Profitability Report

Introduction

New this quarter

This is the first time our Profitability Report has been released quarterly. Instead of analyzing just the past month’s data, we’ve included lane profitability data from all of Q4 2023.

Our intention is to improve this report over time. To that end, If you have any requests for insights 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 Q4 2023 Profitability Report section. If you missed our last edition, you can read the September 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 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 Q4 2023’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 a ranking of fuel prices by US region.

About SmartHop

SmartHop helps small fleets and independent dispatchers 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 that previously required a separate load board, TMS, factoring company, and fuel card provider. 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.

Q4 2023 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 Q4 2023.

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:

October Total Hot Markets: 11 🔥 Chicago
🔥 Grand Rapids
🔥 Terre Haute
🔥 Louisville
🔥 Toledo

November Total Hot Markets: 8 🔥 Chicago
🔥 Grand Rapids
🔥 Terre Haute

December Total Hot Markets: 11 🔥 Chicago
🔥 Grand Rapids
🔥 Terre Haute

Reefer:

October Total Hot Markets: 12 🔥 Chicago
🔥 Twin Falls
🔥 Seattle
🔥 Fayetteville

November Total Hot Markets: 3 🔥 Twin Falls
🔥 Spokane

December Total Hot Markets: 10 🔥 Spokane
🔥 Chicago

Flatbed:

October Total Hot Markets: 8 🔥 Cleveland
🔥 Chicago

November Total Hot Markets: 7 🔥 Chicago
🔥 Toledo

December Total Hot Markets: 9 🔥 Cleveland
🔥 Toledo
🔥 Columbus

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 Q4 for van, reefer, and flatbed lanes:

Q4 Lane Profitability

Three Month Trend

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.

Q4 Analysis

Anyone searching for loads on the spot market knows that the trucking industry is still in a down market. Looking at Q4 data, the largest percentage of lanes for all three equipment types fell into the unprofitable lane to unprofitable market category, with 72.9% of dry van lanes, 56.84% of reefer lanes, and 58.45% of flatbed lanes falling into that category. While the dry van market had the highest percentage of these lanes, it did see a considerable drop, from 78.39% of lanes in November to 63.59% of lanes in December.

The next largest lane category across equipment types was profitable lanes to unprofitable markets, with 19.42% of dry van lanes, 27.45% of reefer lanes, and 19.74% of flatbed lanes falling into that category. Carriers should be careful with these lanes, because although the initial load will be profitable, it will be difficult to impossible to get a profitable load going out of the destination market.

To stay on a profitable path, carriers should aim to create trips using profitable lanes ending in profitable and neutral markets, which made up 1.65% of dry van lanes, 6.98% of reefer lanes, and 8.74% of flatbed lanes in Q4. The dry van market saw a significant increase in profitable lanes to neutral markets, from 0.5% of lanes in November to 2.74% in December. Similarly, the reefer market saw an increase in profitable lanes to neutral markets from 4.83% of lanes in October to 6.75% in November.

In this market, booking profitable trips still feels like a big challenge. To help small fleets and dispatchers more confidently book loads that will keep their business running profitably, SmartHop’s platform has automated load recommendations and a background load search feature that finds loads that meet your criteria, even while you’re not actively searching.

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 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 diesel prices increase, we expect to see fewer profitable lanes across the spot market.

Diesel fuel costs are steadily decreasing, after a six-month high of $4.56 per gallon nationally in September. Prices have declined by 12.94% to $3.97 per gallon in December. The West Coast remained the most expensive fuel region, although prices have decreased by 13.92% in Q4, from $5.53 in October to $4.76 in December. The Gulf Coast continues to have the most affordable diesel, and prices decreased by 12.71% in Q4 from $4.17 in October to $3.64 in December.

Conclusion

Overall, we’re still in a challenging market, with the majority of lanes across all equipment types falling into the category of unprofitable lane to unprofitable market. However, by being thoughtful about which markets and lanes to target, we believe carriers can operate profitably.

Q4 saw a continuation of the Midwest being home to many Hot Markets, with all the top markets for dry vans and the majority of top markets for flatbeds located in that region. For reefers, the Northwest was a smart area to stay in, with the majority of Hot Markets (besides Chicago) located within that region during Q4.

Even with the positive trend in fuel prices, running profitably remains challenging. Our biggest recommendation to carriers and dispatchers is to evaluate a load’s profitability (as well as the profitability of the destination market) not just its RPM. To make it easier, we’ve built this functionality seamlessly into our platform in the form of load recommendations, with the option to enable auto-booking.