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Fight the Hours-of-Service Effect

Aug. 11, 2014
The hours-of-service rules can drag carrier productivity down while escalating shipper costs. Here is what shippers can do about it.

Carrier productivity, measured in miles/week per single driver, has dropped by about a third.  

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 2,000 miles per week.  This article explains the causes of this decline and important ways that shippers can improve transportation productivity to cut their costs.

In the good old "2,700 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 other methods of "fudging" paper logs is a good safety practice.  More questionable practices 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;
  • Mandate 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 1 a.m. and 5 a.m. 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.

Reset: Timing is Everything

Driver productivity suffers any time they begin their 34-hour reset before 7 p.m. or after 1 a.m.  With the new rules, starting your reset at 1:05 a.m. 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 7 p.m. means the driver's 34-hour break would increase by one hour.  So if they began their break at 4 p.m., it would last 37 hours.  Since a 34-hour reset didn't historically mandate 1 a.m. to 5 a.m., 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 7 p.m. and 12:59 a.m. -- not always the easiest thing to achieve while trying to maximize driver/truck utilization, maintain customer lane commitments and customer service levels.        
On the flip side, shipper and receiver productivity takes a hit as well.  For example a company may want deliveries to unload at night. With the new "reset," carriers are more hesitant to take appointments in the midnight to daybreak time frame, especially nearing weekends, when a majority of drivers are looking to go home and take a true 34-hour break. 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. Talking with the recruiting managers at two of the larger U.S. carriers, they indicate that driver applications are down 10-20% and replacing a driver costs $3,500-$5,500.

Improving Driver Productivity

It is not a good time to be a transportation manager for a shipper.  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 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 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 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 having 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 truck's 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 for 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.

Best practice is having convenient on-site scales to allow trucks to easily weigh in and out. The inbound weight gives some indication of the potential load size that can be accommodated, and the outbound checks to ensure that the truck is truly full. This gives the opportunity for "topping off" if the shipper indeed has the flexibility.  Drivers are also more open to the idea of hauling heavier loads when there are scales on site.  This alleviates the fear of wasting time going to a scale and having to come back for a rework, or worst case, getting a ticket.

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.  

When a shipper provides a delivered price to their customers, short of having vendor managed inventory, the shipper needs to rely on the buyer's good-ordering practices. Unfortunately, buyers need an incentive to increase their orders to more completely utilize the truck. Providing a pricing incentive works -- just ask P&G.  A few companies have granted shippers flexibility to modify orders or use "filler products."  This needs to happen more.

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 hours-of-service may be reducing carrier productivity, shippers can mitigate the 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.

Will Cotten is director of Transportation|Warehouse Optimization, a logistics consulting firm. He can be reached at [email protected].

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