Profitability Report

Introduction

New this quarter

This Profitability Report includes data on lane profitability and fuel prices from Q3 2024.

We intend to improve this report over time. If you have any requests for information 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’ve read a previous edition of our Profitability Report, you can skip the rest of the introduction (it’s redundant) and jump directly to the Q3 2024 Profitability Report section. If you missed our last edition, you can read the Q2 2024 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. If you’ve been in this industry for some time, you 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 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 quarter’s report, you’ll find an overview of Q2 2024’s Hot Markets and Profitable Lanes for dry vans, reefers, and flatbeds. You’ll also see how lane profitability has changed over the past 3 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 an overview of fuel prices by US region.

This report is a resource for small fleets looking to make smarter decisions that impact their profitability, with the goal of driving business growth. Independent dispatchers can leverage this information to improve their load-booking strategies for their customers.

About SmartHop

SmartHop helps small fleets and independent dispatchers earn more while simplifying the day-to-day, with trusted load recommendations and task automation. We provide a booking and trip management platform that enables trucking companies to manage their load booking and back office all in one place.

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Q3 2024 Profitability Report

Hot Markets

In this section, you’ll see the markets where it was easiest to pick up a profitable dry van, reefer, or flatbed load from the spot market in Q3 2024. 

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:

*While Memphis was the 3rd hottest dry van market in July, and Grand Rapids was the 3rd hottest dry van market in August, they both had MPIs under 85, so didn’t meet our Hot Market criteria for those months.

Reefer:

Flatbed:

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The number of hot dry van markets increased throughout Q3, with only two hot markets in July and August, and ten hot markets in September. Los Angeles, Memphis, and Chicago were each in the top two markets twice during the quarter.

Reefer hot markets increased from three to six in August, and then fell back down to three by September. California was a good place to be for reefer loads in Q3, with San Francisco being the top market in July and August, and number two in September, and Los Angeles taking position two in both July and August. 

Carriers looking for flatbed loads found the most hot markets in Q3, with 19 in July, 21 in August, and 18 in September. For the most part, southern cities made up the majority of flatbed hot markets in Q3, with Memphis and Birmingham occupying the top two spots all quarter.

Profitable Lanes

We evaluated the inbound and outbound freight for thousands of 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 Q3 for van, reefer, and flatbed lanes:

Q2 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. Request a demo to see how the SmartHop platform highlights these 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 a 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 negatively 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.

Q3 Analysis

In Q3 2024, over 50% of lanes across all equipment types fell into the unprofitable lane to unprofitable market category; carriers still felt it was challenging to find a profitable load. For dry vans, the percentage of these lanes remained relatively consistent at 75.70% , a 1.53% decrease from Q2. The reefer market saw a decline in the percentage of unprofitable lanes to unprofitable markets, with 50.76% of Q3 lanes in this category, a 10.33% decrease from Q2. For flatbeds, it was a different story, with a 20.37% increase in unprofitable lanes to unprofitable markets, making up 50.52% of flatbed lanes in Q3. 

The second biggest category across all equipment types in Q3 was profitable lanes leading to unprofitable markets. In Q3, 18.66% of dry van lanes, 27.30% of reefer lanes, and 20.94% of flatbed lanes were profitable but led to unprofitable markets. While these lanes may be tempting in the short term, carriers often face challenges finding profitable outbound loads from these destinations.

The best loads to book for maximizing profitability are lanes that end in profitable or neutral markets. These lanes accounted for a small but crucial portion of the total: 2.40% of dry van lanes, 10.48% of reefer lanes, and 12.39% of flatbed lanes. These are the lanes carriers should target to keep their fleet operating profitably.

SmartHop was built to help carriers more-easily find profitable lanes. Our automated load recommendations and background load search feature are designed to find loads that keep fleets running profitably, even in tough markets. To learn more, request a demo.

Fuel Costs

In this section, we’ll share data from the U.S. Energy Information Administration to show how diesel fuel prices have changed over this year. We’ll also share fuel prices by region.

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

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Diesel fuel prices are the lowest they’ve been all year, with the national average dropping to $3.558 per gallon, from a high of $4.044 in February. The West Coast remained the most expensive region for fuel, with prices reaching $4.423 per gallon in July before dropping to $4.252 per gallon in September. As with Q2, the Gulf Coast offered the lowest prices, with a quarterly low rate of $3.206 per gallon in September.

Conclusion

In Q3 2024, carriers faced significant challenges in finding profitable lanes, with over 50% of all lanes falling into the "unprofitable to unprofitable market" category. Dry van loads remained particularly tough, as 75.7% of lanes ended in unprofitable markets, though this represented a slight improvement from Q2. Meanwhile, reefer lanes showed some recovery, with a 10.33% decrease in unprofitable lanes. Flatbeds, however, saw an uptick in unprofitable lanes, signaling a challenging quarter for this equipment type.

Despite these challenges, certain regions offered better opportunities. For dry vans, markets like Chicago and Los Angeles consistently ranked among the top for profitability. In the reefer market, California cities such as San Francisco and Los Angeles were among the best places to book loads, while for flatbeds, southern markets like Memphis and Birmingham dominated the top spots throughout the quarter.

Opportunities still existed in profitable lanes leading to neutral or profitable markets, though they accounted for a small portion of available options. Additionally, diesel prices showed a consistent decline throughout the quarter, dropping to their lowest levels in September. Lower fuel costs can provide carriers with a slight reprieve, though sustained success will still depend on targeting the right lanes and markets for profitability.

As the spot market remains competitive, we continue to encourage our customers to evaluate not just the rate per mile (RPM) of a load, but also the profitability of the destination market. SmartHop simplifies this decision-making by presenting load recommendations and real-time market profitability data. We’re excited to showcase how our platform can help carriers navigate this challenging environment in this report, and welcome the opportunity to share a personalized demo of this technology for any company.