Top Issues Facing Carriers Today
By John Lower, Director of Strategic Carrier Management, Transplace
It’s certainly no secret that there have been a number of regulatory concerns in the trucking industry over the last 5-10 years. This regulatory activity, including HOS adjustments and the electronic log mandate, has very altruistic intentions regarding safety and environmental improvements. However, it has also had a direct impact on the costs and productivity of motor carriers which has translated into a tightening of available capacity for shippers.
Additional Concerns and Raised Costs
Changes to HOS rules, electronic logs, and other regulatory items on the docket have a direct correlation to capacity and, as a result, are getting the majority of the press. There are also a number of lesser well-known initiatives that have the potential to simply increase a carrier’s cost structure, including:
- Insurance Requirements: One of the major recent concerns is the minimum insurance requirements for many carriers being raised from $750,000 to potentially up to $2 million, which could definitively impact a carrier’s cost structure.
- New Medical Examiner Rules: These rules will require carriers and drivers to be examined by a DOT certified medical examiner, directly raising the cost of physicals.
- National Clearinghouse for Driver Drug and Alcohol Testing: Carriers will have to access this database at the time of application in order to vet a potential driver candidate – and then continue to do so on an annual basis to audit those driver results. Industry analysts project that this could end up costing carriers over $175 million a year.
Pure operating cost increases like those mentioned above leave a carrier little opportunity to mitigate through improved operating efficiencies. Carriers continually seek opportunities to lean their operation but much of the low hanging fruit has been picked in the last several years. This means that is likely these costs will eventually be passed to the shipper and subsequently the consumer as part of the permanent market supply chain and distribution cost.
How Are Carriers Addressing These Challenges?
Carriers have made significant strides in improving the efficiency of their networks through improved planning and operations which has helped mitigate some the negative productivity impacts represented by regulatory activity. Early adopters of in-cab technology are benefiting from improved data which increases awareness of the availability and efficiency of the drivers within their network.
Carriers are also becoming increasingly disciplined in their bidding and freight acceptance practices. We conclude from bid results and feedback that carriers are discriminating and no longer willing to accept freight that does not meet profitability goals, has “unfriendly” driver characteristics or cannot be serviced efficiently. Many carriers are shrinking their service areas in order to find additional efficiencies – they can accomplish this by discovering where they may have overextended themselves and becoming more selective as to where they’re sending their drivers. Regionalizing networks improves driver at home time and addresses some of the lifestyle challenges typically associated with a one-way, long-haul network model.
In the past, shippers have had more leverage due to an abundance of capacity being available in the market, and carriers had to compromise. Now, due to the many challenges they are facing, carriers are being selective and strategic about what shippers they choose to work with. Carriers are much more intensely protective of their drivers – as the cost of losing a driver is just too high given today’s driver shortage issues – detention and dwell time is one of the most important aspects they look at when choosing a preferred shipper. In order to be a preferred shipper to carriers, shippers need to understand what drives carrier efficiency, what’s going to make the driver more efficient and ultimately, what’s going to make the entire network more efficient for all involved.
Want to hear some other ways that carriers can overcome regulatory challenges? Check out the video to hear more from me on this important topic!