The wisdom of the ages, for O/Os, is vanishing fast...

[Rev.Vassago]

When fuel is selling at $4/gallon then you charge $4/mile for the haul rate. I would greatly simplify how we set rates.

Yeah, and we'd all be millionaires too. It's far too simple of a formula, and it assumes that the price of fuel is legitimate. Since there is little real reasoning for why we are paying $4.00+ for fuel right now, the formula becomes skewed in favor of the carrier, and away from the shipper, which is why shippers would never agree to it.

This would work just fine if everyone used the same formula. The main problem with using the formula is that not everyone is on the same page.

You know, the HHG industry uses the same formula across the board to calculate rates. But every HHG company charges differently. You know why? Because they offer discounts (a percentage off) on that fixed rate. Fixed rates, while supporting the top of the industry, also serve to prop up the lowest common denominator of the industry. In fact, discounts are one of the reasons why the HHG industry is failing.

[GMAN]

One other reason tying fuel to rates would have difficulty is due to the sudden fluctuations in costs. It makes it difficult for shippers to stay on top of freight rates. I remember picking up a load in the Southeast going to California. Fuel went up $0.25/gallon on the trip. One reason the fsc works is because it makes the shippers feel that they aren't paying as much to move their products and that the increase is only temporary. Some carriers and broker will separate the fsc from the base rate. Shippers may not think about the fsc, only the base rate when making a decision on whom to use to move their products. They may still be paying the same amount of money to move their freight, but separating it out makes them look at the rate a little differently.

[lowrange]

Not all the costs of operating the truck move with the cost of fuel, so it doesn't make sense that the freight rate would move on a penny for penny basis as the fuel price. From a simple mathematical perspective, the fsc makes more sense.

[BigDiesel]

When fuel is selling at $4/gallon then you charge $4/mile for the haul rate.

Sorry.... But that is the old school way of way of thinking and it does not work anymore. O/O's need to be adaptaptive to change. Many are not, and that is a big reason so many are failing. This isn't the 1980's......

[no_worries]

In principal, it is a good way to standardize rates.

In principle, it's not a good method. A good method would hold true through the entire spectrum of possible outcomes. As you said, this one does not. If fuel were $1 a gallon, no trucker would be happy.

Say fuel moves from $3 to $4. Your costs go up maybe $.20/mile and your customer asks why his rate just went up $1/mile. What are you going to tell him?

Like I said, nobody can intelligently justify the whole, "The rate should be the price of fuel" garbage.

I'll grant you that it would result in a standard. Since when has that ever been desirable?

[Orangetxguy]

In principal, it is a good way to standardize rates.

In principle, it's not a good method. A good method would hold true through the entire spectrum of possible outcomes. As you said, this one does not. If fuel were $1 a gallon, no trucker would be happy.

Say fuel moves from $3 to $4. Your costs go up maybe $.20/mile and your customer asks why his rate just went up $1/mile. What are you going to tell him?

Like I said, nobody can intelligently justify the whole, "The rate should be the price of fuel" garbage.

I'll grant you that it would result in a standard. Since when has that ever been desirable?

The "Rate" should reflect the cost of "Investing" in the equipment to do the work, the cost to "operate" said equipment...which should include Wages, as well as fuel, tires, taxes, insurance, repairs, and replacement.


At $1.45 a mile on short miles..the rate doesn't hardly cover fuel, tires, taxes, insurance and repairs..let alone replacement of the equipment and wages.

That is why I choose to be leased to a company like I am. It's not always rosey...but it is better than fighting tooth and nail for existance right now.

[GMAN]

In principal, it is a good way to standardize rates.

In principle, it's not a good method. A good method would hold true through the entire spectrum of possible outcomes. As you said, this one does not. If fuel were $1 a gallon, no trucker would be happy.

Say fuel moves from $3 to $4. Your costs go up maybe $.20/mile and your customer asks why his rate just went up $1/mile. What are you going to tell him?

Like I said, nobody can intelligently justify the whole, "The rate should be the price of fuel" garbage.

I'll grant you that it would result in a standard. Since when has that ever been desirable?

Using the fuel price as a rate would require the shippers to come on board as well as the carriers. There would need to be a standardized way to change the rates, such as every week when the national fuel price comes out on Monday. If fuel goes up, then so would rates. If fuel goes down, the rates would drop accordingly.

[no_worries]

The point is, at $4.00/gallon, you're talking 50% profit margin...and that's being conservative. You need to be doing something a whole lot more difficult than trucking to justify those kind of margins.

[BigDiesel]

Using the fuel price as a rate would require the shippers to come on board as well as the carriers. There would need to be a standardized way to change the rates, such as every week when the national fuel price comes out on Monday. If fuel goes up, then so would rates. If fuel goes down, the rates would drop accordingly.

This will never happen.

The smart way, is to negotiate a base rate with a shipper and use the FSC as it was intended for.

[Rev.Vassago]

Using the fuel price as a rate would require the shippers to come on board as well as the carriers. There would need to be a standardized way to change the rates, such as every week when the national fuel price comes out on Monday. If fuel goes up, then so would rates. If fuel goes down, the rates would drop accordingly.

In other words, you are looking for a standardized FSC. Why? Standardized anything only props up the failures.

BELIEVE ME, standardized rates do not work in today's trucking industry. They are a failure in HHG, and they would be a failure in general freight. Why anyone would want to take away one of their tools for competition is beyond me. The days of competing on service alone are long gone. If you make rates standardized, you will have carriers promising discounts off that standardized rate to their shippers.

Plus, who do you think is going to enforce these standardized rates?

Regulation may have worked in the 70's, but a lot has changed since then. Going back to the days of freight lane regulation is not the answer.

[allan5oh]

Regulation never worked. It promoted inefficiency, and made the economy impotent.

Of course you're going to have failures after deregulation, those failing companies shouldn't have existed in the first place.

[GMAN]

I would not want to see rates regulated again. All regulated rates would do is protect the inefficient.

[Rev.Vassago]

I would not want to see rates regulated again. All regulated rates would do is protect the inefficient.

There would need to be a standardized way to change the rates,

Standardized rates = regulated rates. Make up your mind.

[GMAN]

I was only explaining the rationale to using the price of fuel for establishing rates. I don't want any government intervention into my business. I seem to do pretty well negotiating rates on my own.

[Rev.Vassago]

I was only explaining the rationale to using the price of fuel for establishing rates. I don't want any government intervention into my business. I seem to do pretty well negotiating rates on my own.

I guess I misunderstood when you said "I would greatly simplify how we set rates. This would work just fine if everyone used the same formula." and realize now that it was simply a typo.

[T * Storm II]

the hard way? Not me. Thats the reason why i have been on here since 2006. I read everything, even though some post does not even intrest me. We all know how some threads starts out with one thing and ends up with a diffrent topic. So again, i would like to thank all of the vets of cad. Thank you.

amen!

[heavyhaulerss]

The good money manager will always come out on top.



This is the point.. just 2 days ago while talking to my eldest daughter 19. she asked how I accomplished all that I have so far. I brought down some old files from the attic. pay stubs from when I made $85.00 for a 60 hour work week. where I worked 2 full time job's, where I made $5.25 an hour. I tell her thats where & when it all started. It DID NOT start in the last year, so dont look at all I have now & think WOW! look at what I had to do to get where I am at. the good thing is my daughter remembers our lifestyle back when she was little. we did not have champagne taste on A Beer budget. we just had a beer budget. It WAS the managing of our resources that got me where I am today.