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Sourcing fleet compliance: Cost vs. value

Compliance issues can result in large fines for companies, which is why some companies find outsourcing compliance programs to experts can be a financial win. ( Photo: J.J. Keller & Associates Inc. )

Running a trucking operation today requires finding the right drivers. It also takes skill in recruiting those drivers, training them, ensuring they hold the proper credentials and can pass drug tests and medical checkups, and that they can follow strict operational regulations such as hours-of-service (HOS) regulations. The list is seemingly endless, which is why ensuring fleet compliance has become a job – or even a department – within many fleets.

Building the right compliance process, though, requires getting the right people in place who understand the thousands of regulations and laws fleet operations must abide by. That can be costly, yet a single mistake can result in fines in the tens of thousands of dollars for violations, or even millions of dollars if a fleet vehicle is involved in an incident. For many businesses, especially those whose primary business is not running a trucking fleet, this process is onerous, costly and too often neglected.

Following the law is critical. Documenting that you followed the law is paramount.

“A high percentage of the organizations we deal with are not trucking companies,” said Rob Johnson, client services manager for fleet compliance specialist J.J. Keller. “They’re distributors. They don’t have that core competency. They run businesses that require trucks but that is not their core business.”

To avoid compliance issues, companies generally have three options: ignore the responsibility; hire an in-house expert; or hire an outside compliance firm. Ignoring the problem, of course, is not a solution, or at least one that will keep your business operating for long, leading many to hire in-house experts. Companies looking for a more cost-effective approach will turn to outside firms that employ a team of experts.

“The impacts of non-compliance can range from fees and drivers placed out-of-service for at least 10 hours (likely leading to revenue losses and potential towing fees), to a fleet’s Compliance, Safety, Accountability (CSA) BASICs scores declining that can impact business options, insurance premiums and risk of FMCSA investigation), said Susan Beardslee, principal analyst of Intelligent Transportation and eFreight with research firm ABI Research. “Unplanned repairs can also be expensive due to downtime and customer impact. All of these can have a snowball effect on a company’s bottom line in a competitive industry with tight margins.”

The starting point is determining if you need outside help. Compliance issues can arise for a number of reasons, starting at the driver qualification process, and running through file management processes. (How many months must you retain hours-of-service records or how do you document drug test procedures, for instance.) Audits or acquisitions often highlight areas of concern. If you want to avoid compliance issues, thinking about how you will do so often comes down to cost.

Johnson said that among the issues J.J. Keller provides compliance services for are driver compliance, file management, drug and alcohol testing (including non-DOT required testing), some background reports for pre-employment screening and DOT eligibility, and vehicle tax, title and registration.

“One of the major areas of concern is [motor carriers’] understanding and timely compliance with the latest regulatory directives for HOS depending on the mix of vehicles, routes, miles, interstate, and load types,” Beardslee said. “Based on the continued driver turnover, training can also be a factor, and influence both core compliance and safety.”

Johnson pointed out that outside firms can ensure that continued compliance. “Sure, a drug test is a transaction at the end of the day, but the real value to the client is ‘bird-dogging’ of that drug test, making sure the client showed up for the test, and that it was administered properly,” he said.

That additional value is where outside experts come into play and leads to reduced costs for the customer. Bringing to bear the full breadth of a compliance partner allows clients to benefit from in-depth knowledge and scale. Beardslee points to items such as ensuring ELD and CSA compliance as examples.

“This can be time consuming for micro-fleets and SMB’s overall,” she said. “Penalties can range from $1,000 to $10,000. CSA scoring and monitoring BASIC status is another critical component with significant risks, including unsafe driving and vehicle maintenance. Smaller companies may lack the resources to see patterns in the data but would greatly benefit from monitoring and identifying risks.”

Telematics solutions are becoming portals to collect this information, but it still must be tracked by someone. “[Clients] are really looking for a partner that has that regulatory expertise,” Johnson noted.

An example of this is J.J. Keller’s DQ Platinum service. This program combines the company’s Driver Qualification File management service with CSA reporting and roadside inspection monitoring. The result is an end-to-end driver compliance and reporting system that ensures qualified drivers are moving freight. It standardizes processes and provides coaching opportunities to further improve driver behavior, which results in improved CSA scores, fewer fines and benefits the bottom line.

J.J. Keller also offers a “corrective action” training solution, Johnson pointed out. The solution can help with a variety of compliance issues, such as HOS violations. It is this data interpretation that drives success, as simply looking at data doesn’t always tell the full story or identify the proper training approach. With corrective action services, customers get that targeted approach and J.J. Keller will help enroll drivers in online training courses as needed, ensure they complete the program, and document the results in the driver’s file.

Even with outside help, though, Beardslee said that a successful program involves a company-wide effort.

“Any best-in-class safety and compliance solution must permeate the entire company, and become part of the culture and practices throughout,” she said. “Compliance must have clear ownership identified from the drivers to maintenance and operations. There needs to be transparency on performance and some use of gamification has been successful. Driver feedback needs to be acknowledged and encouraged; digital dashboards can be a way to institutionalize this.”

Whether you conduct compliance with in-house resources or choose to outsource, the goal is to always show progress.

“It’s not where you’ve been, but what you are doing [to correct it],” Johnson said. “Obviously you want to ease the administrative burden, the day to day challenges, but you still need to be involved. We want to become an extension of their organizations from a compliance and safety perspective.

“It’s a partnership,” he summed up.

Brian Straight

Brian Straight leads FreightWaves' Modern Shipper brand as Managing Editor. A journalism graduate of the University of Rhode Island, he has covered everything from a presidential election, to professional sports and Little League baseball, and for more than 10 years has covered trucking and logistics. Before joining FreightWaves, he was previously responsible for the editorial quality and production of Fleet Owner magazine and Brian lives in Connecticut with his wife and two kids and spends his time coaching his son’s baseball team, golfing with his daughter, and pursuing his never-ending quest to become a professional bowler. You can reach him at [email protected]