from February to March 2010. The spot market freight sector of flatbed hauling had the largest rate increase of $0.05 per mile to $1.47 per mile average. The other bright portion of this picture is the flatbed load-to-truck ratio increased from 13.4 loads per truck to a high of 20 loads per truck. Keep in mind a portion of this load-to-truck ratio increase can be attributed to the recent ceasing of operations of several large flatbed carriers. But according to TransCore, even though hauling capacity has been recently reduced due to major flatbed carriers going out of business, the number of flatbed truck postings has not declined at a faster rate than postings for other equipment types. Reefer and dry van rates by comparison rose by 3% in March on the spot market. Reefers commanded a premium of $0.04 per mile increasing to $1.35 per mile, compared to $1.31 in February. Van rates rose by $0.03 per mile, from $1.11 to $1.14.

The good news is freight volumes are increasing and are being followed by hauling rate increases. The grayer side of this news; for carriers at least,  is freight rates are still not at the levels they were in 2005; and from the speed of this recovery, it’s going to take a while to get back to that point. So what should you be doing in the meantime?

God grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference—is the first step any small motor carrier owner should take. There will always be brokers, carriers and shippers who will want and try to get you to haul freight at a rate that is less than you feel is fair. But what is ‘fair’? Is there really a valid answer to this question? What is perceived as fair to you may seem like a gouge to the one paying the freight bill. Now I won’t say there aren’t individuals and companies who desire to control the revenue you receive when you haul one of their loads, but remember, you possess the same desire to control the hauling rate you receive from them. Sounds like the proverbial financial tug-of-war. The best weapon you need to have in your armory is knowledge. The more you know about the market and sector you serve, the more you know about your cost of doing business and your necessary rate range, the more weight you’ll have on your end of the rope.

Think of knowledge as the weight that provides you the needed strength to control your end of this hauling rate tug-of-war. The more knowledge you have of the freight lane and customers with which you work the more strength you have pulling on your end. Now add to that an anchor weight at the end of your rope by knowing your numbers. Knowing what your costs are and what you need as a profit margin adds tremendous weight to your anchor.  On the other hand, by not knowing your rate range based on your numbers, you’re giving the broker, 3PL, shipper or carrier more weight on their anchor. There is no possible means for a provider of freight to know your numbers and capital needs. By not knowing your numbers and your rate range you’ve passed all the strength and weight to the freight providers’ side of this tug-of-war. So hang on. You are literally the only person who has access to the information required to establish your hauling rate range. If you don’t do it, there isn’t anyone else who can.

You can’t control where the economy is headed, you can’t control the load-to-truck ratios in the areas where you haul—in fact, there is a whole litany of events neither you, I nor anyone else has control over. But the one area you can control is knowledge. Knowledge of your lanes, your customers, and most importantly,  the knowledge of your numbers; the required revenue and the rate range from where you need to operate.

We may be improving, but the only way for you to get where you need to be is by having the right information and the knowledge to use it. Your rate range gives you a firm grip on the rope and greater weight at your end, so PULL! 

Good loads and good roads, everyone

Timothy Brady © 2010 
www.timothybrady.com
731.749.8567