Setting up a profitable freight lane takes more than just being in the right place at the right time. It’s more about understanding the dynamics of what freight is moving in what direction during certain periods of a month. A freight ‘lane’ can be any of a number of shapes and sizes. It can be a Point A to Point B and return to Point A. It can be in a triangle; square, an octagon. Or it can look like the six-pointed star we drew as kids, or a look all its own. In other words, the shape isn’t as important as the freight that’s available to haul at the times that it’s needed.
Freight Lane and rates. 10 steps to designing a profitable freight lane
Important Note: Before you begin the process of developing your plan you need to establish a freight plan and rates range that encompass a range from your break-even point to your highest profit level. Don’t expect shippers and brokers to know what you need in revenue; that’s your responsibility.
1. Determine your beginning point; this is usually the domicile or home base of your operation. As a small or micro-motor carrier, this will be where you find the best paying freight in your freight lane the vast majority of time. The reason is fairly simple – home is where you know the territory the best, where you’re more likely to know a principle owner or general manager of a manufacturer or distribution center and you can develop a direct-ship relationship (one that doesn’t require brokers’ involvement).
2. Make a list of all the local manufacturers and distribution centers within a 50 to 100 mile radius of your home base.
3. Call each one and ask to be placed on their preferred carrier list. Keep in mind not all will accommodate you, but several will. Those are the ones from which you’ll start working to develop your first leg of your freight lane.
4. The shippers who won’t put you on their preferred carrier list are usually using a freight broker or 3PL to handle their shipment scheduling, so find out the names and contacts for those companies. Then call the 3PLs and brokers and get on their preferred carrier list.
Note: No need to discuss hauling rates with any of these folks at this time. The idea here is to garner a sizeable list of available freight going out of your area.
5. Once on these manufacturers’, DCs’, freight brokers’ and 3PLs’ preferred carrier list, then contact them again and ask:
what areas do they currently have the most difficulty in getting the other carriers to haul to?
a list of available regular outbound destinations for the majority of their freight
what services they’re currently not getting from their other carriers that they’d like to be getting?
This provides you with three valuable pieces of information from which to begin building your freight lane.
6. Look at the areas into which they’re having difficulty getting carriers to haul. Find out what kind of freight is available from these areas and how frequently these loads occur. You might discover that it’s a dead freight area with very little outbound freight available, which usually equals very low backhaul freight rates. This is extremely valuable information when providing the shipper with freight lane rates, in that you may need to quote a higher rate that covers your deadhead miles to the nearest location of decent-paying freight. In other words, a low truck-to-load ratio in an area means a higher freight lane rate going in.
7. Start looking in an ever-widening circle out from the low rate or no freight area until you find freight that fits into your carrier’s established hauling rate range. That will provide you with the distance and time requirements to establish your freight lane rate from your home base to the low outbound freight destination.
8. Follow the same procedure looking at all available freight going to different destinations to find what will work in conjunction with the difficult outbound freight or as a stand-alone outbound load.
Note: It may require the development of one or more additional freight legs within your freight lane to generate the required revenue to make the lane profitable.
9. Next take a look at the services the other carriers are not providing to the shippers, brokers and 3PLs and see if you can develop a plan to provide those services. Determine whether it would require an increase in what you charge to haul the freight or if you could do it as a value-added service at no charge, making you a far more valuable carrier to the shipper, broker, or 3PL.
10. The final objective is to design a freight lane for each of your trucks that covers a full month of hauling. The combined revenue from all the legs of the lane needs to achieve the profit necessary. While you may have a few legs that are low revenue, it’s the grouping of all the legs of a freight lane and their associated revenue that determine its profitability.