No matter the situation, managing the little things drives the most success. We hear the importance of managing the most minute details from athletes, and we hear it from business leaders. In the logistics and supply chain space, the smallest detail to manage is drayage.
To drive the point forward, just think of all the dollars and hours spent moving containers in, out and around the ports in 2021 and early 2022. The inefficiencies drove millions in storage and demurrage accessorial fees and increased companies’ inventory purchases because of the lack of trust that the product would be moved through the ports.
Drayage is the shipping of goods over a short distance via truck.
From an operational perspective, dray moves are a well-orchestrated series of events that optimize the movement of containers over short distances and time periods. The goal is to provide the highest level of service and turn the equipment the most times in a given day, allowing the operator to offer the best price to their customer and produce the most profit for their operation.
Utopia in the dray world is obtained when sales and operations teams work together to find freight that allows for what are called street turns, which is moving emptied shipping containers directly to another shipper versus returning it back to the port or intermodal ramp. Street turns not only improve the efficiency for the truck driver by increasing freight turns in a day, but they also reduce ocean port and intermodal ramp congestion.
Drayage’s short-haul characteristics allow logistics professionals to tap into various other logistics solutions using a variety of equipment when market conditions shift. As an example, the dray truck driver can haul trailers and flatbeds when dray demand is down or chassis and container shortages exist.
Also, through dray brokers and agents there are opportunities for dray operators to roll into larger logistics solutions through 3PL relationships that have a need to feed: transloads, cross-dock operations, warehousing, distribution and yard storage options. Dray helps to move equipment quickly and hold down total supply chain costs.
Drayage’s importance in slimming freight budgets cannot be overstated. By closely monitoring containers at ocean ports or intermodal ramps to where the dray operations is turning out the oldest ISO and intermodal boxes first holds down and avoids per diem and storage costs, which increase exponentially the longer the equipment sits past their free days.
Inventory management was a critical issue in 2021 and 2022 and inefficient dray work caused many containers to be delayed or lost, which drove unnecessary buys and/or additional expedited freight trips to clear up backorders.
Repo freight service solutions are the best fit for shippers that find their truckloads weigh out before they cube out. In these situations, shippers do not have to change anything with their order levels because their freight will fit nicely within the smaller box versus those customers that need the full 53’ capacity found in a trailer or domestic intermodal container.
The drayage community is highly fragmented with much of dray capacity coming from small operators.
As a localized example of the fragmentation of the drayage market, the best estimate is over 700 dray carriers serve the Southern California market alone.
The largest national drayage companies: JB Hunt, HUB Group and Schneider do offer dray. But more often than not, they have their capacity tied up in managing their own network. That makes dray brokers and agents the best option for shippers to gain access to greater dray capacity without having to manage several dray operators in a market.
Dray agents are beneficial for the small to medium asset dray operators as well, as they perform all the back office functions, provide the cashflow for the operations and act as a sales team bringing additional business opportunities to the dray business.
The shipment information is very similar to the requirements when buying truckload capacity:
The dray provider prices the move based on the previously mentioned shipment characteristics, with a very close eye on time. Time in transit, time to load and time to unload are essentially how drayage cost is calculated. Price per mile and other similar pricing models found in standard truckload do not come into play because there are not enough miles in dray to spread the efficiencies of long haul into a short day trip.
The most common dray pricing is a flat rate, plus fuel percentage or an all-in rate that includes fuel.
In addition to the standard rate, there are accessorials to be aware of as adds because of their impact to time:
Keep in mind, when you are contracting an intermodal freight move, the intermodal provider (IMC) will give you an all-in rate that would include all of the above so the pricing appears just like a truckload shipment. In that case, you’d only receive one invoice and that would be from the IMC.
The working conditions and regulations involved in hauling drayage mean that drivers and drayage carriers have some characteristics and priorities that are a bit different than truckload operators, which include:
There are two flavors of drayage, with one being part of a door-to-door intermodal move and another where a shipper is working to turn equipment out of (or into) ports and ramps themselves.
In a door-to-door intermodal move, shippers do not need to do anything other than book the full intermodal move with their intermodal provider (IMC). The IMC will book and coordinate the origin and destination dray, along with the linehaul leg with the railroad for a seamless solution and single invoice.
In the situation where a shipper is looking to turn containers in or out of a port or ramp, the shipper will book and coordinate the work directly with a dray provider.
In summary, drayage is the linchpin in IPI and domestic intermodal shipments, as it is the first and final mile delivery segment in an intermodal shipment moving goods between ports, terminals, warehouses and retailers.
We can expect drayage needs to increase and be more critical as the global economy continues to be more interconnected. The more fluid and transparent drayage operations are will improve cost, provide continuity, reduce risk and keep an uninterrupted flow of goods moving through a company’s supply chain - driving a competitive advantage.
If you're looking for an IMC to help with drayage services or assistance with other freight and logistics needs, let us know by filling out our brief Request a Quote form. We'll be happy to get back to you to discuss your shipping needs, whatever they are. If you need more information about this or other freight topics, visit our Resources page for free eBooks and comprehensive articles, or continue browsing our blog.