What Management Needs to Know about the Transportation Market, Part Three: Legislation

09/06/2011

What Management Needs to Know about the Transportation Market, Part Three: Legislation

There are several major pieces of legislation that will have a major impact on transportation that you should be aware of.

CSA 2010- CSA went into effect in December of 2010 and was designed to make the roads safer by measuring the performance of trucking companies and the individual drivers that they work with. It is still unclear how much of an impact CSA will actually have on the industry, but industry analysts believe as many as 200,000 drivers could lose their jobs as a result of the new regulations.  Some of these drivers should probably be taken off of the road, but many of them are just going to be victims of circumstance. The more you drive the more likely you are going to be to get into an accident or get a speeding ticket. There are going to be many experienced professional truck drivers that are no longer going to be able to make a living driving a truck. These are drivers that have experience handling your freight and driving trucks in bad weather.  Many of these experienced drivers are going to be replaced by drivers with no experience.

When someone is driving 80,000 lbs on a highway at 65 mph you want that person to have as much experience as possible.

As a result of CSA, experienced drivers with good scores will be in high demand and will be able to act as “free agents”.  Good drivers will be able to demand higher wages, which will eventually be passed on to shippers.  You can check out the FMCSA website for more information about CSA http://csa.fmcsa.dot.gov/default.aspx.

Hours of Service
(HOS)–  There will be a final ruling in October of 2011, but it is believed that the biggest change will be to reduce the number of driving hours per day from 11 to 10. This does not sound like a lot, but many shippers operate on regional distribution models and reduction of just one hour per day could devastate many of these models. Over the course of a week a driver may drive over 300 miles less which would have a big impact on that driver’s pay. Drivers will want to be compensated for the lost wages.  In addition this will require more trucks on the road to move the same amount of freight that is being moved today. Additional trucks on the road would cause even more congestion to the nation’s roadways causing additional traffic which could result in lost hours for drivers. In a market that is already in the midst of a severe driver shortage, a reduction in driver’s hours would be devastating and extremely expensive for shippers, carriers, and consumers.

Electronic on board recorders (EOBR)-  There is a potential legislation that would require all carriers to install EOBR in their trucks to replace their paper log books. Currently, log books are utilized by drivers to record their on/off duty times.  It is widely believed that drivers take certain liberties with their paper log books that allow them to drive a few extra miles. However if EOBR legislation is passed when a driver reaches his allotted hours he will lose his ability to drive. If the driver continues to drive without hours then this will have a negative impact on the driver’s CSA score. There has also been talk of the EOBR being connected to law enforcement.  The FMSCA currently is requiring carriers/drivers in certain cases to install an EOBR as part of their corrective action required and many carriers are also proactively installing EOBR devices to regulate their drivers.  In my opinion EOBR would be the biggest game changer to the transportation industry since the trucking industry was deregulated in 1979. Every minute that a driver has to drive will become more valuable and the penalty for holding a driver up will also become more substantial. Detention charges will most likely go up and will be charged after a short window. Stop off charges on multi-stop loads will also go up.

The bottom line is that transportation costs are going up and will continue to do so for the foreseeable future.  Carriers are in control of the market and chances are you need them more than they need you. The good news is there are things that you can do to offset the cost increases you are seeing on your freight spend. A good place to start is to review your transportation personnel, process and technology. If the people handling your transportation do not know what CSA is then you have room for improvement. If your processes for handling transportation have not been reviewed or updated recently then you should probably take a look at them since the transportation market has gone through several major shifts in the last four years. If you are using spreadsheets, faxes, emails, and phones to manage your freight you may want to look at some transportation specific technology. Your ability to quickly load and unload carriers will become extremely important going forward. The bottom line is that you need carriers as much if not more than they need you right now. The shippers that treat their carriers as a valued partner will be able to overcome the challenges of the transportation market.