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Cost per mile ...
- Thread starter Michael Ludwig
- Start date
So are you saying every mile would cost $2.88cdn or $2.48usd?
Rob stated earlier the under $1.5 was low and over $2.5 was high.
How do you explain the freight rate index being dead on?
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G Roch; To acquire an actual cost to operate is a very, very simple calculation. Take your year end financial statement, add up all of the expenses and divide it by the number of miles driven in the year. That is an overall cost per mile, and that is what the freight index uses, however, it is not indicative of the industry as a whole. It only represents a mean of those companies that report. On a guess, probably 1% or less of the entire industry population and then likely only the big carriers.
WALTERK; I get their email blast. I never even look at it. It has zero influence on how we conduct our business. On the other hand, the one thing we do subscribe to, and pay attention to, is the FCA Fuel Surcharge Index.
WALTERK; I get their email blast. I never even look at it. It has zero influence on how we conduct our business. On the other hand, the one thing we do subscribe to, and pay attention to, is the FCA Fuel Surcharge Index.
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Sorry, missed that part ... the short answer is NO, each mile would not cost top dollar. There are a number of variables to consider and they all depend on the size and scope of what your are offering. Top dollar only refers to what the carrier would need per mile over a period of time to cover all costs whether they are actually rolling stock costs or others.
Having said that, here is a little insight on how we do things (I am NOT speaking for anyone else). One-off load offerings are the most expensive. Package deals are calculated differently, and at certain volume levels consider the cost of doing only your requirement.
One-off Load Example 1 ... you have outbound from Toronto to Vancouver. I need $12,500.00 to do the round. I can load back for $6,000.00. Your cost is $6,500.00.
One-off Load Example 2 ... You have outbound from Toronto to Columbus. I need $1,500.00 to do the round. I can load back for $1,000.00. Your cost is $500.00.
Ideally, you want to hit a carrier that has strength in a certain lane or specific area.
Because our methods for calculating package deals are proprietary, I can't discuss them in a public forum. Ideally, for package offerings, you want to tap into a carrier that is looking to, or willing to, expand their operations.
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I've actually been involved on both sides of the fence so I have the perspective of both. I think having the all-around knowledge gives me an edge with the right customers. There are customers out there who shop rate and don't give a damn if the carrier's are sustainable or not, but most are actually mindful of it, believe it or not.
But anyone who can claim that there is a standard cost per mile to run a truck is really foolish. The poll is actually useless.
Michael Ludwig is right that the industry needs brokers. Heck, every industry has and needs brokers! However, a good broker will tread the line of offering the best value to its customers while still making sure their suppliers are sustainable. I believe most players out there make an attempt to do so, but some simply don't have the background to understand these things, and as in all industries there are some out there who just don't do business in a respectable manner.
I'm not voting.
But anyone who can claim that there is a standard cost per mile to run a truck is really foolish. The poll is actually useless.
Michael Ludwig is right that the industry needs brokers. Heck, every industry has and needs brokers! However, a good broker will tread the line of offering the best value to its customers while still making sure their suppliers are sustainable. I believe most players out there make an attempt to do so, but some simply don't have the background to understand these things, and as in all industries there are some out there who just don't do business in a respectable manner.
I'm not voting.
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An owner operator has exactly the same costs as a company truck ... including land tax (his wife and kids have to live somewhere). Yes, he pays less land tax than a carrier does, but he also pays more for a truck than a carrier does.
The only way an owner operator works cheaper than a company truck is if he/she devalues the worth of their time. The owner operator takes the chance that the load rate will make his time more valuable. If, as a company, you are using owner operators to haul cheap freight, you're basically cheating them out of their opportunity to make a better living for themselves.
The advantage to a company employing owner operators is that the company does not have to put out the capital overhead that a company the does not employ owner operators does.
The only way an owner operator works cheaper than a company truck is if he/she devalues the worth of their time. The owner operator takes the chance that the load rate will make his time more valuable. If, as a company, you are using owner operators to haul cheap freight, you're basically cheating them out of their opportunity to make a better living for themselves.
The advantage to a company employing owner operators is that the company does not have to put out the capital overhead that a company the does not employ owner operators does.
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operating costs
All successful carriers must have an inkling of what their costs per mile are.
There are several ways of looking at these costs. Just like introduction to economics there is the macro and the micro.
I would equate the Macro with your annual operating cost, which as another member had posted earlier, is simply all expenses ( fixed and variable) over the fiscal year.
Secondly, there is the snapshot of operating cost that can be viewed either on a shorter period such as a month and also viewed on a specific lane.
Assuming, dry box , 2 axle Canada /US cartage the rate will be close to $1.75 on an annual basis.
Mr. Shneider with his 15000 tractors might be close to the $1.50 mark. Most fleets of under 30 units will not have Schneider's efficiencies of scale.
Running heavy loads over mountainous terrain will also greatly increase your costs.
I do not agree with Faye. An O/O's costs are not lower than a properly run carriers' with his own equipment, quite the opposite.
There is also the trailer to consider, O/O' s, especially Eastern Europeans are hard on your equipment. They are hard on brakes and flat spot tires( they love that spike) and generally never even look at the trailer's mechanical's.
Now enter the fray, the new carriers that do not actually know their costs.
They will run the very cheap freight offered by some Freight brokers often in both directions and eventually run out of money. Unfortunately for the reputable carrier, there will always be a constant replenishment of these new entries.
These are the carriers that will run from Mtl. l to New Jersey for $900.00 when they could get closer to $1300 if they knew where to look.
I recently read an article in a trucking magazine by a reputable author ( at least I thought he was ) exactly about cost and profit.
This gentleman, actually suggested that running a back-haul for under operating costs was savvy. Because, what he was concerned with was the round trip viability.
If we gave him a gun maybe he could shoot himself in the foot. What is primordial is that carriers stick to their guns and not haul anything for less than it costs to haul it, the price of that back-haul would increase.
Simple supply and demand.
Might I add that, it does not matter if it is a load broker or a carrier that offers the freight, they are both equally needed participants in this industry.
All successful carriers must have an inkling of what their costs per mile are.
There are several ways of looking at these costs. Just like introduction to economics there is the macro and the micro.
I would equate the Macro with your annual operating cost, which as another member had posted earlier, is simply all expenses ( fixed and variable) over the fiscal year.
Secondly, there is the snapshot of operating cost that can be viewed either on a shorter period such as a month and also viewed on a specific lane.
Assuming, dry box , 2 axle Canada /US cartage the rate will be close to $1.75 on an annual basis.
Mr. Shneider with his 15000 tractors might be close to the $1.50 mark. Most fleets of under 30 units will not have Schneider's efficiencies of scale.
Running heavy loads over mountainous terrain will also greatly increase your costs.
I do not agree with Faye. An O/O's costs are not lower than a properly run carriers' with his own equipment, quite the opposite.
There is also the trailer to consider, O/O' s, especially Eastern Europeans are hard on your equipment. They are hard on brakes and flat spot tires( they love that spike) and generally never even look at the trailer's mechanical's.
Now enter the fray, the new carriers that do not actually know their costs.
They will run the very cheap freight offered by some Freight brokers often in both directions and eventually run out of money. Unfortunately for the reputable carrier, there will always be a constant replenishment of these new entries.
These are the carriers that will run from Mtl. l to New Jersey for $900.00 when they could get closer to $1300 if they knew where to look.
I recently read an article in a trucking magazine by a reputable author ( at least I thought he was ) exactly about cost and profit.
This gentleman, actually suggested that running a back-haul for under operating costs was savvy. Because, what he was concerned with was the round trip viability.
If we gave him a gun maybe he could shoot himself in the foot. What is primordial is that carriers stick to their guns and not haul anything for less than it costs to haul it, the price of that back-haul would increase.
Simple supply and demand.
Might I add that, it does not matter if it is a load broker or a carrier that offers the freight, they are both equally needed participants in this industry.
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This is a great thread. I agree with Mr Ludwig to respectfully disagree waith Faey 06. If it is consistently cheaper to have an owner operator, then either not all costs are being considered, or the o/o is underpaid. To me, the owner op alternative FIXES my cost...less surprises, opens up another pool of drivers, ties up less capital, and generally has slightly higher productivity.
You still need your terminal, your admin, your safety dept, so the overhead should be the same, it will just be different line items.
Alx2...I believe every carrier knows what their variable costs are. The problem that befalls the less "savvy" for lack of a better word, is they do not calculate all their fixed costs. NYS HUT, accountant fees, HVUT, process agent, SCAC...all those little piddly amounts (and we know there are hundreds) can add up to several cents a mile. I said below there is a cost per day to own a truck...do you know how many companies fail to see it that way? They equate everything to "per mile"...You HAVE to look at both. Sit a truck for a day waiting for better freight, you need to make 300.00 more on tomorrow's load to be on par with where you would have been today.
You still need your terminal, your admin, your safety dept, so the overhead should be the same, it will just be different line items.
Alx2...I believe every carrier knows what their variable costs are. The problem that befalls the less "savvy" for lack of a better word, is they do not calculate all their fixed costs. NYS HUT, accountant fees, HVUT, process agent, SCAC...all those little piddly amounts (and we know there are hundreds) can add up to several cents a mile. I said below there is a cost per day to own a truck...do you know how many companies fail to see it that way? They equate everything to "per mile"...You HAVE to look at both. Sit a truck for a day waiting for better freight, you need to make 300.00 more on tomorrow's load to be on par with where you would have been today.
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I do think with guys with reefers in particular who run produce, it's definitely better to run with owner operators as far as cost. A carrier with owner-operators reduces risk by not putting out the captial outlay for the trucks (though much more often than not they own the trailers), however the risk they are under is that O-O's are more likely to run outside the law as far as log books are concerned. Eventually it'll catch up to you on the SAFER.
But with how the OFTB and grocery store DCs operate, I don't see how one can possibly run these with company trucks.
O/Os conversely on short runs are a poor choice. Generally their trucks are more expensive becuase they are O-O spec'd versus fleet spec, with more cosmetic and comfort options and more importantly, more powerful engines (O-O spec trucks usually get roughly 6 mpg for a modern shaped truck with aero add ons, a long nose truck probably .5 mpg less than that, while a fleet spec truck with the right gearing and speed limited it's actually about 7 mpg on our fleet).
My point is -- the O-O versus company truck thing really depends on the routes you run and the type of freight you haul.
But with how the OFTB and grocery store DCs operate, I don't see how one can possibly run these with company trucks.
O/Os conversely on short runs are a poor choice. Generally their trucks are more expensive becuase they are O-O spec'd versus fleet spec, with more cosmetic and comfort options and more importantly, more powerful engines (O-O spec trucks usually get roughly 6 mpg for a modern shaped truck with aero add ons, a long nose truck probably .5 mpg less than that, while a fleet spec truck with the right gearing and speed limited it's actually about 7 mpg on our fleet).
My point is -- the O-O versus company truck thing really depends on the routes you run and the type of freight you haul.
I am fully aware of the difference...maybe I was a little obtuse...I was talking from a company point of view for costing. But theman has covered everything very well
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In my experience, with O-Os you have one or the other
a) someone who has pride in ownership of their truck and will keep it pristine -- and generally with some mechanical knowledge to do some work themselves
b) someone who will run the thing into the ground -- I've had to dismiss owner-ops in the past because their equipment was frankly making us look bad
Another thing with owner-ops -- if they use your trailer, 'broker brake' is the term ... many of you will know what that means.
But as I said, whether O-Os or company drivers are better depends largely on the type of freight you run.
a) someone who has pride in ownership of their truck and will keep it pristine -- and generally with some mechanical knowledge to do some work themselves
b) someone who will run the thing into the ground -- I've had to dismiss owner-ops in the past because their equipment was frankly making us look bad
Another thing with owner-ops -- if they use your trailer, 'broker brake' is the term ... many of you will know what that means.
But as I said, whether O-Os or company drivers are better depends largely on the type of freight you run.
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I call BS on this one. Maybe some company drivers do but I am proud to say my company drivers all take pride in their company equipment and look after it very well. I have - as theman said - had to let Owner Ops go because of shoddy trucks.
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I concur Rob.
I have seen company drivers that would make excellent owner ops, and don't only because they feel they can put more in their jeans without a nickel invested (I don't disagree)
And I have seen owner ops that shouldn't own a bicycle, and wouldn't know how to maintain it either.
TheMan has it right, depends on the job, freight type, distance, etc.