You might think that the hours of service (HOS) regulations that began July 1, 2013 only affect carriers. But any rules that reduce the flexibility of carriers’ schedules ultimately affect brokers. Already, there is evidence that the new regulation is increasing rates and decreasing productivity.
In case you’re not familiar with the details of HOS, the most significant changes include:
- Drivers must take a 30-minute rest break prior to exceeding 8 consecutive hours of driving.
- In order to use the restart provision, drivers must be off duty for 34 consecutive hours, and those hours must include two 1 a.m.-5 a.m. segments.
- The restart provision can be used only once in a 168-hour (one week) period.
Here are some of the ways the new rules are affecting brokers:
Increased rates – As I stated in my Dec. 12 blog post HOS Update: Carrier Rate Increases Don’t Cover Productivity Loss, rates have increased from 1.6-1.7% since July 1, when the HOS rule took effect, after seasonal adjustment. In comparison, the industry-wide loss of productivity for carriers is estimated in the 3-5% range. That means the carriers are “eating” about half of the revenue loss, at least until they can negotiate new contract rates for 2014. Freight brokers and 3PLs may want to set expectations with their shipper customers, as some lane rates are sure to rise in 2014. This transition can be an opportunity for brokers and 3PLs to advise the shipper, or even to bid on RFPs for key customers. The shipper may not be aware that a 3PL or broker can often quote rates that are on par with or lower than those of a core carrier, especially during peak seasons.
Less flexible scheduling – Requiring a 30-minute break before exceeding 8 hours of driving may seem like a good idea, but it can reduce flexibility. For example, if a driver is not near a truck stop but he has driven 8 consecutive hours, he must stop and take the required break. Safe, secure parking can be an issue. Furthermore, the rule that drivers take two breaks between 1-5 a.m. means that more trucks will be starting up at 5 a.m. and hitting the highways during congested rush hours—decreasing productivity.
Long hauls could take longer – HOS rules have the greatest impact on longer hauls, especially those with a length of haul approaching 500 miles one-way or round trip. Mandatory breaks combined with the 34-hour reset rule will reduce the maximum number of miles a driver can cover in a day. (See my blog post How a Two-Day Trip Becomes a Three-Day Trip.) So if you’re making promises to a shipper, make sure the carrier can cover the miles in the time allotted.
Last but not least, there are concerns about the impact of HOS rules on safety. Although the original purpose of HOS was to reduce driver fatigue, two-thirds of drivers reported that the new rules actually increased their levels of fatigue, potentially leading to unsafe driving, according to a study by the American Transportation Research Institute (ATRI.)
The debate about HOS is far from over. There are legal challenges pending, and industry groups are increasing pressure on lawmakers to repeal the law. Reviews are underway in both houses of Congress. I’ll follow up soon with a detailed, five-month rate and capacity analysis, so be sure to keep an eye out for that report.
Categories: Broker News