Who is responsible for establishing the rates a carrier charges? It's up to the carrier to know how much revenue is needed to keep its trucks running. There will always be an ebb and flow to the amount of freight in relation to the number of trucks in any given location. More trucks equates to fewer available loads for your carrier and lower rates. A smaller number of trucks results in more available loads and higher rates.
A carrier must have a rate range from high to low within which it is comfortable hauling. There must also be a comfort level with how much available freight is in a given location so the carrier knows from which end of the rate range it should be quoting.
Put another way, it is virtually impossible for a broker to know the break-even point or the profitable rate range of a specific carrier; there are simply too many variables. A broker should know the truck-to-load ratio; the rate range of the freight in specific areas based on truck-to-load ratios; and his shipper's needs. Just like the trucker, though, the broker needs a rate range within which to work. It's the communication of all this information between brokers and carriers that creates a fair rate environment for all involved.
In surveys I have conducted, I've found that nearly 95% of small carriers have no idea how to determine a hauling rate range. That one aspect alone explains why it appears brokers take advantage of these carriers. I'm not going to say there aren't brokers who exploit this weakness, but from my experience, most are not doing it intentionally.
In what other business does the service provider ask the customer what they are willing to pay for the service they need? When you take your car in for service, when was the last time the mechanic asked you what you thought the price of the service should be? And if that mechanic did ask you, would you tell them a high rate or a low one? The majority of people would go with a low number. That's all a broker is doing, and carriers have been playing along.
A carrier must be willing to establish a rate range and negotiate to a rate within that range, otherwise it will continue to be at the mercy of every broker and shipper by placing control of its revenue in their hands.
Contact Tim Brady at 731-749-8567 or at www.timothybrady.com
