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Shipper and carrier needs ebb and flow with market cycles, but one particular service remains in high demand: drop and hook.
The practice involves a carrier leaving a trailer at a dock and attaching another pre-filled one, instead of live loading. The programs are popular among carriers, drivers, brokers and shippers due to efficiency and reduced dwell time.
“It’s a service that shippers need and carriers want,” said Adam McDonough, Vice President of Trucking, North American Surface Transportation at CH Robinson Worldwide.
In today’s soft freight environment, fleets and freight brokers can use drop-and-hook programs to combat low volume and secure long-term agreements with shippers. JB Hunt Transport Services saw this last into the 4th trimester. Sales volume was down 7% year-over-year in the pickup truck segment. But the volume increased under the 360box drop-and-hook program.
“Having a trailer pool makes it stickier,” said Chris Caplice, chief scientist at DAT Freight & Analytics. Instead of the volume changing with each offer, drop and hook shippers and carriers must commit to a certain amount of trade with each other, he explained.
“That’s exactly the key thing carriers want: consistency,” Caplice said.
Trailers and more trailers
The truck market has reversed from the second quarter of 2022. According to DAT data, dry truck rates are about $2.14, or 36 cents less than contract rates. But drop and hook was popular with shippers and carriers long before the market turned.
With its application ELD mandate in 2017, carriers had to plan drivers’ shifts and hours more carefully, McDonough said. Drop trailers were a way to add more predictability and save time for carriers and their drivers.
Shipper interest has escalated during the pandemic, said David Spencer, vice president of market intelligence at Arrive Logistics. A big reason was work. The trailers allowed shippers to load products when workers were available. Having a trailer available reduced detention fees and the possibility of product damage during loading or unloading.
Many pandemic-era issues, such as bloated inventories and trailer shortages, have now subsided, but shippers still see the value of drop and hook. Carriers and brokers have gradually responded by creating or developing drop-and-hook programs.
The Landstar System fleet has more than 15,500 trailers. JB Hunt’s 360box expanded to 16,000 trailers until the end of last year. Just over a year ago, Ryder System launched a drop-and-hook service. At the time, the platform had more than 6,000 trailers in the US, “with inventory growing daily,” the company said.
Werner Enterprises drop and hook network includes a pool of 30,000 trailers, and “that’s grown significantly over the last five years,” said Andy Damkroger, Werner’s vice president of logistics. The company’s shippers, many of whom are in the retail or consumer packaged goods industries, have a “strong preference” for drop and hook, he added.
“It’s a competitive advantage for us to have such a large trailer network,” Damkroger said.
As fleets and brokers deploy drop trailer programs, they are seeing the benefits. About 80% of Werner’s one-way trucking business is drop and hook.
CH Robinson handles about 2,700 trailer shipments per day and has more than tripled its drop trailer volumes and revenue over the past six years, according to McDonough.
“It’s an important part of our business,” McDonough said.
Market switching
Shippers recognize that today’s low prices won’t last forever. Market analysts expect a market correction in the near future. Caplice said at some point this year, DAT expects spot rates to return to being more expensive than contracts.
Housing starts, higher vehicle sales and higher consumer demand could impact the logistics market. Arrive Logistics expects the Federal Reserve to cut interest rates this year, which would “likely trigger an increase in housing activity and thereby increase overall freight demand,” it said in a recent statement. market update.
As a result, charterers who shortened their contractual terms are now trying to extend them to offset potential rate increases, Spencer said. And carriers that offer drop and hook could be able to secure shippers’ business in the long run.
“It’s a lot easier for a shipper to be tighter with the carrier because of market disruptions when they have large trailer pools and large contract agreements,” Spencer said.
Experts said demand for drop and hook is not necessarily expected to increase dramatically, but will likely remain steady as shippers favor the practice.
As Caplice put it, “If they can drop and hook, they will drop and hook.”