edbenton Why did I go to Florida called we were servicing a CUSTOMER. Walmart has a HUGE DC in Winter Haven FL. It takes care of the Whole State on Its own. My company in 2000 did not have a customer at the time for Outbound loads back to IL and I was due to get HOME after being out of the house for about 8 weeks. I had been on a different run that would have kept me out of FL 3 days earlier but a driver had a Heart Attack and I was the only driver that could Cover the load. That was why we got SCREWED. Our normal load out was go to Tropicana and get a load of Juice for California and HAUL BUTT. So my boss decided to get me home a take a loss for one run. However as to the claim well at least you still have that 10K bond to file on. That bond amount is for all claims against the BROKER. So if he goes out with 300K agianst him only the first 10K in claims will get paid the rest are told SO SORRY YOUR SCREWED.
Why did I go to Florida called we were servicing a CUSTOMER. Walmart has a HUGE DC in Winter Haven FL. It takes care of the Whole State on Its own. My company in 2000 did not have a customer at the time for Outbound loads back to IL and I was due to get HOME after being out of the house for about 8 weeks. I had been on a different run that would have kept me out of FL 3 days earlier but a driver had a Heart Attack and I was the only driver that could Cover the load. That was why we got SCREWED. Our normal load out was go to Tropicana and get a load of Juice for California and HAUL BUTT. So my boss decided to get me home a take a loss for one run. However as to the claim well at least you still have that 10K bond to file on. That bond amount is for all claims against the BROKER. So if he goes out with 300K agianst him only the first 10K in claims will get paid the rest are told SO SORRY YOUR SCREWED.
but that can happen with any business closure...look at the recent closure of Arrow and look at how many people lost on that deal. Usually when a business goes bust there are casualties..that's true of a freight brokerage, a clothing store, a railroad, a trucking company, etc.. The bond may not be much..but it is more than shippers have...when they go bust there's no bond to file against..
Ed why are you even going to FL if you have come back that cheep.
I know a guy that does pallets. He buys them in New England and ships intermodal from Boston to Chicago for $700 and that includes the dray at each end. The Zombies would have a hard time with that. Just the tolls back to Chicago would be too much. The Zombies will be gone as things pick up. The banks will get their money and go after them.
I have to say I learn more about trucking here than any other place.
edbenton Yeah Trust me I know all about the Brokage regulations all you need to do is put up a 10K bond get a DOT Number and guess what your a Broker. Guess what until the age of the Internet there was NO WAY to check to see how many carriers had filed against that BOND. It would be nothing for a carrier to have 100-200K against their bond Close up shop then reopen new name and start all over and be keeping all the cash. IT DOES HAPPEN GRAYHOUNDS EVEN TODAY IT STILL FREAKING DOES.
Yeah Trust me I know all about the Brokage regulations all you need to do is put up a 10K bond get a DOT Number and guess what your a Broker. Guess what until the age of the Internet there was NO WAY to check to see how many carriers had filed against that BOND. It would be nothing for a carrier to have 100-200K against their bond Close up shop then reopen new name and start all over and be keeping all the cash. IT DOES HAPPEN GRAYHOUNDS EVEN TODAY IT STILL FREAKING DOES.
Look at the bright side...you at least have the 10K bond when dealing with brokers. When dealing with shippers directly you don't even have that...and trust me on this one...plenty of shippers are stretched to the max and aren't paying their bills. Why do you suppose so many brokerages are struggling if all that is required is a telephone and the margins are a juicy 40%?..Answer..a) because margins are alot less...b) there's plenty of bad debt to go around...3) huge risk..4) a lack of street smarts.. Of those I would say 3 and 4 are the most important...most people who get into brokerage are unaware of the risks involved and don't have the mental wherewithal to solve problems/deal with crises as they occur. Sure..from an asset based standpoint it is easy to get into brokerage..just as it is easy to become a lawyer or an accountant because those folks don't need hundreds of thousands in assets either to get started...but they do need a good mind and the ability to use it..if you don't have that you get yourself into alot of trouble as a broker...I do both asset based and brokerage..I see it from both sides.
edbenton Greyhounds here is what I am talking about the Brokers Keeping 30-40% of the Total Freight charges. They might tell you it pays say 1000 bucks for 800 miles yet when you get the BOL it may say and I have had this happen to me MULTIPLE TIMES IN REAL LIFE 1500 bucks for the Brokers Carrier listed. Yet the company has no idea that the Broker is getting that much for that load. Worst loads were ALWAYS out of Florida Nothing coming out either Deadhead out or haul cheaper than HELL ITSELF and the Brokers KNOW IT. I hauled Grapefrit out of Florida one time for a decent sized company as their driver for less than 70 CPM and I was getting 30 CPM as my pay there was no way in hell 40 cents a mile was going to cover the Fuel INSURANCE OR MAINTAINCE AND PAYMENTS ON MY EQUIPMENT BACK TO ILLINOIS. Load milage was 1300 miles barely paid the truck 1000 Bucks. Yet when the company got the Freight bill it showed that the Original rate was 2000 to teh BROKER.
Greyhounds here is what I am talking about the Brokers Keeping 30-40% of the Total Freight charges. They might tell you it pays say 1000 bucks for 800 miles yet when you get the BOL it may say and I have had this happen to me MULTIPLE TIMES IN REAL LIFE 1500 bucks for the Brokers Carrier listed. Yet the company has no idea that the Broker is getting that much for that load. Worst loads were ALWAYS out of Florida Nothing coming out either Deadhead out or haul cheaper than HELL ITSELF and the Brokers KNOW IT. I hauled Grapefrit out of Florida one time for a decent sized company as their driver for less than 70 CPM and I was getting 30 CPM as my pay there was no way in hell 40 cents a mile was going to cover the Fuel INSURANCE OR MAINTAINCE AND PAYMENTS ON MY EQUIPMENT BACK TO ILLINOIS. Load milage was 1300 miles barely paid the truck 1000 Bucks. Yet when the company got the Freight bill it showed that the Original rate was 2000 to teh BROKER.
OK, I believe I understand the situation.
But first, I'd like to thank everyone who has participated. This has been a good discussion. It relates to railroads in that it deals with how freight moves around the country. That's the evnvironment the railroads have to earn a living in. Understanding that environment ("The Freight Market") helps understand the actions of the railroads. The railroads do what they do for real reasons. And those reasons come from the freight market being described in this thread.
I don't want to get cross wise with Ed or anyone else. But the disputes he describes are not unique to trucking. The freight is moving in a "Channel of Distribution". Different entities play different roles in the channel. Each entitiy is alternatively a buyer or a seller and there is a natural conflict between buyer and seller. The buyer wants more value for fewer dollars. The seller wants more dollars for what he does.
This conflict is generally a good thing. It keeps everyone on their toes looking for a better deal. It avoids complacency and promotes efficiency. The national economy is better off for it. Similar "Channel" disputes exist in other lines of trade. A retailer resents a wholesaler who resents a manufacturer. Each thinks the other gets too much for too little. And this causes them to search for a better way. When the inevitable better way is found the nation benifits because competition will force savings through to the end users, and that be us. (Unless, of course, the government steps in and locks in inefficiency, as it often did with the railroads.)
The railroads have had their own version on this "Broker" vs. "Transporter" conflict. The Intermodal Marketing Companies (formerly known as "Shippers' Agents") were the railroads' brokers. They sold the IM freight. The railroads would look at this and think these guys were getting paid good money for taking phone calls. There's a lot more to it than that.
In any event, I'll disagree with Ed. (No offense guy, I hope we can respectfully disagree.) I don't know of any meaningful government barrier to entry into the freight brokerage business. If you know what you're doing (always a barrier to entry into anything) and are willing to take the financial risk you can set up a freight brokerage. That would mean that if the brokers were making excess profits other folks would enter the business seeking the high profits, provide more competition, and eliminate the excess profits. This assumes no government interferance in the market. That's how she works.
Brokers are an important part of the freight system. A trucker with a base in Chicago can take a load for Florida. Even if he has no contacts in Florida and has absolutely no way on his own to secure a backhaul load out of Florida. (If he comes back empty one too many times, he's broke.) He can get some kind of load and some revenue out of a broker, who "Knows The Territory". But the brokers will keep as much of the money as they can, and so will the trucker. That makes for conflict, and, as I said, that conflict is good for the country.
How the railroads compete in this environment is an interesting problem. But it's a problem with viable solutions.
Note to Ed: The loads out of Florida are bananas. No, they don't grow bananas in Florida. But the loads are there for the taking.
The rate on the BOL is not the rate the broker gets..I have a bill in front of me that shows transportation charges as $2743.58...but I got only $2300.00 of that. The reason for that is simple..the rate on the bill is what my customer (the shipper) charges their receiver. They make a profit on transportation (obviously) apart from their core business. It ain't always what it seems. Freight brokers do well at 18 to 19% margins.. and in my opinion that often isn't high enough as there is huge risk involved. In general, the bigger the account the skinner the margins because the folks at GE or Kraft (or any of the other big ones) know what the market will take..unlike some smaller shippers who can be fooled into paying premium rates...
Ulrich There is some good news...the shippers are getting truckload service levels at rates that often aren't much higher than a dollar a mile. If nothing else that's got to be quite an incentive to the domestic manufacturing sector..a good thing as we all depend on that sector for survival.
That's just what is supposed to happen in a recession/ depression - it's the old Adam Smith 'Law of Supply and Demand' at work - when demand goes down, so does the price* - and/ or much better = faster service is provided. That tends to counteract the plunge and re-stabilize the economy - at both the micro-economic (= at the individual firm) and the macro-economic (= nation as a whole) levels at a new equilibrium.
*Typically, to a 'short-term marginal cost of production' level, which is the bare 'avoidable costs'. In this ''zombie'' context, for each truck trip it would be the fuel, tolls, some food and coffee, and maybe a few bucks towards the next - or last - set of tires, next or last repairs, and next or last insurance payment, etc.
The payments to the bank can wait - that's why they're in a ''zombie'' state . . . It's an unfair advantage as to the guys who are paying all their bills on time, though.
It's not new, either, as Murphy mentioned - I can find columns by Professional Iconoclast John Kneiling in Trains in the 1960's and 1970's that conceded the unfairness of it all - and then pointed out that like it or not, that was the competition that the railroad had to face.
On the other hand, consider the shipper. If it's something like high-value electronics and/ or irreplaceable goods, he calls Fed-Ex Custom Ground or another reliable name brand and pays handsomely, I'm sure. On the other hand, if it's a commodity load of potatoes or lumber with no great value beyond the replacement value of the shipment - which is easily and cheaply done - and the time frame is not too critical, then go with the lowest possible price. ''Youse pays your money and makes yer choice'', as the saying goes.
- Paul North.
aegrotatio I hope I'm not the only one that thought this was a story about long haul co-drivers hooked on meth.
I hope I'm not the only one that thought this was a story about long haul co-drivers hooked on meth.
WWEEEELLLLLLLLLL-----
Any argument carried far enough will end up in Semantics--Hartz's law of rhetoric Emerald. Leemer and Southern The route of the Sceptre Express Barry
I just started my blog site...more stuff to come...
http://modeltrainswithmusic.blogspot.ca/
There is some good news...the shippers are getting truckload service levels at rates that often aren't much higher than a dollar a mile. If nothing else that's got to be quite an incentive to the domestic manufacturing sector..a good thing as we all depend on that sector for survival.
BNSFwatcher Down in Nova Scotia, on Cape Breton Island, we had 'entrepreneurs' that sold coal, door-to-door, out of small trucks. We called them "bootleggers", "gypsies", "independents", "outlaws", and other things. I don't know where they obtained their coal. They might have had small mines, or picked over the culm tailings of the big-time operator in town, the Dominion Steel and Coal Co., Ltd., owner of the Sydney & Louisburg Railway. Their prices were much cheaper, but the quality of the coal was very poor. Lots of shale, etc.. I'm sure that others, who lived in "coal country", had the same experience. They seemed to make a marginal living, and delivered softwood 'slabwood', too. One guy even delivered fresh fish! Pret' good fish!!! We'd trade him fresh vegetables, maybe some milk or butter, and a bit of cash and everyone was happy! No UMW involved! Hays
Down in Nova Scotia, on Cape Breton Island, we had 'entrepreneurs' that sold coal, door-to-door, out of small trucks. We called them "bootleggers", "gypsies", "independents", "outlaws", and other things. I don't know where they obtained their coal. They might have had small mines, or picked over the culm tailings of the big-time operator in town, the Dominion Steel and Coal Co., Ltd., owner of the Sydney & Louisburg Railway. Their prices were much cheaper, but the quality of the coal was very poor. Lots of shale, etc.. I'm sure that others, who lived in "coal country", had the same experience. They seemed to make a marginal living, and delivered softwood 'slabwood', too. One guy even delivered fresh fish! Pret' good fish!!! We'd trade him fresh vegetables, maybe some milk or butter, and a bit of cash and everyone was happy! No UMW involved!
Hays
Thanks to Chris / CopCarSS for my avatar.
Ulrich:Well said. As a commission based salesman (not trucking, but in a related field), you pretty much nailed it on the head.
These shippers do not want to deal with the day to day selection of carriers. Many have eliminated their "traffic departments" and have given those functions to "Logistics Services". I have customers (trucking companies) on both sides of the fence. Some provide full service (including sales) and complain of "how the brokers screw up the system". Others pretty much move "brokered" freight and seem to be doing ok at it. For the most part, the latter group is almost exclusively Eastern European immigrant based companies. Their drivers are usually from the same country (Poland, Bulgaria, Lithowania, etc).
Dynamics are changing rapidly in trucking.
Ed
Not really accurate.
1) Commissions are no where near 30% to 40%..and CH Robinson is a publicly traded company..so you can check that for yourself.
2) Truckers don't need to use brokers.. they CAN call on shippers directly..no laws state that loads must go through third parties. Let me help out a bit here with some leads.. Kraft Foods, GM, General Electric, Ford, Progressive Packaging..call on them and others and I guarantee you that one of two things will happen..1)..you will get alot of freight and become wealthy...2) you will gain a new appreciation for the importance of sales and in the cost and difficulty in winning accounts in an industry that views what you have to offer as a commodity.
I run asset based (trucks) as well as broker operations..the most intensive part of my business is sales...my sales people are straight commission and make more than anyone else in the company. This is becuase there are hundreds of thousands of carriers in the marketplace that are virtually indistinguishable in terms of service and price. Thus...the person or persons who can direct freight my way are extremely valuable to me.. trucking is not a service that sells itself. Don't knock brokers for taking a healthy cut...if you think sales is easy then pickup the phone and call GE or Exxon right now.. to get an account like that (and keep it) is alot of hard work..even before you see a pound of freight sent your way.
greyhounds rvos1979 Greyhounds, I'll try to explain it, but I can't guarantee you will understand. I'm just a dumb truck driver, after all..... When a load is brokered, the person paying for the transportation pays the freight broker a rate. The broker keeps some of this money as a "fee", and passes the rest onto the company or owner-operator. Ed's mention of the broker keeping 30-40% of the rate is not too far off, that is how CH Robinson earned the nickname "Cheap and Heavy". In my experience in the last two years, freight volume and rates were pretty good until about October of 2008, when the bottom dropped out of both. I had a hard time making 2000 miles a week in the first quarter of 2009, and that was as a company driver. With closing of several companies, the volume has picked up for us a bit, but rates are still low, as there is still too much capacity in the market. Being the major carrier for a certain beer brand has helped us a lot, too...... I have noticed that brokers seem to be out of touch with what happens in the industry. Case in point: After emptying out in Binghamton, NY, I was dispatched to pick up a load near Rochester, about 150 miles away, a 2.5 hour drive. The load was supposed to be in Chicago at 9am the next morning, 700+ miles away. Leaving at 10am central, got there just before 1pm (after they changed the loading point on me, and going to the new loading point), had to wait till nearly 3 to get into a dock, and was loaded and rolling again by 5:15pm. Four hours later, stopped for fuel, and decided to take my required rest where I fueled, as I had only two more hours available to drive. Next morning the broker was not happy with that fact, but I told him the company I drive for likes their trucks undamaged and upright. It was 3pm before the load was delivered, and I only stopped once on the way......... Should be interesting in the next few months, as the company I drive for switches to paperless logbooks, the dispatchers are already having fits........ Thanks. I've got that. But.. In the case of CH Robinson aren't things different in that CHR buys the freight (in the cited accident, a load of potatoes) at origin and arranges transportation for their own load. They're a produce broker that is suposidly buying transportation for a commodity they own from a trucker. Or am I still wandering in the wilderness?
rvos1979 Greyhounds, I'll try to explain it, but I can't guarantee you will understand. I'm just a dumb truck driver, after all..... When a load is brokered, the person paying for the transportation pays the freight broker a rate. The broker keeps some of this money as a "fee", and passes the rest onto the company or owner-operator. Ed's mention of the broker keeping 30-40% of the rate is not too far off, that is how CH Robinson earned the nickname "Cheap and Heavy". In my experience in the last two years, freight volume and rates were pretty good until about October of 2008, when the bottom dropped out of both. I had a hard time making 2000 miles a week in the first quarter of 2009, and that was as a company driver. With closing of several companies, the volume has picked up for us a bit, but rates are still low, as there is still too much capacity in the market. Being the major carrier for a certain beer brand has helped us a lot, too...... I have noticed that brokers seem to be out of touch with what happens in the industry. Case in point: After emptying out in Binghamton, NY, I was dispatched to pick up a load near Rochester, about 150 miles away, a 2.5 hour drive. The load was supposed to be in Chicago at 9am the next morning, 700+ miles away. Leaving at 10am central, got there just before 1pm (after they changed the loading point on me, and going to the new loading point), had to wait till nearly 3 to get into a dock, and was loaded and rolling again by 5:15pm. Four hours later, stopped for fuel, and decided to take my required rest where I fueled, as I had only two more hours available to drive. Next morning the broker was not happy with that fact, but I told him the company I drive for likes their trucks undamaged and upright. It was 3pm before the load was delivered, and I only stopped once on the way......... Should be interesting in the next few months, as the company I drive for switches to paperless logbooks, the dispatchers are already having fits........
Greyhounds, I'll try to explain it, but I can't guarantee you will understand. I'm just a dumb truck driver, after all.....
When a load is brokered, the person paying for the transportation pays the freight broker a rate. The broker keeps some of this money as a "fee", and passes the rest onto the company or owner-operator. Ed's mention of the broker keeping 30-40% of the rate is not too far off, that is how CH Robinson earned the nickname "Cheap and Heavy".
In my experience in the last two years, freight volume and rates were pretty good until about October of 2008, when the bottom dropped out of both. I had a hard time making 2000 miles a week in the first quarter of 2009, and that was as a company driver. With closing of several companies, the volume has picked up for us a bit, but rates are still low, as there is still too much capacity in the market. Being the major carrier for a certain beer brand has helped us a lot, too......
I have noticed that brokers seem to be out of touch with what happens in the industry. Case in point: After emptying out in Binghamton, NY, I was dispatched to pick up a load near Rochester, about 150 miles away, a 2.5 hour drive. The load was supposed to be in Chicago at 9am the next morning, 700+ miles away. Leaving at 10am central, got there just before 1pm (after they changed the loading point on me, and going to the new loading point), had to wait till nearly 3 to get into a dock, and was loaded and rolling again by 5:15pm. Four hours later, stopped for fuel, and decided to take my required rest where I fueled, as I had only two more hours available to drive. Next morning the broker was not happy with that fact, but I told him the company I drive for likes their trucks undamaged and upright. It was 3pm before the load was delivered, and I only stopped once on the way.........
Should be interesting in the next few months, as the company I drive for switches to paperless logbooks, the dispatchers are already having fits........
Thanks. I've got that.
But..
In the case of CH Robinson aren't things different in that CHR buys the freight (in the cited accident, a load of potatoes) at origin and arranges transportation for their own load. They're a produce broker that is suposidly buying transportation for a commodity they own from a trucker.
Or am I still wandering in the wilderness?
Sam- I fairly familiar with trucking. I've worked in a lumberyard for the last 29 years. 99% of what we sell comes in on a semi. Most of those cats are struggling. This obviously has a tremendous effect on transportation, and trucking specifically. I still question what, if any, effect this has on railroad intermodal. Randy Vos mentioned this in his post above: ..... the volume has picked up for us a bit, but rates are still low, as there is still too much capacity in the market. Being the major carrier for a certain beer brand has helped us a lot, too...... I read that as meaning that the major shippers are willing to pay a little more for dependable, ongoing, predictable service. I see that as something rail intermodal would be good at, but some trucker or trucking firm barely holding, probably would not be.As a point of reference, my father was an over the road trucker.
Murphy Siding greyhounds Not only do they compete with other truckers, they divert freight from rail intermodal. Their equipment ownership costs are minimal or possibly nothing. That allows them to low ball rates and keep a positive cash flow going. It can't last. But for now, rail domestic intermodal competes with truckers that are being carried by their lenders. The lenders' goal is aparently to keep the equipment on the books as a "good loan" until the used truck market picks up and the truckers' equipment can be reposessed and sold for a decent price I'm not sure that I agree, that they divert freight from rail intermodal. While these *zombies* might be selling their services below cost, and disrupting the *real* cost of transportation, that's certainly nothing new. It seems like there always has been, and always will be, truckers and trucking firms willing to haul goods *to cheap* for their own good. It doesn't matter whether it's an owner/operator trying to make a payment, a trucking firm trying to get enough cash flow to keep the wolf away from the door, or a zombie trucking outfit running on empty. The end result is the same. It seems to me, that rail intermodal would be sold to customers with an ongoing need for reasonably priced transportation, with high reliability. Even if you could save some bucks by shipping something with a zombie trucking outfit, how much do you save when the goods don't get there? Regional note: In our part of the world, the truckers who sell their services too cheap, and mess it up for everyone else, have always been known as *bull haulers*. That term predates the zombies by several decades.
greyhounds Not only do they compete with other truckers, they divert freight from rail intermodal. Their equipment ownership costs are minimal or possibly nothing. That allows them to low ball rates and keep a positive cash flow going. It can't last. But for now, rail domestic intermodal competes with truckers that are being carried by their lenders. The lenders' goal is aparently to keep the equipment on the books as a "good loan" until the used truck market picks up and the truckers' equipment can be reposessed and sold for a decent price
Not only do they compete with other truckers, they divert freight from rail intermodal. Their equipment ownership costs are minimal or possibly nothing. That allows them to low ball rates and keep a positive cash flow going. It can't last.
But for now, rail domestic intermodal competes with truckers that are being carried by their lenders. The lenders' goal is aparently to keep the equipment on the books as a "good loan" until the used truck market picks up and the truckers' equipment can be reposessed and sold for a decent price
It seems to me, that rail intermodal would be sold to customers with an ongoing need for reasonably priced transportation, with high reliability. Even if you could save some bucks by shipping something with a zombie trucking outfit, how much do you save when the goods don't get there? Regional note: In our part of the world, the truckers who sell their services too cheap, and mess it up for everyone else, have always been known as *bull haulers*. That term predates the zombies by several decades.
Murphy Siding:
referencing the part of your quote that I highlighted. The 'zombe' truckers and previously an older term 'gypsies' have had a place in the OTR trucking inddustry of taking what amount to 'spot' loads; loads booked for pick up and delivery by a load broker (or transportation broker) on a contracted basis with individual drivers who function as an agent for a 'carrier'. The driver may be an employee of the carrier or a contracted leasee of the carrier-(ie. a driver who may own hias own equipment, or only the tractor pulling company trailers, or a driver who is working as only a driver for equipment owned by a contracted fleet owner)- This just a broad description of this group (may be known by he designation of owner/operators). I would think that edbenton, randy voss, or blue streak 1 could get more current and definitive here.
Another facet of this kalidoscopic picture is the structure of the Food Distribution Industry (since we have previously mentioned CH Robinson, I'll reference them as well). The Food Dist. Industry is layered with brokers/distributors and users.
The manufacturer/producer sells their product to an area distributor (owner of the distribution franchise in a broad area(ie. NW,SW,NE, you get the picture) who will then sell the product to a distribution warehouse for/or to a specific Company (ie. Safeway,Kroger,Pathmark, and so on). usually those legs will be drop shipped from the manufacturer, but not always. Products then eenter the retail distributor's operations and then to the consumer.Each step may be taylored for specifi needs of each leg of the distribution net. I think most will get the general idea of the way it works
The transportation broker (ie; like CHR) has a contractual relationship at either end of each leg of the distribution net. They 'broker the spot loads as their customers needs require. The broker is to 'hire' the transportation and pay that transportation provider (OTR trucker) an agreed upon price per mile.
This is the part that causes the(blood pressure to rise) with the OTR side of the equation. (ie; drives Ed,Randy, and anyone else who has had to deal in this area, up the wall). For the sake of illustration lets say the shipper/manufacturer has agreed to pay the broker a rate (by the mile) or (per 100lbs) or whatever method is agreed upon to get delivery accomplished. The broker then checkes his local truck availability (and arbitrarily sets a price goal-this can depend on the number of trucks immediatly available in the area, day of the week vs delivery date. and so on. The driver who sees the load info displayed at the truck stop contracts the broker about the specifics (the price may rise slightly if the driver has a previously proven record with that broker, or if the load really needs to get going to meet scheduled delivery, the broker will adjust the price "to the truck" accordingly. IF the load is 'hot' (really needs to get rolling) th price to the truck may be a little better. The driver makes the contact with the broker and then contacts his company(contracted carrier) for approval and transmission to the broker of pertinent paperwork (insurance,authority,etc). It can be a relitively complicated process, almost a Kabuki Dance in some cases. Once the load is ready to roll, it is then incumbent on the Carrier to see it through to delivery (truck breakdowns, driver/personnel issues, enroute theft, and all sorts of unplanned events can act on the delivery schedule of the load- to the point that the broker can'fine' a Carrier for non-performance, even to the point of not paying for the load when the delivery is finally accomplished (read in here-lawyering-up or the driver act upon his own to try and force payment, but taking another load and 'holding it hostage'- I know, it's illegal, but it happens with predictable results.
I know this is kind of like telling someone how to build a watch, when asked for the time, but it is an important function of understanding what happens in this area of transport. All of this could be looked on as ultimately a positive for the rail transport of longer distance freight. The Carrier is only responsible for pick up and delivery at origin, and destination. The vageries of OTR operations, as well as satisfying a driver satisfaction of being at work close to home ( off on week-ends, handling family issues, financies,etc) are relieved on the Carrier.
"Free Enterprise" at its best! If they can make a dime, and avoid joining the Teamster's Unions, more power to them! Tough way to make a living, though....
Thanks for linking up the VF article for me. I am computer illiterate.
That entire debacle was an amazing period of time. I had never heard of the hedge fund prior to reading the article, but he certainly had it right.
ed
samfp1943 The VF article is really interesting and here is a link directly to the VF Magazine article: ( Will be faster to find for those interested) http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004 Thanks, Ed.
The VF article is really interesting and here is a link directly to the VF Magazine article:
( Will be faster to find for those interested)
http://www.vanityfair.com/business/features/2010/04/wall-street-excerpt-201004
Thanks, Ed.
Couple this fascinating article with what occured in congress during that same time frame + some lax oversight(sic?) and one gets a very weird feeling.
The odd thing about this is that I remember a few blogs that appeared on Seeking Alpha during that time talking about what he was doing and how the SEC tried to shut down certain shorters who were going after the housing bubble "pushers"----an amazing period
Randy Vos
"Ever have one of those days where you couldn't hit the ground with your hat??" - Waylon Jennings
"May the Lord take a liking to you and blow you up, real good" - SCTV
MP173 The F&F was a mess and continues so today. They are just burning money. Without getting too political here, there was a definate level of responsibility with Congress, along with the investment banks. I will just leave it at that. Do read the VF article. The ending is pretty amazing. Well worth the time. Ed
The F&F was a mess and continues so today. They are just burning money.
Without getting too political here, there was a definate level of responsibility with Congress, along with the investment banks. I will just leave it at that.
Do read the VF article. The ending is pretty amazing. Well worth the time.
edbenton Most of the ISSUES your describing I am VERY familar with in the OTR industry. However most of it can be traced to one thing the BROKERS. How do they feel justified to keep 30-40% of the entire FREIGHT bill for making a couple phone calls. They also refuse to pass on FSC and other charges to the people that deliver the frieght. Things were so bad on Goverment loads the Congress got involved they passed a law that all loads for the US Goverment all Fuel SurCharges 100% WILL BE PASSED ON TO THE DELIVERING CARRIER OR OWNER OPERATOR that delivers the load. Failure to do so results in a 500K fine and 10 years in the Federal Pen. Also carriers that will not have insurance and other things on them. Why because the FMCSA is overloaded and can only look at 2% of all carriers a year. However look for things to change this year. CVSA2010 is rolling out and if you have a certain point level your OOS and can not move this goes for the Carrier and the DRIVER. These points stay in effect for 6 months for Drivers and 18 months for a Carrier. No chance to reinstate if your a carrier either. Why do you think CH Robinson lost a 25 Million dollar case last year they used a carrier for a load that had a UNSat rating and he had a Fatal accident. CH Robinson had NOT EVEN CHECKED ON HIS INSURANCE. Turns out he HAD NO INSURANCE.
Most of the ISSUES your describing I am VERY familar with in the OTR industry. However most of it can be traced to one thing the BROKERS. How do they feel justified to keep 30-40% of the entire FREIGHT bill for making a couple phone calls. They also refuse to pass on FSC and other charges to the people that deliver the frieght. Things were so bad on Goverment loads the Congress got involved they passed a law that all loads for the US Goverment all Fuel SurCharges 100% WILL BE PASSED ON TO THE DELIVERING CARRIER OR OWNER OPERATOR that delivers the load. Failure to do so results in a 500K fine and 10 years in the Federal Pen. Also carriers that will not have insurance and other things on them. Why because the FMCSA is overloaded and can only look at 2% of all carriers a year. However look for things to change this year. CVSA2010 is rolling out and if you have a certain point level your OOS and can not move this goes for the Carrier and the DRIVER. These points stay in effect for 6 months for Drivers and 18 months for a Carrier. No chance to reinstate if your a carrier either. Why do you think CH Robinson lost a 25 Million dollar case last year they used a carrier for a load that had a UNSat rating and he had a Fatal accident. CH Robinson had NOT EVEN CHECKED ON HIS INSURANCE. Turns out he HAD NO INSURANCE.
Well, Ed, you've confused me. (A lot of Some folks say that's easy to do.)
In any event, here's some detail on the wreck Ed is citing:
http://www.verdictsearch.com/index.jsp?do=news&rep=recent&art=170094
I remember the incident because: 1) It happened near Chicago, 2) It was bad, and 3) the truck driver was a woman. Two dead and one badly injured. Traffic had backed up and stopped on northbound I-55 southwest of Chicago. The semi didn't stop and hit the stopped cars.
If you read the above link it will provide some insight into just how produce is moved in the US.
The truck was hauling a solid load of "Table" potatoes from Colorado to a distribution facility near Chicago. Colorado produces a lot of potatoes that are shipped to population centers such as Chicago for consumption. Colorado doesn't produce anywhere near the potato volumes of Idaho and Washington (those two states produce about half the US potato crop), but it's production is substantial. In the seven day period ended March 4, 2010 the USDA reports Colorado potato shipments equal to 656 loads. It's virtually all by truck. Rail participation in this business is almost non existant.
The term "Table" potato means the spuds are unprocessed. Most Colorado potatoes are shipped unprocessed. In contrast, the potatoes from Washington and Idaho are mostly processed into frozen and dehydrated products.
The potato farmer in Colorado obviously doesn't have sales offices in far off cities such as Chicago. He sells his potatoes locally to a "Broker", in this case C.H. Robinson. In this case at least, the broker took ownership of the potatoes in Colorado and arranged transport to destination. At destination the normal procedure would be to sell the spuds to whoever is buying potatoes on the wholesale market. It's efficient to do things this way because C.H. Robinson can achieve economies of scale by handling loads from many origins to many destinations. These economies of scale would not be available to any farmer trying to directly serve a mass market.
Anyway, ole CHR seems to have screwed up quite well here by dealing directly with the driver (Owner Operator?) instead of going through the trucking company.
What I don't understand about Ed's post is his contention that CHR was "Keeping" 30%-40% of the freight bill. They were the freight customer, they owned the potatoes - so how could they keep part of the bill?
In any event, this should be a solid rail intermodal market with rail being the dominant mode. It isn't. It's got good volume with hauls long enough for rail. Colorado is overbalanced inbound so an outbound load is a "backhaul". In the past when the railroads were flush with freight they could get by ignoring markets such as this. I think they're going to have to rethink that.
Ed,
Thanks for that information. I do not dispute your explanation. I have heard of some of those details, but have not studied them in great detail. I’ll take a look at the article that you mentioned. My main concern was to point out the role of F&F, along with congress because the popular belief is that the subprime mortgage bubble was caused 100% by a failure of capitalism and the private sector due to greed. And, so much effort has gone into creating that perception that I doubt it can ever be corrected.
Bucyrus:I am going to disagree with you not completely, but somewhat.
Regulations were relaxed in two instances that had huge consequences in this matter:
1. Glass Stegal was repealed. This law allowed banks to provide investment banking services, and vice versa. Thus you had giant financial supermarkets such as Citi.
2. Another huge issue was that the leverage regulations were relaxed around 2005. Suddenly these financials which were leveraged 15-1 were allowed to pump up the leverage. Lehman and others soon had leverage ratios approaching 40-1. Thus, a 3% drop in the valuations of the holdings would wipe out ALL equity. This is what occurred.
Not all of these subprimes were handed over to F&F. Many were bundled into "Asset Backed Securities", with the homes as ultimate collateral. These mortgages were sliced and diced into tranches of various risk and bundled and sold as AAA rated securities. Why? Because Moodys and others assigned those ratings. Credit default swaps were issued as "insurance" against failure of these securities. Who issued the CDS? AIG and others.
If you want to see how a one man hedge fund saw this coming and made hundreds of millions of dollars, perhaps billions, read Michael Lewis' book excerpt "Betting on the Blind Side" in this month's Vanity Fair .... it is on line and is an excellent description of how things blew up and how one man saw it coming years ago.
This is the same Michael Lewis who wrote "The Blind Side" about the football player. The article is long and will take at least 45 minutes, but is well worth it.
Bucyrus, I agree in principal with nearly all of your views, but in this case two relaxations of regulations, along with the F&F fiasco, led to all of this.
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