Fuel Costs Renew Focus on Empty Miles
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Trucking is renewing focus on empty miles amid rising diesel prices that lead to greater expense.
Empty miles occur when a truck isn’t hauling any freight that would earn revenue. The operational expenses can make empty miles costly.
“All of these higher costs are resulting in somewhere around a dollar a mile higher in costs,” Blume Global CEO Pervinder Johar told Transport Topics. “They’re starting to look at how do I optimize my overall costs, and empty miles, of course, plays a big role in that optimization.”
Johar
That is expecially true in the current environment. The U.S. Energy Information Administration reported June 13 that the cost of diesel nationwide increased $2.43 a gallon over the last year to $5.71.
“We are seeing it both from the carriers, but also from their customers,” Johar said. “All of them are [incentivized] to reduce the empty miles because the savings can pass onto the end customer to some extent So, some of the demand that we are seeing is coming from the trucking companies, carriers themselves, but other is coming from people like ocean carriers who rely on these companies for moving their containers around.”
Ben Cubitt, senior vice president of consulting at Transplace, has seen shippers and carriers focusing on the issue. He noticed over the last couple of years that efficiency took a back seat. Shippers were instead focused on getting shipments to customers quickly because they were facing a high demand and limited capacity environment. He noted that when the economy started settling down, focus shifted back to building in efficiencies.
“We were all getting back into that rhythm despite the challenges,” Cubitt said. “When that fuel run-up first happened, the economy was still strong, there was still pretty strong demand. So, people started to focus on it and there was a lot of discussion and that added a couple exclamation marks. And now I would say that with business conditions, there’s some concern about a potential recession, etc., that has put more emphasis on it.”
Cubitt
Cubitt found when working with shippers that many of them budgeted fuel for about half of what it turned out being. He saw renewed interest in trailer weights, optimizing shipments and backhauls to reduce empty miles and partial empty miles.
“There was already a focus coming out of COVID and the shock of that,” Cubitt said. “I think what the fuel has done is add an exclamation mark to that and made many shippers much more decisive.”
Penske Logistics has looked to the open market to help offset empty-mile costs for itself and its customers. The company has a team that looks for opportunities to sell backhaul capacity from its dedicated fleet that would otherwise have turned into empty miles.
READ MORE: Convoy Survey: Empty Miles Top Carriers’ List of Priorities
“We have a pretty large centralized corporate backhaul team,” said Tom Scollard, vice president of dedicated contract carriage at Penske. “What we do is use that team to fill our customers’ empty miles. There’s two types of operations. When it comes to backhaul it’s those operations that have fleets that are conducive to the open market loading, which would be the 53x102 dry van, reefers or flatbeds. That equipment is sought out by the market.”
Scollard noted that with diesel costs at about $5.70 a gallon nationwide, it costs about 87.7 cents a mile. Those costs would have been closer to 50 cents about a year ago with diesel prices at $3.28 a gallon. That cost difference can add up fast for empty miles because there is no revenue to offset them.
“We have our customers paying for round trips, but we have our third-party backhaul department that is going out in the open market and selling that capacity at really a cost that is attractive,” Scollard said. “In the last six months with capacity being very tight, our backhaul revenue per load has never been higher. So, our average rate per load is doing pretty well right now. We aggressively look for those opportunities and fill those miles.”
XPO Connect is a digital freight platform that includes numerous features to help reduce empty miles. It allows carriers to look for consistent freight in lanes they frequently travel. Its reload functionality offers carriers the opportunity to keep trailers full through backhaul for continuous movement.
“On the Drive XPO app, not only can carriers find loads to reduce the empty miles,” said Yoav Amiel, senior vice president of technology at XPO Logistics, “but we’re now showcasing fuel prices at partner locations through our XPO Carrier Rewards program so carriers can save as much money at the pump as possible.”
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