There are fewer carriers in the market today in all modes. That deficit may hit shippers of hazardous materials a bit harder than other shippers. On the carrier side, just finding or developing qualified hazmat drivers is a challenge. Many carriers are driving away from hazmat handling for that reason alone. However, hazmat shippers often make that decision easier for the carrier by being difficult to serve in other ways.
Do you pay invoices quickly? Are you willing to let a carrier spot empty trailers at your site for pre-loading by your staff?
The Driver Issue
“If there’s a reduction in driver’s hours of service, as we anticipate, hazmat shippers must think about ways they can make their freight more attractive to carriers,” says John Danielsen, director of operations for ChemLogix, provider of chemical industry transportation management services (www.ChemLogix.com). “A shipper’s order characteristics have to do with how hard it is for the driver to get loaded and unloaded, how many times the order changes before it’s picked up, how much lead time you provide, how easy the receiving staff is to work with, and how long your loading process is compared to others. Carriers are looking for more profitable accounts, and these days hazmat shippers need more negotiating points.”
The proposed hours of service rule will increase driver break time from 36 hours to above 40. Portions of that proposal may mandate that when the driver takes that 40 plus hour break that at least 8 of them will be between set periods of time, like midnight to 8 a.m. So when a driver completes a shipment and gets done at noon to take a break, he may not be able to start his break by DOT standards until midnight. All that extra time between noon and midnight means lost capacity.
A clear indication of how bad the driver market is now is that transportation and the housing construction market are inversely proportional to each other. When the housing industry is booming the trucking industry is hurt, and when housing is dead the trucking industry should be much stronger because drivers who leave construction go into trucking, according to Danielsen.
“That pattern didn’t happen much in the last two years and it’s a clear sign that the pendulum has swung for this industry because of the inability of the driver to make a reasonable income based on the number of hours they put in on a given day,” he says. “The hours of service issue will reduce the driver’s ability to make money, which we think will not only reduce capacity because they’re driving less, but it will also reduce capacity because drivers will decide to get out faster. The average age of a driver is 55 and not getting younger, so as these older guys get out that number will creep up. Where that makes a difference for hazmat is that carriers will start charging more for hazmat shipments.”
If markets grow as expected in 2012, hazmat shippers will have a harder time competing with other shippers for that limited transportation capacity. Rising insurance rates will only add fuel to that combustible situation.
“That means we’ll start to see a trend where carriers will price hazmat shipments significantly more than they are today because they are more risky to them and they require drivers who are trained, certified and licensed,” Danielsen explains. “Right now I can get shipments charged at the same rate for hazmat and non hazmat in the same lane, but I think we may see more being charged for hazmats, just as LTL carriers charge a hazmat premium or surcharge.”
Shippers will also have a harder time attracting hazmat-certified employees—especially if they ship products by air or sea. Those are the most demanding hazmat documentation requirements and getting it wrong leads to regulatory sanctions. New hires must be fully trained and certified by a DOT certified instructor within 90 days of hire and that process must be documented. Training must be followed by refresher training.
“If shippers don’t manage that and they get inspected by OSHA or DOT, they can receive big fines—especially if the inspection is associated with some catastrophic accident or spill,” says Danielsen.
The Devil’s in Details
Where lack of training is especially evident is how hazmats are loaded into a trailer. To Danielsen, blocking and bracing are a lost art.
“The Dept. of Transportation does a bad job of telling shippers how to do it,” he says. “So shippers are left to themselves. As a result they load stuff, they think they’re bracing it correctly, they don’t allow the driver to inspect the load, the driver leaves, the load shifts, and there’s an accident followed by a claim. In most cases the shipper will lose the claim battle because they didn’t allow the driver to inspect before sealing the trailer. Once they seal the trailer the monkey is off the carrier’s back.”
Packaging and labeling are also challenges, especially for international shipments. Complying with customs regulations can be like hitting a moving target thanks to the Dept. of Homeland Security.
“We found that many clients were doing international documentation wrong,” Danielsen says. “If they get caught, even though they’re accidental issues, they can get fined and those fines have increased substantially since 9/11. These regulations require a lot of training to be in compliance.”
The Art of Negotiation
There are ways around the higher costs of hazmat shipping, besides being a model customer to carriers. It helps to master the art of negotiation. The client may ask for a certain hazmat fee and have it embedded in the linehaul charge, or they may simply ask for a quote on the cost of going from point A to point B and allow the carrier to bill a hazmat assessorial charge.
“The latter allows the carrier to give you a single rate for hazmat and non hazmat and only charge the additional amount when it’s needed,” Danielsen says. “If not they’ll have to give you two rates—hazmat and non hazmat. A third solution is when the carrier gives you a single rate and allows you to move hazmat. But if you move a non hazmat load they’ll still charge the same amount, so you end up paying too much. We tell our clients to ask for a non hazmat rate and negotiate a hazmat accessorial fee when applicable.”
Every rate may be negotiable, but it helps to do market research. By contacting at least five carriers for rates you’ll know the market trends. Then if you find a carrier that is better but more expensive than others you may be able to use that market intelligence to leverage a reduced rate.
Even on the parcel side hazmat shippers may have room to maneuver, adds John Haber, a transportation consultant with NPI, a spend management consulting firm (www.npifinancial.com). In fact you’d be doing your company a disservice if you didn’t negotiate with these carriers.
“The surcharges on shipping hazmats with UPS or FedEx are over $30 a package,” he says.
And hazmats aren’t only bulk chemicals, but can be any shipment of electronic products containing lithium batteries.
“That impacts companies like Canon and Nikon, and there has been a lot of lobbying going on where hazmat classification has come up as a concern,” Haber adds. “But those charges are negotiable if you have a contract with one of those carriers, and you should do so, just as you negotiate freight rates. The ability to get a 30-40% discount means pure profit. Yet these surcharges pile up and sometimes shippers don’t realize how much they’re paying if they don’t have a process in place where they get visibility to what they get charged on a weekly basis. Many times the bill comes in and it goes to accounts payable and the bill gets paid. The people on the loading dock who ship the packages may not realize the financial impact these charges have on them.”
These days hazmat shipping management requires a mix of talents, and even those who don’t handle hazardous materials would do themselves and their companies a favor by adopting the skills required to do so.