According to the Florida Department of Transportation (FDOT), 146 million tons of freight go into the state annually, but only 85 million tons come out.
This large imbalance of inbound and outbound freight has significant implications for freight rates and the ability of drivers to find loads exiting the state. In fact, many of the trucks coming out of Florida are doing so without a revenue-generating load on board.
Florida isn’t the only area of the country where this is happening. There are many other markets where manufacturing activity and population demographics create a significant imbalance between the demand for trucks and the supply of trucks.
As an independent contractor driver, it is important to be aware of these markets and how they can influence your income. Without a concrete plan in place, you may end up running into financial difficulty.
In this article, I’ll explain:
- The key characteristics of headhaul and backhaul markets
- How these markets affect your success
- Tactics to consider when entering a backhaul market
- Strategies for success in any market
When you’re finished reading, you’ll know exactly what to look for when selecting loads to different destinations.
What is a Headhaul Market?
Simply put, a headhaul market is one where there is more outbound than inbound freight. With fewer trucks entering the market than are required to move freight out, prices rise until they reach a level where additional trucks are attracted into the market. This is typically the case in markets with high levels of industrial production and manufacturing.
A headhaul market is going to offer drivers plentiful freight opportunities and allow them to minimize the time spent waiting for their next load. Atlanta is a good example of a headhaul market.
What is a Backhaul Market?
A backhaul market is the opposite of a headhaul market. It’s a market where there is more inbound than outbound freight. As a result, the number of trucks entering the market exceeds the number of trucks required to move freight out and it can be very difficult for drivers to find a load.
In addition, the excess supply of trucks pushes rates down, so even if you are able to find a load out it will likely be at a very low rate. Las Vegas is a good example of a backhaul market. Its hotels and casinos consume a much higher volume of goods than the area produces and hence there is nearly always a surplus of trucks in the Las Vegas market.
How do Headhaul and Backhaul Freight Markets Affect You?
Understanding headhaul and backhaul markets is a matter of understanding supply and demand. Due to population demographics, manufacturing and distribution patterns, there are certain areas of the country that nearly always have the characteristics of a headhaul market and others that are persistent backhaul markets.
However, during specific times of the year, market fluctuations can occur and temporarily change supply and demand patterns and hence the traditional landscape of headhaul and backhaul markets.
For instance, in the third quarter and early into the fourth quarter of the year, California receives a huge influx of freight into the ports of Los Angeles and Long Beach as retailers look to stock their shelves in the run up to Thanksgiving and Christmas.
As a result, the demand for trucks surges, and carriers are able to benefit from higher demand and premium rates. Indeed, many retailers pay a “peak season” surcharge in order to secure the necessary capacity to ensure their shelves are full.
Another example is fresh produce season in the Southeast. This annual event, which typically occurs in April, May and early June, causes a sudden increase in the demand for trucks as farmers and co-ops scramble to move their harvested produce from the fields to a processing plant or a storage facility as quickly as possible.
These demand spikes lead to temporary increases in rates, which in turn attracts additional capacity into the market until an equilibrium is reached. Of course, this sudden influx of capacity can have ripple effects in other markets and cause capacity challenges where there had previously been none.
Supply and demand may also affect you differently depending on whether you’re a dry van driver or a flatbed driver. The flatbed market is considerably smaller and hence supply and demand fluctuations can be more pronounced on the flatbed side.
Demand varies depending upon the time of year. For instance, construction and farming activity is much diminished in the dead of winter — especially in the midwest and northeastern states. As a result, this can be a particularly challenging time of the year for flatbed drivers, especially if they haul steel, building products or agricultural machinery and equipment.
Indeed during these winter months, some flatbed drivers will convert to dry vans in order to benefit from more consistent and plentiful freight opportunities.
3 Key Tactics for Dealing with Backhaul Markets
The ideal situation is to find a shipper in a backhaul market and try to build a long-term relationship with them. That way you’ll have consistent freight to get you out of a market that typically has a deficit of freight opportunities. However, while this is easily said, in reality, it can be very difficult to achieve.
Therefore, you’ll need other strategies to succeed. There are three primary rules to follow when hauling freight into a backhaul market:
- Get a good rate going in.
- Don’t sit for days waiting for an outbound load.
- Be flexible and triangulate your route out.
Get a Good Rate Going In
Plan ahead and ensure that the rate going into a backhaul market properly compensates you for the low rate, or possible deadhead, coming out.
Be sure to accurately understand your operating costs (fuel, maintenance, equipment, insurance and pay) on a per-mile basis and make sure that the rate going into a back-haul market coupled with the rate coming out generates sufficient revenue to cover your costs.
For example, if your operating costs are $1.90 a mile, you need to average $1.90 a mile on all miles, including deadhead, in order to break even. So if a load from Atlanta to Fort Lauderdale is paying $2.70 a mile, you would need to find an outbound load paying at least $1.10 a mile in order to break even.
Of course, there is almost twice as much freight moving into Florida than there is coming out so that outbound load from Fort Lauderdale might be very difficult to find. Therefore, you might have to refine your calculation and factor in a deadhead to Tampa or Jacksonville in order to find your next load.
Don’t Be Tempted to Wait for a Perfect Load: Take a Lower-Paying Load
Don’t be tempted to layover for days waiting for a golden load opportunity.
Unfortunately, you cannot buck the market and that “golden” load probably doesn’t exist. While you are sitting, the fixed costs of operating your truck continue to accumulate and, more importantly, you are missing the opportunity to reposition to a stronger market and source better-paying freight.
You will be better off immediately taking a lower-paying load or even making a short deadhead to a market with better freight options. Again the key to success is understanding your costs and planning ahead.
Triangulate Your Trip
Triangulating your routes consists of adding an extra leg to your trip.
If a round trip in and out of a backhaul market doesn’t pencil out, look to triangulate and utilize the closest stronger market as a springboard home. For instance, if you are hauling a load from Chicago to Las Vegas, instead of trying to find a load directly back to Chicago consider adding another stop to your trip. Try to find a load from Las Vegas to Southern California and then take a load from Southern California back to Chicago. It may even be worth deadheading into the Los Angeles market in order to get a return load. The key is to understand your costs, do the math and pick the best option.
Triangulating your routes allows you to generate increased revenue per mile because rather than returning directly to your origin market, you plot a route through the closest, more attractive headhaul market and benefit from a higher rate for a portion of the return trip. A good rule of thumb is to always take at least two headhauls for every backhaul and that is the goal in triangulating trips.
Strategies for Success in Any Freight Market
If you want to succeed in a backhaul market, here are a few additional tips and tricks to follow:
Be Strategic and Plan Your Loads
The number one way to succeed in a backhaul market is to plan ahead. If you are a company driver, a driver manager or dispatcher is planning your routes to keep the truck well utilized and generating as much revenue per week as possible. As an independent contractor or an owner-operator, you’re the one that has to make the load selection decisions that ultimately determine your revenue and income for the year.
Therefore, you should always be thinking about your next load. If you’re heading into a backhaul market, you should know exactly how you’re going to get out and the rate you’ll be able to achieve in order to get out. Fortunately, there are lots of tools available today that enable you to plan ahead and keep on top of market trends and changes throughout the year.
Schedule your loads ahead of time so that even when you’re in a backhaul market, you know you have a load to get you home or to a nearby headhaul market.
Being strategic and planning your loads go hand-in-hand with triangulating your trip and viewing the trip as a whole, not as an individual leg.
I’ve seen plenty of drivers get burned because they jumped on a load paying $3,500 but they didn’t have a plan for getting out of the destination market once they delivered that load. If you have a long deadhead out or have to take a load that does not exceed your cost per mile on a round trip basis, suddenly that $3,500 doesn’t seem so great.
You should always think one or two loads ahead. With a little discipline, you can book your loads out ahead of time to make sure that your wheels are always turning.
Do Not Go From a Backhaul Market into Another Backhaul Market
Remember: Be strategic in how you choose your loads. One of the absolute worst things you can do is take a load from one backhaul market straight into another backhaul market.
It sounds obvious but sometimes due to the length of haul and overall revenue for the load, it might be tempting. However, on a revenue-per-mile basis, running from one deadhead market to another is a recipe for failure.
Ask the Customer to Pay Roundtrip
If a customer wants you to take a load into a backhaul market or consistently wants you to pick up freight in a remote market, you can ask the customer to help pay for the empty miles you will almost certainly incur or even pay for the entire roundtrip. Depending on the situation and the customer’s capacity needs, this is something they may be willing to do.
Understand and Manage Your Costs
As an owner-operator or a small carrier, it is critical that you understand your operating costs and manage them as closely as possible. Principal costs include fuel, equipment financing, maintenance, insurance, licensing, permits, tolls and food.
Some of these costs are fixed, but several are variable and can be impacted by your driving habits and buying behaviors. For example, driving at 65 mph rather than 70 mph will likely improve fuel consumption between 0.5 and 0.7 mpg. So if fuel is $3.50 a gallon, and you are averaging 1,700 miles a week, driving 5 mph slower (65 mph vs. 70 mph) could save you $65 a week in fuel or about $3,000 over the course of a year.
Now, it will take you a little bit longer to drive those 1,700 miles each week, but overall it should be a net financial positive. Similarly, observing good habits with idling the truck or sticking to a regular preventive maintenance program can save thousands of dollars over the course of a year.
Utilize Additional Tools
To succeed, you must be well-informed. Fortunately, with advances in technology, there’s now a wide array of available tools to help you watch the market and obtain more timely and accurate information on capacity and rates than ever before.
In addition to traditional information sources such as DAT and Truckstop.com, companies like FreightWaves and Trucker Tools offer web-based and mobile products that help drivers understand the market and remain informed of current market trends and changes in rates and capacity.
Furthermore, traditional brokerages, such as J.B. Hunt, TQL and C.H. Robinson, and freight tech start-ups, such as Cloud Trucks, Transfix and Newtrul, have developed web-based and mobile apps that provide small carriers and owner-operators with visibility to thousands of freight opportunities and allow them to easily sort, select, bid on and book loads days, sometimes weeks, in advance. As a result, owner-operators are better equipped than ever before to be able to make good business decisions and achieve a lifestyle balance that works for them.
Talk to Your Dispatcher
If you’re an independent contractor who’s leased to a carrier and being offered loads by your dispatcher or driver manager, make sure you’re asking them questions before you accept a load.
Try to build a good relationship with them where you feel like you can work in tandem with them. They should have your best interests at heart and provide load offers that’ll give you good settlements.
Of course not every load will be a “perfect” fit and, on occasion, you will no doubt need to be flexible in order to keep your truck moving and generating sufficient revenue to pay both the bills and yourself. If you have concerns about the destination, ask if they have a load planned to get you out or what you will be paid for deadhead miles. At the end of the day you decide what loads to take, but a little bit of give and take usually goes a long way.
Move More Freight
With awareness and strategic planning, you can find success no matter what market you’re in. A general understanding of supply and demand and how it shifts during the year in certain areas of the country will help you navigate which areas of the country you should go to for high-paying loads.
Heat maps and apps that help you choose your loads can benefit you immensely, as will thinking a load or two ahead at all times. I’ve seen drivers have great success when they follow these practices.
If you’re still looking for some tips to improve your efficiency as a driver and maximize your Hours of Service, learn more about strategies to help you move more loads.
