Backhauling is the act of hauling cargo from a destination point back to the truck’s originating point.
The cost of driving a fully loaded truck is only slightly higher than driving one that’s empty, which is commonly known as deadheading. Therefore, it makes economic sense to backhaul as much as possible, even if it requires a trucking company to offer a discount on its services.
What are Backhaul Services?
A carrier will generally want to bring its trucks back to its home base as quickly as possible to pick up a load from one of its primary customers. If a carrier doesn’t have any trucks available when a customer calls for service, that customer can simply call another carrier, resulting in a lost opportunity to earn revenue.
Effective backhauling requires a motor carrier to work closely with freight brokers who can locate customers needing freight moved from the destination back to the carrier’s home base. A freight broker will then negotiate the rate with the customers, usually at a discount of 10 to 30 percent from the standard rate.
Backhaul services thus provides the customer with a discount, and the carrier still earns a profit. However, the carrier must weigh the cost of deadheading the truck back to its home base against the cost of keeping the truck at its current location in the hopes of getting a higher-paying load.
Using Backhaul Services to Reduce Costs
A truck incurs expenses whether it’s moving or not, so every minute that a truck isn’t hauling a paid load is a minute the truck is costing the carrier money. Expenses such as loan or lease payments and insurance must be paid even if the truck isn’t moving.
Additional expenses such as fuel, driver pay and depreciation are also incurred when the truck is moving, whether it’s hauling a load or not.
A growing number of carriers are now providing backhauling services as a way to minimize the cost of returning the truck to its home base. Backhauling typically requires the carrier to use a different customer from the one it used on the outbound trip, so the truck usually must deadhead for some distance to pick up the next load.
Freight brokers can help carriers minimize their deadhead distance by finding jobs with a pickup point near the truck’s current location and a delivery point near the truck’s home base.
The average distance for deadheading a truck to pick up its next load was at least 100 miles just a few years ago, but that average has now dropped to about 60 miles. The contributing factors for this trend include the rising cost of fuel and improvements in logistics.
Backhaul Services Savings
Assume that a truck travels 100,000 miles per year and has an average fuel economy of six miles per gallon, resulting in an annual fuel consumption of 16,667 gallons. Assume further that the average price of diesel fuel is $3.83, which means the annual cost of operating the truck is about $63,000 per year.
Let’s also suppose that half the truck’s mileage is used to return the truck to its home base, and the carrier is able to backhaul for all of its return mileage.
The carrier in this example will save over $30,000 per year by backhauling, even if it only charges its backhaul customers the cost of fuel.
Backhaul Services & Private Fleets
Private fleets are another growing trend in the trucking industry because it allows carriers to backhaul more easily.
Companies that deliver their own products to customers often maintain private fleets of trucks rather than paying an independent carrier to transport their goods. Walmart is particularly effective at using backhauling to reduce shipping expenses due to its large number of customers and retail locations.
Bridgestone, Del Monte Foods, and Wegmans also maintain large private fleets that routinely provide backhauling services.
Backhaul Services & Reloading
Reloading, or round-trip reloading, is a type of backhaul service in which the carrier uses the same customer on both the outbound and return trip, eliminating all deadhead mileage.
This example shows how backhaul services can cut a carrier’s shipping costs, even if it involves a detour on the return trip.
Assume that the truck is hauling a load from St. Louis, Missouri to Atlanta, Georgia, a distance of 550 miles. The carrier contacts the customer while the truck is en route and asks if they need anything delivered on the return trip. The customer responds by saying they need a load delivered to Louisville, Kentucky, which is 420 miles from Atlanta.
This stop will add 130 miles to the return trip, so the fee for the backhaul service would only need to pay for the 130-mile detour to be worthwhile for the carrier.
Backhaul Services & Discounted Rates
Carriers can offer significant discounts for backhaul services and because it replaces deadhead mileage with paid mileage.
This example shows why a carrier would want to backhaul, even if it’s for a discounted rate.
Assume that a carrier is moving a load from Cleveland, Ohio to Miami, Florida for its standard rate of $2.30 per mile. A backhaul is available from Miami to Charlotte, North Carolina that only pays $1.10 per mile, which is just enough to cover operating expenses.
However, a customer in Charlotte needs a load delivered back to Cleveland, which will pay $2.00 per mile. This backhauling arrangement should be well worth it for the carrier, even though both backhauls are for a discounted rate and the return trip requires a detour.