Avoiding 'Hour-mageddon'

William B. Cassidy | Feb 23, 2011 6:42PM GMT

Trucking interests are issuing dire warnings about the proposed changes to truck driver hours-of-service rules they say would cut driver and truck productivity, jack up transportation costs and potentially undermine the economic recovery.

One could call HOS reform a "watershed event that has the potential to increase shippers' rates, decrease trucking productivity and sap the nascent economic recovery." That's exactly what one transportation magazine did -- in 2003.

In a Nov. 10, 2003 cover story, Traffic World called the hours-of-service rules that took effect in January 2004 the biggest change in trucking since deregulation. Truckers said fewer hours would increase rising operating costs and rates.

Today similar arguments are resurfacing, as the FMCSA looks to squeeze more time out of those 2003 rules, possibly dropping the driving limit to 10 hours, requiring all work be completed in a 13-hour period and changing the 34-hour restart provision.

Are truckers' warnings valid? The experience of 2003 says they are, to an extent. Trucking operating costs and shipping rates will rise, perhaps sharply, if the FMCSA's proposed changes are implemented in late 2011 or in 2012.

However, tighter hours-of-service and higher transportation costs didn't derail the economy in 2004, when the "nascent" recovery proved more resilient than some had expected. Carriers enjoyed some of their best years in the mid-2000s.

Truckers are hoping for a repeat performance in 2012 and beyond, but if they want to avoid a potential "hour-mageddon," truckers and shippers need to dust off the strategies that helped them cope with the loss of hours-of-service in 2004.

For one, take it for granted that operating costs and rates are going to rise. Today, as in 2003, capacity is tight, and carriers aren't expected to loosen their grip on truck count much this year or next, which will keep upward pressure on pricing.

The proposed HOS changes would drain truck capacity without actually scrapping trucks. Compensating for that becomes difficult without altering distribution networks and bringing on more trucks -- at an additional cost.

Although carriers say they would have to add trucks to handle current levels of freight under the proposed changes, they're not required to add those trucks, or haul every shipment. They'll choose between moving freight and making money.

For shippers, the only way to soften the blow is to rethink distribution and inventory options. That means questioning how quickly goods must arrive, how far in advance to place orders, and when to shift freight to other modes or options.

There's something else we can learn from experience: changes don't always unfold as planned, and outside factors can influence them in unforeseen ways. The recession ended what was hailed in 2003 as a "new era" of higher shipping costs.

There are many "outside" factors at play today, from high unemployment and a slower than usual recovery to other federal truck safety initiatives, tight commercial lending, higher truck equipment and driver costs, and the rising price of oil and fuel.

A sustained period of high fuel prices -- diesel at $5 a gallon -- could prove the biggest drain on capacity yet, and the biggest threat to a healthy recovery.

-- Contact William B. Cassidy at wcassidy@joc.com.

Thanks for these insightful and detailed comments on the hours of service dilemma. I believe carriers are already looking at the profit margin for loads, lanes and accounts much more closely to weed out freight that doesn't provide an acceptable return, as Hank suggests. And trucking companies will need to rethink how they do business, as eaach62 suggests.

Trucking companies are going to have to be increasingly innovative even if the hours of service rules stay just as they are, as federal regulation, fuel prices and rising operating costs put pressure on their bottom lines and their transportation networks.

- By William B. Cassidy on 3/15/11

Red Ball Express kept the supply chain moving in Europe during WW2. Just change drivers and keep on rolling. Nothing new about the relay system.

- By pete milne on 2/26/11

Trucking companies also need to question their fundamental assumptions about how they currently provide transportation services. Most truckload (TL) companies these days have one driver in one truck. The truck either sits idle a large part of the day, or the driver tries to keep the truck moving 24 hours a day, becoming fatigued, breaking HOS regulations, and risking major property damage accidents and the inevitable lawsuits. A situation that has resulted in greater government intervention in the industry. As exemplified in the current HOS debate.

Greater efficiency and safety, in providing transportation services will be the hallmark of trucking companies that survive in the future. Trucking as practiced for the past eighty years will not fly.

For example, there are two fundamental inefficiencies that plague the vast majority of truckload carriers; 1. Having capital equipment sitting idle while the driver sleeps. 2. Having two drivers in one truck: sleeper teams. The first system is inefficient in capital equipment terms, the second is inefficient in human capital terms.

The most efficient system is to have one driver in one truck, and have that truck moving 24 hours a day. A relay system. I have seen it used effectively for 20 years in the LTL business, and it could easily be adapted to work in the TL business.

All that is needed is for truckload company owners to look at their operations with an eye for opportunities to implement the relay in their company's operations. One example is a truckload company that regularly picks up beer in Golden, Colorado and delivers to Rapid City, SD, a round trip distance of about 640 miles. Just a little too far for one driver to load, unload and return to Golden in a 14 hour day, legally, thereby requiring a 10 hour rest period within about 100 miles from Golden on the return trip.

Many carriers in this scenario would merely ask the driver to fudge his logs, make the run five days a week, and hope they don't get caught. Or, have the dispatchers find a driver within the fleet with available hours, and in the right spot, every single day of the week.

Both of these systems result in inefficient resource utilization, late deliveries, very frustrated drivers and dispatchers, and lost opportunities to provide top-notch services to an ever-widening customer base.

Assuming the beer distributor wants one load of beer delivered every morning at 6:00 a.m. the Colorado-based truckload carrier would require two power units and a minimum of two trailers to provide the desired service, with each tractor/driver delivering a load on alternate days. And each tractor/driver sitting idle approximately 20 hours at Golden waiting for the next days' load. There is a great opportunity to re-engineer the system for greater efficiency.

This inefficient system could be replaced in an innovative way with a relay system. With a relay system, the carrier could deliver the same one load every morning at 6:00 a.m. with one truck, one trailer and the same two drivers

The key would be to hire two drivers to live in Torrington, Wyoming, (the halfway point between Golden and Rapid City) with one driver assigned to the north half of the roundtrip, and the other driver assigned to the south half of the round trip, with each driver handing off the truck to the other driver in Torrington. Each driver would be driving only about 7-8 hours a day (320 miles), with ample time for loading, unloading and delays. And each would be home each day, with a consistent, predictable schedule. Which would contribute to driver satisfaction, increased retention, and a smooth working relationship with both shipper and consignee.

As a result, the trucking company owner woud have consistent revenue from a very happy customer, a system that would run itself without the need for constant intervention by an expensive dispatcher, a profitable business segment, and a reputation as an innovator in the industry. It is doable, it is easy, and best of all it costs nothing. In fact, it reduces costs dramatically.

The use of relays will 1. Reduce operating costs and HR costs as a percentage of revenue. 2. Reduce capital requirements. 3. Increase driver retention, and 4. Eliminate HOS challenges that most truckload companies struggle with. The relay system is the wave of the future, and the sooner truckload companies incorporate relays in their operations, the larger and more consistent will be their profits, and the longer they will remain in business.

- By eaach62 on 2/25/11

For shippers, the only way to soften the blow is to rethink distribution and inventory options. That means questioning how quickly goods must arrive, how far in advance to place orders, and when to shift freight to other modes or options.

Transportation cost per SKU by mode. Now carriers can start selling Value Drivers and metrics to reduce inventory and cost by SKU.

What is the "cost" for out of stock"

To me what is needed most is a system of pricing based on amount of space occupied that ALL carriers can use. Long term pricing agreements that are effective for 1, 2, or 3 years just can not keep up with the Fuel and regulations that hammer the industry daily.

Carriers will have to consider NOT hauling freight that is not profitable or offer a one time SPOT quote effective for a limited time period.

"We are not going to build a church for Easter" this was stated by top trucking officials at a recent conference in Atlanta..

My comment "prove it" It aint bragging if you can do it!

- By Hank Mullen on 2/25/11

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