Shipper costs increase as hours-of-service further reduce carrier productivity
Here is what shippers can do about it
When I started working for a carrier 10+ years ago the fleet’s weekly average single driver productivity was 2,700 miles. Today that number is below 2000 miles per week. This article explains the causes of this decrease and important ways that shippers can improve transportation productivity to cut their costs.
In the good old "2700 miles a week" days, drivers were not faced with electronic logs and, more recently, the new government mandated hours of service. Eliminating drivers keeping multiple logbooks or allowing other methods of “fudging” paper logs is a good safety practice. More questionable, are the latest hours-of-service regulations that:
- Require drivers to take a 30-minute break during the first eight hours of a shift
- Limit the maximum average work week to 70 hours, a decrease from the previous 82 hours
- Mandates a "reset" that requires a driver to be off-duty for 34 hours after 70 hours of work. This reset must include two consecutive time periods between 1am and 5am to allow for a “natural” sleep cycle—which might be tough to achieve if they have been working the equivalent of the night shift.
It is this last provision that has created so much pain in the industry.
For example, driver productivity suffers any time they begin their 34hr reset before 7pm or after 1am. With the new rules, starting your reset at 1:05am would realistically mean their break would last 52 hours – reducing driving time and their chances for a “good” paycheck. Given this is a worst case scenario, another way to look at it is every hour before 7pm means the driver’s 34hr break would increase by one hour. So if they began their break at 4pm, it would last 37 hours. Since a 34 hour reset didn’t historically mandate 1AM to 5AM drivers could break whenever it was advantageous – like when they finished a trip. Now a planner/fleet manager’s goal is to have their drivers begin a 34 hour reset between the hours of 7pm and 12:59am – not always the easiest thing to achieve while trying to maximize driver/truck utilization, maintain customer lane commitments and customer service levels.
Most drivers are paid by the mile so this significant reduction in their weekly miles yields a significant reduction in the base on which their income is calculated. While driver wages have increased over the period, they have not kept up with this erosion of the ability to earn. This, combined with the aging demographic of a "typical" truck driver, has reduced driver availability.
All this is bad news for shippers – it is not a good time to be a transportation manager. Some have indicated they believe this is the year that a shortage of trucks will cause the "excrement to hit the rotating ventilating apparatus." In fact, some think it already did over the brutal winter where intermodal availability was compromised and over-the-road trucks were very hard to find! Indeed, anecdotal evidence suggests that it is much harder to cover loads at pre-negotiated prices. Much more volume is being pushed to the spot market with an adverse impact on total cost.
How can a shipper fight back? Unfortunately, like the hours of service, a lot of things that have driven up the cost of transportation are out of a shipper’s control: Insurance, fuel, driver cost, and pollution control mandates etc, but the shipper can improve carrier productivity by multiple means including using drop trailers, eliminating waiting and ensuring that loads are legal before they leave the dock. One area that’s often been neglected is fully utilizing the truck capacity whether that be weight or cube.
A review of more than 1 million loads from a variety of companies’ shows that most companies doing a “good” job are only utilizing 90-95% of what they think is a truck’s capacity. Often the capacity number is understated. Not using what is considered to be the truck’s capacity is often caused by:
- Buyers wanting to order the “minimum quantity” to get “best price.”
- Planners not having enough time to consistently create high utilization VMI or deployment shipments – especially with product weight variations and trucks with different capacities
- The misguided belief that the TMS will fix things. Often the TMS (Transportation Management System) doesn’t have a small order to add to the load so it ships “as is”
- Truck capacity is not well known even by the carrier. I personally used to believe the “tribal knowledge” that our company trucks load-weight limit was 45,500 pounds. After doing research on our equipment and using fuel management I found we could haul 47,200 pounds. What’s considered to be a truck’s capacity is often wrong because carriers use “tribal knowledge”, and have a lot of the same fears a shipper does when you push weight limits. Remember, carriers and their drivers take the responsibility of getting an over-weight or over-axle ticket. So when the carriers don’t know and the shipper keeps the target weight low to avoid the pain caused by over-weight axles, the result is most trucks have a lot of capacity left.
- Fear of over-axle issues or dock cuts when pushing trailer capacity limits
To improve utilization and reduce transportation costs, industry leading companies have turned to implementing a wide range of improvements:
- On-site scales
- Order Optimization for the shipments they write themselves (like deployment or VMI orders)
- Incentives for customers to maximize their order size – when the shipper pays the freight
- Collaboration with other shippers
Order optimization is writing better orders that truly utilize the equipment while enabling the dock staff to construct a “damage-free” load that is axle-legal for all the states through which it will travel. Order optimization should increase truck-capacity utilization to better than 98%. In most companies this yields a 4 to 8% transportation savings.
But shippers can’t stop at writing good orders. Planning must provide detailed instructions for pickers and loaders. Without detailed instructions, loads are often cut and workers spend too much time analyzing how to build a pallet and load the truck. Without specific directions, no two pallets are built the same or trucks identically loaded. The order-optimization technology should guide the pickers and loaders creating a consistent and repeatable process in the warehouse. It essentially turns thinking time into productive time while reducing issues like over-axles and damage. Most companies see a 15-20% increase in warehouse productivity and a decrease up to 75% in damage.
Collaboration with other shippers to increase truck utilization is somewhat like the abominable snowman: people claim to have seen it but there is very little hard evidence. The instances we’ve experienced have been limited. The ideal situation of combining a shipper of bricks with a shipper of feathers is truly a win-win and, one day, somebody will achieve this nirvana. To do this appropriately, the allocation of freight costs is a significant challenge. An independent, systems-based, approach to this is essential.
While the hours-of-service may be reducing carrier productivity, shippers can mitigate their impact by reducing the numbers of shipments needed every year. By maximizing truck capacity utilization the need for more shipments is reduced. In a time where transportation costs are on the rise and transportation managers are under pressure, there are still ways to obtain savings.
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