David Goodson is a management consultant specializing in the transportation industry. E-mail [email protected].
Some of the most important numbers in trucking – driver pay and freight charges, to name two – revolve around the calculation of the distance between two points. And yet, there may be no greater source of contention in trucking than what miles to use. Miles come in three basic varieties:
· Household good or short miles
· Practical route miles
· Hub or odometer miles
Household good miles – the granddaddy of all the methods – became standard because they were what the Defense Department used to calculate the cost of moving servicemen around the country. They were supposed to be the shortest route between two points over which household goods were permitted to move. The household goods mileage guide lists shortest miles from and to the main post office of hundreds of cities and towns throughout the United States. If a location wasn’t circled in the guide, the user would have to estimate additional miles by adding up the mileage segments listed on the map.
This was a tedious and unreliable process. Eventually, the computer age eliminated most of the controversy in how miles got computed. A new one developed, however. During the ’80s, most truckload carriers converted their rates to a cost per mile based on household goods miles.
The problem was that a route over which a household mover could operate wasn’t necessarily the same as the route for a truckload carrier. As truckload rates dropped, many carriers felt they weren’t being compensated for the actual miles they had to haul.
A new source of computer miles came along that was based on the route for which it is practical to operate a semi tractor and trailer weighing 80,000 pounds. So-called practical route miles helped clear up many of the problems with the older household goods system – although any driver who reviews the “practical routes” the computer generates will tell you they aren’t very practical.
Finally, we have what are usually called hub miles – actual miles the truck traveled. “Hub” refers to the hubdometer, which was placed on the tractor axle to record miles. At the time, the odometer was considered unreliable, but in practice hub miles are calculated today using the odometer in the cab.
If you were to determine the miles using all three methods over hundreds of lanes you would find:
· Household good miles are indeed the shortest route;
· Practical route miles average 3 to 5 percent more than household good miles depending on the region of the country;
· Hub miles average 3 to 5 percent more than practical route miles due to the added miles of drivers getting on and off highways, road construction detours, etc.
For obvious reasons, most shippers once insisted that carriers base freight charges on household goods miles. Carriers, however, are winning the battle. Practical route miles are well on the way to becoming the industry standard miles. Even so, some shippers look for loopholes, such as insisting that carriers use the miles in effect as of a certain date.
But we still have the issue of driver pay. Just as shippers want to pay based on the shortest possible route, carriers obviously would love to pay drivers based on household goods miles. During the ’80s, most carriers paid drivers and charged shippers based on household goods miles.
As carriers switched their shippers to practical route miles during the ’90s, many also began paying drivers on the same basis. Most drivers, however, still feel that they should be paid based on hub miles. Very few carriers do so. Margins are thin enough without throwing in an unfavorable variance between freight rates and driver pay. If, for example, you billed a shipper in household goods miles and paid the driver in hub miles, the difference in pay miles versus revenue miles would be 6 to 10 percent. And that assumes the driver didn’t drive out of route.
Computer miles aren’t perfect, but at least a third party calculates them. Using practical route miles is better than having carriers, shippers and drivers arguing with each over what miles to use.