The lies of supply and demand in trucking
Supply and Demand in Trucking
One of the biggest lies that you will be told in trucking, is that the rates are because of the supply and the demand. If this were true then all loads out of New Jersey would pay more than loads out of Kansas City and so on.
Here is an example of the true supply and demand in trucking:
I will use a penny, a nickel, a dime, and a quarter as the example.
One truck is a penny per mile, the next is a nickel, the next a dime, and finally the next a quarter.
One load is a penny per mile, the next is a nickel, the next a dime, and finally the next a quarter.
Take this change out of your pocket put it on the table and you will see how the game works.
The shipper tells the broker that he wants a penny truck. The broker goes out and finds one for him. The penny truck is now gone from the market.
A little later the shipper tells the broker to find him another penny truck. Problem is that there are no more pennies in the market. But the broker has said that he can find the penny truck. What does he do, he convinces a nickel truck to haul the load for him. Now the nickel truck just took .04 per mile loss so the shipper and broker could get what they want.
Let's reverse this:
A trucker calls on the load and it pays a quarter, now it is ok for the penny, nickel, dime, trucks to haul such load. The load is then gone. Now the next truck calls on another load and it is offered to him for the penny rate, but he is a quarter truck. What should this trucker do? Either make a decision to bounce to a better market where there are quarters, or wait for a quarter to pop up. If he takes the penny load then he will be .24 per mile in the hole for that load.
The reality is there are only so many pennies in the market but the shippers and brokers will always want the penny truck. This is where they are either lying or they are screwing up. They should make the assumption that all trucks cost a quarter and then their basis is covered at all times. I personally believe that they are lying. A person that knows how to make widgets surely by now has done the numbers on what it would cost them to run their own trucks. They know they can't run their own trucks for even the quarter, so they are getting a good deal. But NOOOOOOO they are greedy and we are suckers for falling for the penny more times than not.
Truckers why do you fall for the lie, if you are a quarter then you need to haul for a quarter. Plain and simple is it not? Quit believing the supply and demand lie, you can solve that problem by removing yourself from that market or not going to that market without getting paid for some bounce miles out.
If you are a penny truck then you should be trying to get at least 20% on that penny. The same holds true for whichever rate per mile you are at. 2017 is the year that we need to stop the stinking thinking and wake up to how to run our business on a profit margin instead of hoping that it will all pan out.
Winners plan to win
Losers fail to plan
Alfred Scott Jordan
Powerhouse Transportation
Founder
Independent Carrier Group
Freedom with Integrity