With freight demand growing and capacity limited, carriers find ways to get the most from their assets through tough customer policies and smart use of technology.
he trucking industry typically has responded quickly to increases in freight demand. For years, carriers added capacity promptly, with the result that freight rates remained soft for a long time.
As everyone knows, that dynamic has changed. Freight demand seems to be outstripping the supply of trucks, and the busy fourth quarter lies ahead. Shippers are unable to turn elsewhere, as competing modes of transportation – most notably rail – also are experiencing overwhelming demand.
Thousands of trucking companies have failed in the last five years. And with the economic outlook continuing to be uncertain, few carriers have been willing to build their fleets rapidly, even if they had resources to do so.
But most important of all, trucking companies lack the personnel to drive any new trucks they might buy. In a survey of CCJ readers conducted last month, 62 percent of trucking company executives said that a shortage of drivers was the single greatest factor limiting the growth of their fleets.
These economic forces were already in place when the new hours-of-service rules kicked in Jan. 4. The new regulations, such as a strict 14-hour window for driving and two additional hours of rest, challenged productivity. But perhaps most of all, the new rules helped carriers focus their customers on a specific, tangible challenge – and on the need for change.
“All of us in this business were feeling the effects, and we had to do something to fix it,” says Larry Miller, president of Logan, Utah-based L.W. Miller Transportation, a 200-truck carrier.
Not surprisingly, carriers have concentrated on slashing delays at customer facilities, which represent the biggest drains on driver productivity and asset utilization. Many carriers are trying to get out of the waiting game altogether by insisting on drop-and-hook operations or reducing the number of stops on a trip. Others are using technology and newfound leverage to get customers to speed up live loading and unloading of trailers.
Many of the changes that carriers are making to boost efficiency ultimately may make recruiting and retention easier. But the big question is: Can carriers drive enough inefficiency out of their systems to meet the demands of their customers and the U.S. economy?
More trailers, no waiting
To improve driver productivity and eliminate excessive detention because of live loading and unloading, carriers and shippers have long used drop-and-hook operations. With the current driver shortage and new challenges to productivity, this approach is becoming more common. In last month’s CCJ survey, 38 percent of trucking executives reported increased use of drop-and-hook operations over the past year.
For Sellersburg, Ind.-based National Distributors, three shipments per week at a location justifies the cost of spotting one trailer, says Judd Reese, president and chief executive officer.
“We get as much benefit out of that as the customer,” Reese says. “Anytime a driver can be running down the highway, we win.”
The high demand for equipment capacity has given fleets leverage in negotiating the costs of trailer pools with their customers. Last November, Garner Transportation Group increased its trailer-tractor ratio from about 1.5 to 3 so it could use drop-and-hook operations to eliminate routine three-hour delays at several customer facilities.
“After so many trailers, we charge customers additional amounts per trailer,” says Vern Garner, chairman and CEO of the 100-truck carrier based in Findlay, Ohio. “We’re not giving it to them. You don’t have to do that today.” Seeing the capacity situation, customers are much more willing to work with carriers, he says.
Improvements in driver productivity because of drop-and-hook operations may be offset somewhat by the cost of additional trailers. That’s one reason why trailer tracking is gaining popularity.
To gain visibility of its trailer assets and improve utilization, Las Cruces, N.M.-based Mesilla Valley Transport (MVT) last year deployed a trailer-tracking solution from SkyBitz. MVT set up automatic reports that detail what trailers are sitting idle at one location for more than three days. The 600-truck carrier also provides customers with a daily “yard check” report that shows the number of days that each trailer has been sitting.
“We can grow trucks at a much greater rate than we have to order trailers,” says Dean Rigg, MVT’s chief financial officer. “Not only that, we are billing out detention with satellite printouts of where and how long a trailer’s been sitting. There is no fighting it. In the past, you’d call a customer and say, ‘The trailer has been sitting for 20 days,’ and they would say, ‘Oh no, it’s not there.’ And then we think, ‘Who do we have to go over there and look?’ ”
After installing trailer tracking on its entire fleet of more than 1,700 trailers to date, MVT reduced its trailer ratio from 3.25 to 2.8, Rigg says.
Similarly, National Distributors reduced its trailer ratio from 3 down to about 2.4 by using its AirIQ trailer-tracking solution. The company uses the Web-based system to provide “turn time” reports for its trailer pools at each facility. Using this key performance indicator, the company also can monitor and bill customers for detention of trailers when necessary, Reese says.
Trailer pools work well in many dry-van applications, but they are less acceptable in situations where the trailer itself is more costly or requires maintenance. That’s why L.W. Miller Transportation uses a shuttle operation, where possible, to eliminate equipment and driver detention for its mixed fleet of livestock, refrigerated, tanker and bulk pneumatic trailers.
L.W. Miller Transportation hired a local shuttle driver this year to load at a Phoenix-based customer and switch trailers with four to five drivers arriving from Utah each week. The shuttle driver then makes the local deliveries.
“We find that it’s very successful,” Miller says. “It has solved a lot of problems.”
While drop-and-hook and shuttle operations have grown a bit in popularity, many carriers can’t avoid live loading and unloading. More than half of the trucking executives surveyed by CCJ said they had imposed higher detention charges in the past year.
“We have always paid our drivers for detention, but we didn’t always charge our customers,” says Jeff Blank, director of operations for Granger, Iowa-based Barr-Nunn Transportation. “We started at four hours, and went down to three hours. Now, we’re at two hours. The help we’ve received from our customers on this is enormous.”
The only way to improve detention and asset utilization is to create accountability, says Tom Kretsinger Jr. of American Central Transport, a 340-truck carrier based in Liberty, Mo. And the only way to create accountability is to bill customers for detention. “If you just bill detention into the rate, you are getting money, but you are not improving the situation,” says Kretsinger, the carrier’s executive vice president.
To increase accountability with customers for detention events, many carriers made significant improvements to operations, information systems and business processes. Some are able to use this data to notify customers automatically before detention occurs.
Successful detention billing doesn’t necessarily require the latest in information technology, however. To provide proof of detention for billing purposes, L.W. Miller Transportation has its drivers give customers a paper form to sign at time of arrival and departure. The drivers return these forms with their trip documents, and they are used to charge for detention, as needed, in accordance with the carrier’s agreements.
Swift Transportation and Schneider National also use paper-based forms to keep records of detention – but with a technological twist. Drivers present a paper form on the outside of their driver trip envelopes to shippers and consignees for acknowledgement of detention events. The trip documents are deposited in TripPak dropboxes, and the detention papers are scanned, indexed and routed to carriers’ computer systems with the other documents by TripPak Services, says Mark Cleveland, president and chief development officer of TripPak Services, an ACS company.
Other carriers are using fully electronic systems to track detention events. When drivers for Langford Inc. arrive at a customer location, they scroll through a list of macros in their in-cab display. Drivers enter “arrived at shipper,” and if after an hour the driver is not loaded or unloaded, they enter “delayed at stop.” When finished, they enter “delivered stop.”
These messages, combined with the location and time information gathered by wireless communications, provide the necessary information for Langford Inc. to collect detention charges, says Greg Langford, president of the 15-truck carrier based in St. Cloud, Minn.
Earlier this year, for example, a driver showed up at 2 p.m. and was held over until 1 p.m. the following day. The customer disputed the detention charges, which were part of the contract. To collect the $600 in detention fees, Langford printed and mailed a report from his Web-based fleet management system. The customer paid the detention. “I never heard another word,” Langford says.
Similarly, both Miller and Garner say their companies have drivers enter macros through their Qualcomm units when arriving, to report detention events and to record when they depart shipper locations. Company dispatchers monitor these events on a real-time basis through the position reports in their dispatch software.
“We know what the appointment time is, and we can monitor it to see how long they’ve been there,” Garner says.
Langford is planning to add a feature called Pacos offered by his PeopleNet onboard computing and mobile communications system to automate detention tracking. Pacos uses geofencing to automatically record the time a truck arrives at landmarks, such as shipper or receiver locations, that are pre-programmed based on their GPS coordinates. When exceptions to the rule occur, such as a late departure or detention event, the system generates automatic, predefined messages such as “delayed at shipper” to fleet managers and customers.
National Distributors already uses geofencing to record when a trailer entered a customer location, how long it was there and when it left, Reese says. The carrier’s AirIQ trailer-tracking system sends dispatchers an e-mail alert when a trailer has been at a certain point for a certain time, he says. Since detention agreements vary by customer, dispatchers contact customers via telephone or e-mail to notify of impending detention charges.
Some carriers use cargo sensors to improve productivity and management of detention events by providing immediate notification of when a trailer is ready for dispatch as well as when detention time begins and ends. Phoenix-based Knight Transportation added cargo sensors to its Terion FleetView trailer management solution this year.
“Just knowing where trailers are and what their statuses are has really helped,” says Steve Grover, Knight’s director of corporate communications and facilities. “But the only way you can monitor detention appropriately is with cargo sensors.” Otherwise, you are relying on a person at a remote site to tell you when the trailer was unloaded or when it’s available for use, Grover says.
Over the past few years, Knight’s customers have been using trucking companies’ trailers for storage because their warehouse is full and they don’t have a place to put backlogged inventory until it starts to move. In the past, Knight had no way to monitor remotely whether or not shippers were tying up their trailer assets, and which ones were available for use. “Those days are gone,” Grover says.
Another challenge is communication with customers before detention happens. Garner Transportation contacts its customers by telephone before detention charges occur. “Most all shippers require us, if we are going on the clock for detention, to notify them,” Garner says. The company’s information systems have the capability to communicate automatically with customers about impending detention, but the company hasn’t used the feature yet.
“The problem with charging detention is that you have to be able to verify to the customer that the tractor or trailer was there,” Reese says. “They want proof. Not only do they want proof, but they want the ability to rectify the situation prior to being charged detention.” Reese says the company calls or e-mails customers facing detention charges.
Managing differing detention requirements is a hassle all its own. While voice notification is probably sufficient for many customers, some may insist on receiving documentation before detention charges are accrued.
To monitor detention for its power units, American Central Transport in mid-January began using Add On Systems’ DM/400, a detention management module for the carrier’s AS400-based Innovative Enterprise Software system. The program collects information from the operations software and wireless updates to monitor and notify customers of detention based on customer preference.
The system can notify customers automatically of detention events through e-mail or fax. But it took carrier personnel several months to determine how customers wanted to receive detention notification, Kretsinger says. Staffing two full-time people to manage detention events – one for power units and one for trailers – has helped speed the process. Employees see on a single screen assets that are in detention, not in detention and about to go into detention.
“They notify customers, and they keep fleet coordinators aware of what is happening with customers and drivers,” Kretsinger says. The employees also work with fleet coordinators and driver managers to see that drivers follow procedures and do the paperwork.
Knight Transportation uses its DM/400 not only to provide real-time detention notification to customers but also to offer customers reports on the performance of its shipping and receiving facilities. Suppose that a customer complains that the carrier is late for an appointment at a consignee, Grover says. “We can go back and say, ‘But your [shipping] location was slow loading 50 percent of the time. You’re doing pretty well, but you need to work on the origination shipper.'”
Pulling out the stops
If one loading or unloading delay can hurt productivity and utilization, several delays on a multi-stop trip can wreck it. And, like limiting live loading and unloading in general, fighting multiple stops can help with driver recruiting and retention.
“I think that drivers are preferring to do less and less of [multi-stop freight],” says John Pope, president of Cargo Transporters, a 400-truck dry-van carrier based in Claremont, N.C. “With the tight driver market, we’re trying to move toward less stop freight if we can. We still offer that service, but the price to perform it has gone up quite dramatically since January. It’s not something we’ll go out and sell or solicit.”
American Central Transport also has decreased its multiple-stop freight by raising its rates and, for what little does remain, increasing stop-off pay for drivers. When drivers are faced with multiple stops, the company makes sure it is worth their effort.
“We don’t tell customers no,” Kretsinger says. “We tell them we will do things for a price. We make [multi-stop freight] cost prohibitive.”
Barr-Nunn also is working with its customers to get them to tender fewer loads with multiple stops, Blank says. A related problem is what Blank calls “hangers” – loads where the driver can’t make the last stop of the day and must sit overnight to make the delivery. Barr-Nunn manages that problem not only by reducing the number of stops but also by cutting the transit time between them. “We have walked away from a lot of multi-stop freight when the customer was not willing to compensate us for lost time.”
Another way customers have helped is by providing flexible receiving and delivery hours so Barr-Nunn can use drivers coming off their breaks, Blank says. Appointments for loading also have helped reduce waiting.
Just because you can monitor, record and bill detention doesn’t mean you are truly improving the situation. Customers may pay your detention charges, but it’s more important that they change inefficient practices, especially in light of the current hours-of-service regulations.
“Being paid for detention is not the issue,” says John Ports, president of Lancaster, Pa.-based B&B Services. “Although being reimbursed for this cost is appreciated, all detention does is not allow us to get a unit in and out and back ready to do another core customer load.”
American Central Transport has made reducing detention a companywide project. “We got all departments together on a weekly basis to have detention meetings,” Kretsinger says. The sales department is important, for example, because fixing detention typically requires communicating with customers at the corporate level, he says. The traffic department may try to hide the news – and the bill – from corporate managers.
“What we want is not to have to bill any detention,” Kretsinger says. “Our preference is to have our equipment and have it running down the road. That’s what the drivers prefer, too.”
—Sean Kelley contributed to this article.
Shipper ElkCorp focuses on drivers, productivity
About a year ago, Randy Hughes saw big problems coming. Hughes, operations services manager for building materials supplier ElkCorp, already had a tough time getting trucks at the Tuscaloosa, Ala., plant where he is responsible for distribution. The area has significant outbound demand for flatbeds, but not much inbound demand, so supply is always tight, Hughes says.
In the summer of 2003, the outlook was particularly bleak. Truck capacity nationwide was tightening, and freight demand was rising. And soon, new hours-of-service rules for truck drivers would challenge productivity.
So Hughes approached the Dallas corporate office of ElkCorp, which also has manufacturing facilities in Texas, California and Pennsylvania. Those plants, too, were feeling the effects of tighter capacity, although not as severely as the Alabama operation. Hughes got the go-ahead for numerous changes, including implementation of a more competitive rate. Then he turned to operational changes that would make the company more attractive to trucking companies and their drivers. “I told my staff, ‘We’ve got to realize that the trucker is just as important to our business as our own employees.'”
As part of a major expansion and renovation of the Tuscaloosa facilities, ElkCorp remodeled the driver break room and provided vending, satellite TV, free coffee and free ice – even complimentary bottled water on ice in the yard. And as new facilities came online in Tuscaloosa earlier this year, the plant eliminated the need for tarping by wrapping stacks of roofing shingles in sturdy plastic bags.
More importantly, ElkCorp is focusing on productivity. It installed lighting in the staging yard to encourage overnight parking that would allow truckers to get moving early the next morning. The company extended its loading hours by three hours and plans eventually to extend them another four hours. With local carriers, ElkCorp is preloading trailers in the morning, allowing for drop-and-hook operations. Company personnel monitor loading bays with video cameras so they can fill them quickly once they are vacated.
The efforts culminated in a new service guarantee. “We’re committed to getting them out of here in 30 minutes or less,” Hughes says. He estimates that the industry average is more than 2 hours. “So my pitch is, ‘I’m going to give you 2 hours a day. Over the course of a week, that’s an extra load.’ “