Last week on The Road Forward we interviewed Sage from Sage Live Outcast on YouTube. From his experience as a freight broker, he shared his thoughts on dynamic (surge) pricing in the trucking industry.
What Is Dynamic Pricing?
In the past, trucking companies have had to rely on older and somewhat static pricing for their routes. This meant that the load prices would only take into account past route data, usually the last two weeks, but not current market condition which would result in freight prices that don’t accurately reflect the current freight market.
Now, dynamic pricing is becoming more common in trucking. Dynamic pricing is based on instant supply and demand— it’s used by companies like Uber to determine how much you’ll pay for a ride, as well as by airlines that charge more for seats on flights during busy travel times.
Challenges for Drivers
Dynamic pricing can help make sure trucks are being used efficiently, but it presents some challenges to the industry:
- Older trucks/trucks with low gas mileage can't compete with newer models that have better fuel efficiency.
- Dynamic pricing makes it harder to cross the threshold from driver to Owner-Operator.
- If you’re under contract, price surges could either hurt or benefit your business. For example, if your contract has you locked in at a certain price, you’ll be safe if prices drop but won’t be able to take advantage of rising prices.
- Dynamic pricing may increase the likelihood for volatility. A load set to be transported on Thursday may not have the same urgency as a load set to be shipped on Friday before shippers close, so intraday day freight prices may fluctuate drastically.
It's no secret that the industry is changing quickly—Drivers need to be smarter and more efficient if they want to succeed. Dynamic pricing is taking technology in the trucking industry to the next level. Sage even comments that this could be the next step towards autonomous trucking.
Be sure to check out the full episode where we talk about the current state of the spot market, the snow plow operator shortage, and recent news about the indictment of an FMCSA Safety Auditor.
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