Cash Flow CornerNewsTrucking

Combating cheap freight with direct shippers

 Working directly with shippers can help boost a small carrier's revenue with guaranteed freight. ( Photo: Shutterstock )
Working directly with shippers can help boost a small carrier’s revenue with guaranteed freight. ( Photo: Shutterstock )

Many truck drivers get their start hauling for one of the larger carriers like a Schneider National or a Swift, for instance. After a period of time, though, the driver decides more money and more freedom is available if they go it alone.

Welcome to your own authority. Running for yourself offers plenty of challenges, but some would have it no other way. One of the biggest challenges will be finding freight. Load boards, and now apps, offer plenty of loads, but a quick search of social media finds complaints about the “cheap freight” that populates these places. Cheap freight, aka loads that are priced extremely low, abound on load boards. The problem is that they wouldn’t be there if truckers didn’t accept them. Filtering through the cheap freight to find good-paying freight can take time, though, which is why some advocate for shipper direct freight.

What is shipper direct freight? This is freight that you, as the owner-operator or small fleet owner, contracts for directly with the shipper. It has several advantages over load boards, namely a more consistent nature and often better paying as you are negotiating directly with the shipper, cutting out the middleman. This can also benefit the shipper by lowering the overall cost. You are also able to quickly react to issues or concerns and build a rapport with that shipper that leads to better overall service and, perhaps, more business.

The key to getting that direct shipper freight, though, is not an easy path to take in many cases. Unless you have an in already, the process starts the old-fashioned way, with boots on the ground. It starts with research. Before you start contacting shippers, ask yourself a few questions.

What rate do I need? It’s important to know what hauling rate you need to make the lane profitable. Is $2 per mile sufficient, or you do you need more to sustain your business? Don’t start contacting potential shippers until you know the minimum rate you need for sustainability – and then add a little to it to give yourself some negotiating room. Research what rates along that lane are going for – now and historically – so you are not under-pricing or over-pricing your services.

What lane do I want to run? This is important to help you identify potential shippers. Find a lane or lanes you want to operate in and then make a list of shippers along these lanes to contact. A more targeted approach will lead to better results and more likely, a group of shippers clustered together.

Is there enough freight along this lane to sustain my business? This is a question that many people ignore. Getting one customer along a lane is a good start, but if that is the only customer, it might be a losing lane. Be sure you can get enough freight along a lane to keep your trailer filled and revenue-producing.

Is there return freight or will I have to deadhead back to the next load? Just because there isn’t return freight from a destination doesn’t mean you should turn down that business, but you need to know this when bidding on a contract. If there is no return freight, your rate needs to reflect the costs associated with deadheading to the next location that has available freight.

Look for smaller shippers. Smaller shippers with more infrequent loads sometimes have a harder time booking capacity from larger carriers. And there are a lot of them, so look for these types of companies that have a need for reliable, cost-effective shipping options.

Once you’ve identified potential shippers and set potential rates, the hard work now begins: getting a contract. Social media has made it easy to reach out to many people quickly, but consider personal letters or trying to schedule a meeting with decision makers at the shipper to make your presentation. Making your pitch through an in-person presentation can be more effective than simply sending along a document. Be professional and be prepared. Anticipate questions the shipper may ask, such as what happens if your truck breaks down or you get sick? Make sure you know everything you can about the shipper, what it ships, where it ships, and how often. And make sure you know everything about your own business – it’s amazing how many people get tripped up on a question about their own business.

In your presentation, it is often best to focus on service, not price. There is always someone willing to haul it cheaper, and shippers who are focused only on price will eventually leave for that cheaper carrier. Instead, sell your services – what you will provide, your attention to detail, your communication skills, your ability to treat their freight like it is your own. Do you offer any additional services that others may not? Let the shipper know this, especially if it might pertain to their business. Don’t overpromise but deliver on all your promises.

As you look to find direct shippers, keep in mind that a good rule of thumb is not to let any one shipper become the sole source of revenue for your business. It’s nice to have only one customer, but if that customer bolts, your business goes with it. If possible, don’t let any one shipper account for more than 25% of your overall revenue. A good freight mix also can keep your truck moving when there is a pause – maybe the shipper shuts down operations for two weeks each summer.

The success of landing a direct shipper depends on your own knowledge of your operations and its needs, your knowledge of the shipper and what they need, and a lot of hard work to land those initial accounts. Doing so, though, can provide a good source of revenue that you can build your operation’s foundation upon.

Show More

Brian Straight

Brian Straight covers general transportation news and leads the editorial team as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler.