Trucking

There is never a bad load, just a bad rate

Freight transportation has never received as much attention as we are experiencing now. And like the crowd on Reddit’s Wall Street Bets, our industry loves to talk about market directions. FreightWaves and other industry publications are always talking about fares, but mainstream media is entering the game. This is new. Most people were unaware of fare volatility, with the exception of people in the industry who are responding to the daily rises and falls of fares.

In fact, when I first started Freight Waves, I spoke with a respected industry journalist in major mainstream publications about truck price volatility. He suggested that trucking rates were not very volatile. I have great respect for his experience and knowledge of the global supply chain and logistics industry, but I was convinced that truck freight variability is a foreign concept.

I experienced the variability of truck fares early in my career. It was in 2001, when US Xpress had just started its air cargo division, providing airport-to-airport line hall services to air cargo forwarders. I worked as a sales representative at DFW Airport. In addition to selling air cargo in pounds, there was also what was called “dedicated” or EUV. I’ve been on the truck for the rest of my life, but the term was new to me. That basically meant a full track.

When I was working at DFW Airport, US Xpress had no sales presence in the North Texas market and was always available for trucks. At the time, there was a view that Texas was a backhaul market and was not worth representing full time. So when I called the truck, they always said so. It helped our customers always be willing to pay premiums.

Over time, I have found that companies can make far more money by selling EUV than airport-to-airport LTL. We were selling trucks for $ 1 to $ 2 per mile than other customers were paying. The idea of ​​spreading this nationwide came up with the birth of Xpress Direct.

The Xpress Direct division provided shippers with on-demand capacity in 60 markets within 6 hours. We do not guarantee the price, but we do guarantee the capacity. We processed a surge, fast and special project for as many brokers as hundreds of shippers. We were a “911” service for the industry that offered trucks when everyone else said “no”.

Over the two years, the division’s revenue increased to $ 144 million and its margins exceeded the market rate by $ 68 million. In other words, it was very informative and grew as fast as any other transport sector in the history of trucking. I resigned in 2005, but the sector was closed as interest rates fell from the bottom of the market during the financial crisis.

But through the Xpress Direct lens, I learned how volatile trucking rates are and how opaque the freight market is. We learned that shippers pay whatever they need to move their cargo, and the market has had a very predictable cycle. You may not know which shipper will call, but if the market begins to overheat, you may have been plagued by loading requests. We have developed rudimentary models and forecasting tools and have begun to identify seasonal patterns in the market that allow trucks to move ahead of demand.

Our entire business model was built for last-minute capacity and pricing was always quoted at a premium. We did not participate in regular freight and told our customers to call only when all other options were exhausted. We’ve found customers who often don’t want an RFP increase of 1 penny per mile, but are willing to pay $ 2 to $ 3 more per mile to move their luggage. The reason was simple – they had no choice. The routing guide negotiations were inflexible in absorbing these unpredictable load demands because they beat the carriers with price concessions.

There was no shortage of opportunities in the market. Most days we couldn’t keep up with the phone. There was also a lot of backlash from the rest of the truck loading work. We take all the trucks on the market and then some. However, we had rules that were strictly enforced internally.

We never said no.

After all, there is never a bad load, just a bad rate..

In the absence of a truck or driver physically, we will quote an insane fee in the hope that the shipper will refuse it. Sometimes they still said yes, and when they did, we cleaned up. After all, we were mercenaries.

And who was the one to judge if the rate was fair anyway? The shipper had various reasons to call us. In some cases it was an emergency and in other cases it was a surge. Sometimes it was because the contracted carrier had to miss the baggage, and sometimes it was because someone failed. Whatever the reason, something was wrong when they arrived at us, but we never decided. Xpress Direct was a 911 capacity hotline.

And even the most trained and pre-planned shippers have always encountered confusion. I remember one big bleach brand saying my service was “interesting” at dinner, but that wasn’t right. They told me that they have one of the most operated logistics departments in the world and have never had a problem. Two weeks later, the company’s vice president of supply chain called and requested 100 pieces of luggage that needed to be moved immediately due to factory problems. It was the end of the quarter and they had no alternative. Not surprisingly, I charged $ 2 more per mile than the lane contract fee.

There were other opportunities, such as a traffic manager who just called on Thanksgiving Day and was warned about the special marketing the store runs. He had to move 85 trucks from the savanna distribution center to stores in the southeast by midnight. The product was available for a Black Friday promotion that the marketing department had forgotten to tell them.

The most extreme example was a forwarder from Chicago who needed to move 110 trucks to another facility 30 miles away across Chicago on New Year’s Eve. To that end, we charged $ 10,000 per truck. We have charged over $ 1 million for the work, most of which is margin.

There was a water bottler ordering hundreds of trucks that needed to be covered. These were the luggage left by the contract carrier and needed to be moved as soon as possible.

People who have been involved in trucks for many years have found the whole idea behind an on-demand service that challenges everything they know about trucks. How can a shipper, who has always been considered “super cheap”, pay two to three times the amount he paid for regular services?

I knew they didn’t know because I learned it from an air freight carrier. There are always people who do the efficient job of managing routing guides and simply have too much cargo or unexpected things happen. And when that happens, it’s when those same shippers are willing to pay. After all, they did a very efficient job of cutting costs from their budget, so they can pay huge premiums with a single load, which doesn’t affect them.



https://www.freightwaves.com/news/there-is-never-a-bad-load-just-a-bad-rate There is never a bad load, just a bad rate

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