QuestionQUESTION: Mr. Bowers, I own a small trucking company. We have 2 power units, 2 flat beds, and one step deck. I have been in business 3 years and currently have my common carrier authority. I am pursuing my contract carrier authority.
I believe that contracts with manufacturer's would pay better than getting loads from brokers and would like to get some hard information on this topic. Unfortunately I am having a difficult time finding out where to look for this information.
How can I put together a route with contracts? How do I find bid solicitations for companies in the areas I am targeting?
I am located in Knoxville Tennessee and would prefer a run from here to Texas. Texas to Chicago, and return from Chicago to Knoxville. Obviously we are pretty flexible on what route we put together but I just wanted to give you some information. Also, I am planning on putting another power unit on the road in February, but possibly as late as April. I also have the funds lined up next year to add 2 more units above the one I'm adding in the Spring. As I understand it, 4 trucks is a minimum for contracts.
I would love to start researching this if you could point me in the right direction.
ANSWER: Matthew, I have heard that a fair amount of flatbed capacity has left the market since the downturn in the building industry, so your timing might be good to find the companies that need their product moved. Basically what you have is a marketing problem. You need to get your name known to the shippers that have the freight you want to haul. Competitive bidding on RFP's is one option but it can be tough to go head to head with numerous competitors and win a bid at a price you can make money at. If you can establish direct relationships with shippers and offer them solutions at a reasonable price to both you will have a more sustainable base of business. Start by buying or subscribing to targeted lists of manufacturers in the states you want to serve. Some libraries used to keep these but since most directories are now on line that's probably quicker.
I did a quick search and found this list:
http://www.knoxvilletennessee.com/major-mfgs.html
which you may recognize many of these companies. The trick is figuring out which ones may have shipments that require flatbeds. Then start calling and asking questions til you get to the decision makers.
Check this source for a variety of directories.
http://www.mnistore.com/
There is no minimum number of trucks to have a contract. Just get your authority and a boilerplate transportation contract. Check here:
http://www.nitl.org/press33.htm
Some shippers may offer you their boilerplate contract and it is advisable to have it reviewed by a transportation attorney with the specialized knowledge of the federal and state regulations. Find one here:
http://www.translaw.org/index.cfm?fuse=member_lookup
I think that covers the high points but I am open to follow up questions if needed. If you get into Central GA and need loads let me know.
Good luck with your business.
Jim
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QUESTION: Jim,
I had a few follow up questions. I've been contacted by a shipper and I want to offer them our services. They have a full load moving from East Coast to Los Angeles for 1.72 a mile (one load a week). That price I had quoted from a broker currently servicing their business. The shipper is unhappy with the service, but we haven't discussed price.
How much is the broker taking off the top? The load, to me, is 4000 dollars. If I want to quote the shipper a price I figure it would help to know the ballpark of what he is paying now.
Question two, do I just reapply for my Contract Carrier Authority, since I already have my Common Carrier Authority?
And my last question is a little off subject but do you have any advice on fleet maintenance? I have mostly been replacing parts at failure on my two Freightliners, but I thought that there might be a better way. Is there a service manual or some sort of program that I can use to set a maintenance schedule for my trucks? I would love to be able to anticipate problems with the parts that are nearing the end of their service life.
Thanks again for all the help,
Matt
ANSWER: Matt, I assume the $1.72 is all in including fuel. Depending on exact origin that sounds like a good market rate. Is that the rate the shipper was paying the broker? or the rate the broker pays the carrier? Brokers typically work towards a 20% margin (25% markup) but on long haul cross country moves they will often cut that margin if it's regular repetitive business. Just be sure to protect yourself from potential fuel fluctuations either with a fuel surcharge that is tied to the National DOE index or a provision in the contract that allows renegotiation if fuel spikes over a certain price (known as the fuel peg). I recommend that you obtain your contract authority although you don't absolutely have to, since under current regulations common carriers are free to enter into contracts with shippers if the shipper is willing. Did you look at the boilerplate contract I referenced above? Make sure your liability is limited to no more than the insurance you are carrying. Once you get established you can also get your brokerage authority and contract other carriers to handle your overflow loads.
On the maintenance issue check this site and it's associated links:
http://www.etrucker.com/default.asp?magid=3
Hope this helps. Jim.
---------- FOLLOW-UP ----------
QUESTION: Jim, yes the rate quoted to me from the broker is 4000 and that works out to 1.72 a mile. So from your information my calculations show the shipper is paying the broker somewhere between 4800 and 5300. That leaves me a lot of room to negotiate a better solution for both my company and the shipper's.
I have read the boilerplate contract you mentioned, and with the notes that are included in the contract it was very informative. It will definitely help me with entering into my first contract with a shipper.
My plans are to move a second person into my office once we reach a certain amount of power unit's on the road to help with dispatching. I have also planned to get a broker authority for that person.
Thanks for all the help Jim, you are a wealth of information!
Matt
AnswerMatt, just to clarify:
"on long haul cross country moves they will often cut that margin"
You could find the broker charging as little as $4200 for a flat $200 margin if they have been forced that low by competition. Just be aware in case the $4800 doesn't fly. Another concern is you mentioned that you were contacted by the shipper. You just need to be cautious if you ever handle this shipper through a broker to check the agreement you signed with that broker. Most Broker-Carrier Agreements have a non-solicitation clause with penalties to stop you from going after their customers. If the shipper approached you directly and you did not "solicit" them you can defend the brokers claim, but just be aware if you are taking business away from a broker you have done business with, they may threaten you with legal action or try to intimidate you into giving them a piece of the pie.
Your brokerage authority can be in an individual's name but usually it will be in your company name and then you can hire as many employees or agents as you want to work the business under your authority.
Best of luck. Jim.
