HOUSTON — Businesses that ship goods are starting to feel a pinch from changes to federal regulations that limit how much time truck drivers spend on the road, though more from service problems than from higher shipping rates. However, the hours of service rules may push up the cost of hiring a truck as long-term contracts come up for bid next year, logistics managers said at a major shipping and intermodal conference here this week.
“We haven’t seen the impact we thought we would” from the new hours of service, or HOS, rules, Kate Scott, director of logistics at Wendy’s Quality Supply Chain Cooperative, said during a panel on trends affecting shippers.
The logistics arm of the third-largest fast-food chain expected truckload pricing to rise fast once the rules took effect in July. “We were projecting about an 8 percent impact to the rates, not counting in transportation time delays,” Scott said. “We’ve seen maybe a 2 percent impact on rates, but capacity is where we’ve seen (an impact).”
Tighter regulation of driver hours “hasn’t taken our overall capacity down,” Scott said, “but they have made our challenging lanes that much worse. If we had a challenging situation before (the new rules), now no one wants to go do that. And we’ve seen a couple of examples where we had a one-day (transit time) that we can’t make now.”
Scott was one of many shipping and logistics executives who expressed concern about tighter HOS regulations at the joint annual meeting of the National Industrial Transportation League, Intermodal Association of North America and Transportation Intermediaries Association and the 2013 Intermodal Expo. Trucking executives say the new rules cut their productivity anywhere from 2 to 4 percent and are costing truck drivers anywhere from $1.6 billion to $3.9 billion in annual pay.
The latest revisions to the HOS rules require truck drivers to take a half-hour break after eight hours since their last time off-duty and to include two back-to-back 1 a.m. to 5 a.m. periods in any weekly “restart.” That can turn a 34-hour restart into a 52-hour break, as drivers must go off-duty in a seven-hour window to meet the new requirement.
Simply put, trucking companies need more trucks and drivers to haul the same amount of freight they carried under the previous version of the work rules, as drivers can complete less work per week, making fewer turns and hauling fewer loads, and take longer to get back on the job the following week. Trucking groups are backing a House bill that would rescind the new rules and launch an independent federal investigation of the rulemaking.
Truck capacity and reliable service are big issues for Dublin, Ohio-based Wendy’s Quality Supply Chain Cooperative, which spends more than $100 million a year to ship food and supplies to more than 6,500 restaurants worldwide. “Supply assurance is our number one priority,” Scott said. “We go to extremes you wouldn’t associate with a fast-food restaurant,” including chartering planes to meet critical delivery deadlines, if necessary.
“When we say ‘fresh not frozen’ beef, we really mean it,” said Scott. “It is produced and in a restaurant within seven days.” Lettuce, she said, is shipped straight from the field. That means Wendy’s relies heavily on over-the-road trucking to supply its restaurants on a timely basis. If a truck isn’t available, or a driver can’t meet a delivery deadline because of hours of service restrictions, Wendy’s would have to turn to more expensive shipping options.
Other shipping executives at the four-day event also reported HOS-related problems, especially those with customers that demand time-definite deliveries or have tight delivery windows.
“Where there’s no flexibility on the delivery side, we’re seeing an impact on overall service levels,” said Brad Parkhurst, carrier relations leader at Owens Corning, the home building products manufacturer. “The utilization that motor carriers are trying to hit is so high that if anything happens inside of that transit or the shipment before that we see delays,” Parkhurst told the shipper panel. “We’ve seen a major impact on time (definite) deliveries.”
Sometimes delays or disruptions at other companies spill over into Owens Corning’s supply chain. “If the consignee on the prior load takes four hours to unload (the truck), there’s going to be a delay,” said Parkhurst. Owens Corning is trying to be more flexible on the front end of a shipment, allowing truckers to pick up freight the day before a shipment is scheduled to leave a plant, for example.
Flooring manufacturer Shaw Industries had to rethink how it runs its internal trucking operation or private fleet under the new regulations, said Kevin Santori, manager of transportation services.
“We flipped to a team operation” when serving some of Shaw’s 29 regional distribution centers proved difficult using solo drivers, Santori told the shipper panel. “Four weeks into it, we’re really pleased,” he said. “Improved utilization has really helped with the costs and we want to keep that balanced going forward.”
Shippers will see the effect of the revised work rules build up over time, especially if the economy moves faster and freight demand rises, said Jim Filter, senior vice president of intermodal commercial management at Schneider National, the nation’s largest privately owned U.S. truckload carrier. “We have to help shippers understand what the impact will look like,” he said.
“It’s not as if suddenly we stop picking up freight,” Filter said. “We’ve been through this before and all the freight moves. It just moves at a different price and a different service level.”
What that price will be is a question begging an answer. “Everyone is still trying to figure out what it means to their financials,” said Scott. She expects to learn more next spring, as contracts come up for bid. “Next April we’ll really know what increase we’re going to pay.”