WHAT WILL HOS COST YOU? 2004-01-19 (2)

LIZ PARKS

It lasted 65 years. Yet on Jan. 4, the federal hours-of-service rule for truck drivers officially changed.

The change, which reduces the amount of continuous time truckers can spend on the job, could drive costs up for supermarket retailers and wholesalers who do not have efficient procedures for handling goods at the receiving and loading docks of warehouses. On the other hand, some sources are saying that may not happen if retailers collaborate with their shippers to enhance productivity.

"We are anticipating that there may be some cost increases," said Mike LaCourse, director of distribution and transportation for Scarborough, Maine-based Hannaford Bros., which operates approximately 140 stores in the Northeast. "But we think we can mitigate some of that by unloading trucks quicker, and turning them around faster to get them back on the road."

The new rule, first described last April by the U.S. Department of Transportation's Federal Motor Carrier Safety Administration (FMCSA), allows drivers to drive 11 hours within a 14-hour, on-duty period after 10 consecutive hours off duty. Previously, they could drive for 10 hours within a 15-hour period after eight hours off duty. On-duty time can increase to 16 hours once in a seven-day period. The new rule maintains the 60-hour maximum for on-duty hours in a seven-day period.

Aimed at reducing driver fatigue, the new rule could save up to 75 lives and prevent more than 1,300 crashes annually, according to FMCSA estimates. However, safety critics said although continuous time on the job is reduced, drive time is up.

Never one to take potentially higher costs lying down, Wal-Mart petitioned the FMCSA for relief from the provision that only allows a driver 14 hours of consecutive on-duty time. In its lengthy filing, the retail colossus stated that the on-duty time change could have a "significant" impact on its business, possibly reducing the productivity of its drivers by 6%.

In its filing, Wal-Mart estimated that it could lose 48 minutes per day of driver time, which could add up to a total loss in productivity of 5,694 hours per day, and that its drivers could potentially travel 296,000 fewer miles each day than they were able to drive under the earlier rule.

To transport the same amount of freight it now hauls under the new rule, Wal-Mart estimated that its private fleet, which now numbers about 7,200 drivers, might have to add about 275 new drivers and 300 new tractors. Wal-Mart also estimated that hiring 275 drivers and buying new equipment to meet the new HOS rule would cost about $25 million.

Another change in the new rule raising concerns is that drivers will no longer be able to go off the clock during idle time. "In the food industry, where there seems to be a lot of delays at the docks for whatever reasons, to the extent that drivers can no longer go off the clock while they're waiting, there will be incremental costs," said Clifford Lynch, a principal of Memphis, Tenn.-based C. F. Lynch & Associates, a provider of logistics management services. "I've seen estimated shipping cost increases that range from 3% to 6%, and I think that's realistic if things stay as they are."

That view is shared by Richard Kochersperger, president of Wallingford, Pa.-based Food Marketing Group, another provider of logistics management services. "Before, if they got to a receiving dock and had to wait," Kochersperger said, "they could go off the clock, sleep or eat, and that would not count as driving hours. Today, if a driver has to wait for four hours, that's part of their 14 hours on duty. So that's four hours less they can drive. It's a problem. Everybody will have to add drivers in an environment when it's very difficult to find drivers. And many businesses will have to add more equipment."

Nevertheless, retailers who have expressed concern about the new rule said they are taking a "wait-and-see" attitude. "Because of the hype, everybody wants to raise prices right away, but we really don't know what the impact will be," said LaCourse. "I think if we just take a business approach to this issue, we will find out where the real problems are, and then we go after the root causes and solve them."

Wal-Mart is also taking a wait-and-see approach toward the new rule, according to spokeswoman Sharon Weber. "The rules are in place, and we're complying with them," she said. "In the regulatory filings, we did estimate what we thought the costs might be, but that was an estimate. It's too early to tell what the impact will be, so we're really just watching, listening and looking to the future with an open mind."

Enhancing Productivity

Still, most retailers SN interviewed are not standing pat, preferring to take proactive steps to counter any potential rise in costs. Indeed, some knowledgeable sources are saying that the new rule could potentially create a "competitive advantage" for supermarket operators, wholesalers and other retailers with efficient systems in place.

"It's all going to be about improving the productivity for the carriers so they can keep their costs down and not have added costs to pass along to receivers," said Lynch. "So if every receiver runs their warehouse more efficiently, they could reduce wait times and possibly even lower costs. It will not necessarily cost more money to become more efficient. It's more of a mind-set than anything else."

"Things can be done to cut delays at docks," said Ken Ackerman, president of Columbus, Ohio-based K.B. Ackerman Co. "That's one thing the rules are designed to do."

"If you can avoid having the driver wait to get a door," said Kochersperger, "you can keep costs down because, obviously, that helps everybody. So those retailers who do a very good job scheduling deliveries, turning trucks in and out, making sure people don't wait, will be more productive than those who cannot manage that. But when you have thousands of trucks to manage, you can have problems."

Professor Mokhtar Bazaraa, director of global logistics at Georgia Tech, said the entire issue of cost increases is relative. "It's a function of time and operation. There is not one impact that will fit all scenarios. If you have an operation that does a lot of long hauls and very few stops, then the rules are favorable. But if you have to make multiple stops and there are delays at the dock, those delays will be dead time that shippers can't make up, and that will add to costs. So the solution is to minimize wait times as much as possible."

Steve Wolfe, transportation manager for Spokane, Wash.-based URM Stores, a wholesaler cooperative currently servicing approximately 150 grocery stores, said URM has been working to offset at least some of the potential cost increases by collaborating more actively with its vendors and its retail customers to enhance productivity.

Wolfe said he doubts that outbound costs will increase much, if at all, because URM has been working with its customers for the past several months preparing for the changes. "Our goal is to reduce our wait times at the dock from an average unload time of about 90 minutes to 45 to 60 minutes," he said, "and we're making progress because we benefit and our customers benefit if we keep costs down."

On the inbound side, to avoid additional charges for delays incurred while a truck waits at the warehouse dock, Wolfe said URM is working to make its receiving system "more efficient so trucks can be turned around more quickly." Among other things, the wholesaler is working with its purchasing department to encourage more purchases in truckload quantities. It is also trying to palletize more products, which will reduce the number of individual stockkeeping units that need to be handled.

"What we're looking for," said Wolfe, "is more roll-on/roll-off loads. That isn't always possible, but when we can do it, it's more efficient."

In addition, URM several months ago told drivers they no longer have to clean out their trucks, or wash and fuel their equipment. "That probably saved a half hour per driver," Wolfe noted.

LaCourse pointed out that while there will be more time in transit for trucks traveling cross-country, "there will be more driving time as well. So when you are doing a long haul driving non-stop, you're going to make up some of that potentially lost time."

LaCourse said Hannaford has been talking to its vendors and contract carriers to keep the lines of communication open for several months now.

"If you can work with carriers in advance and have negotiated rates and dedicated runs in advance," he said, "they have a better feel for where the business is going to be and when."

Short and Sweet

To minimize the cost impact of the new hours-of-service rule for truck drivers, get the drivers in and out of the warehouse and on their way with a minimum of elapsed time, advised Clifford Lynch, a principal of Memphis, Tenn.-based C. F. Lynch & Associates, a provider of logistics management services.

To do that, he said, warehouse managers could adopt any or all of the following recommendations:

Make sure that if a driver has eight, 10 or 12 stops to make, he can do so in a 14-hour period.

Make sure that receivers have the proper documentation ready when a driver pulls up to the dock.

Ship as much unitized freight as possible.

Work with carriers to improve operations.

"Develop programs for enhancing carrier productivity, and establish benchmarks that reward productivity," said Lynch. "There is no reason the distribution center manager should not share in the savings that result from carefully planned and implemented initiatives."