In the last blog, we went through the process of determining the value of a load, but that was only the first step in selecting which loads to haul and which ones to leave on the dock. Now for the next step, looking at the quality of a load. Value is what a load pays; quality is what does or doesn’t occur as you develop multiple loads into a freight lane. Note: A freight lane is the combination of outbound loads and required inbound loads needed to come back to your original departure location of the outbound shipment. The objective when developing Freight Lane is to craft a series of loads that combine to generate the necessary revenue which creates a profit at the completion of each freight lane run. The combined revenue of all the loads in a specific trip, plus the amount by which this revenue exceeds your Break-Even Point is what determines the quality of the loads.
The biggest challenge to developing a freight lane is that outbound and inbound freight lanes are inherently imbalanced. This is particularly true when working in truckload hauling. The typical description of an unbalanced freight lane would be hauling steel girders to Miami, Florida, from Pittsburgh, Pennsylvania. Pittsburgh is a major manufacturing hub with numerous factories and support industries, whereas Miami is a large consumer locale with very little manufacturing; very little outbound freight. In short, Miami needs the steel to build its condominiums and high-rises, but has very little freight to send to Pittsburgh, thus the imbalanced freight lane. When developing your freight lane it’s important to take this imbalance into consideration. But because a freight lane is imbalanced to some degree, it doesn’t mean it’s not worth developing. There are always going to be freight areas where the inbound freight far exceeds the outbound freight, meaning there will be more trucks than freight in an area. In a well-designed freight lane this imbalance is taken into consideration. It might be necessary to depart a low freight area empty and head to a location which has better paying freight, or it might make sense to take that cheap load to generate cash flow to increase your total revenue on the trip. This is all decided by doing a Freight Lane Development Analysis.
The first step in developing a freight lane is to look at your available outbound freight from your Home Domicile for the niche you’ve selected.
- To what location is the largest amount of freight headed?
- What is the available freight returning to your Home Domicile from the destination of the outbound freight?
- What is the return freight area’s truck-to-load ratio average over the past month, quarter, and year?
- If the truck-to-load ratio is too many trucks and not enough freight for the backhaul, how far will you need to run empty from this area to find a positive truck-to-load ratio which will give you the revenue to return to your Home Domicile? Is it moving your trucks further away from getting back to your Home Domicile?
- Look at multiple scenarios to determine the best routes to produce the highest overall revenue at the end of each round (outbound and return).
- You must have at least one loaded shipment returning (or being compensated at your minimum hauling rate if having to return to your Home Domicile empty) from any backhaul location. The trick is to be sure you’re paid for the miles and time required, regardless whether you are loaded or empty.
The best approach to finding, and continuing to get the best loads for your trucks, is by targeting specific areas where your outbound freight is headed. This means going from a scattergun to the ‘lock and load’ approach with your sights on the bull’s-eye of available loads in your Freight Lane Development Plan.
Good roads and good loads, everyone.