So the Golden ticket in the Trucking game is direct shippers. They are the how you get rid of the load boards and deal with brokers directly. They can pay more per mile bring some consistency to your revenue. You will know what to expect when they need you, and most times they are closer to your home base.
There are downsides too. You have to be available when they need you. You won’t keep them long if you are not available a couple of times. Then there is the part about getting back to the same area to be ready for them. It could involve deadheading back or taking a cheap rate just to bring you back to the same area. This is especially true for OTR loads, no quick way or easy way back.
Now this all works fine if you can satisfy your client. You should have a well thought out contract clarifying your pricing, your responsibilities, TONU, Detention time, lead time for loads, level of service such as straight through/expedited, Full Truck or partial, minimum rates or hourly.
Pros of Direct Shippers Include:
• Higher charges for rates because you are cutting out the middleman or broker.
• Dedicated customer.
• Less dependent on Load boards.
• Better customer relations and loyalty.
• Regular delivery destinations, familiarity with receiver.
Cons Include:
• Missing out on better paying loads.
• Having to deadhead back to service account.
• Dependent on shippers.
• Losing out on established Broker relations.
What is the best way to determine what to charge direct shippers?
Establishing a minimum charge. $250 – $500 depending on several factors. Your goal is to set a daily revenue target, such as $1000 – $1,200 as a goal. If the average loads takes you a couple hours or takes up half a day, then you charge accordingly.
Factors to consider:
• Time of Shipment: Such as AM deliveries or later in the day, If you have to come at 1pm for instance, most of your day is wasted.
• Is this a one time or repeat customer? If they are giving you more business you want to give them better rates.
• Waiting time and time involved loading: Is a strap and go load, a pallet or piece of equipment? Does it involve timely load securement, tarps, chains, dunnage, and full truckload?
• Miles involved: Are we talking OTR and dollars per mile, or 50 miles or less, multiple stops? Regional or State, and how often are they expecting your service?
• Lanes: Are you delivering to dead freight zones or strong market areas? For instance, if you are heading to areas like Florida, Colorado, Arizona, New Mexico, El Paso, anywhere west of OKC or Dallas, you better add at least a dollar a mile because you most likely may have to deadhead back.
The best model of business is local runs, multiple runs, smaller loads, and less than 50 miles. I have an associate that contracts exclusively for construction materials and equipment deliveries and has a more consistent revenue than most OTR with less fuel cost or wear on his equipment.
As a carrier, your primary responsibility is to move freight. To meet that goal, you need customers—and whether you’re an owner-operator or a fleet owner, you’ll find those customers wherever you can.
Often, that means working with a freight broker (a third-party agent who connects shippers, your customers, with carriers, your trucking company). Some shippers only work with brokers; they may be daunted by contracts, want a flexible rate, or need access to a huge network of carriers rather than relying on a single fleet of half a dozen trucks.
So not all direct shippers are willing to establish direct relationships with carriers. Other shippers, however, prefer the consistency and predictability of that direct shipper-carrier relationship. For trucking companies, these direct relationships with shippers carry distinct advantages:
Top 5 Advantages To Establishing A Relationship With Direct Shippers
- You negotiate rates with direct shippers. That’s not always possible through a broker.
- Contracts with direct shippers ensure steady, reliable work for your company.
- Direct shippers will let you know what equipment their loads require, which can help you make purchasing decisions.
- Planning loads is usually easier when you have access to the shipper: You can ask about their dock (appointment only? First-come, first-served?) to prevent delays. You can discuss the drop trailer situation. It’s better to know all that before your driver sets out for the job, and brokers can’t always provide that information.
- Your business relationship is more flexible with a direct shipper. Maybe you can offer a rebate in exchange for more work—or maybe you need to increase the rate due to unforeseen delays. With a direct shipper, you can at least discuss these changes.
So, how much per hour should I charge per mile? Remember that you are committing your professional services. You can go down, but you cannot go up easily. Get your money and charge worthy of your efforts and time. You must consider all the factors I have mentioned.
At the end of the day, this is your customer, your negotiations, and your business. No one can tell you how to run your business. We can only make you aware of the factors to consider.
In conclusion: Direct shippers can be great money makers if you have the right situations. However, they can be troublesome, and less than ideal, take you away from making money by customers that expect too much. Remember that they probably have had previous relationships with carriers and are looking to save money as well.
