Previously in this series: To own or not to own a trailer: How COVID fast-tracked an explosion in power-only opportunity
When Timmons Transit was just beginning to hit a growth stride with new power-only opportunities through large broker C.H. Robinson, a story told in brief in Part 1 of this "Niche Hauls" series focused on growth in power-only opportunities for independents with motor carrier authority, owner-operator Tim DeWitt had just one truck, pulling Prime-owned trailers on the power-only side of the large carrier/brokerage's refrigerated business.
His DeWitt Transportation operation didn't sit there for much longer, though. In 2019, at the urging of contacts at Prime, he bought another truck and brought on a driver, continuing to drive himself. In 2020, the growth spurt in reefer freight, partly as a result of the pandemic, brought him off the road with further truck investments. The 2021 Overdrive Small Fleet Champ semi-finalist DeWitt Transportation is now a 34-truck business, hauling exclusively power-only in the Prime system.
"They have way more freight available to them than they have the ability to cover" with either owned fleet trucks or leased owner-operators, DeWitt said. It's particularly true today given large fleets' growth limitations with owned equipment, but in some ways it's nothing new. "Prime’s been like that for quite a few years" in terms of freight volume, DeWitt added. Prime's system for his power-only fleet operates in ways that are similar to a small-fleet or owner-operator leasing model in that his revenues are defined on a percentage-of-every-load basis.
“I give up a significant percentage to Prime,” he said, and in exchange the business benefits from fuel discounts, outsourced maintenance and parts procurement at reasonable rates through the buying power of the large fleet and its extensive terminal network.
Dispatch is outsourced, too through Prime's brokerage, freeing up time for DeWitt to focus closely on his business's relationship with its most important resource -- its drivers. DeWitt's worked hard to secure health-insurance options for drivers, partially company paid. And the weekly guaranteed-pay system he's put in place keeps income for those drivers somewhat predictable, eliminating driver consternation over short hauls -- or the large amounts of deadhead that can be common for power-only operators -- when paid on a miles basis.
Those outcomes reflect a couple of different advantages earmarked by Overdrive readers as benefits of power-only trucking in Overdrive's recent survey.
Scaling up with access to freight under contract/more reliable rates
With a solid freight partner taking the pressure of managing freight relationships with multiple direct customers or brokers off his shoulders, DeWitt clearly scaled up -- and quickly, even amid all the delays in truck manufacturing over the last couple years. He acknowledges that, "for the short-term minded person," power-only in a system like Prime's is probably not where the truly big money is right now. "The spot market’s off the charts," he added, delivering big dividends to owner-ops chasing rates from hot market to hot market.
[Related: Rates hack: The spot market 3 o'clock hustle]
Yet, he added, "by definition, the spot market is cyclical. The guys bragging about the money they’re making right now, well, 19 months ago they were marching on Washington begging for Uncle Sam" to help, a reference to May 2020 protests asking for enforced transparency into brokers' margins.
Hauling largely freight under contract is the rule for power-only operations yolked to large brokerages affiliated with large carriers, yielding a measure of rates stability, also among the benefits earmarked by survey respondents shown in the chart above.
Wayne Timmons, co-owner of Arkansas-based Timmons Transit, found similar with legacy broker C.H. Robinson's Power+ power-only system. "Most of this is contracted freight," he said. "You’re not riding a wave where it’s good one day and bad the next."
Similarly, successful digital brokerage platforms like Convoy Go give smaller carriers and owner-operators a chance to work closely "with major shippers," said Convoy Senior Director Tito Hubert, "something that’s previously been the semi-exclusive domain of large carriers. In this sense, power-only helps level the playing field and this has been a key to boosting interest in Convoy Go since we launched the program in 2019."
For Timmons' operation, too, with Power+ loads it's easy to know "what you’re going to be doing week in and week out," delivering more than one advantage. "A lot of the freight is tied to a fuel surcharge," so up-and-down fuel-price moves don't become an issue. "It’s very low-maintenance – we don’t have dispatchers out trying to find backhauls for drivers. Most of it is set and it’s a closed loop."
For Timmons -- and clearly also for DeWitt -- it's been "pretty easy to recruit drivers into a system like that." Home time for operators gets a lot more predictable, too. "We typically stay within a region – city to city, back and forth."
Reliably available freight with such operations makes scaling up like DeWitt has done these past couple years a distinct possibility for power-only carriers focused long-term, especially now with trailer production limited, said Adam Wingfield of the Innovative Logistics Group owner-op/small fleet consultancy. "You may have a power-only carrier who does well on Amazon Relay. Let's say they get to the top of the pecking order with the best-paying freight. You can find yourself scaling up very quickly on dedicated routes with predictability of home time. Right now, in today’s marketplace, I do see a lot of folks scaling on a power-only model."
Among those thinking along those lines is owner-operator Kenyette Godhigh-Bell, current running one truck in the Amazon system, without a trailer.
"I just need to make certain my baseline infrastructure is set up," she said, to make it a reality, with "somebody I end up using as a dispatcher" to help manage the Amazon system, where choosing loads can be a tough prospect given how quickly they come and go in the in-house application contracted haulers there use. "There are some people with 20 trucks [and more] running with Amazon," she added. "That is something I am considering."
DeWitt offered baseline advice for anyone making such a consideration -- pick your partner wisely. "Take your one truck," he said, and "ask around" for others' experiences. "Carriers have reputations, sometimes deserved, sometimes not. ... It’s like going to lease on someplace, but you’re not leasing. Give it a couple months and see if it’s working."
An associate of Godhigh-Bell's has been doing just that in recent times -- and sharing the wealth of her experience. You can follow owner-operator Tamara Brock's tours through different power-only operations via her Facebook page.
Power only yields innovation in pay, recruiting ease, more
Growth in the power-only side of Timmons Transit's business through C.H. Robinson has offered another way for the carrier to truly set itself apart in recruiting efforts, as co-owner Wayne Timmons suggested above. In the Dallas area, where the fleet has a terminal, Timmons said, "we’ve been able to recruit several guys who can run regional and be home every day. For a company our size," at 150 trucks, "we have our own freight, but not so much stuff that runs the same route on a daily basis, or 10 loads on a daily basis where you can just plug somebody in and leave them" to work it week in, week out.
With demand high for drivers and owner-operators who would lease on, "a driver can pretty much call his own shots right now," Timmons said. "They’ll come to work but they want to do it their way. Anything we can do to keep a driver close to home or get him home multiple times a week means we don’t have to deal with so much turnover."
With some of the pressure off when it comes to arranging loads, the ability to closely focus on buttoning up in-house business issues manifests in other ways, too, for successful power-only operators who've scaled up.
For Tim DeWitt, as he began to add trucks and employee drivers, that meant making good on a goal of transforming trucking's traditional miles-pay arrangements for drivers to a salary-type structure, with weekly guarantees of $1,400 for those just starting out, rising to $1,540 over the course of the first 90 days a driver is with the company. Do the math: That's almost $75K annually for a driver at work 48 weeks of the year, with bonuses built in for top performers.
Expecting revenue to rise with the new year as freight contracts are renegotiated to reflect improved demand and cost inflation over the course of 2021, DeWitt focused in on improving the incentive structure to deliver more income to those top performers. Though it's likely to cost him more than $80K next year, he said, starting at the end of January he plans to begin ranking drivers' net settlements to pay out bonuses based on terms of production, in addition to the guarantee. No. 1 "will get $500" extra for the month, with positions down to 25 getting more than $100.
"In any fleet," he said, "you've got superstars and you've also got those who are lucky to have a job." He hopes to reward and thus "protect the superstars" with the new arrangement. As months stack up through the year, monthly bonuses will be based on the average weekly settlement for the entirety of the year. "The further along the year goes," that will ensure more "protection that they’ll have in the ranking."
For those at the bottom who get no monthly bonus, he hopes it's incentive to improve. If all goes according to plan, by June the bottom performers will have increased their output such that he might be able to expand the bonus structure to deliver more, with those rate increases that are coming. Any added business income left over he'll put to better delivering assistance on driver health insurance premiums. DeWitt currently pays a quarter of a driver's premium in a plan that's structured like an individual-market plan, with rates "based on [each driver's] personal health situation," he said.
The reality that DeWitt doesn't have to worry about booking loads given his participation in the Prime system, he believes, allows him "to do the nontraditional things," he said. "I'm probably giving Prime a million and a half this year. I could hire a heck of a lot of office staff for that. But if I was doing my own thing, I'd have to have a couple people" dedicated to operations. "I'd have to have accounts receivable" and so much more.
Outsourcing a lot of the aggravation and with just one full-time staff member (plus a part-timer) in the back office other than himself, "the way I pay," he said, "I can take some of the suckiness out of the job. Most of our customers are bigger, too. They have their acts together. [Drivers aren't] dealing with a lot of rude, disrespectful people – it’s endemic with the job" in the wider trucking world. Perhaps the very worst thing, he added, or so he always thought when he was a company driver in years past.
Wayne Timmons, too, though the vast majority of his compensation packages for leased owner-operators and drivers are miles-based, has focused closely on improving compensation given recent success with power-only hauls. "We’ve raised the base rate [to owner-operators] 10 cents this year to go along with the fuel surcharge," he said. Company driver miles rates have increased by roughly 15-20 percent over the past 12-14 months," too.