Angry with the avalanche of government regulation, the Hours of Service changes chief among them, truck drivers, who see themselves as capitalists, were talking socialism.
So great was the whining -- let’s shut down America and let people miss us -- that a group calling itself Truckers For The Constitution hijacked the debate, twisting it into an “impeach Obama” campaign to foment support for a convoy on Washington, DC.
It failed -- tremendously.
While I didn’t support that protest, it doesn’t mean there aren’t important issues.
Small business has been under fire for more than 30 years from the behemoth corporations that need to grow at all costs. The avalanche of corporate-spawned regulations, in the name of safety, that is smothering small trucking, is promoted by the large carriers in an unholy alliance with safety groups. Government no longer makes regulation, today's regulations are drafted by industry lobbyists, whether it’s finance or transportation.
It’s the corporate stamp-out-the-little-guy playbook. And for those who defend the new corporatocracy by quoting the Founding Fathers and The Constitution, the founding fathers knew that if government stopped acting as referee, it no longer does, communities and citizens would eventually lose to capitalism. And lose big.
Trucking is a commodity business. It is extremely difficult to make money in highly competitive commodity markets from tortilla chips to baby car seats to trucking. There is only one money-making equation. Unit times Price equals Revenue. Sell more, charge less. Sell less, charge more.
Shippers want to move their goods as cheaply as possible. The major carriers have volume to drive down price. The challenge for the small trucking fleets and owner operators is to persuade shippers that their services and equipment offers qualities worthy of a price premium.
Now that Ferro & Co, the Federal Motor Carrier Safety Administration Director and her staff, have reduced paid Drive time, increased unpaid On Duty time and eliminated flexibility with changes to the 34 hour restart, raising prices must be added to the profit-making mix that includes saving money with efficiencies like fuel efficiency.
Corporations, in a grow or die cycle, absorb some cost increases, temporarily, but continually work to pass costs along to the consumer, their customer.
This year the $12 shower at the TA/Petro is $13. Buy six coffees get one free at the Pilot is now buy nine-get-one-free. The cash discount for diesel decreased. Hot dog prices increased.
Many owner operators trust the mileage rate to cover costs and leave a profit, but with the changes to Hours of Service, we must cover every mile we drive and every hour we are on duty. Saying “that’s trucking” and absorbing waiting time or canceled loads is not the road to profit. And without profit there is no rational reason to risk $200,000 on a tractor, trailer and gear to be in business.
So how can I be a profitable little guy? By looking at these profit killers.
1. Oops, we don’t need you. Truck Ordered Not Used.
The shipper has the agent order an extra truck “just in case” because no one ever makes the shipper pay penalties for ordering a truck and not using it. Or, what happened to us outside San Francisco last year, we deadheaded almost 500 miles to pick up a 42,000 pound Hazardous Materials load that was heavier than advertised even though we were explicit about our payload. The shipper’s practice is not to include the pallets in the total weight. Pallets weigh 40 pounds each. There were 16. The load put us 2,000 pounds over gross weight.
What do drivers do? The dockworkers told us some abandon the load, others take it, running the risk of an overweight ticket. We left. It took one month of phone calls and emails to get a Truck Ordered Not Used payment of $250. It did not cover our deadhead and time.
Ordering a truck and not using it is breaking a contract. When a Freight Bill Number is issued, it's a contract. If the shipper breaks the contract, and does not use my truck, it owes me money. It is called the cost of lost opportunity and it is a fundamental, economic principle.
The cancellation deprived me of revenue and, worse, it deprived me of the opportunity during that time to accept another load and bring in other revenue.
The cost of lost opportunity is often seen in residential real estate, if the buyer cancels the contract to buy, the seller is entitled to keep the deposit. The seller was deprived of her opportunity to sell.
Capitalism only works if commitments are honored.
Solution: Determine the Truck Ordered Not Used policy when accepting the load. Start at $500.
2. Hurry up and wait. Detention.
Shippers load by appointment or first-come-first-served. Often they run with fewer forklifts than needed, saving them money, since they don’t pay drivers to wait. Lost time is lost money for an Owner Operator.
The first two hours are typically free, but every hour of waiting time should be compensated. Recently we were told to arrive at 0700 for loading, assuming an appointment. We were fifth in line. There was only one person loading. We had deadheaded, because we planned the route with this piece, abandoning it would cost more than waiting. I wished every minute of that four hours that we could leave.
“We have to let it go to preserve the relationship,” the agents typically say. But the agent’s time hasn’t been wasted, they work on many loads at the same time and the shipper saved money with less staff. Drivers have a specific number of money-making hours per week that must be protected.
Solution: determine the detention policy. $50 an hour is the average.
3. Heavy is more expensive than light. Fuel Surcharge.
A fuel surcharge is attached to each load, based on a national fuel price average by region, which is adjusted weekly.
However, the fuel surcharge does not reflect the freight's weight. Shippers are lobbying hard to increase the 80,000 pound gross vehicle weight for tractor/trailer units. It costs more to pull 45,000 pounds up Eisenhower Pass on I-70 in Colorado than a 15,000 pound load, considerably more. We know our fuel consumption on every load. Last year it was 51-cents per mile, this year it is 47-cents.
Solution: Ask for more if you need it. Business is a negotiation.
4. Covering deadhead for short miles. Practical miles.
Loaded miles are typically two-to-10 percent less than the actual miles the truck travels. Shippers want a deal, agents are happy to oblige, drivers are expected to give the discount.
Depending on the loaded miles and the deadhead miles to pick up the load, unpaid miles can eliminate profit because Owner Operators pay to deadhead. Our calculations tell us the ALL miles rate before saying yes.
Solution: Know the total miles the truck will travel and how the rate affects each mile.
One of my favorite quotes from another Owner Operator who drives a hard bargain is: If you don’t ask, you don’t get.
It takes a surprisingly small amount of money to get negotiating power. In our small business life, I have found that as little as $1,000 in the bank to pay unexpected bills prevents a small business owner from taking a job that she knows she shouldn't.
Saying no is scary. We’re always told someone cheaper is waiting to do the job, but it surprises me how often the other party says “I’ll pay.”
It happened recently on a load from Texas to Quebec. Willing to walk away from the load -- while we wanted it, we didn’t need it -- MacGyver requested an additional $1,000 to put a team on it for expedited delivery. The shipper paid.
Small business owners everywhere leave too much money on the table.