Channel 19

Todd Dills

One hauler’s rate benchmark and more on pricing

| December 20, 2012

After my post about rates last week — including independent Greg Trott’s dark example of a brokered load any reefer hauler accepting the offered rate would “pay for” the privilege of hauling — former owner-operator Adrian Vechiarelli of Toronto, Ontario (sidelined for health reasons fairly recently), chimed in on rates with a commendation for Trott. “It’s good to see some owner-operators can do quick math and realize that most of the rates do not add up,” he wrote. “It would be nice if a majority of owner-operators, if not all, agreed to national rates that are established once a year,” something he figured would never happen, given well-heeled opposition to a return to almost any form of price regulation.

All the same, Vechiarelli offered a strategy for rate benchmarking that in an ideal world might raise the bar, and it’s fairly simple. For those independents who have some degree of control over rates, start negotiation on a roundtrip cost basis rather than a one-way trip, “and mark up from that price,” Vechiarelli says. “Maybe the industry would be profitable again. If shippers would disagree with my logic, then maybe they should buy trucks and realize what it costs to run a tractor-trailer.

Related

Don’t pay for the privilege to haul

Second Wind Transport independent owner-operator Greg Trott was offered a load recently he would have paid out of pocket to haul -- had he made the wrong decision and taken it.

“Pricing in this manner means you don’t always have to count on ‘back haul’ freight to make some kind of profit…. At least this method ensures some profitability and you’re not always running your equipment hard. Unfortunately, because a majority don’t use this method, your price can get beaten down.”

Does anyone out there think about rates in similar ways, or are such ideals pie-in-the-sky in most niches due to the competition from large carriers who can figure economies of scale into the rate mix?

Related

The safety argument for increased pay

At U.S. House hearing on CSA, concerns about driver pay were aired with contentions that better nondriving-time compensation was much needed.

Judging by the number of times this has come up in recent months, it’s clear many believe something needs to change. The primacy of price in competition for freight in the industry, United Van Lines-leased owner-operator Mike Falesch made note of just yesterday in a conversation I had with the 20-year operator, is responsible for a lot of the personal responsibility and professional courtesy flying right out of the business of hauling. Both aspects are, too, bedrocks of safe operation, as Falesch and others see it. Falesch actually favors a return to some kind of price regulation nationwide. “Regulate pricing and you don’t need” the Compliance, Safety Accountability compliance regime or electronic logs or any of the safety (“compliance is more like it,” Falesch notes) programs that continue to be heaped on drivers and carriers. “If one carrier can haul it for the same price that another can haul it, and another can’t come in and cut it down, all of a sudden the owner-operator who gets paid a little more [for being the safest, most-professional driver on the road] isn’t choosing between his house payment and fixing his tires.”

Related

The forces at work on detention pay

Operators and industry reps weigh in on the problem of uncompensated detention time at shippers and receivers, and what is being and could be done about it. The problem was No. 3 in Overdrive's 2012 poll of top challenges for owner-operators.

Detention time isn’t an issue for Falesch, given his household-goods-hauling operation, but it’s the one potential-price-regulation area that has at least seen some federal attention in recent times. As long as we’re talking ideal worlds: hey, maybe it’s the brick in the wall that, removed, could send the rest crashing down…

In the meantime, as Vechiarelli suggests, there’s no substitute for taking all potential costs into consideration, as well as a healthy margin of profit, to determine acceptable rates.

  • http://www.facebook.com/william.mckelvie William McKelvie

    I highly doubt that round trip idea will float, especially when you have the big fleet leased operators barely running at or just above cost, and chomping at the bit to run.

  • http://www.facebook.com/bradley.d.coddington Bradley D Coddington

    I love seeing these cpm rates on some of these large carriers saying top pay and there paying .90cpm+ fsc if thats top pay we are all in trouble unless they are getting 1.00 per mile for there fsc. I don’t know how they say thats top pay when most operators are paying anywhere between .50 and .60 cpm for just fuel

  • 4btrucking

    The only thing I get round trip on is fresh greens in open tops. This insures the company harvesting that the trucks will be back in the same circulation. As far as my reefer, I’d be laughed at for wanting round trip. I just pick and choose and I have stayed with a broker and have had consistant $2 a loaded mile rates. I would like to see brokers capped to a certain percentage and a full printout of what the load pays. I do know that 25 or 30% is too much for a broker to keep. And a lot do it…As for worrying about a backhaul, I look and book if I can before I leave with a load to a destination. If I can’t see a load back I don’t go there.

  • http://www.facebook.com/channel19todd Todd Dills

    Hear you, Cody. Welcome to the real world, right? Did you note my message on Twitter to you about a potential conversation re: inspections/CSA? Here’s my phone: 205-907-2481.

  • http://www.facebook.com/channel19todd Todd Dills

    Yes, William — Vechiarelli acknowledged as much, though did give an example of a series of short hauls (accomplishable in one day) where loaded/empty round-trip is the reality, much like what 4B’s talking about above with open tops. In any case, thought it was an interesting idea.

  • http://www.facebook.com/william.mckelvie William McKelvie

    Todd, the problem is the dishonest and corrupt brokers. I have a close friend, we speak daily about rates. Most recently a brokered load paid 2500, no one covered it. The shipper called him directly, it paid 4k to him. Need I say more?

  • http://www.facebook.com/gregga.trott Gregga Trott

    Hey William I have been doing a lot of thinking and seaching for a way to get direct shipments and move away from brokers. I have a buddy that thinks I am crazy for wanting to do this. He says I may never get my money if I deal direct. I think otherwise.

  • Overworked444

    Cap the Brokers cut..These pimps need to be regulated