Get ahead of the game by getting a load for the backhaul. Continue reading to learn more!
What is a Headhaul and Backhaul? Why are these terms important to know?
Carriers have opportunities to move freight all around the country but must understand how markets can influence their profits and impact their success. The locations that carriers move freight to and from can influence the rate shippers or brokers are willing to pay the CDL driver. Origin is a factor in determining the rate, but oftentimes the destination will have a bigger impact on rate estimation. Knowing how to source freight and negotiate rates are useful tools for carriers who understand that freight on their truck means they are not driving empty miles. Deadhead, or operating and driving a CMV without any freight on board, can be a costly opportunity for drivers and a waste of fuel consumption. Deadhead normally occurs due to bad planning and when a driver does not have any freight lined up to return to their home area after making a delivery. The longer a carrier drives without freight the more they will lose on overhead costs.
Markets can be distinguished by whether freight is entering a location (inbound) or leaving a location (outbound). Inbound freight refers to situations where freight is generally moving into the market from other locations. Outbound freight is when shippers are sending products out of a general area to other locations.
Freight movement can be a factor in rate negotiation, and this is important for carriers to understand. For instance, a headhaul is simply when a carrier plans to transport freight from point A to point B. Drivers have negotiating leverage because there is more demand for their services. Backhaul is when that same carrier, who has now made it to point B, finds a load that is headed back to their home location. Because there may be less demand for their services and wanting to avoid deadhead, drivers tend to offer shipper-friendly rates. There tends to be a balance in market balancing similar to other supply and demand examples. When there is more inbound freight moving into an area than outbound freight, the area can be considered a backhaul market. Inversely, when there is more outbound freight than inbound the area will be considered a headhaul market.
More formally, a backhaul is “the return movement of a transportation vehicle from a delivery point back to its point of origin.” We illustrate the difference between headhaul and backhaul in the graphic shown above.
Let’s quickly explore the topics of headhaul and backhaul as market distinctions and why carriers should understand how each market can ultimately affect their company’s success.
What is a headhaul market?
Individual freight markets could be viewed as singular economic regions that have their own unique inbound/outbound dynamic. As mentioned before, headhaul markets occur when there is more outbound freight leaving a market than inbound freight coming in. These market conditions are favorable for carriers and indicate that carriers have freight choices and the option to choose freight that best fits their network capabilities.
What is a backhaul market?
Backhaul markets occur in regions where there is more inbound freight than freight leaving outbound. These markets tend to have ample number of receivers and destination locations, but there is a lack of shippers with freight moving out that is attractive to drivers. This means there is little demand for the lane and ultimately limits the outbound options for drivers, creating a “take what you can get” environment. The limited choices of outbound freight from backhaul markets leads to more volatility in transportation rates. A characteristic of backhaul markets tends to be lower rates for shippers because drivers do not want to deadhead their trucks and will take lower rates to head back in the direction of their home locations. Tools like DAT Load Board will be useful for drivers looking for available freight in backhaul markets. The U.S. Northeast tends to be a primary backhaul market for reasons like the area consuming products produced locally, importing everything else, and not generating as many exports as in other regions. Carriers understand the characteristics of this market are backhaul oriented and will charge a premium for loads destined for this location to offset and potential deadhead miles they may have when leaving after their delivery.
How does all of this help me?
Geographic locations can generate their own economic markets which can have an impact on the success of trucking companies. Each market will have its own supply and demand relationship with carrier services, which will determine if that area is a headhaul market or a backhaul market. Carriers must understand how freight movement can affect their rates and impact their operating success overall. Operating strategically and additional planning are foolproof ways for carriers to make sure they have the most opportunities for freight. The best way to navigate backhaul markets which are full of uncertainty is to plan ahead by using tools like DAT’s Truckers Edge, other load boards, and relevant resources to ensure freight is consistently scheduled.
New trucking companies and even existing carriers and owner-operators can work with freight brokers and 3PL providers to take advantage of their network of shippers to expand their freight opportunities. Carriers can also work directly with shippers by inquiring about the shipper’s inbound needs and seeing if there is an opportunity for a round-trip delivery schedule. Drivers can additionally negotiate that shippers pay for empty miles driven if they are scheduled to head into a backhaul market or are required to pick up in remote locations consistently. Paying close attention to paid miles and empty miles matters!
What is an optimal route?
There is a saying that the most expensive commodity to ship is a trailer full of air. When the trailer is empty on the fronthaul (aka line haul and headhaul), or the backhaul, or even between stretches in the leg segments of a given route, carriers still incur variable expenses including the driver, fuel, maintenance, etc. The phrase that should come to mind here is “empty miles”. In short, it still costs money to haul nothing, meaning it costs a ton of money to haul air. Suffice it to say, trip planning and route optimization are vitally important.
What’s this "haul" about?
In an attempt to mitigate costs and empty miles in backhauls and deadheads, companies and drivers must think through a number of scenarios such as pairing different origins/destinations efficiently and scheduling with hours of service in mind. Hopefully, somebody has your back (haul). Or maybe that somebody is you. If so, then you better take steps to CYA! Cover your backhaul!
Trip planning and route optimization are essential components of this process that factor in weather, traffic, road type, vehicle speed, and more. It is also a good place to factor in hours of service, receiver schedules and appointments, seasonality of certain freight, the desirability of a particular lane or route, the frequency at which you (a driver/carrier) travel a particular lane or route, and understanding shipper/broker patterns relative to headhaul and backhaul exposure. Understanding the difference between headhaul and backhaul, paid miles and empty miles (deadhead), and poor routes and optimal routes is essential.
Using these concepts as a part of a strategy when finding freight will ensure you're able to consistently have freight on board and it will improve your overall chances of success.
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Soshaul Logistics LLC and its affiliates do not provide tax, legal or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. It is meant to serve as a guide and information only and Soshaul Logistics, LLC - Copyright 2023 - does not assume responsibility for any omissions, errors, or ambiguity contained herein. You should consult your own tax, legal and accounting advisors before engaging in any transaction or operation.