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Waiting to go broke

One of your customers won’t give you the rate you want, so you find one that pays more. After a couple of months, you discover that your profits have dropped, not risen – even though costs have held steady. Your operating profit on each haul is higher, of course, because your revenue per mile is higher. But total revenue is down significantly. You simply aren’t hauling as many loads each month.

There are many possible reasons for a sudden drop in utilization. Overall freight volume might have dropped off substantially. Perhaps you were losing more drivers than usual and had several tractors sit. Maybe you just hired a new and inexperienced dispatcher who is scheduling loads poorly. It could be that the new lane puts you into an area where it’s harder to find backhauls.

Or, maybe, your new shipper just costs you more than the previous one.

Excessive delays at shipper and receiver facilities represent opportunity costs for trucking companies. They keep trucks and drivers sitting – and maybe even wasting fuel idling – while potential loads drift past your dispatchers.

A 1998 study prepared for the Truckload Carriers Association by Martin Labbe Associates concluded from driver surveys that refrigerated drivers on average spend 43 hours a week loading, unloading and waiting at shipper and receiver facilities. A 1999 survey concluded that dry van drivers spend an average of 33.5 hours on these unproductive tasks.

To make matters worse, long delays, demands for uncompensated work and other indignities contribute to driver turnover. In a recent survey of more than 200 Commercial Carrier Journal readers, 53 percent said that in the year 2000, they lost at least one driver primarily due to treatment by shippers or receivers or to conditions at their facilities. Almost 15 percent said they lost at least six drivers in 2000 due to dock conditions. Loss of drivers contributes further to poor utilization and imposes recruiting and training costs.

The first step in countering these problems is recognizing that they have financial consequences. If you focus on per-mile financial data alone, you don’t get a complete picture.

To account roughly for dock delays, you need to measure items like a truck’s total revenue per day or revenue per hour while under dispatch. This information may not tell you the extent of your current problem, but it’s a benchmark against which you can measure future deterioration or improvement.

In reality, you probably don’t need numerical measurements to tell you that you have a problem with shippers or receivers. Driver complaints and dispatcher frustrations should do the trick. But what can you do about it? The following steps might improve the situation:

  • Walk away from bad freight. If delays are so excessive or driver treatment is so poor that there’s not much hope of improvement soon, don’t accept it. Carriers that specialize in time-sensitive freight really have no choice. That’s why Don Battaglia of San Francisco Sea Food Express sometimes has to get tough with customers. (See “Fish or cut bait,” page 58.)
  • Unbundle costs to reveal problem areas. This was a recommendation of TCA’s July 2000 study on best practices in expediting loading and unloading. Known as activity-based costing, this approach means greater complexity for your accounting department, but it shows you what’s truly costing you money. And if you expect the shipper or receiver to do anything to help – either by solving the problem or compensating you for it – you had better be prepared to quantify it.
  • Write expectations, penalties and incentives into contracts. Contracts often are silent or at least vague about what each party expects regarding loading and unloading issues, such as driver responsibilities and trailer spotting and detention. TCA’s best practices concluded that contracts should include detailed expectations, including incentives for superior performance and penalties for poor performance. (See page 35).
  • Consider investments in technology. Tampa, Fla.-based Mitchell Transport uses its mobile communications system to establish waiting times, so it can more easily charge customers for excessive delays. Onboard computers or satellite tracking systems may help ease the burden of collecting the various data elements that go into charging for delays. Trailer tracking might help with assessing detention fees and getting greater trailer utilization (See “On the trail of trailers,” page 48).
  • Share information on shippers and receivers. Whether you trade horror stories at trade association conferences or post your experiences on the Internet, spotlighting good and bad shippers and receivers helps reward the good practitioners and discipline the bad. In response to this need, CompuNet Credit Services worked with TCA to develop Dock Report, a website where carriers can research and report dock conditions nationwide. Through Dock Report, carriers can report on key items such as wait times, lumper and gate fees, and the availability of facilities for drivers.
  • Make sure drivers have good directions. This sounds like a given, but apparently, it isn’t. In two separate surveys, TCA found that getting good directions to shipper and receiver facilities was most important to drivers – more important even than dispatcher attitude – in determining how they felt about their work. Strictly speaking, this is a routing issue, not a dock issue, but it’s important nevertheless.

The most important thing to remember is that dock inefficiencies are costing the shipper or receiver, too. Your chances for getting cooperation are better if you approach your business partners with an attitude of solving a common problem rather than beating them up over your gripes.

Resources:

  • The Truckload Carriers Association and the National Industrial Transportation League last year adopted voluntary guidelines for good business relations among shippers, receivers, carriers and drivers. For the text of guidelines, visit www.truckload.org/
    relationsguide.htm.
  • TCA’s study of best practices for streamlining loading and unloading functions is available in PDF format at
    www.truckload.org/Best_Practices_Study.pdf

Put it in writing
A study of the best practices in streamlining loading and unloading found that carriers often use off-the-shelf contracts with little or no tailoring. The study, conducted for the Truckload Carriers Association by Mercer Management Consulting, recommended that contracts clearly address the following issues where applicable and include incentives and penalties to encourage efficiency:

  • Spotting trailers (procedures, expectations, charges, trailer damage, switching responsibilities)
  • Using trailers for storing goods by the customer or carrier
  • Detention charges and procedures
  • Scheduling and pick-up/delivery notice requirements
  • Loading and unloading requirements
  • Duties of drivers, including paperwork
  • Notification of delays and procedures for handling them
  • Measurements used for determining on-time deliveries
  • Seasonal or peak demand issues, such as minimum equipment supply
  • Mandatory periodic meetings and mediation procedures to address problems

  • Freight claim responsibility and procedures (counting, shorts, damages, seal control and liability for spot trailers’ contents)
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