Trucking companies that receive some shocking mail in the next few weeks from the Federal Motor Carrier Safety Administration can’t say they and their customers weren’t warned.
Starting Dec. 12, the FMCSA will begin sending warning letters to trucking companies that exceed key safety threshold limits set by its much heralded, much misunderstood and much feared Comprehensive Safety Analysis 2010 initiative.
Those letters are the first major step in the agency’s broad new safety program aimed at the trucking industry, an effort that begins with a new intervention process aimed at correcting safety defects before they lead to truck accidents, injuries and deaths.
Podcast: Q&A: The CSA 2010 Initiative
It’s a turning point for the FMCSA and CSA 2010, the trucking industry and for shippers, third-party logistics companies and their supply chain partners.
For shippers, the FMCSA’s letters are a big warning sign of capacity constraints, higher distribution costs and potential legal troubles in years ahead. And, in today’s tightly wound supply chains, where speed to market is paramount and where international and domestic shippers determine everything from sourcing and routing to transportation mode, the initiative could push more U.S. freight to the largest, well-capitalized trucking companies and intermodal rail.
The Department of Transportation has been working on the program for five years. The FMCSA has published reams of information about the initiative and held town hall-style meetings nationwide.
FMCSA officials have crossed the country speaking about CSA 2010 at industry events and participated in numerous conferences and online seminars, including an Oct. 6 Journal of Commerce Webcast on avoiding CSA 2010 “roadblocks.” Key trucking officials call it a “game changer” for the industry that could have a broader impact than changes to truck driver hours-of-service work rules.
Side Bar: Unfolding Impact on Capacity, Drivers.
In trucking, information — and misinformation — about CSA 2010 has reached everyone from owner-operators to the CEOs of billion-dollar carriers. But there also are hundreds of thousands of DOT-licensed motor carriers that haven’t checked their CSA 2010 scores online, where they’ve been available for carriers to review since April.
A DOT official last month estimated only 23,000 carriers out of more than 500,000 have used their PIN numbers to access and review CSA 2010 scores. The FMCSA plans to make carrier scores in five of seven key performance areas public this month, so shippers and brokers can review them.
Some shippers are just as late in realizing how the safety initiative could affect their business, their ability to move freight, their transportation costs and their liability in accident lawsuits.
Shippers that leave CSA 2010 “for their truckers to figure out” are putting their supply chains in peril, not to mention their jobs. “If you’re telling your CEO that rates won’t go up next year, you’d better make sure your résumé is up to date,” one industry consultant quipped at the Transcomp/Intermodal Expo last month.
“A lot of people don’t quite realize what’s about to happen,” said Hans Stig Moller, president of Bridge Terminal Transport, a nationwide drayage operator based in Charlotte, N.C. He expects an exodus of drivers from the trucking industry that will put more pressure on truck capacity and rates just as the economic recovery kicks into higher gear over the next year or two.
The trucking industry could lose 10 percent of its drivers over the next few years because of CSA 2010, Christopher B. Lofgren, chairman, president and CEO of Schneider National, said at the Transcomp conference.
That translates to more than 300,000 commercial drivers. “There is no doubt the industry has drivers who have moved from company to company with records that are less than stellar,” Lofgren told shippers at the Fort Lauderdale, Fla., conference.
That’s going to challenge importers, shipping lines and railroads that work with Bridge Terminal Transport and other drayage haulers — whether local, regional or nationwide operators — already feeling the impact of other initiatives that have tightened the driver pool. Security regulations such as the Transportation Worker Identification Credential likely would have created severe driver shortages at the nation’s largest ports if not for the global economic downturn.
It’s going to put more pressure on brokers who depend on smaller truckload carriers looking for backhaul loads to fill critical gaps in their customers’ supply chains.
And it may widen a growing schism in trucking in which large carriers with greater purchasing power and advantages of scale gain share from smaller competitors that are challenged when buying equipment and raising pay and freight rates.
Side Bar: Small Carriers, Big Trouble.
That’s a factor in a lawsuit challenging the FMCSA filed last week in the U.S. Court of Appeals in Washington by the National Association of Small Trucking Companies, which is seeking an emergency stay on CSA 2010.
“CSA 2010 will eliminate unsafe drivers for all the right reasons,” Moller said. “However, it will place greater pressure on the supply of drivers. Capacity is expected to remain tight, as carriers are replacing trucks, not adding them.”
As a consequence, CSA 2010 will add more muscle to the grip carriers are gaining on pricing power, pushing up rates across all segments of trucking, he said.
“Drayage rates will likely see a healthy increase, from 7 to 10 percent compared with existing levels” over the next year, Moller said. “These rate adjustments reflect the need to give drivers a competitive income and to retain their services.”
The safety initiative is a key part of a puzzle that when assembled shows truck capacity shrinking in a growing economy. Other pieces include higher equipment costs, driver hours-of-service regulations and tougher lending requirements.
Instant Access Webcast: Steering Clear of CSA 2010 Roadblocks .
The piece the trucking industry is having the most difficult time fitting into the picture is the truck drivers, specifically finding them. “We’re actively looking for more owner-operators right now, and we could probably use another 350,” said Moller, whose company contracts about 1,800 owner-operators.
With unemployment above 9 percent, the driver “shortage” isn’t about a lack of employable people — it’s about a lack of people wanting to work in trucking, either because of the unforgiving nature of the job or inadequate pay.
“We must make sure drivers can make a living,” Moller said. “As an industry, we need to do a better job of that. It’s great to have low rates, but that will not necessarily move cargo in the future.”
CSA 2010 “is without a doubt going to have a significant impact,” said Ray Cznadel, vice president of risk management at intermodal services provider H&M International Transportation in Iselin, N.J.
New Jersey is one of nine states participating in a two-year test in which the current SafeStat carrier safety rating system and a prototype CSA 2010 operate side-by-side, so H&M works under both.
The intermodal trucker, which dispatches more than 350 trucks nationwide, took “major steps” to tighten its maintenance and driver programs as CSA 2010 took effect and it began monitoring its scores in the program’s seven Behavior Analysis and Safety Improvement Categories or BASICs. “We had to really deal with maintenance and roadside inspections,” Cznadel said.
H&M also tightened its auditing procedures on driver logbooks. “CSA 2010 is really focused on driver behavior, on addressing causes of fatigue and unsafe driving,” Cznadel said. “We eliminated a lot of areas where we had issues by having an audit on a weekly basis and having the logs turned in before the end of the 13-day period.”
The real test came when a major customer — a large container shipping line — noted one of H&M’s BASIC scores had passed a threshold. That customer came calling with serious questions about the carrier’s safety. “They came down and we went through our policies, our BASIC ratios, and they looked at our contracting procedures with owner-operators,” Cznadel said. “They walked away satisfied.”
Many smaller carriers in the same position that don’t have a close a relationship with a customer might not be as lucky. Carriers report concerns over potential charges of negligent hiring in lawsuits are pushing more companies to bar the use of truckers whose BASIC scores include one or more “alerts.”
That threat will gain prominence when the FMCSA makes those scores public this month — unless it’s blocked by a court order. Even if it is not, carriers will certainly urge the FMCSA to accelerate a rule-making that will create a new safety rating system based on CSA 2010’s BASIC scores that will replace the SafeStat safety fitness ratings shippers and brokers rely on to screen motor carriers.
Contact William B. Cassidy at email@example.com.