Moore on Pricing: Regulations have trucking surrounded

In meetings with shippers and third-party logistics providers (3PLs) who buy freight transportation services, I often encourage them to step back and consider the many cost areas that make up the “rate” that they’re trying to reduce.

While they may be familiar with the total landed cost of their product, they don’t understand the other costs—many of which they control—that have to be considered in the safe and efficient delivery of goods. The one cost area that earns me the most blank stares is the cost of regulation. The most common responses are: “That’s the carriers problem,” referring to drivers hours of service; or “we don’t ship hazmat,” referring to extra charges for dangerous goods transport.  

However, wise shippers are well aware of the situation and assist in controlling regulatory compliance costs for the transporters of their freight. For highway transport, I use the acronym “ROADS” to help remind shippers of the problems—and opportunities—that the various parties have in this often overlooked cost driver.

R is for Receiver. Like most operational reviews, we should start with the customer. The receiver is responsible to minimize the turn-around time for drivers who are subject to hours of service (HOS) regulations. Further, if the inbound product is hazardous, then the receiver’s employees have to be trained under both DOT and OSHA regulations. 

If the buyer is the importer of record for the transaction, they’re subject to Customs and homeland security regulations. Overall, it may be the buyer who sets the bar for all characters in the supply chain; and in turn, everything from packaging to receiving dock door design is influenced by buyer standards. Safety centered attitudes and regulatory compliance will help everyone save money on claims, fines, and delays. 

O is for Operator. I refer here to the “carrier business owner.” For small carriers, they can be “operator and driver.” As an operator, there are costs in liability insurance, training, financing, and labor laws, while for larger public firms there are SEC/stockholder regulatory costs. As an example, mandates on emissions are forcing investments in newer technologies and fuels.  

A is for Asset Supplier. Assets include tractors, trailers, and handling equipment. Manufacturers and dealers of equipment assets are faced with costs for engineering improvements and new materials fabrication to meet minimum regulatory requirements in emissions, safety, and fuel consumption. 

D is for Driver. Drivers have demonstrated that long hours, poor living conditions, instability in income, and job-related injuries can have a negative impact on their work performance. In fact, there are state and federal laws dictating much of the work life of drivers.

For example, the DOT HOS laws, Commercial Drivers Licensing hurdles, TSA ID requirements, Hazmat regulations, and OSHA standards regulate most of the workday. Despite this, drivers are generally underpaid and poorly treated by management and customers and the general public. The cost of turnover rates approaching 100 percent and compliance with mounting driver regulation continues to push up rates. 

S is for Shipper. The sophisticated shipper is aware of their liabilities in all of the above roles. It’s not unusual in small and mid-size companies with delivery fleets with some commercial freight business to have a part in all of these roles.

In fact, the shipper can directly affect the business costs of the other players by being aware of downstream impacts of decisions from packaging to electronic documentation. It’s imperative that shippers, receivers, and service providers collaboratively take the lead in insisting on compliance and innovation across the supply chain in order to overcome the “not so hidden” cost of continued regulation.