Finding the best Lanes, Negotiations, and Rates

Let's start by defining two key concepts: Front hauls and Back hauls.

Front Haul is a trucking term that actually has many meanings. At its most basic, a front haul refers to a load being transported directly to its intended destination. It is also known as a shipping lane that generates the highest revenue for the shipper or the receiver. Essentially, the front haul represents the route with the highest rate between a specific origin and destination. A front haul market has a few particular characteristics:

Freight carriers are presented with numerous options in the market.

• Carriers can often command a higher price for their services.
• The loads are frequently located in close proximity to the carrier's location.
• The loads are typically straightforward, uncomplicated, and consist of full loads.
• Carriers may choose to deadhead into the market to access higher-rated freight options.

The final bullet point highlights the appeal of a front haul for carriers. Despite its indirect route, carriers are willing to go the extra mile to take advantage of the higher rates and improved load options available. This is made possible by the scarcity of carriers handling the route in high demand by shippers.

Back Haul is also a trucking term and it refers to the return trip after the delivery of the front haul load. It essentially serves as a counterbalance to the front haul. In financial terms, the back haul represents the lower of the rates between a round trip's origin and destination pair. However, a back haul can also occur without a pre-booked roundtrip as long as a load is available for transport in the opposite direction.

A back haul market differs significantly from a front haul market. In a back haul market, the supply of carriers exceeds the demand from shippers, resulting in carriers' willingness to accept loads at reduced rates. These loads are often from shippers other than the one who provided the headhaul, the initial leg of the journey. The primary goal is to avoid deadheading, where a truck travels without cargo, which will be discussed in more detail soon.

Characteristics of a backhaul market include:

• Carriers have limited options to withdraw from the market.
• The likelihood of driving empty miles to access a market for the subsequent load increases.
• To exit the market, carriers frequently incur losses on the route due to pressure to reduce prices.

Many examples of back haul markets exist. Florida frequently experiences an imbalance, with more freight entering than exiting the state throughout much of the year. Similarly, when compared to Mexico, which exports significantly more freight northward than it receives, the United States is also seen as a back haul market.

Another critical distinction regarding back hauls is that they may not always return directly to the origin but instead follow a general path in that direction. This is because carriers frequently cannot afford to be too selective. For instance, if a front haul transports a load from Dallas to Chicago, a back haul might travel from Chicago to Little Rock. Although not a complete return, it brings the truck or container closer to its point of origin.

Carriers prioritize the back haul's destination and how quickly it can be completed. Their primary goal is to get back to front haul territory without driving an empty truck.

Knowing that, let’s look at the following example with the current average rates in the industry for a dry van load from Los Angeles, CA to Seattle, WA, which comes to around s $2.97 per mile, while the average rate for the return trip from Seattle to Los Angeles is $1.00 per mile. Comparatively, this significant difference often leads to the misconception that backhauls always have poor rates.

However, the concept of Front Hauls and Back Hauls is relative to the carrier's base location. If a carrier is based in Seattle, the head haul would pay $1.00 per mile, and the backhaul would pay $2.97 per mile. Therefore, it’s a matter of perspective as well.

The question arises, are carriers doomed to get bad rates one way or another? The answer is no. By employing strategic planning and route optimization, it is possible to bypass poor rates on the spot market or mitigate their impact when working on dedicated lanes.

One technique is to zigzag the truck through different states with higher-paying loads, rather than booking a straight backhaul. For instance, a carrier could transport a load from Los Angeles to Seattle, then zigzag through Salt Lake City, UT; Reno, NV; Phoenix, AZ, and back to Los Angeles, thus earning a higher average rate per mile while passing through several states.

However, this zigzagging approach may not be feasible for company drivers with scheduled home time. In such cases, carriers can employ a "game of averages" strategy. Likewise, by carefully planning routes and loads, carriers can ensure that drivers return home on time while maximizing earnings over multiple loads.

The principle of supply and demand also significantly impacts trucking rates. When there is a high demand for trucks and a limited supply, rates tend to increase. This principle applies to specific regions and weather conditions as well.

During winter, states like Montana, Wyoming, South Dakota, North Dakota, and Nebraska experience high inbound rates due to carriers' reluctance to deliver in these areas. Similarly, dense cities like New York City, Philadelphia, Los Angeles, and Chicago have higher rates due to the challenges of maneuvering semi-trucks in those areas.

States with a shortage of loads, such as Montana, North Dakota, South Dakota, Wyoming, Nebraska, and sometimes Florida, also tend to have higher rates. Therefore, carriers may have difficulty finding loads out of these states, leading them to accept higher rates to deliver there.

In terms of negotiation, avoiding states with challenging conditions or limited loads is not a viable strategy for maximizing earnings. Calculated risk-taking is crucial for success in the trucking industry. Carriers need to analyze factors like weather, density, and load availability to determine the appropriate rate for a particular load.

One example of strategic planning involves considering the deadhead miles and potential loads in nearby areas. If a carrier is offered a load from Allentown, PA to Gainesville, FL, which pays $2100 for 970 miles, they might initially be tempted to skip it due to the lack of loads in Gainesville. However, by factoring in the deadhead miles to a nearby area with ample loads, such as Savannah, GA, the carrier can calculate an adjusted rate per mile that includes the deadhead and still ensures profitability.

By incorporating deadhead miles into rate calculations and strategically planning routes, carriers can optimize their earnings and avoid getting stuck with poor rates.