Schneider executive links inventories, truck safety

   Motor carriers are bracing for new driver work rules that are expected to complicate operations and increase costs, but a prominent industry official says that shippers need to temper their service expectations in an era of heightened safety regulations.
   Regulatory and economic pressures, including the rising price of new trucks with less fuel-efficient clean engines mandated by the government, have reduced trucking productivity in recent years. New safety rules are especially challenging for carriers to meet, so shippers should adjust their supply chains so carriers don’t feel compelled to cut corners to retain their business, Don Osterberg, senior vice president for safety and security at Schneider National, recently said at an industry gathering.
   “We don’t need to chase just-in-time logistics,” he said.
   And, he argued, the government should make sure drivers are following drive-time limits before implementing new standards.

Osterburg

   A federal court had set a target of Oct. 28 for the U.S. Federal Motor Carrier Safety Administration to issue a final rule modifying the number of hours a commercial driver can work in a day or week, but it appears doubtful that will happen. The agency has yet to send the final rule to the Office of Management and Budget for final review, a process which often takes a month or more. The draft rules would shorten the effective work day by an hour to 13 hours by introducing an hour of mandatory breaks and implement a variable restart period.
   Under current rules, a driver has to rest for 34 hours before he or she can restart the 70-hour clock for the next eight-day period. The FMCSA proposal would require two consecutive nights off from midnight to 6 a.m. that could make the restart period longer than 34 hours depending on when a driver began his or her break.
   The agency was undecided about whether to shorten the daily driving time to 10 hours from 11 hours, but has said it is leaning in that direction and most trucking industry executives fear it will do so.
   Osterberg recently predicted that the FMCSA would not reduce the actual driving time allowed per day to 10 hours, but that going from a 14-hour continuous clock to a 13-hour day will de facto eliminate an hour of driving anyway.
   “It’s nearly impossible today to drive 11 hours within 14 hours” because drivers have to spend time eating, refueling, doing pre-and post-trip inspections and other activities, he said during a panel discussion at the Council of Supply Chain Management Professionals conference in Philadelphia earlier this month.
   Osterberg said that highway safety would be better served by requiring all trucks to carry electronic on-board recorders (EOBR) to automatically monitor driver time behind the wheel. Most drivers currently fill out paper logs documenting how much time they spent working and resting. The system is rife with cheating by drivers who want to drive further and make more money.
   “Before we tinker with the hours-of-service rule, let’s address the issues of regulatory non-compliance in our industry,” Schneider’s safety chief said. “The way to do that is to mandate broadly electronic on-board recorders, clean up the issues of non-compliance and then measure the effectiveness of the current hours-of-service rules.
   “And if changes are required, change them at that point. But to put the hours-of-service rule changes ahead of the EOBR mandate, sequentially, in my view is misguided.”
   In April 2010, FMCSA proposed requiring electronic loggers for trucking companies that get poor scores on safety audits, but early this year issued a proposed rule that would cover the entire trucking industry phased in over three years. A federal court recently sided with the Owner-Operator Independent Drivers Association and remanded the first rulemaking for bad actors to address the concern that companies might use the technology to harass tired drivers to continue driving at the end of the day if they still had time on their duty clock.
   Many big fleets, like Schneider of Green Bay, Wis., have already adopted electronic logging devices and learned they can operate more efficiently because they have a better handle on where their drivers are and how many hours they have available, so they can dispatch them more effectively.
   Osterberg said the ruling doesn’t make sense because in the paper environment “there’s much greater potential for a carrier to ask a driver to push the envelope with recognition they can creatively log to mask any hours-of-service violations.”
   Trucking industry analysts say the pending work rules will reduce driver productivity by about 5 percent, requiring companies to operate more trucks and hire more inexperienced drivers to move the same amount of freight. They also question the need for the rule because truck-related accident fatalities are at an all-time low since rules were last changed in 2004.
   Noël Perry, a freight economist with FTR Associates who also runs his own consulting firm, has estimated the industry will need 150,000 more drivers if the hours-of –service rule goes through.
   But the Obama administration, at the behest of labor unions and auto safety advocates, agreed after taking office to revise the on-duty requirements for commercial drivers. Some motor carrier executives have characterized the proposed rule as a measure designed to create more jobs.
   Rep. John Mica, chairman of the House Transportation and Infrastructure Committee, on Sept. 23 sent a letter to President Obama warning that the proposed changes will hurt the economy and add to congestion. “In our enormous, consumer-driven economy, the last thing our government should be doing is artificially increasing the costs of almost every consumer good with unneeded regulation. As such, we will aggressively oversee any attempt by the U.S. DOT to impose new regulatory burdens on the trucking industry by making changes to the current hours-of-service rules,” he and three colleagues said.
   Despite evidence that the rule is unnecessary, and even counterproductive, the White House will not change its mind, Lana Batts, president of Transport Capital Partners, bluntly said on a conference call hosted last week by Stifel Nicolaus stock advisors about challenges facing the trucking industry.
   “I don’t know if you can sway the current administration, which takes its cue from the French socialists who believe that the way to increase employment was to reduce the work week from 40 hours to 36… I think they view it as a way to get 150,000 more drivers on the road as opposed to taking away productivity,” she said.
   The American Trucking Associations has made clear that it will litigate against the rule as currently proposed, adding uncertainty for carriers already coping with an anemic economy, high fuel prices and difficulty finding qualified drivers.
   “Regulations are run amuck. And that’s why the business community is so upset. It’s not just hours-of-service,” Batts said of the Obama administration. “It’s everything else. But that’s why the trucking industry is not really anxious to invest in new equipment until they can figure out what the rules are going to be.”
   A shorter driving day will create a huge burden for less-than-truckload carriers because they’ve set up their terminals for 11-hour runs, the former president of the Truckload Carriers Association, added.
   Shippers need to understand that service levels they enjoyed in the past are no longer attainable given the huge operating constraints on carriers, Osterberg said. In addition to hours-of-service, capacity reductions are widely anticipated from drivers and carriers being weeded out by the FMCSA’s new database for keeping track of violations, initial inefficiencies from deploying EOBR systems, shortages of qualified drivers and highway congestion, according to industry experts.
   “I might argue that historic levels of service are not even required today” if supply chain professionals challenge their assumptions for just-in-time delivery and lean manufacturing designed to keep inventory levels as low as possible, the Schneider executive said.
    As transportation costs as a percentage of goods sold begin to reach the level of inventory carrying costs shippers might want to increase safety stocks and build reliability into their distribution system instead of valuing delivery speed as the best performance measure, he said.
   “The number one cause of poor decision-making among human beings is time pressure,” he explained. “Today, we create tremendous time pressure on commercial drivers. I would argue that commercial drivers have historically been the elastic link in an otherwise rigid supply chain. They’re becoming increasingly inelastic.
   “So they can’t buffer the upstream and downstream inefficiencies of the supply chain. And we have to stop being delusional about that and recognize on a go-forward basis that service expectations will have to rationalize because unrealistic service expectations in my view drive unsafe and inappropriate behavior by both commercial drivers and carriers. And I believe public safety is the bill payer for that today,” Osterberg said.
   International Paper, for example, has changed its mindset towards inventory by differentiating between how it deploys overall inventory and strategic inventory, especially as transportation becomes less plentiful, Tom Carpenter, the company’s director of logistics for North America, said.
   One of the outcomes of a new supply chain paradigm, according to trucking analysts and executives, is that shippers will have to accept higher rates so carriers can pay more to retain and attract drivers.      — Eric Kulisch