Profitability Report

Introduction

New this month

This is the second edition of our Monthly Profitability Report, and we’ve added a few updates. In this edition, we’ve included:

1. August Hot Markets and lane profitability data for flatbeds, in addition to dry vans and reefers.
2. Graphs that show how dry van, reefer, and flatbed lane profitability has changed over the last 3 months. Readers can use this data to understand trends and make predictions about the direction that lane profitability is moving.
3. Fuel cost data from the U.S. Energy Information Administration. Fuel is one of the largest costs for fleet operators, so has a large impact on profitability. When we see fuel costs rise, we’d expect profitability to decline.

Our intention is to improve the contents of this report over time based on the sophistication of our analysis and customer and industry interest.

If you have any requests for data you’d like to see in this report or feedback on how you’d like to see it evolve, please contact profitabilityreport@smarthop.co.

If you read last month’s report, you can skip the rest of the introduction (it’s redundant) and jump directly to the August Profitability Report section.  If you haven’t read last month’s report, you can find the July Profitability Report here.

Why is profitability so important?

When evaluating which loads to book, many dispatchers and fleet managers look for the highest RPM they can find. However, the most successful dispatchers know that optimizing for RPM can be shortsighted. We all know the pain of booking a high RPM load, only to find that the destination market is “cold,” with few, or only low paying outbound loads.

At SmartHop, we believe that profit potential should be the deciding factor when planning routes and booking loads, not RPM. This means doing two things differently:

1. Instead of just focusing on how much revenue you could earn by looking at RPM, we encourage our customers to focus on profit, by taking the total trip rate and their costs into consideration. This gives dispatchers and fleet owners an understanding of the loads they could book and still make money, even if they don’t have the highest RPM.
2. Instead of choosing loads by finding the highest RPM, we believe the key to sustainable profitability is to plan routes that drop your trucks in markets with a high potential to book another high-RPM load. This could mean passing over the highest RPM load for something that is still profitable but also ends in a market that allows you to book another profitable load. Stringing together loads in this way is what we mean by optimizing for profit potential. 

If you’re a SmartHop customer, you get real-time profitable load recommendations built into our load board, taking your costs into consideration.

About SmartHop’s Profitability Report

Our monthly profitability report analyzes millions of reefer, dry van, and flatbed spot market loads from 70 US markets to highlight the most profitable lanes and markets across the country. In this month’s report, you’ll find an overview of August’s Hot Markets and Profitable Lanes for reefers, dry vans, and flatbeds. You’ll also see how lane profitability has changed over the past three months.

To calculate profit, we input a standard cost structure that is representative of the average truck on the SmartHop platform.

You’ll also find an overview of how fuel prices have changed over the last 6 months, and a ranking of fuel prices by US region, from most to least expensive.

The intention is for this report to serve as a resource for small fleets looking to make smarter decisions that impact their profitability, with the goal of driving business growth.

About SmartHop

SmartHop helps small fleets and independent dispatching services grow their businesses. We were built by truckers, for truckers and have built the solution we wish we had, a single platform that combines the functionality of multiple point solutions. 

With SmartHop, you can accomplish the tasks you used to need a separate load board, TMS, factoring company, and fuel card provider for.  Plus, our added layer of market intelligence helps users make better decisions faster. The result for our customers is hours back, increased profitability, happier drivers, and improved cash flow.

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August Profitability Report

Hot Markets

In this section, you’ll see the markets where it was easiest to pick up a profitable dry van or reefer load from the spot market in August. 

To come up with our list of Hot Markets, we use SmartHop’s Market Profitability Index (MPI) to compare 70 US markets. The markets that we consider “Hot” have to have an MPI of 85 or above, meaning that the profitability of that market is much higher than the US average, which would be a market with an MPI of 50.

Dry Van:

🔥 Chicago

🔥 Grand Rapids

🔥 Terre Haute

Reefer:

🔥 San Francisco

🔥 Los Angeles

🔥 Chicago

Flatbed:

🔥 Cleveland

🔥 Syracuse

🔥 Cincinnati

In August, five markets met the Hot Market criteria for dry vans, which is a significant change from July, where Chicago was the only dry van Hot Market. Chicago remained the most profitable market, and Terre Haute moved from the second hottest market to the third. Grand Rapids came in at the second most profitable market, bumping Louisville out of the top three.

Reefer lanes continued to be more profitable than dry van lanes on average, with six markets meeting the Hot Market Criteria. The top three Hot Markets remained the same, with San Francisco being the most profitable market, followed by Los Angeles and Chicago.

We added flatbed lanes to our analysis this month and found that 18 markets met our Hot Market criteria. Our top three Hot Markets for flatbeds in August were Cleveland, Syracuse, and Cincinnati.

Profitable Lanes

We evaluated the inbound and outbound freight for thousands of US lanes to determine where it was possible to make a profit on one load while positioning yourself to pick up another profitable load in your destination market. This is what we saw in August for van, reefer, and flatbed lanes:

August Lane Profitability

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Three Month Trend

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Lane Categories

Profitable Lane to a Profitable Market: These are the best lanes available. A carrier can expect to earn a profit on the delivery and easily pick up another profitable load in that market. Identifying and booking these lanes isn’t easy, but it is the best way to keep your trucks on the money path in a very difficult market. The SmartHop platform highlights these lanes as “Hop” lanes” to make them easier to find and book.

Profitable Lane to Neutral Market:  You’re likely to break even on loads coming out of neutral markets. In this scenario. While big profits are unlikely, these loads can be used strategically to keep your balanced profit above $0.

Profitable Lane to Unprofitable Market: The cost of taking a load from the destination market could cancel out profits from the initial profitable load, leaving you with negative combined profit. 

Unprofitable Lane to Profitable Market: This is the best possible option when deciding between unprofitable lanes. In this scenario, you’d end up in a market where it’s more likely to pick up a profitable load, which could be enough to offset the loss you took on the initial load.

Unprofitable Lane to Neutral Market: In this scenario, while you’ll lose money on the initial load, you’ll break even on the load coming out of the neutral market. While you’re not continuing to lose more money by taking a load here, you’re still netting negative on your trip so far.

Unprofitable Lane to Unprofitable Market: This is the worst scenario you could be in, hauling bad loads to markets where it’s also difficult to pick up a good load. Carriers can anticipate losing money on the delivery and only unprofitable options for reloads. 

August Analysis

For all three equipment types, the largest percentage of lanes in August fell into the unprofitable lane to unprofitable market category, with 70.8% of dry van lanes, 47.59% of reefer lanes, and 58.19% of flatbed lanes falling into that category. For dry vans and reefers, the percentage of lanes in this category dropped significantly from July (by 9.29% and 19.13%, respectively), an indicator that the market may be shifting favorably.

The next largest lane category across equipment types was profitable lanes to unprofitable markets, with 17.76% of dry van lanes, 29% of reefer lanes, and 20.5% of flatbed lanes falling into that category.

To stay on the profitable path, carriers should aim to create trips out of profitable lanes ending in profitable and neutral markets, which made up 3.95% of dry van lanes (up from 1.7%), 10.36% of reefer lanes (up from 3.9%), and 7.83% of flatbed lanes (down from 14.68%) in August. 

Both the dry van and reefer markets seem to be improving, because there’s been an increase in the percentage of lanes that could lead to profitable trips, and a decline in the “worst” lanes (unprofitable lanes to unprofitable markets). The story is a little different for flatbeds, where, despite having the overall highest percentage of the “best” lanes (profitable lanes to profitable and neutral markets), it has become more challenging to find them over the past 3 months, and we’ve seen an increase in unprofitable lanes to unprofitable markets during the same period.

In terms of absolute number of lanes, creating a profitable trip can still feel like finding a needle in a haystack. That’s why we built automated load recommendations into the SmartHop platform to help small fleets and dispatchers more confidently book loads that will keep their business running profitably, increasing their take home pay. See a demo of how it works.

Fuel Costs

In this section, we’ll share data from the U.S. Energy Information Administration to show how fuel prices have changed over the past 6 months. We’ll also share fuel prices by region, from highest to lowest price per gallon.

Fuel is one of the largest costs factored into the profitability of a fleet operation. As fuel prices increase, we expect to see fewer profitable lanes across the spot market.

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Region / Price Per Gallon

1. West Coast (PADD 5): $5.11
2. Rocky Mountain (PADD 4): $4.46
3. East Coast (PADD 1): $4.39
4. Midwest (PADD 2): $4.30
5. Gulf Coast (PADD 3): $4.08

Fuel costs reached a 6-month high in August, with an average cost of $4.37 per gallon across the country. The West Coast had the most expensive fuel in August, with a price of $5.11 per gallon. 

Fuel is a major cost that carriers should take into consideration when calculating profitability. When fuel costs are high, carriers must focus even more on finding high-paying loads and cutting costs across their business to run profitably. At SmartHop, one of the ways we help our customers cut costs is with a fuel card program that offers competitive discounts at over 2,700 major fuel stations.

Conclusion

From a lane profitability standpoint, August was quite optimistic for reefers, with a 7.22% increase in the best lanes (profitable lanes to profitable and neutral markets), and an 11.89% decrease in the worst lanes (unprofitable lanes to unprofitable and neutral markets), despite rising fuel costs. Dry vans also saw a positive trend, though less extreme, with a 2.63% increase in the best lanes and a 4.87% decrease in the worst lanes. Unfortunately, the trend was the opposite for flatbeds in August. Despite flatbeds having a higher percentage of profitable lanes to profitable and neutral markets than dry vans, we’ve seen it decline monthly for the past three months, with a 6.85% decrease from July to August. Meanwhile, the percentage of the worst lanes has increased for flatbeds for the past three months, with a 6.71% increase in August.

Even when faced with a tough market, success is always possible. High RPMs are only part of the equation, and being singularly focused on that metric can often hurt a carrier’s long-term profits. SmartHop’s take is that profitability should be the deciding factor when selecting loads, and we’ve built it seamlessly into our platform to make it easier to make smarter decisions. We’re excited to provide the industry with a snapshot of what our platform can do in this monthly report.