Cutting the Rate/Rate Cutting.....Lets dig into it

Good info.

 

The free market works the way you posted. I really do not have a problem with shippers or rate cutters as much as I did my own co. (not my current co) years ago, several of us hauled dedicated. Eastern bid the rate down & got the dedicated run. they did this when it was very slow for our particular area & run. we got knocked off the run. just before turkey day. Eastern hauled the loads for 5 months, then they were gone, but the rate stayed the same. 4 years later it is still the same.I blame that on my co only. they were & are still afraid to say boo to anyone about a decent rate. well it pays a dollar a mile. yeah dispatch still says that. that is why I left last co. great people, but gutless when it came to negotiating rates. they think if they ask, or as I think DEMAND a higher rate, they will lose all consideration of future loads. I told my dispatcher, why don't we get our rate back to where it was? dispatch got mad for me even mentioning it. while at the same time, as freight has picked up other co's have come in & doing the same run for more money every day. my old co had this dedicated run for 9 trucks for over 15 years. my new co, that I have been with for about 3 months has the same run, but demanded a decent rate, So I changed co's. I am a leased o/o so I only know about that, nothing to add to own authority.

 

I see no point in hauling freight that I cannot make a profit. I believe that some carriers and owner operators don't think much of the service that they offer. So many in trucking refuse to adjust rates for inflation. Every other industry raises rates to adjust for inflation or increased operating costs. This has never made sense to me. It goes back to whether you are a truck driver or businessman. A businessman will negotiate to get a fair rate. A truck driver will haul whatever he can get on the truck in order to keep moving, regardless of the rate.

 

I simply tell them X is my rate.

They either pay it or they don't.

When they realize the dispatcher is the driver is the owner, I can sometimes get better rates.

There are places the would prefer to work with an o/o than a carrier. They are repeat customers.

 

Some carriers try to negotiate rates that will pay them for hauling the shipment, other carriers will cut the rates just to get the business. Shippers use them until they have continued service failures, and they go back to the companies that have minimal service failures. This is why they have several companies that they use to haul for them, but as an owner operator using your own authority you cannot just settle for what they want to pay you. You have to figure the miles, the cpm, the fuel, and other costs associated with the load to see if you will even make a profit. Now, if it is not a full truckload and it is a ltl then you can marry up another ltl load going along the same path to make sure you get a profit.

I may not be a truck driver or an owner operator, but I do have 7 years experience in the trucking business. I started out as an administrative assistant and worked my way up to dispatching, and along the way I did billing and plenty of rate comparisons for the contracts. The shorter the miles the higher the cpm rate, and the longer the miles the lower the cpm rate is. The fuel has to be based off of the DOE weekly fuel averages in order to make sure your fuel cost is getting covered. The shipper and the carrier has to agree upon a set amount of any accessorial charges before they enter into a contract, which also must state the terms of how they want their invoices, paperwork attached, and terms of payment. I know that alot of shippers will pay off of EDI, but with owner operators they will pay off of invoices. Carriers cut their own throats just to run these shipments, but these companies wind up going under because they have major overhead and not enough revenue coming in to carry it.

 

Too much thinking. A fair rate is exactly how much a shipper and carrier will accept to move stuff. Obviously market pressures for both the shipper and carrier will push that number all over the place.

As a carrier, you decide. If you're that guy, accept the load. If not, say "no." It's just not productive to get worried over offers you see as "cheap." For that matter, don't even stress when you're docked next to another guy with the exact same product from the same place and the rate is different. You don't know what market pressures were in play at the moment the other guy's rate was agreed to. Or what sort of competitive advantage you or the other guy may have or not.

Don't take this the wrong way: I have more than enough stress over just knowing my market while minding my own business.

 

"Value" is just not the rate the shipper gets. I have negotiated rates for a major dry van carrier that also runs a reefer fleet. Some shippers are pretty loyal if you have great service, good equipment, decent drivers; the stuff the OP mentioned. They won't dump you for a few bucks a load because they depend on getting their product delivered.

On the flip side, I know and have made sales calls on shippers, one in particular, that gave my former employer the boot over $25 a load. There wasn't a service issue but these guys were just about moving their product cheap. If you know your customers you know who the dollar shoppers are and I would consider them the bottom 10% that we'd look to replace anyway. The good thing is that when they call with a last minute load they need moved, you can spot market them and get some good money.

 

I have never tried to be the cheapest. In fact, if someone tries to play that game I tell them to find another carrier. I feel that I provide a quality service. I pick up and deliver in a timely manner, have a good safety record and don't have claims. That has value. If I get to the point where I think that I need to cut rates to get business, I will find something else to do.