Profitability Report

Introduction

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 and dry van 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 July's Hot Markets and Profitable Lanes for reefers and dry vans.

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

The goal is for this report to serve as a resource for small fleets looking to make smarter decisions about which loads to book with the goal of driving business profitability.

About SmartHop

American truckers move billions of tons of freight annually, working against incredible headwinds to turn a profit. SmartHop was founded by truckers for truckers in 2018, with the mission of helping small fleets build healthier businesses for the long run.

SmartHop combines comprehensive TMS functionality like trip management and performance reporting with custom load recommendations, so small fleets can increase profits while saving time, all in one platform.

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July Profitability Report

Hot Markets

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

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

Reefer:

🔥 San Francisco

🔥 Los Angeles

🔥 Chicago

In July, Chicago was the only market out of the 70 markets analyzed that had enough profitable loads to be considered a Hot Market for dry vans. After Chicago, Terre Haute and Louisville were the next best markets for dry van loads, but they were under the threshold to be considered a Hot Market. The story for reefer loads was a little more optimistic, with three markets meeting the Hot Market criteria: San Francisco, Los Angeles, and Chicago.

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 July for van and reefer lanes:

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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 Any Market: For this month’s report, we combined all unprofitable lanes into one category, regardless of the profitability of the destination market. However, if you’re in a situation where you’re choosing between only unprofitable lanes, it’s even more important to distinguish between the markets you could end up in:

• 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. 

July Analysis

For both dry vans and reefers, the majority of lanes in July were unprofitable, with 79.5% and 65.5% unprofitable lanes, respectively. The next largest lane category for both vans and reefers was profitable lanes to bad markets, with 18.8% of dry van lanes and 30.6% of reefer 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 1.7% of dry van lanes and 3.9% of reefer lanes in July. 

It might seem daunting to find those loads among so many unprofitable lanes with competition from other carriers. We built 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.

Conclusion

While the market is struggling to balance supply and demand, profitable loads are few and far between. The reefer market is offering better opportunities to carriers, but just barely. Summer produce season is likely playing a part in that. 

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.