Expedite Loads, CWT vs Linehaul Rates | Final Mile 101

Speaker 1: 0:19

All right, welcome back for another edition of the Final Mile. This is our Q&A session, all for you guys. So you guys ask us questions, we answer them. We actually got a ton on YouTube in the last week. I've ignored all of the spam crypto discussions on there. Have you seen all that? And these are like robots talking to each other.

Speaker 2: 0:39

Talking to each other.

Speaker 1: 0:40

Yeah, like our most engaged content is just crypto bros or, you know, ai bots, but anyway, we've got some good questions. Um, make sure to like us, subscribe, share with your friends and colleagues. Check out the freight broker basics course if you're looking for an educational option on how to start a brokerage or grow your, your team size and um, train new folks. And please check out the sponsors in the description to help support this channel. All right, ben, our first question. This one was like kind of off the wall, but there's a reason I picked it because I can kind of broaden the response on it. So the specific question was how are the airport's transportation departments keeping up with the engines and maintenance parts needed for the recent airplane crash events happening in the US? So very narrow question, but I wanted to talk about how, like forecasting and expedite shipments work because I so literally one of the things I did in the army was we had a parts expediting role at an airfield where, like if we needed to get an engine part for a you know Blackhawk helicopter and Apache from one airbase to another, like that they call that like AOG aircraft on ground, where it becomes like priority number one. You need to get this part to this location because that thing can't fly. When that thing can't fly, we can't move whatever it has to move Right. The same happens with commercial airlines, like, in this case, maintenance engine parts. If there's a recall, like, if you remember, the Boeing 737 Max 8 or whatever it was, they got all grounded a few years ago and it was like a rush to get all new parts and whatnot. But this will happen in other industries too, which is why I picked this question. If a customer has, like production line down or a crane needs to be there to replace another crane that's getting moved, or you name it Right, the opportunity costs can be in the millions of dollars per day if this shipment is not delivered on time. Millions of dollars per day if this shipment is not delivered on time.

Speaker 1: 2:44

The other part is forecasting, which I'll just hit on real quick is like understanding. Like this is where you can kind of talk to your customer. If you see repeated issues where they're like we need this there ASAP, like future conversations, you may want to talk with them like hey, are you guys able to forecast this need in advance or try to source it from an alternative vendor to make this a little bit easier on time, because obviously, if I have like literally has to get there yesterday, it's going to cost me and you to get this done Right. But the expedite thing is a it's a huge market where it comes down to like you're not going to send an LTL carrier through their network to get something in three days. It's like, no, I'm going to find a dude in an F-150 or a guy in a Sprinter van or someone in a box truck and we're going to get this thing moved point to point, nothing else on that, you know, on that trailer or in that vehicle.

Speaker 1: 3:34

This is that's your expedite industry. That can be very, very lucrative and there's, like you know, there's a whole entire niche market for it. But I at least wanted to highlight that part of it that, like there's an entire industry that's designed for those critical needs to happen overnight. You know a team of two people driving a Sprinter van like it'll, it'll get there. It's going to cost money and they know they're worth it, but they'll get it done. So you got anything to add on?

Speaker 2: 4:03

We used to do those. One of my closest buddies, who's a broker with me at TQL, had one of those customers and I moved a lot of his freight with them. I mean, here's how it would go their warehouse was in Miami. You'd get a kid, call a cell phone and be like, hey, I need this part at O'Hare Airport in Chicago, right, and every single load was open checkbook, meaning like he's like you just tell me what it costs and send the bill. Like literally was never a budget and everything was flatbed or dry. Van teams had to run 24 seven until it got there as fast as possible Right, and we met with him once later and we just wanted to understand the business a little more.

Speaker 2: 4:43

We ended up becoming good friends with the guy and we were like, hey, just out of curiosity, like you know, every load you've ever sent to us has been open checkbook. And I mean like to give you an idea like I don't know, maybe a flatbed from Miami to Chicago at the time was four grand. We're charging nine and we're probably paying five and a half. So we're overpaying and overbilling. But it was also because you needed to get this done in like 15, 20 minutes, so you had to drop what you're doing.

Speaker 1: 5:08

You're not getting your median rate or below median, You're paying. You're paying on the higher end.

Speaker 2: 5:13

Best truck, newest equipment, two really good drivers, great record in your system. Like you're looking for your best drivers, best capacity, and they've got to be close and they've got to be empty and they've got to be able to pick up inside of an hour 45 minutes.

Speaker 1: 5:25

And you, as the broker, are babysitting that load the whole time.

Speaker 2: 5:28

Yeah, like on your cell phone we're talking to the driver, he's on tracking, but like you, I mean it is the, I would say like one of the highest levels of service of any website. I've kind of run Right Yep and, and it was never like a complaint back and forth about rates or anything and we never really gouged them. Like we kind of gave him an idea on what we would charge an extra and he's like dude, like it doesn't matter, like I'm good with it, Just make sure it gets there. I can't deal with any issues. And he also knew that even if something happened, we could recover that load and get it there.

Speaker 2: 5:55

So, like trust, all those things baked into that. And what I remember what he told us was like he's like, look at, he showed us the air invoices for some of those parts because they weren't made in Miami, that's where their warehouse was and, to your point, they had enough predictive maintenance in their system to know they had enough in stock, whether were like 50, $60,000, because, like sometimes they're flying that part overnight from some manufacturer into Miami and then throwing it on a truck to get to that airport as fast as you can. And he's like, listen, like I make my margin on like the whole thing and he's like if we charge 15%, my bill to this customer is like $95,000 for this part.

Speaker 2: 6:46

Like your, over the road transport is minuscule, it's not even it's not even material and the whole cost of getting this part there as fast as cause to your point. Like if a plane is grounded, like it is a lot of money per 15 minutes, so every 15 minutes to a half an hour it's not there and getting put on that plane to get it back in the air to earn money Like they're losing way more money than it costs to ship it there. So those are like really good extreme examples where price becomes absolutely irrelevant and service is everything.

Speaker 1: 7:17

All right. Next question, as my daughter is staring at me through my door here. Next question I'm currently serving my customer using flat rates on inbound lanes, but as we move into the next quarter I'm thinking about switching to quoting them on a hundred weight basis instead. Do you have any advice on how to approach that conversation with the customer? Should I discuss the change before sending new quotes, and how do I make sure I'm calculating hundred weight rates correctly from my current flat rates? All right, so there's a little bit to unpack here.

Speaker 2: 7:49

So Explain to everybody what a hundred weight is.

Speaker 1: 7:52

Yeah, a hundred weight is where it's going to be a rate per hundred pounds, right? So an example of where this is oftentimes used is potatoes and onions. For produce they have, or they might do, a bag weight which is a 50 pound bag. So it'd basically be double the hundred weight. But let's say it's, let's say it's a commodity like lumber and you say, well, I can do, um, you know, it's 40,000 pounds that you're going to load on a flatbed, but 100 and so instead of doing a single rate for that, your hundred weight would be per hundred pounds. That's on there. So that would be basically, uh, four, what's the math on it? 40, 400 total units max. Um, but basically like, yeah, cause, like in in the potato world, I remember it'd be like 50 pound bags, which is the same concept as hunter weight, but it would be like we might have 780, 50 pound bags getting loaded into, um, a reefer or something like that.

Speaker 1: 8:51

But so what you might do is, instead of being like, hey, it's six thousand dollars, all in, you might say it's four dollars and thirty two cents per bag or per hundred weight or whatever the commodity is. So what you're doing is you're giving the customer flexibility and encouraging them to or I'm sorry, and encouraging them to, or I'm sorry, you're encouraging the driver really to load as full as possible. Where the customer has flexibility, where if they don't load more they're not going to overpay or underpay for their shipping, they're going to pay the exact same rate. And why the customers like it is when they know what their fixed cost is to ship a bag of onions, for example, or 100 pounds of lumber from A to B.

Speaker 1: 9:33

they can factor that into their sale price because they know transportation is fixed at this rate, regardless of how much gets loaded on a single truck. So, to answer the question, I wouldn't switch it before talking to the customer or unless the customer wants to do it. Because I find 100 weight or bag rate to be very frustrating when it gets messy and there's confusion and somebody doesn't get the weight written down or scaled properly. I've had situations where the carrier doesn't know it's a 100 weight payment because the customer's quoted in 100 weight but the carrier says like hey, what's the?

Speaker 1: 10:12

all on rate and then they just calculate you know, oh, it's four dollars times you know X amount of pounds. Here's your, here's your rate. Then they end up not loading all the way, or they know it's hundredweight. But what they don't know is the customers only has enough to fill up three quarters of the trailer. So like stuff like that will happen because the shipper knows like, oh, if it's 100 weight, yeah, like I'm only paying for as much as I load. Um, this is gonna be, I've got enough to go out. That's too much for ltl but it's not enough for full truckload, but it's still gonna be. You know, I'm getting.

Speaker 2: 10:44

Here's the deal, so the upside is all messy stuff there the the important thing is, if you're going to bill your customer 100 weight, you need to make sure your rate cons are 100 weight as well, and they need a line item and specifically be the same on each side, otherwise you have a nightmare.

Speaker 2: 11:00

The second is like it does help the drivers in some ways, and here's why, because if a customer is paying a flat rate call it $4,000 for a load, they're incentivized to put as much on that truck as possible. And then you got the conflict of the driver going. You told me this is $43,500. They put $44,500 in my truck and now I might be overweight, I won't scale. So it helps align the driver with the shipper in a sense that the shipper doesn't try to take advantage of getting the most out of that four grand right. So that is another benefit. The thing that I would say is like, if you're considering this, what I would do is you're likely considering this because somehow you're having some issue between flat and what they're loading, right, but I would, to your point, first talk to the customer and be like I would propose this as an option to see what kind of feedback you get. The second thing I would do is, if I'm going to quote this new customer that you used to flat and hundredweight, I would give them a few examples underneath it so they can start referencing that in the way they see it, meaning like, if I'm used to quoting you, four grand and it's a 40,000 pound shipment, right, I might say, hey, this is your price per hundredweight, and then underneath it I would write like 42.5. Here's what the total would be.

Speaker 2: 12:13

A 40,000 pound truck. Here's what it would be 44,000. Here's what it would be. So you can start to train your customer on understanding what is that hundredweight equivalent to in a full truck. Because, to your point, like the BOL should have an accurate weight, but like that might change a little bit, what they have in stock might be a little. So at the very least your customer can't come back and say they're confused, like to me, like that is one of the ways you can service your customer above other brokers and have an advantage is by giving them examples underneath it hey, this is your per hundred weight. These are usually where your truck loads range 38 to 44. Here's what it would be at 38,000. Here's what it would be at 44. And here's what it would be in the middle. So they can start to visualize what that hundred weight is according to what they'd used to been seeing, and little by little you could probably get them into that habit. But, to your point, like you would need a really good reason to want to go through the additional work.

Speaker 1: 13:07

I think it's usually the. It's usually coming from the customer because somebody somewhere in that organization is like hey, this will help us save money. Um, because we're not overpaying for a truck if we're not loading it all the way. That's usually where I've seen it come from, but all right, uh, last question how do I quote a shipper if they just want the line haul rate only? So I want to differentiate here. If they want an all in rateipper, if they just want the line haul rate only, so I want to differentiate here. If they want an all-in rate or if they just like an all-in rate is like a today rate, which is what am I going to pay you to get a truck today? Um, what it could also mean and I'm guessing that's what they're asking is if it's a future like if it's for a bid and they're saying just give us your, your line haul rates, because we're going to add a fuel surcharge on top of it and we don't know what that fuel surcharge is yet, because we don't know what diesel prices will cost three months from now.

Speaker 1: 13:59

If that's the case, when you're doing your rating and you're looking at historical data, just look at line haul only. That's a very, very common way. Anytime you've done a bid, ben, and anytime I've done a bid, we don't know what gas is going to cost in the future. Right, we're, we're quoting, um, most of the time we're quoting just line all. I had one lady who she's not in the industry anymore for probably for this reason, but she told a customer she could give them all in rates for a future bid. And they're like okay, I'm good on the butt because, uh, fuel went up and she, you know, like she couldn't, obviously didn't have enough margin to handle it. So, um, but yeah, what, what's your take on? Like what? What? I mean, I simply look at analytics and historical data and I go off that line haul rate and then I do my little magic from there on figuring out how to price it. But what's your take on it? Do you do anything different?

Speaker 2: 14:54

So two things is one you always want to ask your customer how they calculate fuel, because every company is a little different. They're all pretty close but they usually benchmark them on, like the Department of Energy thing.

Speaker 2: 15:07

That goes out DOE, it's like a weekly thing that gets published you always want to ask how that calculates, because some companies do it as a percentage, some will do it as a function of that, some have like weird math that they figure out. So, like I always ask how they come up with it, because we've had bids where a customer calculated it very differently than like that when I did one last week that had van fuel at 39 cents and reefer at 42 cents a mile. But, to your point, diesel goes up and down all year and it allows you to at least break out two of the variables in shipping. One is what is the supply and demand of a truck to drive it there and what is the cost of fuel that goes up and down. So it allows you to at least take part of that risk out.

Speaker 2: 15:46

And the thing I think I I think I commented on the YouTube question that says, like if you use data IQ, there's a little box there now that will show you even the spot rate minus fuel. In fact, even in rate of view, you can see that minus fuel. So you can see what is the line haul portion and what is the fuel portion. But at the end of the day, like it, really you shouldn't overthink it or overcomplicate it. Right, like you're. Really it's just the gas money to move your truck there and gas goes up and down, just like if you drove your car to Florida at different times of the year from wherever you're at. Like it's going to be a little bit of a different price. It just allows you to get more money when fuel goes up and you get a little less when fuel goes down.

Speaker 1: 16:24

It's like you brought up. A good point, though, is asking how they do it when you're if you're going through a bid with a customer. If you don't see a fuel surcharge schedule in there to your point, ask for it. But also, how do they handle accessorials too? It's a great way to look at that, like what's your detention policy, layover policy?

Speaker 2: 16:44

Layover policy. How do you?

Speaker 1: 16:45

guys handle toe news? How do you handle Lumpers? Yeah, lumper fees, what do you do? Or is there a chance to adjust rates periodically? Or is there a percentage of loads that we can deviate on by a certain percentage? Those are great questions to ask. And on top of that, um, the brokers that ask those questions and have those conversations clearly are communicating to the shipper that they are very service oriented and focused on that customer's business, versus someone just like all right, I got a bid, let me just go have my margin on it and submit it back like it's. It's just very, very different way of doing things. So, good stuff, keep sending your questions our way and we will continue to answer them. Anything fun and exciting coming up later this year we're going to have some guests we got to bring on.

Speaker 2: 17:33

Yeah, I got some TIA coming up and I'll be in DC in September.

Speaker 1: 17:39

I got to book that still, yeah.

Speaker 2: 17:41

All right, dude, I did see something funny on LinkedIn this week. You'll get a kick of this because you always laugh about how I bring up my cold plunge all the time. But there's this other broker out there that took a picture of his cold plunge and put it on LinkedIn and I guess everybody jumped on the fact that he had the temperature setting there that said 50 on it, right, and all these people do like 30 something.

Speaker 2: 18:01

Like most people are probably like 42, maybe like low forties, but like they'll go down to 38,. Probably like 42, maybe like low forties, but like they'll go down to 38, 37.

Speaker 1: 18:12

And, like his said, 50 and everybody like was going there, like that's a bath, that's not a cold punch, that's hot tub bro.

Speaker 2: 18:16

Well, what made me laugh was like I commented on it and like I just got a new um, a new chiller for mine, cause it was having a hard time keeping up with like the hot weather and I didn't notice, but like mine was creeping up to like 43. And like I switched it out, like the day I was commenting on that post and mine went down to 38 from 42 or 43. And I'm like I didn't think it was going to be that much of a difference. It is significantly different. Like I can tell you that three degrees feels like 15 or 20. And then all I could think of the guy posted at the end of it. He's like oh, I'll turn it down tomorrow and see how I do. And when I noticed the three degree difference I was like man, if he changed his from 50 to 38 the next day, he's going to have a rough morning.

Speaker 1: 18:59

It's going to feel like he's on the Titanic man. Yeah, yeah, wow, all right, good Q&A session. Any final thoughts, ben?

Speaker 2: 19:08

Whether you believe you can or believe you can't, you're right.

Speaker 1: 19:12

And until next time go Bills.