Negotiating Truckload Pricing and Capacity Factors

Understanding truckload pricing involves identifying lanes, volume, seasonality, distance, timing, equipment needs, and service to negotiate effectively with carriers.

### Mastering Truckload Pricing Negotiations
* 🚚 Step one in negotiating truckload pricing is to understand your **full truckload lanes**, including the **volume and seasonality of shipments** in each lane.
* 💰 It's essential to determine what should move under **spot rates** and what should move under **contract rates** based on your lane volumes and characteristics.
* 🛣 Distance plays a significant role in truckload pricing negotiations, as it's based on **mileage**. Utilizing a reliable mileage program like PC Miler and agreeing on the **mileage with carriers** is crucial.
* ⏰ Understanding the time aspects, such as **hours of service regulations**, **transit times**, and **pickup days**, helps in negotiating prices and optimizing the supply chain.
* 🚛 Equipment types and service requirements, such as the need for **specific equipment like refrigerated trailers or blankets**, should be clearly outlined in bid packages.
* 👩 Driver shortages are a critical factor in the truckload market, and working strategically with carriers based on your freight needs and volumes is **key to securing capacity**.
* 📦 "When you do that, oftentimes you'll **pay more in freight**." It's important to proactively manage and understand your truckload pricing to **avoid additional costs and optimize operations**.

oh hey everyone. So today, we're gonna talk about truckload pricing. And we did just do a whiteboard on the mode of truckload and what type of service you can have done in truckload and equipment types. So if you haven't checked that out, you may want to do that first. But today, we're gonna talk about what you need to be thinking about now in terms of negotiating truckload pricing. So step one is the lanes, right? So have a good understanding of your full truckload lanes. Not just where they're from and where they're going, but one of the volume in those lanes. So you may decide that today you ship in, you know, 78 truckload lanes. And what do I mean by lane? I mean there's a shipment coming. You ship from Boston, and you ship to Cincinnati, Ohio. And in an annual, in a 12-month time, you're shipping 300 loads a year. So how many loads do you ship in your lanes? Identify all of them and what you want to be thinking about here also.

is the seasonality of your lanes so you may have 300 loads a month let's say but 200 of them ship in the final week of the month those are things you really need to understand as you're going out to truckload carriers and and trying to get some pricing that's going to hold with this capacity so identify all your lanes right and then identify the number of loads annually in those lanes and if there's any seasonality around those lanes you do want to be able to identify that when you put this information in front of your carriers you also want to think about what would move spot versus contracts so I'm sure you hear that a lot is this moving under a contract rate or is this moving under a spot rate this is why you need to understand your volumes because what you'll find is if you have less than let's say 25 loads a year and a given Lane you probably want to work in the spot market with that it's gonna be you're gonna be hard-pressed to find a carrier who wants

to commit to the capacity for a full 12 months in hand. That load when it's not high-volume. The other thing you'll find is in a lane like this if you then have a contract rate for these 300 loads a month but there's the majority of them ship in the last week of the month, you may have to move some of them in the spot market because you don't have enough capacity and your contract rate. So again really important to understand and that will help you balance what should move in spot versus what should move in contract. And so what's spot? Spot is you're going out to the marketplace. Now you may just decide today I work with 15 carriers. I have contract rates in place with them and when I have a shipment that I can't move at a contract rate, I'll put it out for spot but I'll just put it out to the carriers that I currently work with under contract or you're gonna put it out to the spot and you're gonna put it out to a bunch of carriers even carriers.

that currently aren't in your and your contract routing to see if you can get some utilization, some capacity, and price. So those are lanes. Next is distance. So in truckload, when you're negotiating that pricing, you're working off of mileage. And so what mileage are you working off of? So as an industry, there are different mileage programs that you can actually subscribe to. So we use PC Miler. It's pretty well-known in our industry. Most of the truckload carriers have it. When we're telling them we use PC Miler. Now, within PC Miler, there's a short route distance, kind of like a navigation in your car. Or there's a practical route difference. And there's also areas of the country where in almost every state, what carriers, drivers, and tractors, and trailers can't travel, right? So there are roads that we can travel on in our car that a truckload, a full truckload carrier cannot. So that's important to understand. And it's a lot to understand. And that's why having a mileage program.

will help you. I'm so explore the mileage programs, and what then you want to do is to make sure that you and the carrier agree that you're going to use this mileage in this lane anytime. They're gonna quote on business for you. The other part about distance becomes the time, right? So we all know this, the hours of service. They have to drive and rest and drive and rest. You want to understand that on your longer lengths of hauls, and you also want to understand that with your delivery requirements. And again, if you don't have a good handle on your supply chain and how your truckloads need to move, you're putting the risk on the carriers to figure it out for themselves. And when you do that, oftentimes you'll pay more in freight. And here's a good example of that. If you're traveling, let's just say you have a customer that you're gonna travel. You know it's a five-day transit time, right? So if you ship on a Monday, let's say, and it's a full five days of transit.

time he gets there that or the driver gets there on Friday, they may be too late to deliver, which means now that driver has to layover and deliver on Monday because the customer's not open on Saturday and Sunday. So what's a layover? You know, the driver can't go anywhere, he can't go get another load. It's Friday night, he has a full load of freight that he can't deliver until Monday. That driver is now sitting for the weekend, that's a layover. These carriers and drivers get paid to drive, so you have to stop them, they can't do anything, you're gonna pay for that, that's called the layover. So again, let's say you've promised a client, a customer to deliver in five days. You can actually, if you look at your supply chain and you look at your mileage, let's say you ship this on Thursday, and again, most companies work in business days and they're not running on the weekends. So if you ship this on Thursday, you now have Friday and Saturday as a plus two days, right? So Thursday, Friday

Saturday, Sunday, and Monday. You've now taken a transient. You're able to say to a customer, I can ship you on Thursday and deliver on Monday, versus a Monday to a potential Friday, most likely the following Monday. So again, mileage plays a big part not just in how you're going to negotiate the price, but also in how you're gonna run your supply chain. So you may decide my longer length of hauls, they're gonna ship on Wednesdays or Thursdays because from a business day perspective, I'm gonna get a faster transit, allowing that carrier to have the weekend to drive. The other part is times at which we've already just covered somewhat here in the distance where you do want to pay attention to the number of mileage versus the number of hours and the number of rests those drivers have to really help dictate what are the best pick-up days based on your delivery options. Now, depending on the industry you're in, time matters as well in terms of you may run a business where your customers aren't dictating when you have

to deliver that Freight, and so it's really important to you that that Freight gets out of the building at the shipper at certain times, versus received into your customers. Or you're in a retail consumer product, food product, and the delivery time is crucial, because if you don't make the delivery time, you're gonna get charged back from your customer. So really, again, having an understanding of timing, it will absolutely help you gain the best capacity at the right price for your Freight. The other part of it, again, is service. So we covered in the truckload mode, there's about 19 different types of equipment. So you're going to want to think about what kind of equipment do I need. If you need blankets or straps, that needs to be outlined in your bid package to your carriers, because they need to make sure one, they have the right equipment, and two, that they're going to price it accordingly. You know, refrigerated trailers are more expensive than drive, and then when you get into flatbed, it's even higher than a reefer.

or a dry and it's really given in the market. How much capacity is there? We talk about this a lot and why you know. Even if you're not in this industry, you hear all the time about driver shortages. You know, there just aren't enough truck aren't enough truckload drivers. There aren't enough drivers in all the handle all of the freight that we're picking up and delivering. And it's absolutely true. You know, I think the average age right now of a long-haul driver is 59 years old. You know, kids aren't coming out of college and aspiring to be truck drivers. And so it's really, really important that you understand as much of this as possible because when you understand how your Freight needs to move and the volumes you have, you can work strategically with your carriers so that they gain the right capacity with the right drivers to handle your Freight. So that's kind of the high level wrap up of truck load pricing.

4 Factors that Makeup Truckload Pricing

Weekly market updates by industry experts, interviews with logistics innovators, and whiteboard lessons to assist companies looking to get a leg up in the marketplace.  The FreightPlus YouTube channel is your hub to our knowledge base!

FreightPlus (formerly Aborn & Co.) creates a fully-managed transportation solution to help organizations gain cost control over their logistic programs. As celebrate 30th years as a market leader in supply chain and logistics our best practices have ensured decades of client success. Our dedicated team is an extension of your staff, committed to the same values and principles we were founded on in 1988.

FreightPlus

Negotiating Truckload Pricing: What You Need to Know

Understanding your full truckload lanes and the volume in those lanes is crucial for negotiating truckload pricing effectively.

It's important to identify the seasonality of your lanes and consider whether you need spot or contract rates based on your shipment volumes.

Knowing the number of loads annually in each lane will help you determine the most cost-effective pricing strategy when approaching truckload carriers.

Truckload logistics involves balancing capacity between contract and spot market rates, taking into account high-volume periods.

Negotiating pricing is based on mileage, considering factors like short route distance and travel restrictions for carriers.

Subscribing to a mileage program, such as PC Miler, is common in the industry to navigate these complexities.

Maximizing Mileage Programs for Efficient Supply Chain Management

Agreeing on mileage usage with the carrier is crucial for efficient logistics and cost management.

Understanding the impact of transit time and delivery requirements can help optimize truckload movements and reduce the risk of extra freight costs.

Managing layover situations and utilizing business days can also contribute to meeting client delivery promises effectively.

Mileage plays a significant role in negotiating prices and planning the supply chain for faster transit.

It's crucial to consider the number of mileage, hours, and rest for drivers to determine the best pick-up days based on delivery options.

Understanding the timing and the type of equipment needed is essential for gaining the best capacity at the right price for Freight.

The Impact of Driver Shortages on Truckload Capacity

There is a significant shortage of truck drivers to handle the freight demand, with the average age of long-haul drivers being 59 years old.

The lack of young individuals pursuing truck driving as a career is exacerbating the problem.

It is crucial for businesses to understand and strategically manage their freight needs to ensure they have the necessary capacity and drivers for transportation.