In any market, demand and supply are the main forces that determine prices. Freight rates are no different. Freight rates increase when shipper demand is high, and carrier supply is low. Conversely, when demand is low, and supply is high, the prices decrease. The logistics trade refers to these two phenomena as soft and tight markets.
Read on to learn about soft markets and how to handle this situation as a driver or owner-operator.
What is a soft market?
In a soft market, the supply of carriers exceeds the demand from shippers. As a result, freight rates fall since carriers begin to compete with each other to get shipments. This gives shippers more options to find competitively priced consignments, especially for spot loads.
How a soft market affects carriers
A soft market forces carriers to lower their prices to get shipments and avoid downtime. It is not profitable for shipping services to forego loads even when they bring in less income. During this period, shippers have a better choice of carriers at affordable pricing. It creates a chance for business owners to arrange a spot shipment without paying extra.
Ways carriers can save money and keep revenue coming through in a soft market
The top expense for owner-operators is fuel, and with the price of diesel constantly increasing, it’s crucial to find ways of saving on fuel. Here are some tips that can help owner-operators reduce fuel costs.
Reduce average speed
Shippers and freight brokers often encourage speedy delivery, so drivers drive faster to appease them. Yet, most experts agree that increasing speed does not necessarily lead to less fuel consumption.
Kamion powered by Loadsmart has features such as Fuel Cards that help to import fuel costs for easy IFTA reports. You can save on money and miles by letting technology tell you where to fill up and how much fuel you require based on the current diesel price and the average miles-per-gallon.
Limit the amount of time spent idling
Most drivers idle to power accessories and climate control at night. Nonetheless, idling can consume approximately half a gallon of fuel per hour, increasing fuel costs, especially since the national average has reached about $5.25 a gallon for diesel. Instead, owner-operators and carriers can invest in an auxiliary power unit which will help to reduce fuel costs.
Be mindful of biofuel
Biofuels are usually more expensive and produce lower mileage. Read your engine warranty to know how much biofuel is allowed for your truck and use only the approved fuels.
Purchasing the right type of fuel
In some rural areas, it can be hard to find ultra-low-sulfur-diesel. So ensure you carefully check the labeling if you buy fuel from an outlet that isn’t a truck stop.
A preventative maintenance routine can help ensure your truck runs as efficiently as possible. For example, a dirty air filter, a compressor leak, or low oil can affect your mileage per gallon.
Constantly checking your mileage per gallon
Divide the number of miles between stops by how much fuel you use. Do this at each stop and track it on your phone or a notebook. If you notice a drastic change, try to figure out why. Of course, many factors that affect mileage per gallon are outside your control (for instance, weather), but you must keep track of changes since they might indicate an issue with your truck.
Be careful when choosing your truck
Consider things such as maintenance and weight when choosing a truck. A heavy chrome and big engine may be appealing, but consider aerodynamics to reduce fuel costs and increase profits.
Check tire pressure regularly
To cut on resistance, check the air pressure on all your tires and fill them up to the manufacturer’s stipulations.
Slow your deceleration and acceleration
Save fuel, driveline, tires, and untimely engine wear by losing the lead foot. Slowing your acceleration is essential, especially on hills, because it reduces the effects of gravity.
Be careful when shifting
Let RPMs be the determining factor when driving, not engine sound. When in doubt, the manufacturer can help you find that sweet spot.
Capitalize on fuel tank storage
You should opt for larger dual tanks when purchasing a truck. This will allow you to stock up on super-cheap fuel and reduce the number of fuel stops needed.
Ensure you comprehend low-fuel-tax states
When choosing fuel stops, ensure you understand the difference between pump price and the actual price of fuel without taxes. This might mean that the next state has the cheapest fuel despite having a higher pump price.
Try and get a fuel surcharge
Numerous carriers charge a fuel surcharge when the national average rate for a gallon of diesel exceeds a specific price. As long as you know your truck’s mileage per gallon, you can determine how much value you can get from a fuel surcharge.
Get lighter wheels
Even though aluminum wheels cost much more than steel wheels, most long-haul trucks use aluminum because of the dramatic weight reduction. Aluminum wheels have a higher resale value compared to steel wheels.
Get trailer side skirts
Manufacturing companies claim these devices can improve fuel usage by over 5%, and they cost only $2,900 to install in each trailer. Do the math to see just how much fuel these devices will save you in the long run.
Consider buying low-rolling resistance tires
Deep tread tires have more rolling resistance when they are new. Low-rolling resistance tires have a more resilient tread but at shallower depths.
Consider changing your route, reducing the number of side trips, and using more precise directions. You’ll see a reduction in fuel costs.
Carrier TMS helps you better manage fuel costs
The soft market can be tough to navigate as a driver or owner-operator. The soft market forces carriers to lower prices to avoid downtime and get shipments. In a soft market, an effective way to save money and keep revenue coming means carriers need to find ways to reduce fuel costs. At Kamion, we provide tools to help drivers reduce fuel costs and increase profits during a soft market.
Sign up for a demo today to learn more about how a truck management system can help you handle the soft market.