Determining what freight rate to quote may be one of the most difficult aspects for anyone in the transportation chain. Understanding the variables that affect the rates is how you can make more money per trip. The variables affecting rates can change frequently and it is important to understand what circumstances cause freight rates to vary so that you can get the best rates.
Freight rates vary due these circumstances and events:
- Supply and Demand. One important rate variable is always supply and demand in a given area at any given moment in time. If the ratio of available trucks to available shipments in the lane is high, then the price will be lower. On the other hand, if there are few trucks and lots of shipments going out from an area, trucks will be in high demand, and will command higher prices. This factor will also vary according to the type of equipment needed. Internet Truckstop provides a service called PINTAC, which allows the user to see who has the negotiating power: the owner-operator or a broker, in a particular lane at any given moment in time. Using PINTAC means you can negotiate the best rate on each trip.
- Backhaul Loads. If an owner-operator needs to move with a load in the trailer to get back to the dedicated shipper, they will sometimes accept less so that they can still make money on the backhaul.
- Geography. Some geographical areas have little or no manufacturing and have only seasonal needs for trucks. These areas may be forced to pay higher rates during off-season, as trucks may have to deadhead many miles or wait extended periods of time to pick up load.
- Product. The type of product or commodity to be shipped can directly affect the rate. Less expensive products (such as raw fiber, or recyclables) mean less expensive freight rates, due to lower liability, and high dollar products (pharmaceuticals or computers) cost more to ship due to higher liability. Typically, if a shipper is offering a large volume of freight on a regular basis, they will expect a better rate than a rate for a one-time load.
So how do you stay on top of these freight rate changes and use this knowledge to get the best freight? It takes a good ear in the market to stay on top of the changing freight rates. One way to stay on top is by talking frequently to others within the industry. Using a service such as Internet Truckstop’s FuelDesk® will allow you to compare rates as to what is being offered on the loadboard to what is actually being paid by shippers and brokers. This information is updated daily to keep you better informed and allows you to gain the inside knowledge between what rates are being offered, what was actually negotiated, and what was paid to the carrier. The knowledge you gain from using FuelDesk® allows you to confidently negotiate a higher rate if others are actually getting paid a higher rate than what is posted.
Your reputation in the industry will also help in your negotiations. Often, the most dependable vendors with proven track records are able to get a higher price for their services, because buyers know that they will supply a high level of service with excellent reliability. If you can offer services that are unique, then you are more likely able to influence the price that you receive. Be creative and add as many “value-added” services that you can think of to help your client.
Owner-operators are not just drivers who own a truck. You are professionals who need to make savvy business decisions. The variables in freight rates could make your job a guessing game, but using the business tools like PINTAC and FuelDesk® will help you be more successful at earning the most money from every trip.