Top things a trucking company can do to maximize trucking rates

The trucking industry is massive. According to a report by the American Trucking Associations, in 2018 the trucking industry generated revenues that topped $796 billion. The trucking industry is also very competitive and fragmented, containing over 200,000 independent trucking companies. Each of these carriers are focused on a different part of the market and tend to specialize in specific industry segments. 

Regardless of whether a trucking is primarily a dry van truckload carrier, reefer, tanker, dry bulk, or flatbed, all carriers have one thing in common – a desire to maximize trucking rates.

There is a simple reason for this – once a carrier has the ability to maximize trucking rates, it can increase revenue per loaded mile. In other words, the more miles that a carrier hauls a shipper’s goods across the country at a higher rate, the more revenue it will generate. In addition to this, increased yield per mile allows carriers to improve compensation rates for their valuable professional drivers, which provides protection from driver turnover, which is one of the largest sources of margin erosion that trucking companies face.

But  how does a carrier maximize its trucking rates? How does it go about doing that? 

Here are the top things a trucking company can do to maximize trucking rates: 

1. Hauling commodities that pay more. Certain types of commodities pay a higher rate per mile. Carriers will find these types of loads in more difficult, more dangerous and more regulated areas of the industry. These include tanker hauler; haz-mat loads; specialized heavy-haul and oversized cargo; ice-road trucking; cross-border freight; and expedited team transit.
2. Taking high-value loads. Shippers that have high-value loads are often willing to pay a higher rate per mile to ensure that the cargo is transported safely and can be tracked. Carriers can find these types of shippers among the pharmaceutical, electronic, luxury retail, gaming or automotive sectors. 
3. Find a shipper that has unusual or onerous requirements. Some shippers have extreme or unusual service requirements. Maybe it’s picking up or delivering at odd hours, taking loads that have long in-transit dwell; or loads that require the driver to do something unusual, like helping setup for a public concert or event. 
4. Collecting all available accessorial revenue. Pennies matter in trucking, and many trucking companies do not collect all available accessorial charges provided for load or contract by the shipper. Detention charges provide one of  the largest opportunities for improved margins and yield per mile. However, many shippers have made it difficult to collect on detention and other accessorial charges. As a result, some see collection of this valuable source of compensation as not worth the hassle. Top-performing carriers have invested significant time in automating and simplifying the approval and collection process for detention, as well as other charges, such as stop-offs, tarping, load/unload and other tasks. As a result, when ‘scoring’ their shipper customers, the ease of accessorial revenue collection becomes a valuable criteria when ranking.
5. Taking loads from headhaul markets to a backhaul market. Keep in mind that destination matters. Kyle Litner of K-Ratio said it best on one of his weekly K-Ratio weekly Q&A. Destination does matter. Carriers adjust prices at the origin point based on where loads are headed. Pick your markets accordingly. One of the easiest ways to maximize trucking rates on a single load is to take a load from an overbooked or hot market to an underbooked market or a market that other carriers don’t want to go. Some markets are always backhaul markets, like Montana or New Mexico. Others, like Atlanta or Dallas can fluctuate between backhaul or headhaul depending on the month. Even markets like Seattle have certain months where there is more freight originating out of a market than going in. The challenge of taking loads strictly from an overbooked market to an underbooked market is that a carrier may make a lot of money on the first part of the tour, but will end up losing in the long-run. Once the total miles for a given week have been calculated, the carrier may find that taking a load into an underbooked market hurts its overall profits. 

Taking a load just because it pays high one-way may end up being a costly decision. The carrier may have to sit the truck for a few days to wait for another load; deadhead for the next load; or end up taking a very inferior paying load outbound. 

To mitigate this factor and to maximize trucking rates, a carrier needs to know the conditions of not only the market that a load originates from, but also the conditions of the market that the carrier is hauling a load into. The only way to know the current condition of a market is to have access to a real-time freight market intelligence platform like FreightWaves SONAR. 

SONAR monitors inbound loads and outbound loads to determine what the balance between markets is at any given time. SONAR knows whether there are more loads going into or leaving a market. If there are more loads leaving a market than coming in, the market is said to be a headhaul market. If there are more loads going into a market than leaving, the market is said to be a backhaul market. 

If you are interested in learning more about maximizing rates or to learn more about FreightWaves SONAR, schedule a demo.

Truckload Carriers that are interested in maximizing profitability are also invited to join the TCA Benchmarking program known as TCA Profitability Program. The program is designed to help truckload carriers learn from one-another, compare ideas, and benchmark performance comparing the other members of the program.