Anyone who has needed to ship full truckloads has undoubtedly encountered the spot freight market and its ever-changing prices. Two months ago it cost a little over a thousand dollars to ship your load, and now it costs nearly 500 dollars more. Why is that? There are many factors that go into calculating full truckload shipping costs. Read below as we explore just a few of them.
Where are you going, where are you coming from? These questions are crucial to understanding why your full truckload rates change from load to load. Different lanes have different per-mile rates based on factors such as fuel prices, truck type, and tolls along key highways. These rates directly influence the cost of shipping.
Region and demand are closely related. Take Florida for instance: In January, you may find a truck for a dry van load from central Florida to Atlanta at $400. That same lane in July could cost as much as $1000. How is that possible? Easy, demand. Central Florida is one of the largest producers of oranges in the world, so in peak season demand for a truck in that area is high. In January, or off season, the demand is back to normal. High demand creates more competition for a limited supply of trucks, driving up full truckload rates.
When the weather goes bad, the costs go up. Why? Winter storms, hurricanes, floods and other natural disasters cause a complete upheaval in the trucking industry. When trucks are immobilized by bad weather, freight companies find themselves with capacity problems, and therefore charge shippers premium rates that reflect the imbalance of supply and demand. Additionally, requests for shipping during inclement weather often have shorter lead times, reducing the amount of time carriers have to plan and coordinate their trip, which also leads to higher prices. When roads are iced over, truck drivers are often forced to reroute, take more stop offs, and use more fuel to navigate their load safely to its destination, causing additional accessorial charges, which are added to the shipping cost.
Though the economy is slowly but surely recovering from the recession, the state of the economy has a huge impact on full truckload quotes. When Americans are out spending money, increased demand strains supply chains and freight companies that operate them. Which leads us to…
As previously stated, the economy plays a large part in the trucking industry. When the recession hit, demand slumped which caused many freight companies to hold back on increasing their fleet size. Since the economy is improving, demand is increasing. Throughout 2014 the industry operated at a FTR active truck capacity utilization rate of over 100 percent. Though the rate has dropped to between 95 and 98 percent in 2015, there is still little room for increase. Any sudden influx in demand can cause companies to operate at full capacity, which will in turn raise shipping costs.
Freight is a constantly evolving industry. As new rules and regulations are passed, drivers and companies are expected to adapt– and quickly. Take for instance, the recent passing of stricter emissions regulations. When these regulations were passed, carriers had to purchase new and more efficient equipment and partake in routine maintenance. To make up for these new costs, carriers compensated by raising shipping costs. Another recent change, this one regulating drivers’ hours, reduces the number of loads a driver is able to make in a week, which in turn is compensated by an increase in cost.