One of the most closely watched statistics in operations is the deadhead ratio – the percentage of empty miles to total miles. Many carriers and operators believe that keeping their deadhead ratios to a minimum is a key to making money.
Certainly empty miles represent waste, and waste costs money. In addition, there is no relief from high fuel costs, through a surcharge, for empty miles. What few carriers recognize is that sitting empty also costs money.
Years ago, when truckload drivers were out three to six weeks at a time, laying over trucks to avoid a deadhead didn’t really cost the carrier money. Layover pay was little or nothing. Drivers could be expected to make up the lost time by running harder over the next few days.
When drivers became scarce, the rules changed. Today, carriers offer layover pay, which can range anywhere from $25 to $75. Some fleets even guarantee their drivers a minimum paycheck for every day on the road.
Most carriers also promise to get their drivers home once every two weeks and many try to get drivers home every weekend. Today’s drivers expect to go home, regardless of how many miles of pay they have earned. If a truck loses miles sitting empty, the driver won’t stay out longer to bring his miles up. In that case, a day sitting empty is a real cost to the carrier.
Expectation of home time also breeds turnover. If a driver’s paycheck is smaller because he won’t run longer, he often blames the carrier, not himself. Most managers who track turnover say that when layovers go up, so does turnover. I estimate that for every 10 layovers, a typical trucking company will lose one driver. Assuming turnover costs $3,000 a driver, that means laying a truck over may cost a carrier $300. Add the turnover cost to layover pay and lost utilization, and the bill for sitting a truck empty for a day is several hundred dollars.
Yet, most carriers still sit trucks rather than run empty to an area with loads. To maximize profitability in dispatch operations, carriers need to develop new rules on when to run empty. Here are some suggestions:
Cut your losses. Deadheads usually occur because a carrier overbooks loads into an area. If an area is already overwhelmed with trucks, and tomorrow promises more, it’s time to cut losses. A simple rule is to start moving half the empty trucks as soon as possible.
Get trucks moving early in the day. Too often, carriers sit trucks in an area all day until they finally decide to move them empty into another area. They wait until the last minute in hopes they can avoid a deadhead. But late in the afternoon is the worst time to deadhead. You already lost a day’s utilization, and the driver will wonder if you are moving the truck just to avoid layover pay.
If you deadhead a truck early – by 10 a.m., perhaps – you have a chance of getting a load that day. And even if you don’t get that truck a load until the following day, the driver will be reassured by the decisive action.
Move to a richer freight area. Moving a truck to an area where rates are generally better will help make up some of the costs of deadhead. Conversely, from a rate standpoint, carriers shouldn’t run empty into poorer freight areas, even if loads are available.
Consider driver status. If a driver is reaching the end of his daily or weekly duty time limit, sitting a day is not necessarily a waste of utilization. If hours aren’t an issue, consider the driver’s last few dispatches. If they all resulted in layovers, one more may be the last straw.
Recognize that the rules of trucking are constantly changing. What worked in the past may not apply in today’s world with today’s drivers.
David Goodson is a management consultant specializing in the transportation industry. E-mail [email protected].
