With trucking companies bearing the brunt of the freight recession, the question on every carrier’s mind is how to generate more revenue despite low freight rates and weak demand.
Brian Runnels, vice president of safety at Reliance Partners, a trucking insurance agency and safety consultancy, has observed carriers’ efforts to grow margins in action. Recently, he’s witnessed multiple motor carriers shifting their operational practices to deprioritize high-mileage runs for shorter, more profitable loads.
“Many times, there are minimum fees for short runs,” Runnels explained. “So, for example, a load that requires 200 miles of driving may pay a minimum of $500. A driver can get in one, two or three of those versus a 500-mile run that only pays about $1.30 per mile.”
For drivers, this means more time at loading docks and potentially more driving through congested areas as opposed to longer stretches of interstate driving.
While this operational change may make sense for a company to maintain margins, it can also breed an environment of unsafe driving practices. Drivers feel a time crunch to achieve the same number of miles they used to, but now with added challenges of extra stops, denser traffic and potential trouble finding parking.
This pressure can lead to hours-of-service violations and, in the worst-case scenario, crashes, Runnels said.
This is just one example of how safety can get put on the back burner during tough economic times. While it’s also critical to book loads in order to maintain revenue, deprioritizing safety and compliance can begin the downward spiral, Runnels said.
“Business owners are feeling the pinch. They’re trying to get as much freight moved as they can within a bad market,” he observed. “Some companies, not all, are willing to roll the dice on things like safety and maintenance to try to save money. But, when it comes to safety, neglecting small things can turn into big things.”
Eventually, driver and vehicle violations will be caught in roadside inspections, which can have a detrimental effect on a company’s safety scores and ability to retain drivers and customers, ultimately threatening future business viability.
With proposed changes to the Safety Measurement System (SMS) on the industry’s radar, this could result in more eyes looking at a carrier’s safety scores, out of curiosity if nothing else, Runnels said.
Maintaining good safety practices opens up more options for carriers when it comes to insurance, which could potentially help them manage costs. It comes down to the simple fact that insurance providers compete for the business of carriers with a good safety track record as opposed to others with crashes, vehicle and driver violations, and poor safety scores. Insurance companies have less incentive to give a carrier a lower rate or favorable renewal terms if no one else is willing to take them on.
“When we get through these times, if you come out on the other side and show that you’re a safe carrier and you were able to maintain your business and operate it safely, it’s just going to benefit you more when it comes to getting contract rates and being able to attract good drivers,” Runnels said.