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February 12, 2015                                                                            Issue #93
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Steve Hull, Editor
Allen Lund Company
Manager - Portland Office
(800) 999-LUND (5863)
Freightonomics and the Broker

In today's crazy world where the news cycle is instant and ever changing, we hear a lot about fair share. The hot button of woe changes each day and there are always folks from both sides of the argument fighting for our attention and seeking to influence our beliefs and opinions.


The vast majority of folks in America have little interest to jump into the scum themselves, but are more than happy to watch and form their opinions from that endless cycle of talking heads.


The transportation world of trucks is not much different. For years through the ups and downs (but always trending up) of diesel fuel prices, most carriers we talk to have rightfully sought better rates to help cover the ever increasing fuel costs. The upward volatility has been so extreme at times that neither direct shippers nor brokers could keep up with the escalation through contract FSC programs. I have talked to many of our valued carriers, some of which being owner operators, and the conversation was always the same: "How can we make money at your rates with fuel prices so high?" Often they would tell me that they thought I was profiting handsomely on their backs as many of the talking heads in our industry were telling them so. I was often without an answer that would satisfy their concerns. The truth was that usually, only a portion of the fuel surcharge was my profit. My best response was "we understand but we don't set the market, we just work within it." We knew how hard it was for so many to keep the wheels rolling but the loads would most often move at the rates we were offering. That is the beauty of our free market society.


Fast forward to January 2015. Fuel is down almost $1.00 a gallon since this time last year. The majority of that drop has occurred since August. The average shipper that has a fuel surcharge program is paying 16 cents less per mile to move their product. The fuel cost to the carrier is down $0.16/mile to move the same load they moved a year ago. I can tell you for sure that the broker is not paying 16 cents less per mile for the freight we handle.


A painful reality to those of us in this industry is that drastic reductions in fuel prices, capacity shortage, driver pool which coincides with the production increases of a recovering economy results in 2, 3, 4, or greater point margin declines. The loads to available carrier ratio sets the freight rate market. When I ask my valued carriers how I am supposed to make a living paying the rates they command right now, they will probably tell me that they "don't set the market, they just work with in it." I can't argue with that.



Gerald Ebert

Manager, Richmond Office  

Gerald Ebert is manager of the Richmond office. He has been with the Allen Lund Company for 15 years and in the transportation industry for 16 years. 

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