Researcher Calls Raising Rates due to Hours of Service Rules a Bad Idea
New federal regulations mandating rest time for truckers could mean increased costs for consumers, according to a new study from the Global Supply Chain Institute at the University of Tennessee, Knoxville.
The hours-of-service rules from the U.S. Department of Transportation's Federal Motor Carrier Safety Administration may be designed to improve driver safety by reducing truck driver fatigue, but they could also fatigue carrier relationships with customers. It could either take longer for companies to receive their shipments, or it could force carriers to add more truckers on the road—thus incurring higher costs and possibly highway congestion.
According to a new study from the Global Supply Chain Institute at the University of Tennessee, Knoxville, many carriers plan to pass their higher costs on to the shippers. Researchers surveyed 417 companies and found that 58 percent of them saw that as their most viable strategy.
Mary Holcomb, an associate professor and the study's author, believes that this is not a realistic solution. She is the Niedert Supply Chain Fellow in the UT Department of Marketing and Supply Chain Management, which is based in the College of Business Administration. Dean Vavalides, logistics analyst for Pilot Flying J, collaborated on the study.
"In this economy, companies won't want to damage relationships with their customers by raising prices," Holcomb said. She suggests that carriers would get a better result by becoming more efficient, first. Her study recommends the following strategies:
- Extending lead time for some customers;
- Increasing customer delivery windows;
- Improving shipment consolidation;
- Increasing the use of "drop and hook," which involves dropping a loaded trailer at a customer's facility and hooking up and leaving with another loaded trailer.
The research also uncovered actions that many shippers have yet to consider. Less than 5 percent of the polled companies planned to reduce costs by consolidating shipments with other companies. There’s a good reason for that.
"The logistics of coordinating shipping across companies is often too complex to sustain," Vavalides said. "It just requires too much synchronization."
Holcomb added that she was also surprised to discover that so few shippers plan on shifting their transportation methods from truck to rail although research showed that long-haul moves have been the most affected by the hours-of-service rule change. Switching the long-haul moves from truck to rail could reduce the arrival time, she said.
The UT Global Supply Chain Institute will conduct a follow-up study in mid-2014 on the longer-term impact of the hours-of-service rules. For a copy of the study, email [email protected].
