As the above graph illustrates, rates have been on the rise in all major segments over the past couple of years. Unique conditions this year, however, have led loads such as the one pictured below with super-high rates to become more common, particularly in the spot market. That’s where many independents typically specialize, and a prolonged capacity crunch among more sizable carriers has helped matters along.
Alarmism over shrinking capacity seems to repeat itself every couple of years, always with the assumption that drivers stand to benefit from such tight supply of trucks and drivers. Yet as Overdrive readers have pointed out over the years, freight rate stagnation has remained in large part a fact of life.
This year, however, is different.
The 2013 hours of service changes and other regulatory developments have put pressure on the supply chain. While freight volumes have been on the rise, trucks are more expensive, making fleet investment in new units less likely. Where fleets do invest, it’s harder to find a good driver to take the wheel.
The horrendous 2013-14 winter further limited capacity and threw rate and volume dynamics into turmoil. The typical early-year bid process at the shipper level was disrupted as miles were low and carriers held out for higher rates, according to DAT’s recent “Truckload Capacity in 2014” white paper. A lot of that contract freight then made its way onto the spot market or found itself subject to market rates in some contract stipulations, putting further upward pressure on rates.
Internet Truckstop’s average van rate (see chart at top) has remained above $2 a mile every month of this year. Flatbed and reefer rates likewise have been at historically high levels, even into the typical late-summer seasonal slump.
Ken Harper, DAT marketing director, pointed at press time to strengthening September rates, more evidence of an exceptional year on the spot market, one that possibly would beat 2011’s double peak in rates. “That was a very strong year,” Harper says. “Here in 2014, we’ve already seen a double peak, and September is looking like it could be another one.”
For independents who primarily use brokers for freight, taking advantage of favorable conditions is a matter of putting yourself in a strong negotiating position. There’s more data than ever to help you, as well as new sources for improving your overall business acumen.
While off the road last summer for physical therapy after a knee surgery, independent owner-operator Chad Boblett hooked back into a network of owner-operators he occasionally dispatches. It’s a growing aspect of his business following his creation of the Rate Per Mile Masters Facebook group for independents, which now has upward of 3,000 members. While there’s long been a public light put on cutting costs among owner-operators, now “there’s a big interest in getting a better rate per mile,” says Boblett.
For the first half of this year, says Boblett, his dry van loaded rate per mile averaged $3.40. Grand Marsh, Wis.-based husband-wife team Don and Chris Cartledge, for whom Boblett’s been negotiating and dispatching of late, have seen their $1.72/mile (all miles) average jump up to $2.38, “a substantial pay increase,” says Don.
“The money is there,” Boblett says. “You’ve just got to ask for it and know where to look for it and how to set yourself up for it.”
“I don’t think I’ve seen a more favorable climate for carriers, at least the smaller ones that we primarily use.” TFI Logistics co-owner Dan Metully
His group, like a similar group called “Revenue: Knowing Rates and Lanes,” is focused on tactics toward doing so. Boblett recently launched a “Brokers & Beyond” podcast with Kevin Rutherford’s AudioRoad Network on BlogTalkRadio.com to encourage discussions with a featured broker guest. The first edition of the show ran in September, adding to a stable of shows that also includes the “Trucking With Authority” and “Rates and Lanes” podcasts, the latter focused on supply and demand trends across the nation. Independents will excel if they’re willing to travel where there’s demand, Boblett says.
Boblett occasionally cohosts “Rates and Lanes” with owner-operator Rico Muhammad, who calls Boblett’s following-the-demand strategy “running wild.” Muhammad specializes mostly in the Southeast with a mind toward securing direct customers.
Boblett’s approach is akin to classic irregular-route long-haul, using brokers. Using load data primarily from a subscription to DAT’s TruckersEdge.net load board, ahead of his arrival in any area, he researches incoming/outgoing load ratios to get a bead on the competition. Significantly more loads incoming than outgoing mean your position in any negotiation will be weak.
However, look one state over, and things could be different. Boblett might plan to deadhead from a dropoff in a lousy area to an area where he will have higher negotiating power. Ideally he builds enough cushion into the rate incoming to make it worthwhile beforehand, a tactic he calls “taking your backhaul with you.”
From a rate-negotiation standpoint, says Montana-based TFI Logistics broker Dan Metully, “I don’t think I’ve seen a more favorable climate for carriers, at least the smaller ones that we primarily use.” He cited a recent offer on a 55-foot piece for a standard removable gooseneck trailer. The carrier quoted $40,000 for the 711-mile move. “I’ve never seen such a thing,” Metully adds.
More and more, independents are getting the message about using data to, in Muhammad’s words, “maximize profit.” Thayne Boren, Internet Truckstop vice president of sales, points to a profusion of new carrier subscriptions to its load board service – 2,500 more year-to-date than last year.
“We’re seeing a lot more carriers enter the spot market,” he says. “There’s enough freight to go around, and the load board portion of that has really picked up.”
Owner-operator financial services firm ATBS’ numbers for the first half of 2014 show continued growth in independent owner-operator income. After posting a $6,000 gain in 2012 to reach nearly $56,000 in average annual income, independents held that gain in 2013 and look to do so again in 2014, even with the tough wintry first quarter, if second-quarter figures hold through yearend.
Speaking at the Overdrive Partners in Business seminar at the Great American Trucking Show in August, ATBS President Todd Amen noted the tight market overall and the regulatory blizzard that’s made trucking more difficult — and costly — over the past few years.
The primary difference, Amen said, is that though costs continue to rise, pay from carriers and rates from brokers and shippers are trul ystarting to break in favor of leased and independent owner-operators. “Life is good,” he said.