Hours Changes: The Impact
Productivity slips, rates rise, LTL may regain some business
Patricia Smith
Senior Editor
You could hardly call it a seamless transition. In the first two weeks of the new hours of service rules the Federal Motor Carrier Administration's 24-hour hotline fielded some 5,500 calls from truckers looking for clarification on the 34-hour restart, the split sleeper berth option, on-duty changes, and logging under the revised rules.
HDT's editorial staff heard its share of war stories. Most were from drivers scrambling for details. A few claimed to be battling with misinformed dispatchers or supervisors. Some reported harassment by law enforcement officers. And there was the usual spattering of old-time truckers calling for reinstatement of the old Interstate Commerce Commission and economic regulations.
For the most part, however, the changeover was smoother than expected. January is one of trucking's slower months, which gave carriers and shippers a little breathing room. Equally important, most carriers pushed hard to be ready.
Getting Ready
Landstar started getting the word out to its owner-operators and fleet contractors almost as soon as the new rules were announced. The company also trained more than 300 employees in operations, customer service, billing and safety and posted an interactive tutorial on its web site.
In October, when it was clear there wouldn't be any major changes or implementation delays, Landstar hosted web seminars for customers and its 850 agents. "We're fairly large and because we have so many agents that deal with customers on a daily basis, this was the only practical way to get to a lot of people in a very short time," said Joe Beacom, vice president and chief compliance officer.
FedEx Freight started the process with articles in driver newsletters last fall. Pre-shift meetings became a forum for questions and discussion. Front-line managers were brought up to speed via a computer-based education program. HOS information was made available to all employees on the company's intranet web site.
"We had a plan," said Patrick Reed, president and CEO, FedEx Freight East. "We hit it on the front end and didn't wait until the last minute. When Jan. 4 came, we were in pretty good shape."
West Side Transport started training hard in December. After the first of the year they set up a 24-hour phone number that drivers could call if they had questions. In early March they were still holding daily meetings at the company's Cedar Rapids headquarters where drivers were invited to ask questions and discuss HOS problems over free lunch. The sessions, said Safety Supervisor Chris Pierce, will continue "until we get to a point where we don't get questions any more."
West Side dispatchers, customer service representatives and other internal personnel got their first in-depth look at the new rules in December and were offered follow-up sessions in January. "Some went through it three or four times until they felt they had it down well enough to answer driver questions," Pierce said.
Schneider National's driver education program included competency testing after initial training and again in a couple of weeks. "For the most part, the drivers have picked up the changes reasonably well but, being perfectly honest, I think the rules were more complex than I would have declared prior to Jan. 4," said Don Osterberg, vice president of safety and capacity development.
Rair Technologies, a Boca Raton, Fla., company that provides log auditing services, saw a lot of violations related to the 14-hour on-duty rules, but the split sleeper options seemed to pose particular problems.
"The whole idea of what is legitimate sleeper berth time and how you combine it with off-duty time is very confusing for drivers," explained Dr. Henry Goldberg, president. It's very confusing for us and we've had to put this into a computer program."
Rair provides a variety of reports designed, among other things, to pinpoint where further driver education is needed. But, in some cases, it was management that required extra help. "We got a call from a company with a couple thousand trucks," he recalled. "They had three logs with problems but they couldn't understand where the problems were. Everybody's having problems. These are very difficult regulations to understand."
Shorter Workday
It will likely be months or even years before the industry can measure the full impact of the new rules. Schneider is one of the few companies willing to offer any kind of estimate. Osterberg said his company believes that productivity has been reduced 3-4% overall and more than 5% in some of its operations. But it's early, he emphasized, and there were a lot of variables, including several weeks of bad weather in many parts of the country.
Still, many operations are clearly feeling the pinch of a shorter work day. Gaston, N.C., based G&P Trucking is mainly a regional fleet with loads of 500 miles or less. Under the old rules, which limited on-duty time to 15 hours and didn't count meals or breaks, drivers were home every night. The new 14-hour on-duty limit, which includes meals and breaks, makes that impossible in many cases.
According to G&P President Clifton Parker, their January bill for driver hotel rooms was $22,000 more than any month the previous year, including peak business months, and, he said, they've lost several drivers who don't want to be away from home overnight.
The company is trying to squeeze out lost time wherever it can. "Maintenance scheduling has become even more critical than before and we've had to make extra equipment available in certain locations," he said.
G&P is also looking at replacing its 274 daycab tractors with sleepers. "I call it my $21 million problem," Parker noted. "That's a lot of money for a company that grosses $75 million a year." He acknowledged that the sleeper option isn't ideal, but the ability to take two hours in the sleeper would enable more drivers to get home every night - even if they had to spend some of their home time in the sleeper. Still, "It's an option you just don't have with the daycabs."
Robb MacKie, vice president of government relations for the American Bakers Assn., is quick to point out that the new rules are a "vast improvement" over some of the ideas being considered a year ago, but two provisions pose problems for his members.
One is the split sleeper berth option that requires two periods in the sleeper berth totaling 10 hours, and only allows sleeper and off-duty time to be combined if they're consecutive. "It's a pretty rigid system," he said. "There have been a couple of instances where drivers have returned to the terminal and had to spend time in the sleeper before they could go home."
The new 14-hour on-duty limit poses even bigger problem. "A lot of our drivers don't even get close to the maximum driving time," MacKie explained. "They're making a lot of stops and spending a lot of time with the customers, doing sales, setting up displays or refreshing the products. The old rule gave them some flexibility. If they knew there was going to be a delay, they could take a meal or rest break. Now there's a huge disincentive for those drivers to take breaks."
The Federal Motor Carrier Administration denied the association's request to go back to the old rule, so they're now one of several groups trying to get the rules changed through an amendment to the highway authorization bill (see accompanying story.)
Meantime, MacKie said most of their members have had to hire more drivers and change routes and scheduling. One large company had just revamped its distribution system, cutting costs by about 15%. Now they've lost everything they gained which, he said, could mean a couple million dollars in additional expenses.
John Sheehy, president of Wisconsin-based Sheehy Mail Contractors, said the new rules have presented no big problems for their over-the-road operation, but so-called "star routes" are a different story. Star route drivers load up at a postal center early in the morning and make mail deliveries to a series of post offices in outlying communities. Until January, they could log off at the last stop and lay over until evening when they began the process in reverse. Layovers usually lasted from seven to nine hours. When they got back to the terminal they had eight or nine hours before their next morning run. As Sheehy noted, neither period complies with the new rules, which dictate a minimum 10 hours off-duty.
The U.S. Postal Service is trying to get regulatory relief for its star route mail contractors. Meantime, carriers like Sheehy have to bring their drivers home after the last delivery and send another driver to pick up the evening mail. "That means double the drivers and double the mileage," he said.
Modal Shifts
While most trucking executives are still trying to determine the direct impact on their own operations, transportation and logistics management consultants at Norbridge Inc. have been trying to pinpoint potential long-term effects throughout the supply chain.
"The whole paradigm has changed," explained Senior Partner Lee Clair, who heads the firm's Chicago office. Under the old rules the most limiting provisions were the 10-hour driving maximum and eight hours of mandated rest. If drivers stayed within those rules everything else usually fell into place. Now the limiting factor is the 14-hour on-duty maximum, which includes non-driving time such as lunch, breaks and waiting to be loaded or unloaded. That's not only a tough adjustment for drivers, it's a difficult calculation for logistics analysts.
"It's not linear," said Clair. "When maximum trailer size shifted from 48 feet to 53 feet, it was pretty simple math to figure out what that meant to shippers and carriers. The same was true when weight limits went to 80,000 pounds. But this affects different market segments in different ways. A few segments may actually see productivity gains, although they'll be extremely small. For other segments, it's clear that the pain will be high."
One area of painful transition is likely to center on multi-stop truckload freight. Over the past few years truckload carriers have been taking on more multi-stop loads and, even with stop-off charges, beating the prices of LTL carriers. Shippers found it was more economical to consolidate LTL, and as a result, many distribution networks were set up for multi-stop truckloads.
But those were the days when drivers could clock out while eating, fueling and waiting to pick-up or drop-off freight. If things went right, they could legally run 500 miles with a couple of pickups and a couple of deliveries all in the same day.
Now every stop cuts into on-duty time and many of those one-day multi-stop runs require an additional day of transit. To compensate for the lost revenue, most truckload carriers have raised stop charges and other accessorial fees. In some cases, those increases have pushed the price of a multi-stop load above LTL rates.
"It has become extremely cost and/or service punitive to use stop-offs as a major way of doing business," said Clair. "Many shippers are going to have to redesign their supply chains and rethink how many distribution centers they need and where they should be. They're going to have to recalculate what goes truckload and what goes LTL or other modes. Some shippers may want to evaluate consolidated delivery or pool operations."
There may be some long-term opportunities for railroads to pick up a little new business with those redesigned distribution networks, but short-term it's a question of the glass being half full versus half empty, according to Clair. From the railroad's perspective the gains could be significant, but from the shipper's perspective, rail's ability to solve their problems could be minimal. Shippers can't quickly transfer significant percentages of their volume to rail carload or intermodal because they don't have the capacity to handle any relevant share shift.
The change may even stretch LTL carriers beyond their current capacity limits. For-hire truckload accounts for about 43% of domestic freight tonnage. Private carriers haul some 37%; LTL, 1%. Moving even 0.5% of truckload volume to LTL would mean a 15% increase in LTL tonnage, he noted. A 2% shift could boost LTL tonnage 60%.
Moreover, he added, LTL carriers may have little or no advance warning. "The contracts and scheduled pickups are already in place, so the customers don't have to do or say anything. When the LTL carrier arrives for a pickup, they can just dump it on them."
LTL carriers have reported some increase in weight per shipment, which would indicate that they're getting some of the stop-off shipments. But they also say it's too soon to quantify what they have gained or might gain over time.
Squeezing Downtime
Raising rates has been the common reaction to problems with the new rules, but carriers are also looking inward to see where they might be wasting driver time. At Schneider, an hours of service team analyzed driver delays and, among other things, found that some transportation planners didn't even start looking for another load until a driver reported empty. That meant drivers could spend anywhere from a few minutes to a couple of hours waiting for their next assignment. Schneider is now pre-assigning more loads.
The company is also doing preventive maintenance at more locations and using teams to do PMs. "What may have taken eight hours with one mechanic can be done by a team of two to four mechanics in considerably less time," Osterberg noted. At operating centers, many fuel islands are now manned with support teams that inspect the tractor and trailer while the driver is refueling. Whenever possible, repairs or adjustments are handled on the spot.
To reduce the time drivers spend looking for trailers, Schneider is equipping all of its trailers with satellite-based trailer tracking devices. "Tracking gives us more accuracy as to where trailers really are," Osterberg explained. "It also tells us if a trailer is loaded or unloaded, tethered or untethered. It's an investment that we think will improve driver productivity."
Trailer tracking is a time saver that's bound to become more popular if, as many predict, carriers and shippers adopt more drop and hook operations. Ultimately, that will require larger trailer fleets. Sales of new units are up significantly but many carriers - still uncertain as to their long-term strategy - are instead choosing rental or short-term leasing.
XTRA Lease reported a significant increase in its rental and lease business since the first of the year. "It's not a peak but, for this time of year, it has been quite busy," said President Bill Franz. "That definitely says something about the economy and freight demand, but we think new hours of service rules also contributed."
The Coming Crunch
Customer reaction has been a mixed bag. "As an industry, we were probably late in communicating to our customers the behavior changes that would be required," Osterberg admitted. "By the time we began to actively communicate what the effect would be, and identify the problematic behavior, we were well into the fourth quarter. It's one thing to say that we're going to have to reduce non-productive driver time by making supply chains more efficient. It's another thing to put a mechanism in place to affect that change."
Pierce said West Side's customers for the most part have been cooperative - although some had to be nudged by stricter detention rules. "In the past, a driver may have had a delivery window of six to eight hours. He'd show up at 8 a.m. and might have to sit until 4 o'clock in the afternoon to get unloaded. That doesn't happen now."
"Many shippers continue to take the attitude Ôyou're the carrier, you figure it out,' and they're right. It's our job, not theirs," said Beacom. "Rather than throw a rate increase at them, we gave them the opportunity to look at their own operations and see what they could do. The solution isn't just getting the drivers in and out quickly, it's better scheduling and better communications."
Reports of uncooperative shippers seem to come most from small carriers. "We like to say that our customers choose us because we can provide more personal service," confided the owner of a mid-sized fleet. "But I think some of the smaller shippers choose smaller carriers over large ones because they think that we're easier to push around."
Another fleet owner, with less than 50 trucks, insisted that he couldn't add accessorial charges to his freight bills. "I tried to talk to my customers, but they just said Ôit's your problem, not ours.'"
Those hardheaded shippers might soon discover that the problem is, indeed, theirs. Fourth quarter financial reports from publicly owned carriers were peppered with comments about tightening capacity. As we rolled into March, a number of carriers said they were starting to turn business away - especially business that didn't offer adequate profits. Most market analysts expect trucking companies to delay any significant expansion until they can improve their profit margins. And there are huge barriers for anyone thinking of getting into trucking.
"Who is going to start a trucking company today?" asked Parker. "If I had an abundance of cash would I want to invest it in an industry where you can't find drivers, where insurance premiums are so high that you have to take a huge deductible risk, where fuel prices are a disaster and your ability to recoup them through higher prices depends on the size of your operation?"
The biggest problem is likely to be finding and keeping drivers. Since late last year we've seen a steady stream of announcements from companies that are bumping base pay and raising driver compensation for stop-offs, loading/unloading, and for waiting. Osterberg said there is some indication that Schneider's improved pay package, effective in February, has made a small dent in turnover and has brought in more applicants.
Pay raises will help, but probably won't be enough. As he noted, there's a direct correlation between trucking employment and construction employment, and construction has been strong for the past 18 months. The link between trucking employment and overall employment isn't as direct, but new jobs in manufacturing and the service sectors are still competition for workers.
One strategy: in-house training. Even if a shift from multi-stop truckload to LTL comes quickly and without warning, Fed Ex Freight's Reed said they're ready. The majority of their drivers are home every night, which is a plus in recruiting. And most Fed Ex drivers are promoted from within. A few years ago the company began offering dock workers the chance to get their CDLs. Now it has a cadre of trained drivers ready to move from the docks to the trucks.
"If they went outside to a truck driving school it would cost them several thousand dollars. We let them do it in-house at no cost," Reed said. "They have a chance to improve their wages and benefits. We get people who know our system, and who don't mind working the dock but can jump into a truck to help a customer if needed. It's a win-win situation for everyone."
For truckload carriers, the challenge is even greater. Osterberg said exit interviews of Schneider drivers who quit or are fired indicate that infrequent and unpredictable time at home is a major source of dissatisfaction. Bringing drivers home more often, and on a predictable schedule, could mean costly changes for the truckload industry. On the other hand, he said, it's a change that probably has to be made if the industry is going to make any reasonable strides toward a stable workforce.
Hours of Service continued...
