Productivity Meltdown

As the day of reckoning nears, carriers assess the probable effects of the hours-of-service regulations and weigh options for addressing them. If the rules change customers’ behavior, some carriers may even see productivity gains.

E ight years after Congress ordered them and eight months after the Federal Motor Carrier Safety Administration adopted them, the new hours-of-service regulations for truck drivers finally kick in Jan. 4. After years of effort and debate, the revised hours rules don’t seem all that different from the old ones – another hour here, two more hours there, with all the current exemptions still in place. And yet, there’s one huge difference.

“It doesn’t look like too much on paper, but it’s going to be a big deal for us,” says Michael Gerdin, vice president of regional operations at Heartland Express. “When we switch from 15 non-consecutive hours to 14 consecutive hours, that means a driver’s clock starts as soon as he starts his day,” Gerdin told analysts at a BB&T Capital Markets conference on transportation and logistics in New York.

And that clock continues to run. “In the past, if a customer caused a delay at the docks, Werner and other truckload carriers just had the driver stop the clock,” said Dan Cushman, executive vice president of Werner Enterprises at the Hours of Service Productivity Summit in Atlanta. “It was the path of least resistance. We can’t take that path anymore.”

The lone mechanism for stopping the clock is the sleeper berth. While split rest is used today, it will become more critical after Jan. 4. But how the sleeper berth provision works is still unclear to many fleet managers. (See “Berth control,” page 29.)

Split rest, however, doesn’t offset all the productivity lost to expanded rest requirements and, especially, inefficiencies created by customer preferences and practices. Meanwhile, few drivers will accept a cut in take-home pay, so carriers must find them more miles or pay them more. By late November, several major carriers had announced new pay packages with per-mile increases of up to 4 cents plus accessorial pay in most cases.

But it’s not inevitable that the new rules will net out as a negative for motor carriers. Under the right conditions, trucking operations may thrive. Carriers’ ability to win greater efficiencies – or at least compensation for inefficiency – may determine whether the new rules are, for them, a major disaster, a controllable inconvenience or a significant improvement over the status quo.

Assessing the damage
The new hours rules can actually improve productivity for certain types of operations, according to Mokhtar Bazaraa, managing director of global logistics for The Logistics Institute at Georgia Tech. Bazaraa analyzed actual truckload shipments of varying lengths of haul and types of operation, such as drop and hook, live loading and unloading and multiple stops. He presented the findings at the HOS Productivity Summit, which The Logistics Institute and Schneider National co-sponsored.

Bazaraa found that multi-stop and short-haul operations with lengthy waiting times would suffer the greatest loss in productivity, while long-haul and drop-and-hook operations could enjoy double-digit productivity gains. But Bazaraa’s analysis is based on some extremely favorable assumptions. He assumed, for example, that the 34-hour restart could be used in all cases, regardless of where the driver was when he hit his 60-/70-hour, seven-/eight-day limit. He also assumed prompt availability of the next load in all cases following a delivery.

While the restart, which gives drivers a fresh 60 or 70 hours if he takes 34 hours off duty, can help, it’s hardly a solution to the productivity challenge. Many drivers likely won’t accept routine use of the 34-hour restart while they are on the road. “One of the rumors they’ve heard is when they reach 70, they’re going to be stranded,” says Jim Kitchen, a training curriculum designer for Schneider National. “They don’t look at the 34-hour reset as an advantage.”

Even so, Bazaraa’s analysis of which types of operations will fare better relative to others appears valid. J.B. Hunt, for example, is projecting lost productivity overall. But the carrier expects its drop-and-hook operations to be 8 percent better than the company’s average in on-time performance and 11 percent better in utilization, says Kirk Thompson, J.B. Hunt’s president and CEO. On the other hand, live load and unload operations should suffer 9 percent worse on-time performance than average and 19 percent worse utilization.

Schneider National’s analysis found multiple stops to be the biggest potential delay problem. A trip with two extra stops is delayed by an average of 7.7 hours, says Ted Gifford, director of information technology research at Schneider. Following closely were restrictive appointments and one extra stop, which averaged 6.6 and 6.4 hours, respectively. Driver unloading delays averaged 3.7 hours, while delivery and pickup delays averaged only 1.5 and 1.2 hours, respectively. Overall, the projected productivity loss for Schneider’s varied operations ranges from 2 percent to 19 percent.

In the end, any “paper productivity” created by the new rules is illusory, carriers say. “If we had perfect freight velocity, we could probably pick up some time,” notes Bill Riley, senior executive vice president for Swift Transportation. “In our world, the driver waits.”

Pay or play
Live load and unload, multiple stops and restrictive appointments will be among the greatest time eaters under the new rules. Carriers must account for these customer-driven costs somehow.

“Ultimately, a trucking company is faced with three choices,” Scott Arves, president of transportation for Schneider National, told shipper attendees at the HOS Productivity Summit. “We can sit back and absorb those increases, in which case we probably will be added to the 10,500 that went out of business [in the past three years]. We can attempt to mitigate those by working with you. Or to the extent we can’t, we will have to pass those increases on.”

J.B. Hunt’s Thompson recommends that shippers and consignees:

  • Consider increasing shipping and receiving times so that pickups and deliveries can be made during evenings and weekends;
  • Pre-book loads to allow for optimization of load planning;
  • Accept appointments for delivery following a reasonable transit time to avoid excessive driver waiting time after arrival;
  • Allow drivers to use their sleeper berths on premises when the loading/unloading process likely will exceed two hours;
  • Develop incentive programs for receivers to unload trailers efficiently;
  • Use trailer pools efficiently so drivers can drop loaded trailers and quickly find empties;
  • Analyze facilities with excessive dock waiting times;
  • Re-engineer dock practices.

Using higher accessorial charges, carriers likely will target especially multiple stops and dock practices that require driver assistance. At the Atlanta summit, one shipper representative asked carriers what he should do given that he depends heavily on both multiple stops and driver assistance. “I would recommend Prilosec,” quipped Thompson, referring to a popular heartburn medication.

Trucking companies may benefit from good timing on the rates issue. With freight volume generally recovering now and many carriers failing or consolidating in recent years, the shipping community perceives capacity as tight. At the summit, one shipper panelist asked, “How many of the shippers here today didn’t have any trouble at all getting all your loads covered at the end of September?” Out of about 200 shipper representatives present, none raised his hand. “I was hoping there was at least one