Short and sweet: Length-of-haul strategies at work

| July 10, 2013

Part 1 of this two-part feature looked at growing regionalization in the reefer segment, with reduced length of haul, and the need for better rates to carriers and, in turn, to contracting owner-operators and drivers.

LOCAL NICHE SPECIALIZATION | “Independent owner-operators,” says Chris Brady of Commercial Motor Vehicle Consulting, “are always going to be competitive in niche market segments that do not require large capacity provided by [larger] carriers.” The independent owner-operator can win business due to less required overhead compared to a multi-unit carrier.In the Voices section of Overdrive’s May issue, we reported on former long-haul owner-operators who had turned to shorter and local niche operations – such as that of Pennsylvania-based grain hauler Rich Wilder. After running flatbed over the road for seven years and concluding that “there’s no money running long,” Wilder transitioned to local work. In 2012, he netted $129,000 running within 150 miles of his home.

Some carriers are doing their level-best to make better pay a reality, says Nick Burbidge of Central Refrigerated. “Traditionally for owner-operators, the long-haul business is the money-making freight, so to continue to compensate and grow our contractor fleet properly, we’ve had to make some concessions” in short-haul compensation as the carrier turns to a more regional reefer strategy in various locales around the country.

Central Refrigerated instituted a miles-pay scheme tied to length of haul. In bands of 100 miles, “any move under 600 miles can make up to an additional 12 cents per mile,” Burbidge says, adding that in researching the prevalence of short haul among Central’s owner-operators, he talked to three who did quite a lot of short runs. Between them, they averaged about 13 loads a month each – just more than half of those loads less than 600 miles. The tiered pay program, says Burbidge, brought those operators an extra $161 a month on average.

Carriers of size in the reefer segment, he adds, likely are seeing many of the same pressures on their programs. “But most smaller niche carriers that are hauling a lot of produce and meat [likely haven’t] seen much change.”

At year-end, there were about 60,000 such businesses nationwide.

“I would prefer it if I could keep doing short runs with big money in them. But it’s all a game you have to play with some brokers.” –independent owner-operator Greg Trott

The bread and butter of independent owner-operator Greg Trott’s business, based in Florida, is long-haul reefer freight. His biggest run is typically the 2,000-2,500 miles from either McAllen, Texas, or Nogales, Ariz., along the Mexican border to Hunt’s Point in New York City – or another 200 miles north to Connecticut. Rates to the truck are “right around $2 to $2.50” per mile, Trott says. “I have heard that some guys are getting about $3, but I have yet to see these types of rates.”

For many owner-operators – particularly those under the burden of a truck payment, as owner-operator Bruce Johnston’s example in Part 1 of this feature suggests – shorter hauls won’t work on such rates without drop-and-hook arrangements, Trott says. Occasionally, though, he’s able to put together a few short runs with rates that “end up paying better than one long run,” he says.

Tom and Karen Moore, independent owner-operators

Tom and Karen Moore, independent owner-operators

HOW FLATBED DIFFERS | Because of basic differences in open-deck and other specialized freight, those markets aren’t seeing the systematic changes to length of haul that have been ongoing in dry van and reefer, says ATBS’ Todd Amen.

Flatbed has “slowed down in the last eight to 12 months, but with a lot of the government spending on infrastructure,” it could pick up nationwide, Amen says. Owner-operators in flatbed tend to follow the sometimes quick shifts in freight depending on equipment needs across the country, such as regional booms in oil drilling and hydraulic fracturing. “Wind energy and a lot of heavy-haul stuff,” among other flat runs, can see lengths of haul ranging from 300 to 2,000 miles, he says.

Pickup and delivery locations change with economic conditions and can include remote delivery sites. “You’ve got to be plenty nimble,” Amen adds.

Tom and Karen Moore operate their independent business with a 1999 International 9400 pulling a 48-foot 2001 Utility flatbed. Their bread and butter throughout 10 years generally has been longer-haul freight, says Tom. Typically out three weeks and home for 10 days, the couple looks to bring in $16,000 to $20,000 in revenue over the three weeks. Whatever freight makes that happen – long or short – fits the bill.

They operate as a team but don’t always take team-specific loads, says Tom. “Say we get a broker that calls with a 500-mile run – which means loading, securing and unloading in the same day – the loading and unloading time in that one period of time is much higher than if you haul that same load for three days. We say, ‘OK, we’ve got to make $1,000-$1,500 that day,” more than a full day’s worth of driving under a load would require. Generally, he adds, such a load “we won’t take unless it’s 2.50 to $3 a mile.”

On the other hand, Karen Moore tells of a 40-mile flatbed run they made in their home region that paid $500. They had unloaded at a military base in Paso Robles, Calif., Karen says, and “a broker called and said we have a load out of San Luis Obispo going back to Paso Robles.” The Moores had been looking for a reason to get up to a particular bike shop in San Luis Obispo. “We went up and looked at bikes” and made some money on the way back, Karen adds. “Stuff like that, we would take all day long.”

Trott reflects a point of view heard often throughout the world of independents: “I would prefer it if I could keep doing short runs with big money in them. But it’s all a game you have to play with some brokers.”

Leased owner-operators who are self-dispatched tend to think about length of haul in similar ways. Operating primarily pulling a company dry van with his tractor leased to Landstar, Chicago-area-based John Scott says short-haul rates are a lot better than what he describes as often “junk” long-haul rates: “You have to really like the long-haul to do them.”

All the same, “in my situation, short haul just means more work if it’s not a regular dedicated job,” Scott says. That’s something he could be a part of since he’s recently sold his trailer and gone to pulling a company unit to maximize drop-and-hook and preloaded-freight opportunities.

When taking a short haul in a self-dispatched program, it’s much easier to end up “either sitting around looking for that next load, or you may end up deadheading,” Scott says. “It’s much harder to put together multiple short hauls that would benefit our bottom line. I think that’s why many owner-operators simply accept the cheaper long-haul rates.”

When it comes to maximizing the potential of higher short-haul rates, percentage pay can be “the great equalizer” when combined with diligent planning, says Mike Bethea, Schneider National’s director of independent contractors. “Drivers don’t like to sit around and wait, because there’s a cost to doing that,” but “in our contractor world, particularly the guys running under percentage pay, some really look for that short-haul work.” Operators might find a well-paying niche in a particular area of the country and sit on that for weeks, even months, Bethea says.

Scott’s trend lately has been to split the difference and stay in the medium-to-regional haul range of about 500 miles and “avoid running in areas where tolls [cut into profit and] heavy-weight loads don’t pay.”

As carriers make their cases to shippers for better rates – given the regulatory impacts they’re feeling in all segments – look for shorter hauls to become more attractive, both to them and/or to you. If regulatory and length-of-haul trends continue, Bethea says, “it’s pretty obvious wages and pay will have to go up, and it’s just a matter of it all coming back to the consumer. I don’t know when you’ll see that in a big way industrywide, but I think that’s the other thing that’s coming down the road.”