Choosing a Trucking Company: Routes, Lanes and Loops
As I’ve written before, when operators are deciding between different companies there is more to consider than just base rate, fuel subsidy/cap and load/unload costs. In fact the financial rate of pay is usually only about 60% of the final choice. The indirect factors can often times be critical to the decision process, especially when times are good.
Many company contracts pay one flat rate fee no matter where the operator travels in North America, this simple little contract feature can often be a huge factor in their eventual success or failure. It all depends on the subsequent choices of the operator and the lanes (customers) of the company.
Different regions sometimes have vastly different cost factors. For instance, going through the mountains will have different fuel costs than through the prairies, or south to Florida, especially during winter months (even without factoring winter fuel). In addition, certain routes can have their own peculiar risks/aggravations from various sources: DOT, weather, construction, language, crime, over night parking and others.
A successful long term relationship between trucking company and operator requires both to have similar expectations. Understanding the company’s lanes and loops will give the operator a realistic picture of some of those future expectations and risks. If 65% of all the company’s freight is shipped into New York or New Jersey it would be unrealistic for the operator to expect exemption from the East Coast.
Lease/Owner Operators manage a business. It’s sometimes a good thing to remember that fact. The purpose of a business is to take on risk and responsibility for a set rate of return. Once accepting the risk, the owner then makes a whole series of choices that minimize those risks.
Those seasoned operators who understand that geographical areas have peculiar potential costs carefully navigate through those risks. However, some try to avoid as many as they can. Avoiding, or eliminating risk entirely, can have its own form of risk… unemployment.
As in any business activity, the trick is to determine what levels of risk should be accepted for what rate. Too often operators and companies view their relationship more as an employer-employee rather than a contractor, implying the contractor has no choice regarding their options.
Operators always have a choice, sometimes a large choice is made initially that results in small choices later (that may not seem like choices at all). Bottom line though, operators will always manage risk. They are ultimately responsible for ALL risk they get themselves into, expected or unexpected.
If the operator determines the risk (or accumulated risk) is too high for the return they must have the option to reject their situation. It’s easy to say this in theory but in practice different companies may produce varying conflicts in response. Each operator must accumulate their own bag of goodwill… some bags will be full while others remain empty.
A seasoned operator usually has preferred lanes loops and regions (though some truly love the free board). Matching preferred regions to a respective carrier is an important factor in choosing the right company. If the trucking company is large or diversified enough, the operator may manage their risk exposure within the company itself. But if it is not the operator may well be exposed to risk/aggravation they had not expected.
I have viewed industry turnover from both the inside (L/O +O/O) and the outside (an accountant’s perspective). During good times operators usually focus on the 40% while during bad times they focus much more on remuneration (survival).
If the industry as a whole wishes to deal effectively with turnover, companies must understand that when an operator leaves or chooses another company they need not always take it personally. The more educated both the operator and company are, the more suitable and long term fit for everyone.