The 1980 Motor Carrier Act de-regulated the freight rate approval process. Transport carriers were directed to charge whatever rates they deemed "fair and reasonable." Whatever that meant. It was never defined. As a result freight broker spot market load boards and per mile pricing have been creating current and future unstable and volatile per-mile prices for both shippers and transport carriers.
The Act also scrapped the Uniform System of Cost Accounts required to approve "fair and reasonable" truckload freight rates. Rates that allowed full transport production cost recovery including a "profit cost" like every other regulated utility. The results: thousands of trucking companies going out of business or leaving annually.
TCN CPAs and Transport Cost Specialist have brought back an improved Uniform System of Transport Cost Accounts and formulas for truckload carriers to build a profit cost back into their total per mile revenue requirement.
Developed and maintained by the group, we are now making truckload production costs data public for shippers, BCOs, and transport carriers to reference in negotiating "fair and reasonable" freight rates.
TCN has now created the first Freight Order Reverse Auction Marketplace (FORAM) and the first SPOT MARKET LOAD BOARD reverse auction marketplace where a shipper BUYER can solicit from one or multiple licensed transport carriers SELLERS a Contract for Carriage at current or future per mile rates. The cost per mile information provided at this transport cost center should be used as a guide for Freight Order Reverse Auctions (FORAM) and other per-mile rate negotiations.
TCN also provides transport carriers with a suite of products and services along with Truckwin Dispatch and Accounting software with the Uniform System of Costs Accounts built right into each accounting module along with a cost accounting handbook entitled "When the Rubber Hits the Road.
Interstate truckload transport remains a federally regulated utility. To provide a mile of transport service every licensed transport carrier has production costs that require a certain per mile revenue requirement. Since rate deregulation 40 years ago, total truckload transport production costs have increased at approximately the rate of inflation. Future monthly per mile rates provided are adjusted for inflation. Stops, drops, assessorial charges, and other time and production costs are not considered.
Transport costs are analyzed and published weekly using a solo owner-operator driver operated profile within the hours of service (HOS) regulations of the FMCSA. The above truckload production costs per mile include the following cost segments:
• PADDs Diesel Costs
• Over-the-Road Variable Costs
• Transport Margins
• Shop Costs
• General and Administrative Costs
• Profit Cost
Diesel fuel costs per gallon are based upon the eight diesel fuel districts published weekly by the Petroleum Administration's Department of Defense (PADDs). National average miles per gallon is used to determine diesel costs per-mile.
Additional over-the-road variable costs per mile include driver's wages, related payroll tax costs, payroll fringe benefit costs, and other over-the-road costs production costs such as tires, tolls, and other over the road costs based upon actual and statistically sampled national, regional, and other factors. With diesel costs included total over-the-road variable costs consist of the production costs to move a truck from a given point A to B.
Margins are used to determine the total revenue requirements when including the remaining production costs including a profit cost.
Fixed Line Haul costs are the annual fixed and capital costs necessary to produce a mile of transport service. They include revenue equipment depreciation, interest, PL & PD, Collision, and Cargo Insurance, licensing and fees, highway use taxes, and other fixed line haul costs.
Shop costs consists of the essential repairs and maintenance costs to running a successful trucking business.
G & A costs are the essential general, administrative, and regulatory costs every transport carrier must incur to produce a mile of transport service.
The total per-mile revenue data provided includes a per mile profit costs like any other regulated utility. Profit costs are included to sufficiently yield a fair and reasonable return on the invested capital of a tractor and trailer.
To learn more about how to build the above production cost segments right into a Uniform System of Costs Accounts visit Truckwin Solutions for more about Truckwin Dispatch and Accounting software and Truckwin Brokerage Accounting software.