How to Contain Rising Truckload Prices
You've no doubt seen your truckload shipping costs skyrocket. If you're a niche user—flatbed or refrigerated—you're probably reeling at the price increases. Your brokers tell you prices will moderate; they're wrong. Let's explore strategies to help you contain increasing prices.
Let's talk about why these prices are here to stay. First and foremost, the driver shortage persists. Truck drivers have taken a beating over the past eight years. They work for about 40 cents per mile and pull in approximately $45,000 per year for working 70 hours a week. They also have to eat and sleep out on the road and sometimes in dangerous places. It is not an easy life, and it's a job most millennials won't do.
Drivers are jumping for higher pay. Most people think 60 cents per mile is the number to attract new entrants into the market. That's a built-in 10-percent increase to get the driver.
A Tidy Increase
Diesel, too, has increased to nearly $3 per gallon, and most trucks still average around six miles to the gallon, so there is your five-percent increase. Factor in the shortage of equipment, and trucking firms are baking in another five percent. It all makes for a tidy 20-plus-percent increase.
So how do you position yourself to reduce the impact of these current conditions? Several strategies can help you, both in the purchasing and operational areas.
1. Be open nights, especially if you're in a big city. Why? Congestion. Drivers love to run nights, and they hate rush-hour traffic. Buttoning up a truck at 4 p.m. gives the driver a nightmare getting out of Dodge. You might not be able to do it, but you should consider it as a money-making and equipment-gathering strategy.
2. Provide driver parking. There simply are not enough parking spots for trucks. That sometimes leads to safety issues especially in inner cities. Even some suburban areas are fraught with danger for drivers. If you're known as a driver-friendly facility, the word will get out. Driver friendly also includes a comfortable waiting area, use of bathrooms, and Wi-Fi that works all the way out in the yard.
3. Be quick about loading. Drivers can run 11 hours on the road, then they must take a 30-minute break, and they have to pre-trip inspect their equipment. That leaves about two additional hours in their 14-hour duty cycle. Think about that: 14 hours on duty. They should definitely earn more than $45,000 per year.
Avoid the Spot Market
Some shippers broadcast a list of loads to multiple providers, both asset-based and non-asset-based. Don't do it; you are sabotaging yourself. Why? Brokers are bidding against each other for the truck and spiking the spot market.
Find one broker or one broker for a lane and stick with them. The load-to-truck ratios are sometimes 30 to one. That, as you know, is not tenable. Stop sabotaging yourself.
Be a quick payer. Trucking firms have to front everything, including higher diesel and now higher driver pay. They can't finance you. They won't finance you.
Some trucking firms go to factoring companies charging rates that would make a shylock blush. That only adds to your cost. These factoring rates can exceed five percent; you'll pay it one way or another. If you're the shipper who pays upon presentation, you'll have a loyal following of truckers.
In short, skyrocketing truckload shipping costs shouldn't steer your supply chain off course. Pursue driver-friendly practices, avoid the spot market, and pay promptly to secure capacity and handle rising rates.