The ugly truth about Landstar

Yes, that is what I mean, and that is my business model. I do a LOT of daily short haul where I might have as little as 8 loaded miles, but 125 empty to get it, and 120 empty to get back home. I also go to dead areas for round trip pricing, and refuse to haul anything heavy and cheap back out ie TX, CO, WY. I'll just bounce.

 

I suppose if hauling heavy is putting wear and tear on your truck it makes sense to avoid back hauling. However, there is wear and tear dead heading. Might make some sense to capture some revenue on the way back.

In other industries there is a pricing concept called "Zero Contribution Pricing" (profit is called contribution... as in "contributing" to the parent company). Let's say you have a printing press that has been budgeted to run 3000 hours next year. You calculate all the costs associated with running that press for the year and divide by 3000 to get your "burden rate", which sets your base cost for estimating cost and ultimately your quotes to your customers. Now, what if instead of running the press 3000 hours you were only able to run it 2500 hours because of a downturn in the economy or other factors? You are going to lose money because 500 hours of cost aren't being covered.

This is where Zero Contribution Pricing comes into play for a manufacturing company. They are going to go out and find a customer to fill that missing 500 hours and offer pricing without profit just to cover the cost of operating the press for 500 hours. That way the profit that was generated by 2500 hours of profitable operations will remain as profit instead of getting eaten up by lost operation time.

Looking at it this way, when you deadhead you are in effect "running the printing press" but without actually running any paper through the machine. It is worse than laying off the printers and turning off the lights, you are fully employed, and running the machine, but generating zero revenue.

It might be worthwhile to consider back hauling loads that cover your costs rather than running the truck without generating any revenue.

 

To follow up on this Zero Contribution Pricing I can give a real world example. A trucking company hauling frozen beef from northeast Utah into Seattle needed to haul something back to Utah. At the time I worked for a printing company in Seattle with a big potential customer in NE Utah where we needed to fill about 500 hours of press time using ZCP. It was a match made in heaven for both my printing company and the trucking company. They offered an outstanding rate for truckloads to NE Utah that no other trucking company could match, and we offered printed goods at a price no other company could match. It was a win-win, we both won the business, and it was predictable and stable for many years. Now all the miles they used to dead head back to Utah were covering their costs, so I'm sure their bottom line profit increased dramatically. Our printing company covered the missing hours on the printing press, so all the lease costs and other fixed costs of the printing press were covered and we made more profit than we would have if we simply decided to "turn off the lights" (not to mention being able to retain many high value production employees).

 

@Lepton...Let me give you a perfect example of ''cheap'' and ''heavy'' and this terrible ''fear'' O/O's are stiken with...

Last year a friend of mine and I unloaded in Orlando Fl...We are both very different on this whole ''subject''..I told him i was going to DH to Memphis Tenn..He said you are crazy...I said to him,You are nuts to sit a whole day to pick up that 44,000 lb load in Jacksonville Fl to Kansas City for 1.30...

After reading your thread,you would too..NOT ME.I took off running to Memphis to get a 3,000 lb Load to Kansas City....Watch this BREAKDOWN CLOSE ....


The total miles from Orlando Fl to Kansas City is around 1250...


The total miles from Jacsonville is around 1200...My friend waited till morning to get a load paying 1.20 a mile on a backhaul rate.His total revenue was $1,440 from Orlando to Kansas City..


I was in the wind to pick up Memphis Tn...This is 750 from Orlando....Now watch closely....My load was 3,000 lbs and paid 2,500 Revenue from Memphis to Kansas City...

Keep in mind..We both had the exact same route and close to the same ''hub'' miles to KC...

Please study this and get back to me on which load you want.....I hope you can see that the ''trucking'' business is much different than the printing shop...I hope you can see that deadheading does NOT HURT...

Again.I will NEVER EVER HAUL CHEAP CRAP....

 

I hear you.But trucking is whole different ''beast''..

 

Thanks for using a real world example of why we would choose to deadhead out. The opportunity and time cost to pick up that cheap load can be far greater than the revenue of the cheap load. I'll deadhead from Seattle to Miami to pick up a local 10 mile load paying $6000 before hauling a $7000 load from and to the same points. For my shorthaul, the "backhaul" freight just isn't available, period. I pick up and drop off at 20+ different points in a JIT, with very little notice, atmosphere. On my longhaul, I'd rather bounce half way back and pick up a load paying the same rate as the one originating in the dead area.

 

Correct wording...The ''real'' world.We have to many arm chair wanna be O/O's that don't understand the ''business'' part of trucking...I am deadheading this week to get a Monster paying light load that pays more than the loads in that area i am unloading...Funny how this works..

 

I would say someone knows the business even better than you, since on the other thread your numbers are adding up to having $5000 left after fuel is paid for, and you only end up with $800-$1000.

 

landstarr8891, thank you for posting that example from Orlando to KC. That makes a lot more sense to me to deadhead for higher paying freight and a light load to get to KC than waiting to take low paying freight to KC.

I've noticed in your posts on other threads that your parameters are to take high $/mile loads that are less than 20,000 lbs (if I remember correctly). You've been with LS for quite a while and are obviously successful with what you do. If I may ask, how do you get most of your loads? Are you working with the load board and widening your geographic search for load origination that will fit within your parameters, or are you working "off the board" with a few brokers? Or is it a combination of both? I'd appreciate some insight, especially since my goal is to become a LS O/O as soon as I have enough recent experience to qualify.

 

That was per trip that he was left with. On that thread, you also said the harder you run, the more you make, which couldn't be further from the truth here in the "big boys" area. Go spout your cpm, in going kill myself running hard mantra where someone might believe you, it is not here.