how can a company afford to pay that rate and still make a profit?

How does walmart and most of the LTL carriers pay that and more and stay in business ? Better business people than most of the otr eregular route for hire carriers. The lack of drivers for these otr for hire companies keeps pushing rates up. Supply and demand. Regular business cycle stuff , it just gets agrivated in trucking because freight movement is so up and down.

 

For years the standard driver pay rate was %25 of the gross, that would mean a freight rate of $2.60 per mile would support a ¢.65 per mile driver wage which is below today's rates considerably.

When you remove all the brokers and all the "fees" that companies charge their pullers to "do all the paperwork" you will find some pretty good rates being paid by those who are receiving truck shipments.

All of that "convenience" and "easy financing" conveniently removes most of the profits.

 

LTL shipments pay very well considering how many are being moved by 1 truck. I will sometimes carry up to 30 shipments composed of say 50 skids on 1 53' trailer. They get stacked and packed nose to tail. Linehaul drivers typically pull more money (in terms of shipping charges) on a trailer than an OTR truckload driver does. That's why the company can afford to pay me that mileage rate.

 

Against popular belief that mega carriers pull cheap freight,as it was explained to me by a fleet manager for a nationwide carrier:big shipping volume requires a large dedicated fleet of equipement so the rates have to cover the costs plus a healthy profit margin since not every company have the ability to have a 3:1 trailer to truck ratio or more.
I worked for a company that paid the driver $85 just to bump the dock,$35 for a d/h plus mileage and hourly pay.
Not every company will pay 65cpm but also not every driver is worth that much.

 

OK you need to learn what profit is, what profit margin is and how it all works. A single truck owner has a direct connection to any profit of the truck but when you get into 10, 100 or 1000 trucks, that economy of scale changes the definition of profit and margins come into play. Many companies run as high a margin as they can, most are 3 to 5%, some of the smaller and medium size ones are running at 7 to 12%, I am at this time right at 8.5%. I only see 20% in small companies who run specialized freight.

Rates are not governed by capacity alone but other factors involved, one is cycles of the market segment and the needs of the customers. While right now people are claiming that ELDs are pushing rates up, they are not, Trump and deregulation in some industries have done that. ELDs are an excuse to leave or act like a child, but the truth is that the HOS are so screwed up, the ELD is not impacting the industry and won't, the HOS is and will.

RIGHT NOW we have a huge surplus of drivers, we have an over capacity of trucks and we have a change in the markets, some are gaining strength and others are losing.

 

Nailed it! We have a driver surplus. If there was a driver shortage rates would be through the roof and freight would be gathering dust in warehouses for lack of capacity.

 

It's all relative. Every company has different profit margins depending on the type of freight they specialize in. My last job was with a company that had 50 trucks. I drove a 600 to 700 mile route each week OTR and was paid a flat rate of $250 a day, and one of those days was spent lounging around in my truck at a truck stop waiting for my return load to get ready. I usually had 4-6 stops each week. That works out to around $2.00 a mile for me most weeks. I once added up the rate my employer was being paid for what I was hauling and it worked out to roughly $10,000 to 12,000 a week, so they didn't have a problem paying me well for that route.

 

Do you know what they charge the customer? They could be running $4-5 per mile freight and be making a very nice profit.

 

You want to understand this? Answer this question. Who has made the most money? A fleet owner with 100 trucks making an average of $1,000 per truck per year. Or a fleet owner making say an average of $250 per truck but with 25,000 trucks? Said fleet owner has much more money available to pay with like this and STILL MAKE A NICE PROFIT.