Horrors of service

Transportation professionals are finding little comfort in the new hours of service (HOS) regulations issued earlier this year by the Federal Motor Carrier Safety Administration (www.fmcsa.dot.gov). On one hand, there were some victories over the 2001 version the industry successfully blocked. On the other hand, the negative impact of the HOS regulations on productivity has the industry scrambling to define a course of action before the January 4, 2004, implementation of the rules.

Price increases are also likely for shippers whose freight or service characteristics increase drivers’ non-driving work.

Shippers who have modeled the new rules and their impact on productivity report losses could range from a 3.85% decrease in productivity for one consumer packaged goods company to a decrease of 7.2% for a national retailer using “driver count.” A grocer with “high touch” freight claims the new rules will cause a 14.1% drop in productivity.

Truckload carrier Schneider National (www.schneider.com) points to the consecutive nature of the 14-hour work time as one of the most troubling aspects of the new rules. Joining in this view is Jodi Dalton, senior manager of real estate for drugstore giant Walgreen Co. (www.walgreens.com). Dalton explains that Walgreens’ trailers are floor loaded with orders for two, three, or four stores. The goal is for the driver to perform the multi-stop deliveries and return in a single day.

All deliveries are driver-assist, points out Tom Stedman, director of transportation for Walgreens. In addition, drivers spend a half hour or more “pre-tripping” and fueling vehicles. Stedman is looking for options to complete some of the pre-trip tasks before the driver arrives to start his 14-hours. In that way, he hopes to protect some of the precious driving time during the duty cycle.

Walgreens, which is expanding rapidly with new store openings, could see a longer term impact on its network configuration. Based on its current model, each distribution center costs over $100 million and requires over two years to site and build. Dalton says Walgreen takes a long-term view of where to build, so in addition to the immediate productivity concerns, the drug store chain must consider its network model (see related article).

The immediate impact for Walgreens and other shippers results from counting 14 hours of on-duty time consecutively from the time the driver begins working. At the end of that period, the driver must stop driving and break for 10 hours before the 14-hour clock is reset.

Stedman wants to avoid short-load runs as a result of the new rules. If he has to start delivering to two or three stores on one trailer where he had previously delivered to three or four, it will mean more drivers. On the other hand, Stedman has found a few places where the added hour of driving allows him to eliminate a relay and shift a driver from that route.

Carriers face similar productivity issues plus added cost. According to equity research firm Morgan Stanley (www.morganstanley.com), most carriers pay drivers by the mile, not by the hour. Reduced driving time means lower total compensation for drivers, and with the less experienced drivers earning below 35 cents per mile, some carriers are being challenged to increase the pay scale.

The already tight driver market could develop another driver shortage overall if carriers are forced to increase fleets to offset productivity losses under the new HOS rules. Even in the absence of an industry-wide shortage, truckload carriers are coping with turnover rates of over 100%. These could increase as experienced drivers switch companies to improve their per-mile rate and maintain their earnings levels.

Walgreen’s fleet drivers are paid by the hour — including straight time and overtime, Stedman notes. To make up for reduced pay resulting from changes brought about by the new rules, drivers who had worked three or four days a week could end up working four or five.

But his bigger concern is a potential need for more drivers. “Everybody’s talking about cost, but where are we going to get all the drivers?”

Stedman and other shippers operating private fleets or dependent on truckload carriers evaluated the impact of the new rules and filed comments with the U.S. Department of Transportation. “All of our complains fell on deaf ears,” he says.

The new rules clearly present problems for truckload operations, but they may actually benefit less-than-truckload (LTL) carriers in some areas. The increase in driving hours from 10 to 11 hours allows LTL carriers to extend their line haul, Stedman points out. This offsets some limitations the carriers had experienced in states with 55 miles-per-hour speed limits for trucks. The 14-hour duty restriction has little impact in this case, so an LTL carrier can gain productivity in a line haul from Chicago to St. Louis. LT

What shippers should know

• Reducing hours of service (HOS) could lower productivity and equipment utilization rates. Result: higher transportation costs.
• HOS changes could affect load planning and routing of freight, impacting on customer service levels.
• The number of trucks on the road could increase by 15% to compensate for lost productivity.
• Drivers will make fewer deliveries, negating service advantages and cost efficiencies of multistop route planning.
• Shippers will need to take responsibility for driver productivity.

Source: John Fontanella, AMR Research Inc.

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