The government required use of electronic logging devices is resulting in time replacing mileage as an indicator of truck rate values, according to a new report from the Transportation Intermediaries Association of Alexandria, VA.
The case study, called “Examining detention time in the marketplace: Driver’s hours matter,” is available for review online.
Mileage replaced weight as the top-used valuation for freight rates about 40 years ago after the Motor Carrier Act of 1980 “opened the floodgates” of competition, according to a news release.
At the time, the Interstate Commerce Commission no longer granted carriers operating authority for lanes with rate structures based on the poundage or “hundredweight” by freight type.
The next shift, according to the association, came in December 2017 with the Federal Motor Carrier Safety Administration’s electronic logging device rule.
“In an instant, time leap-frogged mileage for rate valuations and shippers and 3PLs began buying the driver’s time, not the mileage,” the release said.
The case study includes interviews with shippers, motor carriers and third-party logistic suppliers.
“TIA continues to examine issues that directly impact 3PLs, shippers and motor carriers,” Chris Burroughs, vice president of government affairs for TIA, said in the release. “These investigations allow all three entities involved to have open dialogue and identify solutions to problems that continue to plague the industry.”
Detention
The case study reported a detention survey by the American Transportation Research Institute was taken by drivers and motor carriers in 2014 and again in 2018. The survey concluded that customers “have not made real improvements to their staffing, processes, accuracy or efficiency across the four-year time period.”
And gains made in 2018 have since been given up with the softening freight market, according to one transportation supplier quoted by the case study.
“Now it is kind of like we are fighting for (detention pay) as carrier or 3PL,” said John Miller, chief executive of Plains Dedicated, a Champions Gate, Fla.-based asset and non-asset transportation provider.
The case study noted that companies that transport refrigerated loads tend to have more negative experiences with detention than other freight sectors. The study said most parties agree that it should be a billable event after a period of two “free” hours.
According to the case study, on March 15, Fresh Del Monte Produce changed its detention pay policies from paying after three hours to paying after two hours. By making the change, the company saw labor costs increase to more quickly get trucks in and out of its facilities. Del Monte officials said overall transportation costs went down, however, by paying less detention charges and getting more favorable rates, said Robert Savage, vice president of transportation and logistics of Fresh Del Monte Produce.
“It forces the wrong action when you set parameters in a manner that allows people to take their time since it is not costing them any money, but it really does,” he said in the study. “It costs the truck money and increases rates.”
The case study said that although shippers have the upper hand at the moment for rate negotiations, shippers and transportation suppliers agreed that detention should not be used as a bargaining chip.
Miller of Plains Dedicated said in the study that the company decided to stop doing business with one of its largest customers this year after the shipper changed its detention policy to save money. The shipper used to pay for detention on multi-stop shipments, but now only pays it on the final stop.