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Have you heard the joke about the Trucker who charged $4.00 a mile to move a Load?
It is not a joke. It is happening out there. The fact that it is happening caused a tidal wave of comments on the LinkedIn “A Truckload, Trucking, Logistics, Supply Chain, 3PL, Distribution group” over the past week. Here is a sample of what the group members had to say.
“I have asked for and gotten almost $4.00 per mile on loads from the Central Valley in California to Portland/Seattle. These are reefer loads, not dry, but that's a good rate...unless you know beforehand that IF you can find a load back out of that area you will be turned down for the load a lot of times if you want more than $0.89 per mile. On that lane you’ve got to get your money going in...you won't get much out of there,” stated one trucker.
An Operations Manager at another trucker stated, “As someone who has been in this business a long time, I really don't see how $ 3.00 - $ 4.00 a mile rates would be considered greed. The cost associated with transportation - insurance , fuel , equipment, taxes, maintenance have all increased about 4- 5 times over what they were 25 years ago while the rates in most lanes have remained pretty much the same. Brokers are taking a bigger cut in most cases, not all. Generally 8- 10%, used to be the norm”.
“I guess it depends on the load itself” stated a Transportation Planner at a Freight Agent. “Shorter miles equal higher rates. Some carriers are just plain greedy, but then some are working the negotiations, asking for higher rates knowing they will have to take less, but hoping to find a happy medium”.
A sales person/dispatcher at a logistics company provided these insights. “See, these are longer miles between 950 miles to 1150 miles. . . I am all about paying a carrier a fair rate, offering more than the bigger brokers, but to pay $3-$4 per mile is outrageous . . .
Certain people are just plain rude, say your rate isn't good enough and just hang up. It is really becoming tiresome to a point. I want to know what you are thinking and the reasoning behind such a rate. The best part about this week is not ONE word about the Hurricane. I am about good reasoning and to say that a backhaul that pays the same as it always has for years is all of a sudden the reasoning for a $4 per mile outbound is just an excuse”.
“It depends on the trade balance on the specific O-D,” stated an executive with a Canadian freight broker. “Sometimes the freight going the other direction is scarce and/or really low paying. I agree that it's not normal in many cases, but sometimes it's the only way . . . To pay . . . $4 a mile when you know the guy has to run empty to get it is not unreasonable”.
An executive with an asset and non-asset based transportation company stated that “Carriers quoting these rates are basically surfing the boards looking for a broker in a bind and won't book the truck until late afternoon. They get their driver when he is at home so if they don't get a load he just sits and then they just start calling on posted loads and post their truck to markets where the most loads are posted. They just hope to catch you in a bind. The load boards have made it so that carriers can be profitable without dealing with a direct customer. It is the "Great Commoditization of Trucking". Fifteen years ago you would never have considered operating a trucking company without direct customers . . . today you can succeed on broker freight. I'll get off my soap box”.
“It's interesting that this topic is up for discussion when the trucker has the upper hand in freight negotiating. I can guarantee that the moment the trucks to load ratios changes to favor the shippers there will be no concern shown when truckers complain about low rates and brokers "gouging" the trucks,” stated a trucking company owner.
The last word goes to a freight agent. “I think if the price gets too high it'll come around to bite us all in the ass-ets. Here is the domino effect:
Too high shipping costs = shippers have to either pass the price onto their distributors and risk them going elsewhere, or eat the loss = distributors raise the price on consumers = consumers buy less = then shippers have to cut back on production = layoff workers = bad for economy.
It does depend on the miles, but I think the original post on this subject meant on a long haul lane. There's nothing wrong with $2.50 if it includes fuel, but when carriers ask for more than that, then it's just greed”.
Have a Happy National Trucking Week!
The 2012 Surface Transportation Summit is just a few weeks away. Click on the link www.surfacetransportationsummit to see the agenda and register.
A truckers point of view
In the last five months, I have had the EGR valve, the EGR Cooler, the Turbo, the exhaust System, the V-Pod, and the Barometric Pressure Sensor changed, along with other minor repairs that keep my truck up and running so I can deliver the shippers (and the Broker's freight) on time. In total, in the last five months, those normal repairs ran me about $14,000.00 out the door. This included parts, labor, environmental impact fees, shop fees, and what repair shops now call miscellaneous charges. Another $3600.00 was spent on tire replacement on the trailer, and another $6200.00 on the tractor. So, in total (and this is not all), I spent about $24,000.00 in what is considered normal repairs on a big truck....and that was in 5 months time.
Let's add to that the cost of insurance, which is almost $900.00 per month, and cargo insurance at $137.00 month, then there is IFTA taxes, KY HUT, NY HUT, NM HUT, Arkansas Ad Velorem tax, etc...and of course, let's not forget the $1200.00 to $2000.00 every three months for Federal ES taxes.
The big killer is fuel, which is now at the $4.00 gallon mark, there about, and even higher in some of the northern and wester regions. Given that my truck gets about 6.0 miles to the gallon, the cost of moving my truck (yes, empty or loaded) is about $0.67/mile.
I think that it is fair of me to make a reasonable living, seeing as I have to be away from my family for seven to eight weeks at a time, work 14 hour days, and am in a high risk job to safety and health. So is asking to make $60,000.00 per year, too much?? Well, on the average of 100,000 miles per year, that is $0.60/mile. So, in fuel and salary, ALONE, we are now up to $1.20 per mile needed.
I could go on to tell you that tags cost about $1500.00 year, and add up all the FMCSA rule costs, the CSA2010 costs, etc... and it would be very easy to justify the near $4.00 per mile that some truckers are asking. However, the truckers are NOT getting those kinds of rates.....perhaps the Brokers are....but the truckers ARE NOT!!
Personally, we parked our rig at the end of July (2012) and don't plan on running it again until the rates come back up. I am currently getting calls offering frieght at $1.05/mile to $1.55/mile. I simply will not work to loose money.
There are alot of truckers out there who do not have the luxury to park their trucks. Luckily, I married a woman with money. These truckers, who take freight at these low rates, will eventually hit a point where Peter will shake hands with Paul, and one of them is going to want to get paid. They will eventually fold up and wither away. It is then, when shippers are hard up for trucks, that the rates will come back up. I have seen it over and over.
No truck shoud be running out there for less that $2.75/mile right now (all miles; deadhead and loaded), and that is a very low rate. We will put our truck back out there, when we can get $3.00/mile, which is what we ran for most of 2011 and did little more than break even with giving the driver a $60K salary.
The way to make this work is to ...........refuse to haul the freight.........eventually, they will need to ship it or fold up business. That does not make the eceonomy weaker, it makes the strongest companies stronger!! SAY NO TO CHEAP FREIGHT.