A Strong Start for Spot Market in 2014

For January, this is a stunning map. What we are seeing is that in most of the country we have very tight capacity and rates should remain strong for the rest of the month.

Source: DAT

Clearly the weather at the beginning of the month had a big part in this. The lesson for all Independent O/O’s is when you see weather, regardless of the time of year, you need to start planning you next moves to capitalize on the coming truck-to-load imbalance.

Now, I love data and when I can see it graphically like this. I can quickly start looking for ways that I can take advantage of tight capacity.

What I see is a couple opportunities that most would tell you to avoid. Now these are not for the faint of heart but if you are smart and know how to negotiate and who are your best candidates to negotiate with are, you can score a big week.

State graphics-12

Florida

I love the opportunity with Florida right now.

“You are crazy Bill. There is no imbalance in Florida.”

And that is what everyone is thinking. They can make good money running other markets and avoid this all together. But Florida is a consumption state. Take, take, take and they aren’t giving out any freight right now. But they still need their sun screen and Walgreens knows that if they don’t have it the customer will walk across the street to CVS and buy it. So they are going to pay to get the sun screen on the shelf (remember, everyone is running with low inventory levels these days).

But that is only part of it. Because normally that still wouldn’t pay enough to make it worthwhile. But as I look at the map I see that North Florida has an imbalance. So for some planned deadhead you can move North and get a better than normal rate.

But you have to be smart and understand how the markets are working.

The sad fact is that many brokers have seasonal rates. And since January is typically (typical in terms of what the uniformed think) a slower month they will bid a lower rate. They are going to be very reluctant to go into their pockets to move this sun screen. And they likely don’t have room with the way these contracts are designed to go back to the shipper and get more money. So they are going to sit on it and take a service failure.

The other sadder fact is that many of the brokers don’t actually own the freight in times like this. Because Broker A is having a harder time moving the freight than normal they will reach out to other brokers to help them move it. Further reducing your ability to negotiate the rate you need.

No of course, don’t not call on these but understand the dynamics at work. Farm2Fleet has a driver that regularly gets good rates from CH Robinson.

Carriers are in a better position to get a good rate from. They will typically have more money in the load to start and they HAVE to move it. Service failures like this are not an option for the carrier. Taking a loss is typically less of an impact and often they have penalties if they have a failure.

The best option is working with 3PLs that are paid a flat rate. They have the room to move up on rates because it is being passed on to the customer. And the good news is that many of these accounts are coming to them when the broker fails to move the load. So the customer is already expecting to pay more.

State graphics-13Denver

There should be a big red flashing sign here. When do you see an imbalance like this in Denver? What is great about Denver right now is the customer is already expecting to pay more to move into the market. So getting the rate that you need shouldn’t be as hard as Florida.

But like going into Florida, you may need to negotiate a little more because the contract rate is going to reflect the typical market conditions.

Caution Icon-07Be Warned

Capacity can change quickly. So grabbing a load on Wednesday to deliver Friday and reload on Monday is a big gamble. Especially in Denver when you are talking about weather. This time of year you can get delayed days with a decent storm or add days because it is just slow going. And while you will likely still be able to get a rate you have lost days of productivity.

Common sense only works in common conditions. What we have now is not common and the educated Owner Operator can take advantage of these conditions.

By the time I post this the map will likely be out of date. But us this as an example to start thinking differently when conditions like these present themselves.

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