Latest Revision to HOS Rules Underscores the Importance of Carrier Procurement

The on-again/off again Hours of Service (HOS) issue for commercial vehicles in the United States surfaced again recently when the US Federal Motor Carrier Safety Administration (FMCSA) issued it s latest rule revision in December.

While the FMCSA did not further revise the current maximum daily driving time of 11 hours, arguably the most contentious aspect of the HOS rules, it did propose a reduction in the maximum number of hours a truck driver can work per week from 82 hours to 70 hours. The revisions to the current regulations will take effect in 2012-2013.

The FMCSA has been criticized by various groups on both sides of this debate, including the Teamsters and the American Trucking Associations, since it increased the daily driving time from 10 hours to 11 hours in 2003. The discussions surrounding HOS revolve around safety on one hand, and productivity and higher costs on the other, and it appears this latest revision by the FMCSA will do nothing to quell the polarized opinions held by different industry groups.

In fairness to the FMCSA however, driver shortages and general economic conditions make it very difficult to strike a balance between safety and productivity concerns. And while I can appreciate industry efforts to improve economies of scale I think many observers will agree with the FMCSA that maximum driving times of 11 hours per day and 70 hour per week for commercial operators are more reasonable than the former. Nonetheless, changes in the US HOS rules will likely impact Canadian carriers providing US services as well.

Reading the well publicized reports on HOS it’s easy to overlook the fact that the opinions of some of the most importation participants in this debate are often overlooked, those of the drivers themselves.

I was reminded of this fact while reading Al Goodhall’s column in the February edition of Truck News.  He recalls a comment from another driver that driving “just wasn’t any fun anymore”. Undoubtedly, bureaucratic industry wrangling similar to that surrounding the HOS debate in the US played a part in that opinion, coupled with the feeling that many drivers are working longer hours for less compensation. He even suggests this may be the real reason for the driver shortage many claim is now plaguing the industry. While this may, or may not, outweigh factors such as driver attrition or the lack of appeal truck driving holds for younger people, his point serves to remind transportation managers of the importance of selecting carriers that focus on these critical issues when hiring and scheduling hours of service for drivers.

Another factor not to be overlooked is the precarious financial position of some asset-based carriers resulting from current economic conditions, albeit this is quoted as justification by those who support regulations for longer hours of service. This problem was identified by several transportation company owners at a recent Ontario carrier conference as one of growing significance, namely that of carriers operating in virtual bankruptcy. This unfortunate situation is brought about by financial institutions reluctant to foreclose on carriers that are technically bankrupt, because they foresee difficulties in disposing of carrier assets in the current economy. As a result, these carriers operate by offering non-compensatory rates that distort the market for competitors. This condition can be transparent for many purchasers of transportation services, putting shipments in a potentially precarious position.

Transportation networks for many Canadian companies are often complex, consisting of a mix of LTL and TL services, both domestically and Transborder. But the breadth and scope of challenges facing transportation managers today may force many to ask what the impact of these problems will be on their ability to perform due diligence on behalf of their employers.  Negotiating directly with asset-based carriers will remain a primary strategy for many, but it may be impractical for transportation managers to verify the regulatory compliance, financial strength and driver capacity of every supplier. Utilizing the services of a third-party logistics company to qualify suppliers can be an effective strategy for maintaining network integrity (in whole or in part) in the face of such difficulties.

Cumulatively these factors, ranging from changing  regulations affecting driver hours of service, to the (unknown) financial constraints affecting carriers, pose significant challenges for purchasers of transportation services, not only in the  year ahead but, seemingly, for the foreseeable future. Developing a supplier base that includes the volume leverage of a third-party logistics provider as part of an overall contingency plan is an effective strategy.

Posted by: Laurie Turnbull, CITT, P.MM – Supply Chain Consultant, Cole International

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