Trucking is an extremely competitive business, where the ability to turn a profit is dictated by the number of trips that trucks can accommodate and how efficiently they are utilized. With a fleet of trucks requiring a heavy initial investment with various on-going costs, it’s important for truckers and trucking companies to run trips as efficiently as possible.
The largest expenses for trucking companies are truck fuel, lease payments, salary of drivers, as well as repair and maintenance. While these costs increase over time, trucks always try to increase freight utilization to lower these expenses per mile.
One of the most common techniques to increase the efficiency of trips through increased freight utilization is by backhaul trucking. Here’s a quick summary of the content we’ll cover in this guide:
- What is Backhaul Trucking?
- Benefits of Backhaul Trucking
- Backhaul Challenges
- How to Identify Backhaul Opportunities?
- Impact of Backhaul on Freight Costs
- Backhaul Cost Breakdown & Analysis
- How to Incorporate a Backhaul Strategy?
What Is Backhaul Trucking
Backhaul trucking, also referred to as backloading, is a type of transport whereby a truck transports commercial cargo on a return trip instead of returning empty. This means that after a truck has delivered its initial cargo, it picks and moves another commercial load for the trip back to its starting location.
This way, the total operating cost of the truck is lowered because an extra or additional trip has been planned on the backhaul. This is the opposite of deadheading, which is a scenario where the truck does not transport any load back on the return trip.
Example of Backhaul Trucking: Let’s explore the concept of backhauling with a short example. In our scenario, a customer has requested a trucking company to deliver equipment from their factory (Location A) to their distribution center (Location B). The truck delivers the cargo and once the trip is completed, the customer also notices that they would need to return several rejected items back to the factory for quality assessment and further processing. The customer has now instructed to transport the consignment of the rejected cargo from their distribution center (Location B) back to their factory (Location A). When the trucker transports the cargo on its return trip, it's referred to as a backhaul.
As the trucking company is now able to transport another commercial load back to its original location, it’s able to backhaul cargo. If the truck were to return to the factory (initial location) without any load, it would be having an empty return trip, which is also referred to as deadheading.
Not only does a commercial return trip save time, but it also saves costs for the trucking company as well as the customer, as they were able to maximize the freight utilization for both transport legs.
Backhauling can be done through any type of truck that can carry cargo, such as semi trucks, straight trucks and various others. It’s also important to distinguish between the two different types of backhaul transports: internal backhaul and external backhaul.
An internal backhaul occurs if a company operates its own fleet of trucks to arrange a return trip with a commercial cargo load. A good example is Amazon, who operate their own fleet of delivery and cargo trucks that transport cargo between warehouses, distribution centers and delivery locations.
Therefore, extensive cargo and inventory management is required to keep track of inventory levels and route plans. Companies who practice internal backhauling typically work with route and planning tools.
A backhaul is deemed as external if a trucking company operates a fleet of trucks and transports cargo on return trips for one or multiple customers. This scenario is frequently seen with freight forwarding or trucking companies who serve multiple clients.
To secure backload, trucking companies typically work with other brokers or with multiple customers who may have delivery requirements in nearby locations. Fleet operators typically use a fleet management and cargo delivery tool to plan trips and identify backload opportunities.
Benefits of Backhaul in Trucking
As you have gathered through our explanation and examples, there are various benefits of backhauling. This applies to both internal and external backhauls. In this section, we’ll focus on sharing some of the most important benefits that you can expect.
- Increased Freight Utilization – If a trucker or truck operator moves commercial cargo loads on return trips, it increases the freight utilization. This is because the truck is able to be fully utilized on both the initial and the return trip. Moreover, increased utilization also means less running costs per mile.
- Reduced Lead Times – Backhauling also helps to reduce overall lead times when it comes to road freight. If a truck is deadheading instead, it needs to return to its initial starting location before it can initiate a new freight movement, which is inefficient in any type of operation.
- Profit Maximization – Having cargo move through backhaul also maximizes the profit potential of a trucker or a trucking company. This is because they are able to charge for two trips, instead of one. To put things into perspective, a backhaul trip is usually charged at about 70% – 100% of a regular trip. In some cases it can even increase the revenue by 2 – 3 times. FInd out more in our cost analysis and example scenario.
- Maximized Fleet Utilization – Instead of requiring two trucks for two separate trips, only one truck with a backhaul route is required. This means that dispatchers require less monitoring for trucks, as they are now fully utilized, transporting cargo in the initial and the return trip. This maximizes the operator’s fleet utilization and also allows them to move more cargo.
- Increased Capacity – When a truck operator practices an optimal backhaul strategy, they are also able to increase the total amount of cargo they move over a period of time. This is because with increased fleet utilization and ensuring that trucks are loaded with cargo on return trips, it allows them to move more cargo.
Challenges of Backhaul in Trucking
While backloading has many benefits for individual truckers or trucking companies, there are also certain challenges that need to be dealt with. These challenges mainly revolve around setting up a backhaul process and finding routes where this is possible. Let’s explore some of these challenges in more detail.
- Advanced Planning – Planning in advance is a prerequisite for backhauling. This is because the cargo for the return trip needs to be identified ahead of time. Moreover, proper coordination is required, as problems encountered during the initial trip, may affect the backhaul, which could ultimately disrupt transport arrangements.
- Establishing Backhaul Routes – Backloads are best implemented on routes that are heavily frequented, as these transport routes have consistent cargo flow. The team in charge of planning backhaul trips should always be ready to have a plan that is solid but flexible enough to accommodate changes to ensure maximum truck utilization and timely delivery of cargo.
- Requires Demand – Regardless if it’s an internal or external backhaul, there needs to be transport demand on the return trip to ensure maximum utilization. If there is no demand for the return trip, a backhaul can’t be operated efficiently. Nevertheless, trucking companies can always take advantage of transport management systems and a large customer base to plan backhauls.
How to Identify Backhaul Opportunities
It goes without saying that trucking companies who actively seek to accommodate backhaul loads experience increased freight and truck utilization, reduce their operating costs per mile and also increase their overall profitability.
However, it may not always be easy for individual truckers or trucking companies to know when a backhaul strategy is suitable for them. In the following section, we’ll highlight the three best ways and methods to identify and plan for this.
1. Use Existing Customer Data & Demand
Larger freight forwarding or trucking companies can take advantage of their existing customer base to create demand for backhaul trucking. Having multiple customers located in various locations allows them to analyze routes and also predict delivery patterns.
Using this information, trucking companies with larger fleets can plan backloads using transport orders from multiple customers. This strategy is also commonly applied to high-volume trucking routes between two larger cities or in-between states.
2. Use Load Boards
A load board, which is also sometimes referred to as a freight board, is an online tool and marketplace where individual truckers, trucking companies and freight brokers are able to accept transport requests from shippers.
The system works by matching requests from shippers to available truckers, which through a bidding system are able to secure cargo loads that they are interested to transport.
Load boards are an ideal way to find backhaul loads for all types of trucking, as these types of transports can be offered at a much more competitive price (as the return trip would otherwise be empty). This is a win-win for the shipper and the trucker.
3. Use Route Planning & Optimization Tools
Route planning software allows trucking companies who operate a large fleet to efficiently plan and schedule transport orders. Most route planning tools today come with backhaul options and are also able to calculate cost savings.
These planning and optimization tools are great for finding backhaul routes, as they can analyze past data and also predict future patterns. Truck loads are typically prioritized by urgency, type of cargo, distance and efficiency.
Backhaul and the Impact on Freight Costs
Whether you’re a truck driver that transports cargo independently or a manager of a company that owns a large fleet of trucks, it’s important to understand the impact of costs and potential saving that a backhaul strategy could yield.
When operating one or multiple trucks, there are various cost drivers that have an important influence on the overall profitability. Here’s a list of the most impactful cost drivers:
- Insurance – Under federal law, all commercial trucks (regardless of ownership type: owned or leased) are required to have commercial auto insurance. Take note that this requirement may differ in countries outside of the United States.
- Maintenance – Trucks require regular maintenance like any other vehicle. These can range from replacing wear and tear parts to fixing engine problems.
- Wages – Trucks need to be driven by drivers that earn a wage. Even independent truckers need to pay themselves at the end of the day.
- Fuel – Gasoline is one of the most impactful cost drivers, as trucks have big engines and are almost always constantly under heavy load.
- Lease – Certain truck operators prefer leasing trucks compared to owning them. While it may save them on maintenance and insurance, these types of costs are typically factored into the lease rate.
- Permits – Depending on the type of truck, cargo being transported or location where the truck is operated in, certain permits may need to be applied.
It goes without saying that the more trips a truck makes the more revenue it generates and the more it offsets the above mentioned cost drivers. In the next section, we’ll illustrate how backhaul arrangements are able to increase the overall profitability of a truck.
Backhaul Cost Breakdown & Analysis
In our example, a truck driver who operates his own Freightliner Cascadia truck is transporting goods from Los Angeles, California to Phoenix, Arizona. Let’s assume the following:
- MPG: 7.5 (source)
- Average Fuel Price: $3.5 per gallon
- Distance (Los Angeles to Tucson): 390 miles
Example Without Backhaul
A single truck trip from Los Angeles to Tucson covering 390 miles would cost $182, assuming that the Freightliner Cascadia has a mileage per gallon (MPG) of 7.5 and the fuel price per gallon of diesel is $3.50. Taking other costs into account, the trucker decides to charge the customer $650 for the delivery.
If the truck returns back to Los Angeles after its delivery, the return trip also costs $182 making the total cost of delivery $364 ($182 for the trip to Tucson + $182 for the empty return trip). That leaves the trucker with a profit of $286 ($650 – $364).
Example With Backhaul
Assuming the same scenario, the trucker managed to find an additional shipper through a load board who wants to transport cargo from Tucson to Los Angeles. As he wants to make the offer more attractive he charges the first trip at $650 but the return trip at $450, as there were many bidders.
Instead of returning to Los Angeles empty, he is now able to backload cargo from Tucson to Los Angeles, maximizing his freight utilization. Therefore, his profit increased by $450 amounting to a total of $736 ($286 + $450).
That’s almost a return of more than 250% using a backhaul strategy, compared to returning with an empty trailer. This is because an empty return trip negatively affects the balance sheet.
However, take note that wages, maintenance, lease and other costs were not included in this example. Overall, the backhaul scenario not only managed to offset the costs but also generated a profit.
|Without Backhaul||With Backhaul|
|Total Return||Smaller Margin||Larger Margin|
In conclusion, an empty return trip has a negative cost impact and eats into the profit of the initial trip. A backhaul is able to also generate a profit for the return trip and also impacts the overall profit.
How to Take Advantage of Backhaul Loads
In this last section, we would like to share how shippers and truckers (individual truckers and trucking companies) can take advantage of this and incorporate a successful backhaul strategy into their business.
As a Shipper
Shippers who have their own feel are advised to optimize orders according to delivery locations. Moreover, route planning and data analysis tools may help with planning backhauls.
Shippers with multiple locations are also advised to backhaul as much as possible and have a team that plans cargo flows.
As an Individual Trucker
Truckers who own their own commercial trucks are advised to work closely with trucking companies and cargo owners. It’s always a good idea to develop business relationships and be part of a pool of service providers.
Other great tips include subscribing to load boards plans and taking advantage of other relevant product offerings. When transporting cargo, planning well ahead of time is crucial, in order to secure backhaul opportunities.
As a Trucking Company
Trucking companies are advised to work with individual truckers and cargo owners to ensure that their truck fleet is fully utilized on both initial and return trips.
Existing customers provide a great base for starting backhauls, especially when combined with load planning tools. Investing in a fleet management system that provides profitability reports will also help to highlight which type of routes and trips generate the most revenue.