For most of our lives, abundant truck capacity and steadily falling costs fueled a simple, one-way relationship between supply chains and trucking. The supply determined a need for relatively high speed and responsive transportation, and truckers met that need. This relationship extended to the management of loading facilities, ports, or intermodal ramps. The shipper told the carrier what time to show up – and they did. As an economist watching this dance, it always troubled me because the ultimate cost to the supply chain must include inefficiencies in trucking operations. Still, it was very simple from the shippers’ perspective: “Truck delays are just a cost of doing business. They can put up with it or not get my business.”
One obvious inefficiency is detention. Although many carriers tack on an extra fee for delays, those charges, until recently, were seldom assessed and even less commonly paid. But a changing market is suddenly increasing the visibility of detention and shifting responsibility from carrier to shipper.
This shift is based on three factors. The first is a driving fact about contemporary trucking and, for that matter, contemporary supply chains. We now have 80 years of steady refinement within truck-based supply chains. In such a ferociously open market, 80 years is enough time for competition to wring out inefficiencies. And the market has done that in its simple, two-dimensional design: truckers are close to the optimal efficiency available with current regulation and technology; and shippers have also wrung out the last savings possible on their supply costs. The remaining opportunity is to abandon this two-dimensional model – supply plus trucker – and adopt a single-platform optimization that brings carrier inefficiencies under the supply chain tent. (i.e. “I acknowledge that idle trucks cost me money. If I can change my supply design to minimize that, I save that money.”)
The second factor pertains to Hours of Service (HOS). Studies have shown that even the most compliant drivers frequently bend HOS laws for their convenience. Consequently, it’s estimated that, post-ELD-mandate, productivity will slip by two to four percent, causing a shortage of capacity. In fact, spot market results, as shown by Truckstop.com’s data, have already tightened. Such tightening is shifting the balance of power from shipper to trucker. Empowered truckers will favor the shippers who move equipment through their loading facilities quickly and efficiently. Suddenly, detention will become even more a shipper’s problem.
The third factor revolves around Electronic Logging Devices (ELDs). One of the difficulties with managing detention is verifying that a shipper caused it in the first place. But with new digital tools, like ELDs, we now have a reliable means of quantifying and locating delays. Some fleets are already using this ELD-derived information to charge for detention, or better, help their customer eliminate the delay entirely. Moreover, such measuring devices will soon be integrated into supply chain management systems, making, at long last, transport productivity a more integral part of supply chain design. Carriers still resisting the ELD mandate would be wise to consider this development. As supply chain managers realize their increased competitiveness from fostering carrier productivity, the need of real-time carrier data will become a mandatory cost of doing business for truckers.
The takeaway? Detention is a bone of contention between shippers and carriers only when the two players hold one another at arm’s length. As consumers, we don’t care how products get to the store – we care that it’s affordable and unbroken. If the Amazons and Walmarts of the future are to continue to dominate, they’ll need to fold transport into their supply chain design – to achieve the lowest delivered cost. The ELD mandate and the ensuing truck shortage will kick start that process, as will the proliferation of information technology. In the future, the arguments over detention will shift from carriers and shippers to more appropriate, and responsible, parties: the supply chain manager and loading dock foreman.
Noël Perry is Truckstop.com’s Chief Economist. Perry is a specialist in analyzing risks in the transportation market and explaining the implications in the most transparent way to industry professionals. He is a managing partner in FTR Association, the premier transportation forecasting firm in North America, and has 30 years in senior research positions at Schneider National, Cummins Engine Company, and CSX.
Noël is the rare economistic to specialize in transportation. Starting on a loading dock in 1968, he has followed his life's interest in senior research positions at Cummins Engine, CSX and Schneider National. He has been in private practice since 2008, working with clients in four modes and the shipper community. Frequently quoted in the national logistics media and heard on the speaking circuit, he is also a partner in the industry leading transport forecasting house, FTR Associates. His monthly newsletter available from FTR reads like an economic textbook, handling one major strategic transport issue per month.
Noël holds degrees from the University Of Pennsylvania and the Harvard University and navigated KC-135's during the Viet Nam war. He and his wife Ginny live in the historic iron mining village of Cornwall, PA. In his spare time Noël is a gardener, singer, golfer, WWII historian and is a member of the Society for American Baseball Research.