Spot market freight surged last year, creating the high demand for trucks that led to the high rates we saw throughout 2014. That's presented new opportunities for carriers, and even as big fleets have been losing drivers, sales for Class 8 trucks have soared. Last year was the second-best on record for Class 8 orders, and the trend is expected to continue. As more and more carriers add trucks and lease on owner-operators, is it time for you grow your fleet?
Growing on the Spot Market
Parm Sandhu and Raj Nijjar started White Falcon Express as a two-truck operation in San Jose, CA, in May of last year. Since then, the partners have purchased another truck, two dry van trailers and leased on two owner-operators.
“We have been able to survive and expand on the spot market alone,” says Sandhu. “Right now our plan is to purchase another truck in 2015, and potentially add two more dry van [trailers.] We are focusing on adding newer equipment – 2010 year model and up for tractors and brand new dry vans. This allows us to decrease our short-term maintenance cost, keep the trucks on the road, and provide quality equipment to our customers.”
Sandhu explains that the business was running dedicated contract loads in September and November, but they eventually left the contract. “The spot market loads for that lane were providing 8¢ to 15¢ more per mile, and there was no backhaul freight coming from that lane,” he adds. With the new, 100% spot market strategy, White Falcon had more flexibility in selecting loads and routes for better round-trip rates and schedules.
DAT RateView shows that spot market rates from Memphis to Dallas have stayed higher than contract rates in the same lane. Even the spot market rate for the backhaul trip was higher than contract rates from May through July (see below).
Lion Paw Enterprises in Lehigh Acres, FL, has enjoyed similar success since going into business in July. Currently a three-truck operation, they expect to add two trucks early this year and recruit more owner-operators to lease on. “I feel as though we took the plunge into our own authority at just the perfect moment,” says Dee Preteau, who takes care of the company’s bookkeeping and dispatch operations.
“We don't have any regular lanes,” adds Preteau. “At this point, we are doing the spot market. I've found that by offering great service, the brokers with whom I regularly work are happy to do their best for me.”
White Falcon Express and Lion Paw Enterprises are benefiting from the high demand that’s led to a surge in spot market freight, which was up 54% in 2014. Of all the van moves posted on the DAT load board last year, 53% were headhauls, where headhaul is defined as the higher rate in a pair of moves. And in the past 12 months, 45% of freight moves on the spot market paid more than the shippers' contract rates on the same lanes.
Driver Shortage Continues
While rates have been high, fuel prices are declining, and some HOS restrictions have eased, other costs could be climbing. The proposal to raise the minimum amount of liability insurance required of carriers is still in the public comment phase, but if passed, it could mean higher insurance premiums. And despite opposition, electronic logging devices could soon be required in all trucks.
The biggest obstacle might be finding the drivers to get behind the wheels of these new trucks, though.
“Although we get a lot of driver interest, the struggle has been to find that right driver that will be the appropriate fit for our company in terms of work ethic, personality, professionalism, punctuality, etc.,” says Sandhu. “At the end of the day, a lot of people are capable of obtaining a Class A license, but there are other traits that we value and feel are important for this industry.”
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Are you planning to expand your fleet in 2015? Did you add trucks last year? Let us know in the comments.
Categories: Trucking Industry Trends