Part II describes the science of load refusal. When it come to mathmatics there are bascially three types of poeople; those that can do math and those that can't.
As a business practice, we accept most load offers but we have the right of refusal and use the following criterion for turning down a load:
We don’t drive into blizzards.
We need a $120 bonus to drive into or through the New York CityMetro Area (covers pain and suffering)
We need to make a reasonable profit on the run. (we determine what is reasonable)
In a previous blog, I describe our KISS method in determining our cost per mile at about a $1.00/loaded mile. Using the same math, annual gross earnings (haul income plus fuel surcharge) divided by annual loaded miles driven, we compute our gross revenue at $1.75/loaded mile. So when our dispatcher calls and pitches us a load offer, we can do some basic math to see if we are in the ball park of making a reasonable profit on a run. Again, these are approximate numbers that are easy to remember and keep us from making emotional errors about refusing a load.
When calculating costsrevenue for a load offer we use total miles in our formula (dh+loaded). Through experience, we figure that we need to net at least forty cents per total miles driven for us to consider a load, and that number goes to fifty cents if we are taking a load out of the freight lanes.
Let’s do an example: Dispatch calls and says they have a great run for us that they are sure we will love, Atlanta to Chicago. The trip is 600 loaded miles (rate $1.25/mile) and fuel surcharge is .40/loaded mile. Since we are in Birmingham, we’ve 150 deadhead miles (dh rate .30/mile)
We use the following formula to quickly assess our estimated earnings for this offer:
Total Earnings = Revenue/mile
Total Miles Driven
Loaded 600miles x 1.25 = 750
FC 600 x .40 = 240
DH x .30 = 45
Sum of earnings $1035
Total Miles 750
Remembering our cost per mile at a buck, so our net is per mile is on this load is 38 cents. This is below our threshold for accepting a load, but we are going to Chicago. Since we are going to Chicago and staying in the freight lanes, we’ll probably have a load offer outbound before we deliver. Since we’ve minimum layover, we’ll take the load and keep running. We tell dispatch we’ll accept the load on the condition that they reimburse us for tolls.
I appreciate by now, for some, this discussion is already hurting your head, but I try to keep this as simplistic as possible so I can do it in my head or use some “cuff calculations”. When the deadhead is more than a third of the loaded miles, this is a red flag that the dh may eat too much into our profits and I get serious about crunching the numbers. I’ll tell dispatch to call me back in five while I do some math, at this point they sometimes will sense by building reluctance to accept this load and will offer a bonus or some other incentive before I hang up, especially if I’m the only truck close by.
Again this is just our approach to looking at a load, and others have well written articles on this topic. Phil Madsen is an expediting O/O who is also an author, reporter, trainer and magazine contributor and editor. He is a champion in this business for helping folks getting information and training on this work and lifestyle. His website is a must read www.successfulexpediting.com. By experience and research each driver should establish their own method for looking at a load offer and constantly test that approach with results. We’ve learned not to trust our gut reactions alone to making business decisions. Having a calculator handy helps to keep us all honest.
Check your mirrors and keep’r between the lines
gary and barb