A Hard Hit

A Hard Hit

Copyright 2003, Traffic World, Inc.

One less hour on the road may hit truckers hard in their wallets but it may hit truck shippers even harder.

Awakening to the impact of new hours-of-service rules taking effect in January, some surface shippers are considering shifting freight to cost-saving intermodal moves, particularly for shorter distances that are now all but entirely owned by truckers. A new study by one truckload carrier anticipates price increases ranging from 4 to 19 percent as truckers try to recoup rising operating costs.

Retailers such as Target Corp. are already considering switching modes. "We''re always looking for ways to increase our access to capacity, and (short-haul intermodal) is one of the things we would look at in concert with our (intermodal marketing companies)," said Steve Carter, director of transportation at the $44 billion department store giant. "It certainly meets our cost-service trade-off needs. Target is heavily dependent on the contract carrier base."

Fought over for several years, the rules that take effect Jan. 4 are the first major revision of driver rules in nearly 70 years. The most significant change is that the maximum 15 consecutive hours drivers have been allowed at the wheel will be cut to 14 hours. The clock will start once a driver begins working and a 10-hour break is required after that to reset the clock.

Thomas L. Finkbiner, president and CEO of Quality Distribution, Tampa, Fla., North America''s largest bulk carrier, calls the hours-of-service changes the "biggest change in the industry since the advent of the 53-foot trailer" in the mid-1980s. "It''s something we are going to solve because we think we''re flexible enough to solve it," he said. "Companies that are the most flexible will benefit. Companies that are the least flexible will suffer."

Finkbiner said he doubts shippers simply will accept that carriers are about to take on substantial new costs. "Shippers are never ready for a rate increase," he said. "There are a lot of costs going up - insurance, fuel, etc. - and shippers don''t want to acknowledge any of them."

But the carriers say there will be a severe impact on driver productivity, particularly for customers with freight that may trigger delays, according to Schneider National. That means the biggest hit to carriers may come from shippers with live load and unload appointments, excessive driver time at the dock to load and unload, multiple stops, border crossings and miscellaneous waiting time.

"When demand is greater than capacity, prices go up and people have more difficulty moving their goods," said Scott Arves, president of transportation for Schneider National. "So we think there will be more applicability (for intermodal), and some of that freight may be in the 750-1,000-mile range that has traditionally gone to trucks."

Arves cautions that the short-haul intermodal market is further along in concept than in actual application. "We''ve been talking to a number of our rail partners, especially ones in the East, about the concept of shifting some capacity over to a ''sprint train'' concept," Arves said, "and I can tell you that not a lot has developed. But the new hours-of-service rules could change that."

Eastern rail carriers Norfolk Southern and CSX were looking at the short-haul intermodal market even before the rule change.

The railroads, working with Eastern ports and the Intermodal Association of North America, said in a report in March that two short-haul lanes - between the Port of New York and New Jersey and Buffalo (388 miles) and between the port and Pittsburgh (363 miles) - could be "economically feasible today." But they said that hinged on whether "there is sufficient rail volume for full intermodal trains, and if facilities and terminal costs are offset by a public entity other than the railroad."

John Lanigan, executive vice president and chief marketing officer for Burlington Northern Santa Fe Railway, agreed the new hours-of-service rules would hurt productivity for motor carriers and probably help the railroads. "Where they''re going to have a huge impact is more the medium and shorter haul that have multiple stops and lots of customer dock time," Lanigan said.

But Lanigan noted that density, particularly for the Western carriers, is more critical than length of haul. "We''ll continue to evaluate specific traffic lanes with our partners and, if they believe they''ve got significant density between points that might justify a shorter length of haul that aren''t normally served, we''re more than happy to look it," he said. "But we''re not aware of them at this point in time."

Finkbiner says Quality Distribution''s costs will rise because of the need to hire 100 additional drivers. That would be a 3 percent addition to a total driver work force of 3,300 that includes 2,800 owner-operators and 500 company drivers. That''s because, although drivers will be allowed one more hour driving time (11, from the current 10 a day), their overall on-duty time will be reduced by one hour under the 14-hour rule.

Finkbiner also predicts operational snafus in dispatching offices. "There will be an unpredictable fallout," he said. "I call it the law of unintended consequences."

One result may be an exodus of qualified drivers from an industry already suffering from driver shortages.

Schneider National noted the 14-hour clock will cut into a driver''s ability to generate miles - and pay. "We expect the new rules to increase our challenge retaining, recruiting and hiring qualified drivers, an already daunting task given the current regulatory and lifestyle requirements of long-haul driving," the company stated.

Officials in the trucking industry already are asking their shippers, particularly chemical shippers, to do their part to mitigate the impact of the rules. John Conley, vice president of the National Tank Truck Carriers, said, "One of the most important things they can do is get away from the mindset of an eight o''clock pickup and an eight o''clock delivery," a common practice in the chemical industry.

"Chemical plants can only load one trailer at a time and it takes a half-hour to load a trailer. We don''t need to tell nine drivers to be there at eight o''clock because it takes several hours in wait time. So let''s just tell the driver to be there at 11 and we''ve just picked up two or three hours," he said. "They''re going to have to help drivers get in and get out."

Many truckers still are trying to figure out how the rules fit into their ongoing operations, but Finkbiner warns that all spreadsheets might as well be thrown away once the regulations take effect Jan. 4. "It will reduce the productivity of the driver," Finkbiner said flatly. "You can do all the modeling you want but models never fully replace real-world activities."