Factors That Affect Truckload Shipping Rates
Predicting truckload shipping rates is a tricky business. Over the last three years, rates have fluctuated by over 50%! Factors that drive such wild swings are numerous, but they can be nailed down to a couple fundamental issues: changes in supply and demand and fuel prices.
Let’s start with the obvious. Fuel prices impact truckload rates. Recently, diesel prices are around $3.30 per gallon, and that translates on a typical fuel surcharge of approximately $0.35 per mile.
Understanding and predicting the ebbs and flows of supply and demand are much trickier. Truck demand at the highest level is impacted by our overall economy. Strong GDP growth, inventory restocking, housing starts, and auto production all drive the demand for truck transportation. Supply is impacted by equipment and driver availability, as well as truck positioning in any given market. Together, these factors create a myriad of conditions that influence pricing. It’s no wonder predicting where these prices will go is such a challenge.
Having said all that, here are some important considerations when it comes to your truckload shipping rates.
1. Flexibility and Speed
Flexibility around pickup and delivery times is a big deal. Anything you can do to help drivers and trucking companies plan their routes to reduce idle time will go a long way to finding the best truck for the job. This is more and more important today now that ELDs are driving higher levels of compliance in the hours of service rules designed to keep our roads safe. Depending on transit requirements, a load might require team service, which will definitely affect pricing.
One of the most common questions we get asked today is, “What can I do to be considered a shipper of choice?” Being an attractive shipper to truck drivers is critical to securing reliable capacity at competitive rates. Time is money for drivers, so pay close attention to your loading and unloading time to help them maximize their time on the road. Maybe you can support more drop trailers to improve turnaround times.
3. Headhaul versus Backhaul
Freight flows influence pricing on a lane-by-lane basis. When truck drivers are competing to reduce empty miles, rates will be lower. When shippers are competing to find capacity, rates will be higher. What are the chances of getting re-loaded after delivery? What is the load-to-truck ratio at the pickup and delivery locations? These are important factors to consider when you select carriers to move your freight.
4. Deadhead Miles
Actual hauled mileage (obviously) is typically the largest determination of rates. Deadhead miles are often an overlooked factor. What is the proximity of the pickup or delivery location to the next load? If a driver has to go out of the way to make a pickup, the empty miles will become a factor in your overall rates.
5. Loaded Weight
Loaded weight is another overlooked factor in truckload rates. Many shippers measure their transportation costs on a per-piece metric. The larger the quantity of shipped goods, the less you will pay in shipping costs per piece. However, it may increase truck costs as fuel and overall wear and tear are much higher on a fully loaded truck.
Another big discussion item in the trucking business is, “Has produce season started yet?” Yes, produce season starts in the spring and works its way into early summer throughout the country. When it hits—and depending on how hard—can drive up rates very quickly as truck supply gets squeezed. It is critical to forecast as accurately as possible leading up to produce season. Establishing strong relationships with year-round freight in these markets while working with your transportation provider helps minimize the cost impact. There are many other shipping seasons around the country as well. Christmas tree season in the Pacific Northwest is a good example. The bottom line—you should understand how normal seasonal trends may impact your shipping rates.
Finally, markets get disrupted by unforeseen factors. Port strikes and hurricanes come to mind as recent examples. Any time an unforeseen event affects supply chains in general, shippers make adjustments and trucks are out of position, resulting in inefficiencies that influence rates.
Determining truckload shipping rates can be challenging when you consider all the factors that influence cost. For more information, or to help you better understand the nuances around truckload shipping rates, contact your Echo sales representative or request a quote today.