TruckExec

A New Way to Recruit Truck Drivers

I am pleased to announce that I have launched a new recruiting website called Compare Driving Jobs.

Compare Driving Jobs is a unique concept in driver recruiting in that we don't use advertising and job leads include each driver's specific interest in your job listing.

'Employer Showcases' - links to documents, images, web pages or videos that highlight the benefits of working at your company - are used to define driver interest.  The links drivers click on (click history) are recorded in the leads so that recruiters will know which benefits to emphasize when calling candidates.

From a driver perspective, all listings are comparable, making Compare Driving Jobs the best driver job search tool available.  A sample job search display is provided below.

Trucking companies interested in listing on Compare Driving Jobs should contact me at : JWhite@CompareDrivingJobs.com

 

Calculate Your Cost of Driver Turnover

CostDown Consulting developed a Driver Turnover Cost Calculator that calculates the per driver cost of turnover based on all areas of influence.  Included in the calculator are considerations for administrative, maintenance, lost revenue and lost productivity costs.

The calculator can be accessed here:

 

Download CostDown Consulting's Driver Turnover Cost Calculator

2015 Operations & Profit Improvement Plan

Fourth quarter is the time to analyze YTD performance and, using that analysis, begin to develop next year's Operations & Profit Improvement Plan.  The link below is to a planning tool CostDown Consulting developed to help trucking company owners and executives begin development of their 2015 Operations/Profit Improvement Plan.  After you download the file and key in your company’s specific YTD performance data, the tool will provide: 

• Calculation of over 20 key performance metrics
• Forecast of the annual profit impact of various levels of improvement in four key performance areas
• Overview of the 5 steps required to develop an effective 2015 Operations Improvement Plan

I hope you find it of value.

 

Download CostDown Consulting's 2015 Operations & Profit Planning Tool

Driver Retention and Minimum Pay Plan for Drivers

Baylor Trucking (Dry Van TL; Milan, IN) has created a minimum pay plan to help with driver retention.  Drivers that meet specific requirements are guaranteed a certain level of wages.

 

Freight Rates - Know the Marketplace

Key to trucking company profitability is securing the best rates possible.  Rate maximization begins by understanding current marketplace rates.  DAT Trendlines provides solid information about national and regional monthly spot rates for Van, Reefer and Flatbed Operations.

 

Truck Driver Health

Truck driver health and truck driver wellness programs are important to overcome that profession's long periods of inactivity and on-the-road eating.  The image below is linked to 'The Healthy Trucker' You Tube Channel.  Lots of videos are available, many of which could be shared with drivers during safety or other scheduled meeting.

 

ATRI 2013 Cost of Trucking Study

Each year, the American Transportation Research Institute (ATRI) publishes an analysis of the operational costs of trucking.  The file below is their 2013 report.  Keep in mind that operations vary greatly both between trucking company types (long haul, LTL, bulk, etc...) and within similar operations (all Dry Van Long Haul for example).  CostDown Consulting recommends that best way to manage costs is to track internal performance and improvement.

 

 

      Download ATRI Operational Costs of Trucking 2013 FINAL

Load Boards a Primary Source of Revenue

Interesting annual carrier benchmark survey from DAT (1st Quarter 2013).   Per survey responses, load boards on average account for 37.1% of revenue, more than shipper contracts  (31.1%).  Click on image to view full report.

 

 

Why UPS Trucks Never Turn Left

Interesting Fortune C-Suite Strategies video interview with UPS SrVP Bob Soffel explains the savings associated with right only turns.  Note: You'll have to watch a brief commercial first.

Driver Shortage: Operating Strategies for Trucking Companies during a Driver Shortage

A new webinar has been added to CostDown Consulting's website library that overviews what trucking companies should do to offset the impact of a driver shortage.  Here's the link:

 

 

 

Performance Management Program for Truckers

 

The video below details how to develop a Performance Management Program that will reduce your driver and fleet costs.  I hope you find it of value.

 

 

 

Video: How to Develop a Performance Management Program  

 

   

Performance Management Programs provide key employees the Goals, Activities, Resources and Financial Incentive needed to improve performance and reduce operating costs.    

 

 

Fuel Economy Tips

 

  Guest Columnist

 

  Glen Sokolis

 

  President

  Sokolis Group

 

 

When it comes to fuel economy many companies may not know where to start. Newer hybrid fleet vehicles may initially be too costly. Fuel economy can be a fairly simple task for any company; one just has to know what to look for. Below are a few very important tips that will improve the efficiency of fuel for any vehicle.

 

Routine maintenance or preventative maintenance can greatly impact the way a vehicle runs. Each truck should be serviced according to the recommended intervals from the manufacture. This will catch any future problems and keep the vehicle running at top condition, reducing the strain on the engine when hauling. The preventative maintenance would include checks on tire pressure, brake checks, tire alignment and balance and vehicle diagnostic. Also, check for algae growth in the fuel tanks and lines that will clog and prevent fuel from flowing properly. Keeping it like new will make it run like new.

 

Reduce idling, as simple as that sounds it is so true. An idling vehicle will waste up to one gallon of fuel for every total hour. That includes warm up time, of which is unavoidable in some colder areas. A driver may make 10 stops in a day and if the truck idles 6 min at each stop, right there is almost a gallon of fuel gone. Idling could also be avoided by having electronic logs that will monitor the time a truck idles and the problem can be assessed and prevented for future trips.

 

Driver training is also one major way to get in step with fuel economy. A driver that is rough when shifting gears or drive at excessive speeds are impacting the effectiveness of all your hard thought efforts for efficiency. Simply driving the recommended and posted speed limit will help with the process. When the operator of the truck understands his actions on the road will affect the cost of fuel and thus the bottom line, driving at sensible speeds may not seem like a bad idea.

 

Fuel management is also a way to control with fuel economy. Fuel management will be sure that drivers fill up at proper locations to optimize their routes, or even set up on site fueling. Coordinating better discount prices to for fleet fuel cards too. Fuel management would also help with assessing which, if any, fuel additives would be needed and again be there to help negotiate those prices.

 

In the end fuel economy is a careful blend of the above, and when utilized at their best the savings could be great.

 

Glen Sokolis, President of the Sokolis Group, has over 20 years of fuel management experience working as both a buyer and seller of diesel fuel and gasoline. He has successfully help hundreds of companies procure billions gallon of fuel over his career.  Over the years many organizations have asked Glen to be a special guest speaker, writer or panel expert.  He has led his company to be a leader in helping companies outsource their fuel program to his company.  He can be reached at gsokolis@sokolisgroup.com or visit www.sokolisgroup.com for more information.

Without A Doubt, The Safest Drivers On The Roads Are Truckers … Unless They Have Sleep Apnea

 

 

 GUEST COLUMNIST

 

  James Berryhill

 

  President/CEO

  Occupational Sleep Apnea Solutions,Inc.

 

 

 

Obstructive sleep apnea can lead to chronic fatigue syndrome and daytime sleepiness. Clinical studies have shown that those with sleep apnea have the reaction time equivalent of someone with a blood alcohol level of .06 BAC. However, with proper treatment, their cognitive awareness and reaction time improves to normal levels. Obstructive sleep apnea (OSA) is like any other treatable disorder, such as hypertension or diabetes. With  proper treatment and management of the condition, a driver would be considered to be fit for duty. Most truck drivers do not have sleep apnea so expensive testing of all drivers seems ridiculous, It does seem very prudent to do inexpensive education and screening of those with a high likelihood of having the disorder.

In February 2008 the FMCSA Medical Review Board issued recommendations that the newly formed National Registry of Medical Examiners actively screen, at the time of the medical exam, for OSA in all individuals who request fitness for duty certification for the purpose of driving a CMV in interstate commerce. To date, the FMCSA has failed to address this issue and implement a ruling in a timely manner.

Thankfully, some industry leaders have taken matters into their own hands. Schneider National Transportation has implemented a screening, diagnosis, and treatment program for their drivers with sleep apnea. The improved health of their drivers and the savings to the company were, to say the least, very impressive. For every dollar invested into the program, their return on investment was a two to three dollar savings on medical and accident expenses, as well as a 200% increase in employee retention for those in their program as compared to the company overall. They had a 12% reduction in preventable accidents, a 91% reduction in hospital admissions, and overall a 57% reduction in healthcare expenses, which resulted in a savings of over $500 per month per driver, for those who received treatment for sleep apnea. Schneider also reduced their liability and litigation issues, by incurring a 63% reduction of the median accident cost for the company overall. Public safety is the most important benefit of their program, but the added benefit of increasing profits from lowered healthcare costs, as well as reducing liability risks would seem to make addressing this issue for the rest of the transportation industry a slam dunk. Schneider National’s program proves that treatment for those that have sleep apnea is clearly smart financially.

In recent comments concerning cell phone text messaging while driving, Senator Jay Rockefeller stated, “Everyone knows the dangers on the road created by distracted drivers, and they are a threat to all families and serious action must be taken”. Senator Rockefeller has initiated legislation that he states, “will give states real incentives to act, reduce the number of preventable deaths and injuries, and keep Americans safe from destructive and irresponsible distracted drivers”, but the sleep apnea issue is equally important and is being overlooked.

The Northwest Airline pilots that over flew their destination recently have claimed to be on their laptop computers. It seems impossible that for over an hour they were unaware that numerous towers were trying to radio them. These pilots were more likely sleeping, and were afraid to admit it, due to the fact that the pilots with Go Airlines were fired because they were sleeping when they flew past their destination in Hawaii a few months ago. My bet is that the Northwest Airline pilots were asleep as well, and most likely have sleep apnea. They should be tested to determine if sleep apnea could have been the cause of this problem, and if found to have the disorder, receive treatment and be allowed to return to duty. Obviously, fatigued employees in the transportation industry are also “a threat to all families and serious action must be taken,” as well.

The hours of service rule that is now being debated by the FMCSA and the FAA is very important, but those with obstructive sleep apnea, who have unconscious interruptions during sleep that keeps them from reaching restful stages of sleep, will still be fatigued no matter how many hours they sleep. Most people who have sleep apnea have no idea that they suffer from the disorder. Statistical data indicates that 28% of the population has sleep apnea, but 85% of that group is undiagnosed and untreated. Screening for sleep apnea at the time of the medical certification physical for the transportation industry needs to be a requirement as soon as possible.

I do not have a lot of confidence in the government’s understanding of the transportation industry, and I am sure they will make a mess of this issue. Why wait for politicians to make this a bureaucratic monster that causes inefficiencies and unreasonable costs? The American Trucking Association should spearhead an effort that takes the decisions out of the politician’s hands and gives it to the trucking industry leaders like Don Osterberg, ATA Safety Policy Committee Chairman and Vice President of Safety & Training for Schneider National Transportation.

The transportation Industry needs to be pro-active instead of re-active. Currently, only a handful of companies are helping their employees become healthier by recognizing that sleep apnea is an important issue. Companies should take the bull by the horns and create programs that solve the problem of dangerous drivers with sleep apnea and support a logical approach to this problem if it would benefit the entire industry. Transportation industry executives should petition Congress and request a tax credit for wellness / fatigue management programs that address sleep apnea. This would reduce healthcare costs, generate new jobs, and  reduce accidents and deaths on our highways caused by fatigued drivers.

Sleep apnea is a transportation industry wide problem that needs to be addressed. Every day that action is delayed, another 14 people die on our highways due to fatigue, and I pray that someone in my family or yours will not be one of those 14.

James Berryhill

President / CEO

Occupational Sleep Apnea Solutions, Inc.

 

Footnotes:

Powell NB 1999 ReactionTimePerf_SDB_Alcohol

Schneider Symposium Paper

Berger Chest Oct 2006; 130; 157S

George CF Reduction of Auto crashes 2001

Horstmann 2000 Accidents

Kryger MH Utilization of Health Care Services

Parks PD 2009_Screening_OSA_CommDrivers

Ronald J 1999 Health Care_ten yrs

Sassani A 2004 Reducing Motor_Vehicle Collisions_Costs_SA

Kapur V 1999 Medical Cost_Undiagnosed SA

FMCSA - Prevalence of Sleep Apnea

Watkins white paper

Trucking, Carbon Footprint & the Economics of Cap and Trade

GUEST COLUMNIST

 

Eric Taub

 

CEO / Co-Founder

Verus Carbon Neutral

 

 

Whether you believe in human-induced (anthropomorphic) climate change or not, legislation to control green house gas emissions is going to significantly affect the trucking industry in the next couple of years. Trucking companies across the United States will soon have an obligation to measure and control their carbon emissions under Cap and Trade regulations, and that obligation will have a significant financial impact on their performance.

 

The term “Cap and Trade” has frequently been bantered around but many businesses don’t understand what it means or how it works. In simple terms, Cap and Trade rewards companies that are able to reduce their carbon footprint and punishes those that don’t.

The “Cap” is a percentage reduction versus prior years. For example, if your company reduces its 2012 emissions by more than 6% (the 'Cap) compared to a base year of 2005, then you have created Carbon Offsets (the reward) for reducing emissions. Those offsets can be traded and sold to companies whose operations exceed their specific Cap and therefore must purchase offsets (the punishment) to bring themselves into compliance. Here's a specific trucking example:

 

The average tractor-trailer in your fleet travels 10,000 miles a month and at 5.2 MPG creates around 235 metric tons of CO₂e a year.  That means that your fleet of 300 trucks in total generates 70,000 metric tons of CO₂e in a year. Assume that since your baseline year you have reduced fleet size or total emissions (from improvements in idling, mpg, etc…), thereby shrinking your carbon footprint.  If your baseline year performance was 87,500 metric tons of CO₂e, your company has created 17,500 metric tons of Carbon Offsets.  Your reward for achieving ‘Green Trucking’ status would be over $25,000 at current prices or around $47,000 at the four-year average price.

 

Even though Caps and Offsets are currently not enforced in the U.S. , there are many companies in our country voluntary participating in a Cap-and-trade system hosted by the Chicago Climate Exchange (“CCX”). They are selling or holding the offsets they’ve created by reducing their carbon footprint.

The price of CO2e offsets change every day with the market. So far prices have remained low relative to the European Exchange because the majority of emission reductions are voluntary ( California and the Northeast have recently instituted a mandatory Cap and Trade, limited to utilities).

Offsets do not need to be sold right away and can be held as assets that may appreciate over time. More importantly, if your company will be reducing below its 2005 level it can sell options today for these future offsets. That is money paid to you today for a future obligation.

The US is rapidly moving to a mandatory market. In order to qualify, a trucking company would need to measure their historic and current carbon emissions and then join the CCX in order to monetize emission reductions. The CCX, created in 2003 is comprised of over 100 corporations, municipalities and universities; including big names like IBM, Dell, Ford, Dow and DuPont. Each member makes a legally binding commitment to reduce their carbon footprint by 1.5% each year for four years (2007-2010) based on the average of 1998-2001 or 2000 (whichever is greatest).

So a 6% reduction might sound tough to reach but for some the change in the economy has made it easier. Under Cap and Trade your carbon footprint gets smaller if a lack of business causes you to shut down plants, reduce shipping or otherwise reduce greenhouse gases.

Since there are current and future prices for reductions, a trucking company can look at the return on investment from different fuel efficiency strategies and calculate if they can be done for free or, better, for a gain. If we add in grants from the EPA and money from the stimulus package, it is possible to improve your bottom line and be “Greener”.

 

Why do you care about “Green Trucking”?  Because your customers care. Whether it is Wal-Mart, Whole Foods or US Steel, big companies are looking at their supply chain emissions.  Also, members of the CCX have a better understanding of how to best prepare for a world where CO₂ becomes a bigger commodity than soy beans.

 

Currently, there are seven Cap and Trade bills pending, some of which have bi-partisan support (one is co-sponsored by Senator Specter who recently became a Democrat). The most important and imminent is the Waxman Markey Bill. President Obama has made it very clear that he supports Cap and Trade. Finally, the EPA has recently moved to regulate CO₂e as part of the Clean Air Act (a George H. Bush legacy). The EPA set a level of 25,000 metric tons of CO₂ as a starting point. The EPA is the stick in this situation. No one wants the EPA to enforce a limit on Carbon emissions.

 

To get a base line of where your CO₂e emissions levels are and whether there is technology is coming from you must measure your carbon footprint. Without a metric that tells you where you are, it is difficult to determine if you are on the creating offsets for sale or creating liabilities.

 

Cap and Trade regulations are coming.  Knowing how to measure, reduce and account for your company’s carbon footprint will soon become a legal and financial necessity.

-------

Eric Taub is CEO and Co-Founder of Verus Carbon Neutral; a carbon footprint audit and offset organization.  Before founding Verus Carbon Neutral, Eric was a partner and portfolio manager at Juno Management of Atlanta. His career has taken him to London, New York, Mexico City and Chicago. Eric's experience includes several years as Senior Vice President in portfolio management at Wachovia, Managing Director at SunTrust, Director of Emerging Markets at Bank of Montreal, and certification as a Chartered Financial Analyst. He received his MBA from New York University and undergraduate degree from Tufts. A master of carbon emission management strategies—balancing risks against opportunity—he has a deep understanding of the global emissions market. Eric is an expert at identifying and capitalizing on what our new green economy holds and how to best position organizations for success.

Fit to Drive: Improving Commercial Driver Health and Productivity

 

GUEST COLUMNIST

 

Amy J. Khan, MD, MPH

National Medical Director – Concentra TotalCare

 

 

 

 

 

A comprehensive and insightful overview of the health and productivity issues facing commercial drivers and the trucking industry was provided by Dr. Khan of Concentra during the American Trucking Association’s Health and Safety Expo held in Nashville, TN , in September 2008.  Highlights from this presentation are included in this article.

 

Driver Health Status

 

Compared to the rest of the US population, commercial drivers are disproportionately affected by weight problems with up to 90% reported as overweight or obese compared to two thirds of US adults. In fact, compared to workers from other occupational categories, commercial drivers rank among the highest in obesity rates. This increase in obesity has fueled the increased risk and expression of related chronic disease and musculoskeletal injury. For example, obese workers have four-fold greater risk of hypertension. Similarly, the risk for diabetes and sleep apnea is greatly increased among obese persons compared to those with normal weight. Lastly, large physical size can potentially compromise a driver’s functional capacity to safely and comfortably operate a commercial vehicle and can impact the severity or recovery of musculoskeletal injuries.

Lifestyle, poor dietary habits such as consumption of high caloric fast food, sugary soft drinks and high fat snack foods, limited physical activity, long work hours and chronic lack of sleep due to inconsistent domicile and irregular or rotating shifts frequently characterize the lives of many commercial drivers. These characteristics place them at increased risk for weight problems, diabetes, heart disease and other chronic illness. In addition, more than half of commercial drivers report regular tobacco use which increases their risk for heart disease, stroke, lung disease and cancer.

 

Sleep apnea represents a particular concern for commercial drivers and increased risk to driver and public safety from motor vehicle crashes if this condition is not recognized or treated.  Published reports have estimated rates of moderate to severe sleep apnea to range from 10 to 16% among the commercial driver population.  Strongly associated with obesity, sleep apnea also creates a risk for impaired glucose metabolism, contributing to the risk for developing glucose intolerance, insulin resistance, and diabetes. Among sleep apnea patients, over three quarters complain of both excessive daytime sleepiness and cognitive impairments, and half report personality changes.  As a group, sleep apnea patients’ risk of motor vehicle collisions is increased two to seven-fold thereby representing a significant potential liability to employers of commercial drivers.

 

In addition to the health risk issues noted above, commercial drivers tend to be older on average than other members of the US workforce. This represents an additional risk for chronic disease as older persons are more likely to have health issues such as hypertension and other chronic illness (as a factor of aging) compared to younger persons.

Trucking Industry Issues

 

In the United States, federal regulations governing transportation safety require commercial drivers to meet behavioral and health standards as assessed through a periodic medical certification (see http://www.fmcsa.dot.gov/.) Whereas commercial drivers in good health may be qualified for two years, Department of Transportation (DOT) regulations disqualify commercial drivers with Stage 3 hypertension, uncontrolled diabetes or untreated sleep apnea. In many cases, those with poorly managed medical conditions or evidence of worsening health status may have qualification time restricted and be required to return for medical re-evaluation at shorter intervals. Inadequately controlled or advanced medical conditions may lead to permanent medical disqualification of a driver. 

Due to the increased health risks and disease burden of the potentially eligible driver population, employers of commercial drivers are increasingly challenged by the costs associated with more frequent qualifying exams for drivers with certain health risks that are mandated by federal regulation. These costs combined with the increase in non-occupational health care costs in general represent in increasing financial burden to employers. In addition, loss of productivity driven by obesity is well documented as these workers typically incur higher rates of disability and absenteeism.  Frequent driver turnover and related costs for recruitment and training represent an additional issue for employers of commercial drivers.

 

Improving Health Status

 

In an effort to improve driver health, reduce health costs, increase productivity and retain drivers in their workforce, evidence has shown that employers can benefit from acommercial driver wellness program that implements health improvement activities targeted to the risks of their commercial drivers. For example, a JOEM report[i] published last year demonstrated a more than 50% reduction in uncontrolled blood pressure among hypertensive drivers (from 40.7% at baseline to 17.2% at follow up) after a health awareness and hypertension management program was implemented for 6 months. The improvement in blood pressure was consistent across all subgroups defined by diabetes, obesity, and use of antihypertensive medication. 

The specific health promotion activities provided to the commercial drivers in the report cited above included 1) a personal health education session consisting of a five to ten minute consultation by a health specialist following their regular qualifying exam; 2) a health marketing campaign that included placement of health promotion materials at work and mailed home that reinforced the importance of optimal blood pressure control, healthy lifestyle practices, treatment compliance and factors impacting commercial driver certification; 3) access to follow up blood pressure monitoring and facilitated referral for follow up medical care including provision of suggested “Ask your doctor” questions for drivers to pose to their treating provider; and 4) tools for employers, unions, and clinicians that reinforce hypertension awareness.

 

Obesity screening and related risk reduction counseling are recommended by the United States Preventive Services Task Force (USPSTF). This clinical preventive service could easily be offered during the certification/recertification exam process for commercial drivers. Noninvasive body measurements would be obtained to identify chronic disease risk and include determination of body mass index (BMI) and waist circumference, both independent risk factors for development of cardiovascular disease and diabetes. An additional set of focused screening tests could also be provided to identify persons at risk for sleep related problems such as sleep apnea or those with tobacco use problems.

 

Given obesity’s association with increased morbidity and mortality, providing guidance and support to improve dietary practices, increase physical activity, and reduce or prevent weight gain can potentially avert future co-morbidity from associated hypertension, diabetes or sleep apnea.  Population-based screening and referral for ongoing lifestyle support interventions can help reduce related health care and disability costs, as well as reduce the need for more frequent DOT reexaminations, due to improved health status of commercial drivers.

 

Key to Effective Interventions

 

A Truck Driver Wellness Program targeted to your commercial drivers can assist your driver population in staying healthy both on the road and at home. These programs reinforce the message that good health is essential not only for ones wellbeing, but also for the wellbeing of the family and the community. Whereas it is true that the vast majority of commercial drivers will pass their DOT certification and re-certification medical exam, those at risk for future illness often don’t know it but can be identified early to prevent future disease through modification in lifestyle practices or timely referral for medical evaluation.

 

An effective Commercial Driver Wellness Program should be multi-component and offer sufficient intensity and duration to realize the maximum benefit to the employee and employer return on investment[ii]. Essential components of a successful Commercial Driver Wellness Program includes the following elements:

 

·         Health Risk Screening and Education – evidenced-based screening and counseling on risk factors for sleep apnea, diabetes, blood pressure and tobacco use problems. Attention to diet, physical activity, weight management, sleep hygiene and personal accountability for health behaviors are stressed and clinical practice guidance provided that reinforces lifestyle change and link to timely medical care.

·         Ongoing Health Promotion – guided by the risk factor burden of the trucking industry employee population, health messaging and coordinated health awareness campaigns keep recommended lifestyle practices top of mind. Workplace and environmental support for selecting healthy nutritional options and increasing physical activity for drivers are emphasized.

·         Targeted Lifestyle Support – topic-focused educational sessions such as for weight management or diabetes care may be offered via web-based meetings with a focus on building skills and confidence to make and sustain healthy behaviors.

·         Personal Health Coaching –  offered to participants to support improved health practices such as tobacco cessation. Through active engagement, personal responsibility and confidence  is enhanced to make recommended lifestyle changes.

·         Effective Incentives – requires an understanding of the workforce demographics, employee benefits and health management objectives to promote participation.

 

Health management efforts to improve the recognized health and safety risks of commercial drivers are essential especially in light of the workforce characteristics and economic challenges faced by the trucking industry today. By leveraging current requirements for medical certification exams, targeted health improvement programs can be delivered in a cost effective and convenient manner to minimize downtime and ensure commercial drivers are back in their vehicle in a timely manner. Through innovative use of incentives, periodic check ins, web-based tools and telephonic touch points, ongoing support and specific interventions can successfully support healthy lifestyle practices and reduce disease risk among commercial drivers. 

---

 

Dr. Khan serves as the National Medical Director for Concentra’s TotalCare program, an integrated suite of services for employers and their workforce that includes health promotion, disease prevention, occupational health and primary care. Prior to joining Concentra, Dr. Khan served six years at the Centers for Disease Control and Prevention identifying at-risk populations, measuring disease burden, and disseminating disease prevention recommendations. In addition, she has over a decade of health management experience in her prior role as Assistant Physician-in-Chief at Kaiser Permanente in Northern California where she directed a multidisciplinary behavioral health service line serving workers and their dependents impaired by substance-use problems. Specialty boarded in Internal Medicine, General Preventive Medicine & Public Health, and Addiction Medicine, Dr. Khan is an expert in population health, behavioral change and integrated clinical care. Her background gives her broad knowledge of cost effective solutions that improve health while reducing overall health care costs. Dr. Khan earned her BA in chemistry from Albion College, her MD from Wayne State University School of Medicine and her MPH from Johns Hopkins Bloomberg School of Public Health. For more information about how Concentra’s TotalCare services can help improve health, reduce costs and enhance productivity, visit: www.concentratotalcare.com.

 

[1] J Occ Env Med Medicine 2008; 5:359–365.

[1] Am J Prev Med 2005;29( S1):113–121.

Structuring Effective Broker/Carrier Relationships

GUEST COLUMNIST

Robert T Franklin

Partner - Franklin & Prokopik

The transportation industry has seen a dramatic increase in the roles played by freight brokers, and other third party “intermediaries”.  It is also quite common now to motor carriers, both large and small, who also offer freight brokering services, either directly or through a related entity.

Brokers and motor carriers share a desire to remain competitive and profitable.  Their perspectives, however, are inherently different.  The broker seeks to protect the customer base it has spent time and money to develop.  Conversely, the motor carrier wants to ensure that it will be adequately compensated, and that it will have sufficient recourse if a dispute regarding payment should arise.

 

An additional factor in the broker-motor carrier relationship is the increase, in recent years, of claims being filed against freight brokers, and even shippers, for accidents involving motor carriers.  While the specific theories vary, the underlying essence of them is that the broker was negligent in tendering the load to a motor carrier which it knew, or should have known, was unsafe.  The increase in lawsuits under such theories is clearly driven by the fact that a motor carrier’s insurance is often insufficient to cover the damages in a given claim, particularly in light of ever higher jury verdicts. As a result, plaintiffs’ attorneys and, unfortunately, judges, have become ever more creative in seeking additional parties to hold responsible.  Brokers must, accordingly, take that exposure into consideration when entering into related agreements, including its contract with the motor carrier.

 

As with any contract, one entering into a broker-motor carrier agreement needs to understand that “one size does not fit all”, and that the use of someone else’s “form” can result in disastrous consequences.  Each such agreement should be customized, premised upon the parties’ specific circumstances.

 

There are, however, certain fundamental issues which need to be addressed in any broker-motor carrier contract, including those pertaining the scope of the services to be performed, the parties’ qualifications, procedures for shipments, and for resolving issues regarding loss, damage or delay of freight, or for rejected shipments. Compensation needs to be carefully addressed, including issues pertaining to what rights the motor carrier has to withhold freight, or go against the customer directly, in the event of a dispute concerning compensation.  In addition, the broker will almost certainly insist upon a provision requiring the carrier to maintain confidentiality of customers’ and other information, and not to “back solicit” loads from the broker’s customers.  The parties should also carefully draft their respective indemnification obligations.

 

As noted above, one may face certain legal exposures in conjunction with the brokering of freight.  Accordingly, it is imperative to operate one’s brokering operations through a separate entity, in order to better protect the resources of each entity.  In fact, that is a sound approach to business in general.  For example, recent changes in federal law have facilitated the use of a separate entity to own equipment, and lease it to the operating entity, so that the equipment may not be at risk if a judgment exceeds a motor carrier’s insurance limits.

 

Brokers and motor carriers “need each other” in order to generate revenue.  The relationship, however, is inherently somewhat problematic, due to their competing interests.  It is, therefore, important for the parties to clarify their relationship, and carefully draft the contract between them.  If sound business and contract practices are followed, the parties will hopefully minimize their respective exposures, and the possibility of related litigation.  While doing that will necessitate the use of some resources, any such “expenditure” will almost certainly be far less than that which the entity will face  if it fails to do so.

------

 

Robert T. Franklin is a principal with the law firm of Franklin & Prokopik, where the emphasis of his practice is the representation of motor carriers and private fleet operators, and their insurers.  Bob serves as General Counsel to Maryland Motor Truck Association and Counsel to the Maryland Movers Council. He is an active member of the American Trucking Associations, the American Moving & Storage Association, and National Tank Truck Carriers.  Bob is a Past-Chair of the American Bar Association Commercial Transportation Litigation Committee, and the Defense Research Institute (DRI) Trucking Law Committee.  He is also an active member of many other transportation-related professional organizations, including the Trucking Industry Defense Association (TIDA), the Transportation Lawyers Association (TLA), the Association for Transportation Law, Logistics and Policy, the Federal Bar Association Section on Transportation Law, the Maryland Chamber of Commerce Transportation Committee, and the Traffic Club of Baltimore.   Bob is an honors graduate of Duke University and the University of Maryland School of Law, and served as an adjunct professor at the University of Baltimore School of Law from 1988 through 1991.

Freight Demand & Supply in a Crazy World

                                           

GUEST COLUMNIST

Thom Albrecht  -  CFA / Managing Director

Stephens Inc.

 

A comprehensive and insightful overview of the economy and the trucking industry was provided by Mr. Thom Albrecht of Stephens Inc. during a January 2009 meeting of the Atlanta Chapter of the Council of Supply Chain Management Professionals.  Some of his insights regarding the future of trucking included:

• TL Van rates could drop 2-4% in 2009
• Spot rates could be off 15-25% during first half of 2009
• It could take until 2011-2012 until the word 'robust' is associated with our economy

Thom was kind enough to provide TruckExec readers access to his presentation which can be viewed here:    Download T Albrecht Presentation

--------------------------------------

Thom Albrecht's bio:

Thom co-heads the transportation equity research team with a focus upon truckload, less-than-truckload and transport suppliers, working out of the Richmond, VA office. He joined Stephens in February 2005 from BB&T Capital Markets, where he served as a Managing Director and co-head of the transportation equity research team since 2000. 

Prior to joining BB&T, Mr. Albrecht oversaw the transportation research effort at ABN AMRO, Inc. for almost 3 years and prior to that was at A.G. Edwards for 11 years, where he started the transportation research group. He has been quoted on the transportation industry by the national media including the Wall Street Journal, Traffic World, Transport Topics and the Journal of Commerce. He has also been a featured speaker at several American Trucking Association conferences. He has been chosen by the Wall Street Journal as an All-Star Analyst 7 times and has been selected, along with Alex Brand as providing the top regional brokerage transportation research the past 7 years by Institutional Investor magazine.  He was selected by Starmine/Forbes as the best stock picker for “Road and Rail” during 2001, 2004 and 2005 and the runner-up in 2003. 

Mr. Albrecht holds a B.S. in Business Administration with a finance major from the University of Central Missouri and he is also a Chartered Financial Analyst. Interests include golf, politics and baseball, especially the St. Louis Cardinals.  He is married with two children and resides in Richmond, VA.

Managing Your Insurance and Risk Management Costs In a Difficult Economy

 

GUEST COLUMNIST

 

Jim Millar, MBA, CFP

 

Truck Insurance Group Vice President

Cottingham & Butler

 

 

 

 

With the recent financial and credit crises, transportation companies can expect price increases for coverage in 2009. All insurers depend on underwriting profits and investment income to earn their profits. With the bond and stock market in turmoil, insurers will return to underwriting to maintain or increase profit margins. Simply translated to the transportation industry, this means price increases and/or limits of insurance decreases. How should you as a transportation company owner manage this aspect of your business under these conditions?

Very simply, return to the basics of the insurance process to ensure data accuracy and correct and appropriate coverages. Here is a checklist of underwriting procedures that as a company owner you can use to affect your coverages, premiums and risk management program:

 

• Review and refine your hiriing criteria
• Reemphasize your commitment to safety
• Review loss information
• Explanation on any large claims
• Prepare a company to presentation

Review and refine your hiring criteria. It is critical to your Risk Management program to hire the best and safest drivers on the road. Your drivers’ mistakes become claims and increase your company’s risk exposure. Be thorough in your hiring process and do a full back ground check for all your employees to mitigate unforeseen exposures down the road.

 

Reemphasize your commitment to safety. A safer company is a more insurable company. A good safety program lets the underwriters know that you have programs in place to influence behaviors and mitigate your company’s risk exposures. Attaching an overview of your safety program does not really do much good for underwriters - underwriters rarely read them. Take the time to tell them what makes your company different from the average transportation company.

 

Review loss information. Most insurers will request a five-year history plus the current year of loss and exposure experience as well as 2 years of financial information. This data is important to underwrite your risk and it is essential to make sure that the information is up to date and correct. Have your CFO or Controller available to explain any questions on your financial information. You should also have other business partners (bankers, consultants) available to discuss financial, operational and safety issues with the underwriter.

 

Explanation on large claims. Included in the information provided to the underwriter should be detailed explanations of large claims and the steps to reduce or contain this exposure. Underwriters like to know the frequency and severity of large losses. If you have changed insurers in the past, you might want to ask your broker to conduct and audit of any open claims with prior insurers.

 

Company presentation. Insurance provides coverages on predictable risks and the rare instance of the unforeseen risk. As a company owner, you have to sell the underwriter on why your company should be insured at better terms and conditions than your competitors. This means you need to differentiate your company from your competitors and indicate why your company is the safest bet. You should create a presentation on your company to share with primary liability, cargo, workers compensation and excess carriers.

 

In addition to the steps outlined above, a good risk management program collaborates with brokers and consultants that are committed to the transportation industry. The industry has a unique array of perils that differ from the mainstream market place.

 

A good broker should prepare a loss stratification and loss projection for the upcoming year for the underwriter. The projections is based on you company’s prior losses and exposure history along with your projected exposures. These projections will help you select the appropriate deductible based on your risk tolerance. Additionally, the projected exposures will help determine your premium and having accurate data will prevent any additional premiums owed or premium returned.

 

Another area that a broker can advise you is in claims handling. Your broker should work with you to develop claims handling specifications as to how you would like any claim managed. You should always evaluate the insurer or third party administrator based on their track record of handling transportation claims as well as their willingness to handle claims per your specifications.

 

Lastly, your broker must be knowledgeable on safety services. A broker can help you evaluate safety services and programs from the insurer or an outside consultant. Some questions to ask: How will the services offered augment your current program? Does this particular consultant have experience in your industry segment? Does the safety consultant assigned to you have transportation experience in your segment? Your broker should help you evaluate these services.

 

In order to insulate your company from the price increases in 2009 it is important to be prepared for the insurance buying process. Your insurance program should be more than coverages and premiums; your insurance program should help you protect your bottom line and make you a better company. There has been a recent trend to find the best price and change brokers and insurers from year to year. In a hard market, buying on price alone could threaten the viability of your business.  

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Jim Milliar has 29 years of experience in the insurance and risk management profession.  Prior to joining Cottingham & Butler in June of 2007, Jim headed the Transportation Industry Segment for bank owned top ten national brokers.  Jim specializes in alternative risk financing programs which include but are not limited to large deductables, qualified self insurance, discount guarenteed costs and group and single parent captives.

Sleep Apnea—Emerging Concerns for Driver Safety

 GUEST COLUMNIST

Dana H. Hoffman

Attorney -  Young Moore Henderson P.A.

 

 

I.  What Is Sleep Apnea?

In individuals with sleep apnea, the upper airway is periodically blocked during sleep, causing complete obstruction (apnea) or incomplete obstruction (hypopnea) in airflow. These obstructions or pauses in breathing occur repeatedly during sleep. In severe cases, these obstructions can occur as frequently as every 30 seconds. The obstructions or pauses are followed by gasping and snoring sounds. Signs and symptoms of sleep apnea include cessation of breathing while asleep, gasping or choking while asleep, loud snoring, depression, heartburn, insomnia and erectile dysfunction. Individuals who are at risk for sleep apnea may also have a history of heart disease or stroke, hypertension, diabetes, or gastric reflux. Sleep apnea is a concern for commercial drivers because it prevents restorative sleep. Commercial drivers with sleep apnea can exhibit excessive daytime sleepiness, fatigue, and/or inattentiveness. Commercial drivers often mask these symptoms by compensating behaviors including use of caffeine. Untreated sleep apnea can result in crash rates 2 to 7 times higher than average.(Note 2)   The crashes are not only the result of a driver falling asleep, but are also due to fatigue due to the driver’s interrupted sleep. In addition, the driver himself faces long-term health consequences of untreated sleep apnea, including high blood pressure, diabetes and an increased risk of heart attack or stroke. Studies have shown that diagnosis and effective treatment protocols of sleep apnea reduce preventable crashes by 30%, reduce the median cost of crashes by almost 50%, improved driver retention rate by 60% and reduce health care costs by over 50%.

A sleep study called a polysomnagram is the gold standard for diagnosing sleep apnea. The study is administered and attended to by a sleep technician. The study allows the measurement of brain, heart, breathing and limb activity such as restless leg syndrome. Other diagnostic tools are available. Some studies allow for unattended monitoring. However, if a commercial driver is intentionally attempting to skew the results, then there is a risk that someone else could be substituted for the commercial driver during an unattended study.

The most common and effective treatment for sleep apnea is Continuous Positive Airway Pressure (CPAP). A mask, covering just the nose or the nose and mouth, is worn by the driver while sleeping. The device gently blows air into the individual’s throat to keep the airway pressure open. Other treatment options include surgical procedures to the uvula, ear, nose and/or throat, or the use of dental or oral appliances. Only drivers with the mildest cases of sleep apnea would be appropriate for use of the dental or oral appliances. Even with the use of these other treatment options, the driver may still need a CPAP machine. A repeat sleep study will be used to determine the effectiveness of the treatments and the ongoing need for a CPAP machine. As with any treatment, appropriate, effective, and ongoing use of the CPAP machine is key. For the commercial industry, utilizing technology to monitor the driver’s compliance is also key to avoiding federal violations and lawsuits. The biggest concern expressed by the Medical Review Board of the Federal Motor Carrier Safety Association pertains to methods for monitoring driver compliance.

II.   Why Should The Industry Be Concerned With Sleep Apnea?

First, the subject of sleep apnea among commercial drivers has been the focus of several governmental inquiries, many news articles and, unfortunately, an increasing number of lawsuits. On January 28, 2008, the Medical Review Board conducted a public hearing on sleep apnea. (Note 3)  The U.S. House of Representatives’ Committee on Transportation and Infrastructure met on July 24, 2008 for a hearing on “FMCSA’s progress in improving medical oversight of commercial drivers.”(Note 4)

Second, commercial drivers with sleep apnea are not “qualified” drivers. The Physical Qualifications and Examinations section (391.41(b)(4)) of the FMCSR provides that the driver must have “no medical history or clinical diagnosis of a respiratory dysfunction likely to interfere with his/her ability to control and drive a commercial motor vehicle safely”. Sleep apnea is specifically included as an example of respiratory dysfunction in the medical advisory criteria for this section: “[T]here are many conditions that interfere with oxygen exchange and may result in incapacitation, including . . . sleep apnea. If the medical examiner detects a respiratory dysfunction, that in any way is likely to interfere with the driver’s ability to safely control and drive a commercial motor vehicle, the driver must be referred to a specialist for further evaluation and therapy.”(Note 5)   The failure to treat or require treatment for sleep apnea can cause both the driver and his employer to be in violation. Under Frequently Asked Questions/Medical on the FMCSA’s website, the following question and answer appears:

Is Sleep Apnea Disqualifying?

Drivers should be disqualified until the diagnosis of sleep apnea has been ruled out or has been treated successfully. As a condition of continuing qualification, it is recommended that a CMV driver agree to continue uninterrupted therapy such as CPAP, etc./monitoring and undergo objective testing as required.

Narcolepsy and sleep apnea account for about 70% of EDS. EDS lasting from a few days to a few weeks should not limit a driver’s ability in the long run. However, persistent or chronic sleep disorders causing EDS can be a significant risk to the driver and the public. The examiner should consider general certification criteria at the initial and follow-up examinations:

 

• Severity and frequency of EDS
• Presence or absence of warning of attacks
• Possibility of sleep during driving
• Degree of symptomatic relief with treatment
• Compliance with treatment.

Commercial companies rely upon the DOT examiner to certify a commercial driver. The DOT examiner may rely upon the driver’s disclosure that he has had a clinical diagnosis of sleep apnea, or the medical examiner may carefully review certain signs or symptoms that are often attributable to sleep disorders. However, this current approach is ineffective if the driver intentionally fails to reveal a clinical diagnosis or intentionally avoids identifying such signs and symptoms. The current approach also allows commercial drivers to shop around for a cooperative examiner. A primary example of this situation occurred in Kansas in May of 2005 when a commercial driver struck and killed a mother and her two young children after falling asleep. The driver admitted that he had sleep apnea and had gone to several DOT examiners before being certified.

The prevalence of sleep apnea among commercial drivers, the difficulties of diagnosing, treating and monitoring compliance with treatment, and the safety risks that this condition poses to the general public was recently the subject of a presentation to the Medical Review Board of FMCSA. Recommendations currently under consideration by the Medical Review Board include:

 

1. Improve the knowledge of DOT medical examiners and adopt more stringent requirements for certifying who can be a DOT examiner,
2. Require a sleep apnea screening for drivers with a body mass index of 30 or greater with high blood pressure or heart disease before the medical examiner can issue a medical card,
3. Disqualify a driver with evidence of excessive daytime sleepiness or involved in a crash resulting from the driver falling asleep. An AHI of greater than 20 may result in driver disqualification until the driver is compliant with CPAP use,
4. Disqualify a driver with evidence of non-compliance with treatment for sleep apnea.(Note 6)

The Medical Review Board also received recommendations specific to treatment protocols. It has been recommended that a driver should be required to use a CPAP machine for a minimum of 4 hours every 24 hours and have a 70% compliance rate each week. Such use and compliance with a CPAP machine will result in a one year medical certification if the driver is compliant for three months. Thereafter, compliance rates will be checked every year. The ongoing concerns include issues with real time compliance monitoring for over-the-road drivers, drivers who intentionally try to evade the system, and the fact that CPAP machines are not designed for use in a tractor trailer.

Although the Federal Motor Carrier Safety Administration has not yet approved and adopted any of the recommendations submitted by the Medical Expert Panel and the Medical Review Board, at least some of the recommendations are expected to be adopted. Given the prevalence of this topic, industry leaders should be aware of and responding to this problem. While larger carriers may have more financial resources to address sleep apnea within its driver population, the duty for all carriers of any size is the same—to ensure an FMCSR-qualified driver. Some efforts implemented by carriers include making an initial assessment during the hiring process. This assessment would include a review of the medical qualifications long form to identify any known signs and symptoms of sleep apnea, the use of a web-based screening questionnaire, and communication with DOT clinics. The duty on the industry does not stop with the hiring process since drivers who may not have sleep apnea when hired may develop it over the course of their employment. The risk of sleep apnea increases with age. In addition, several factors inherent in the commercial transportation industry, including sedentary lifestyle, poor diet, little exercise and irregular sleep patterns, add to this risk. Carriers should prepare, implement and follow through on a fatigue prevention and wellness program. A successful program should be proactive in managing fatigue issues and identifying the impact of medical issues, including sleep apnea. An effective program should also include an ongoing training and awareness program. Finally, employers can facilitate a driver’s sleep apnea problems by ensuring proper rest through consecutive hours of sleep when the driver can implement treatment protocols such as the use of a CPAP machine.

 

Despite the challenges, carriers must respond or be subject to liability exposure following a sleep apnea-related crash or incident. Exposure can equally arise from a carrier who has failed to implement a sleep apnea/fatigue and wellness program and carriers who have implemented a plan, but failed to follow through with that plan.

 

The future is coming, and it includes sleep apnea.  Some would say that the future is already here.

 

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Footnotes:

Title:  This article is reproduced with permission from a presentation presented by Tom DiSalvi (Schneider National, Inc.), Dana Hoffman (Young Moore & Henderson) and Wendy Sullivan (Precision Pulmonary Diagnostics).

2. According to data compiled by the National Highway Traffic Safety Administration, 7% of all serious truck crashes in which the commercial driver was at fault were attributable to the driver being asleep, which could have occurred for a variety of reasons including sleep apnea. A study sponsored by the FMCSA and the American Transportation Research Institute of the American Trucking Association determined that 28% of commercial truck drivers have mild to severe sleep apnea.

3. The Medical Review Board is commissioned to advise the FMCSA on the medical guidelines for commercial drivers.

4. The hearing was intended to focus on efforts to address eight outstanding National Transportation Safety Board recommendations and several congressional mandates to insure that commercial driver’s license holders are medically fit to drive.

5. The FMCSR recognizes that these recommendations are simply guidance and that the medical examiner may, but is not required to, accept these recommendations. However, while the medical examiner certifies a commercial driver at the time of exam, a motor carrier qualifies the driver every time he puts him in a truck. To this end, Section 3 90.3(d) of the FMCSR allows employers to have more stringent medical requirements.

6. A meeting summary from the Medical Review Board’s January 28, 2008 meeting on Sleep Apnea can be found at www.mrb.fmcsa.dot.gov\. The Medical Expert Panel which made presentations and submitted reports to the Medical Review Board submitted 14 recommendations specifically related to sleep apnea to replace the FMCSA’s current guidelines. These recommendations are also included within the meeting summary.

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Dana H. Hoffman is a shareholder at Young Moore & Henderson, PA located in Raleigh, North Carolina and an active representative of the trucking industry for more than 18 years. Dana’s practice routinely takes her across the state of North Carolina for appearances in State and Federal courts on behalf of her clients.

Trucking: The Most Dangerous Profession

A report conducted by the Washington State  Department of Labor and Industries tagged Trucking as the most dangerous profession in the state of Washington in terms of injuries and fatalities. 

The 58 page report entitled 'Preventing Injuries in the Trucking Industry'  ranked the rate of injuries by group; with Specialized Trucking having the least amount of injuries and Couriers and Messengers having the highest. 

The study also provided solutions for preventing injuries, with a focus on 5 causes of injuries:

1.  Musculoskeletal Disorders  2.  Falls from Elevation   3.  Falls from the same Level  4.  Struck by or against a Vehicle (non-collision) 5.  Struck by a Vehicle (Collision).

Study data was based on the period from 1997 - 2005.

National Association of Small Trucking Companies

GUEST COLUMNIST:

David Owen

President - National Association of Small Trucking Companies

Our members represent arguably the largest niche (by carrier) in the trucking industry, i-e., for-hire, full truckload, long haul companies with fewer than 100 power units.  Generally speaking, most of them have a simple operating plan that operates on a weekly cycle.  Their trucks and drivers are outbound on Sunday evening or Monday morning and back on Friday evening in time for the local high school football game.  The trucks go through the maintenance shop on Saturday while the driver restarts with family time. 

During the Monday through Friday road week, the goal of the company is secure for the truck and the driver, the maximum number of loaded miles with a profitable rate and a fuel surcharge that can be run safely and legally.  Our small carriers cannot grow or prosper without giving their drivers consistent loaded miles, and consistent weekend family time, plus consistent weekly maintenance on their rolling stock.

Since they must run every week to retain customers and drivers, they must buy over-the-road diesel fuel no matter what the price.  Fuel surcharges have helped mitigate the recent unprecedented eighteen month movement of fuel, but there is always a time lag that is seldom recovered and, no one collects a fuel surcharge 100% of the time.  Needless to say, the last eighteen months have not been profitable ones for any segment of the trucking business for this reason.

Beginning in June however, I feel the dynamics in the market showed some signs of changing for the better.  Freight tonnage was up for the sixth straight month, fuel prices came down based primarily on the threat of Congress to regulate fuel speculation and to approve off shore drilling, and capacity (available trucks and drivers) seemed to be below demand for the first time in two years.  The past two months have been promising, but two months does not qualify as a trend.

It is my opinion that Congressional approval for off shore drilling would bring diesel fuel substantially further down and would be the best timed act that could help an industry in trouble.

Below is an op/ed piece that I offered last week that furthers this argument:

Perhaps the greatest thing about America is its size and scope. We have more land than we know what to do with, allowing Americans to dream big and achieve big.  Since it was always possible to find land outside our cities, we have bigger houses than anyone in the world, with bigger yards.  And bigger cars for our longer commutes to work.

But this is where we're starting to have a problem. This summer, the price of gasoline soared past $4 per gallon. The price of diesel fuel went even higher. That's putting the American dream at risk.            

As President of the National Association of Small Trucking Companies, I've seen the damage of expensive fuel firsthand. Many companies are struggling to stay in business, while others have already failed. Plus, shippers are forced to pass along the high cost of fuel by charging customers more. That makes everything from food to furniture more expensive. Our entire economy is at risk, and we already see the effects: Higher unemployment, higher prices and slower economic growth.

But, it doesn't have to be like this.

One reason fuel is so expensive is because we bring most of it from far away. Shipping anything costs money, as truckers know all too well. And the vast majority of our oil must be shipped here either through pipes or by sea. So the answer is pretty simple: Develop more of our domestic oil resources.

The federal government knows there are billions of barrels of oil available under the Outer Continental Shelf, just off our coasts in American waters. The only reason we aren't drilling for and selling that oil is because Congress won't allow us to.  About 85 percent of the OCS is off limits to all oil exploration, a policy that seemed to make sense in days gone by. Back then, the evening news occasionally featured pictures of oil-soaked birds and polluted beaches, natural disasters caused by offshore oil spills.

But today's technology is far superior to that used 30 years ago. Oil rigs leak less oil than the amount that seeps out of the ocean floor naturally. In other countries, fisheries and wildlife preserves thrive right next to drilling platforms. Yet lawmakers seem to believe that Americans, who invented offshore drilling, can't do it as cleanly as our competitors can.

Many in Congress like to talk about conservation and fuel efficiency, and truckers are interested in these, too. We keep our rigs clean (less wind drag) keep our tires inflated correctly (better fuel economy), and stay within the speed limit. But there's nothing more inefficient than going overseas for a product that's available right here.

All Americans realize this. That's why an American Solutions Survey a few months back found that 85 percent of Republicans, 76 percent of Democrats and 83 percent of independents want our country to develop more of its domestic energy resources. You'd be hard pressed to get that sort of agreement on whether the sun will rise in the East tomorrow.

Members of the House of Representatives traditionally take the month of August off to meet with constituents and discuss important issues. There's little doubt that most have been hearing an earful this year about high fuel prices.  Yet, Speaker Nancy Pelosi ended this summer's session without allowing a vote on whether to allow more offshore drilling. That's a shame, especially since President Bush had finally done his part in July, lifting an executive order that had kept the OCS mostly off limits. Until Congress returns, though, there can be no oil exploration off our shores.

The American people need affordable fuel so we can maintain our way of life. Most everything we use these days moves by truck, and our mobile country has more cars than registered drivers. It's time to allow Americans to have more access to American energy, and the lower prices that fuel will deliver.

David Owen is co-founder and President of the National Association of Small Trucking Companies (NASTC) founded in 1989.  He is a graduate of the University of North Carolina with a Bachelor of Science degree in Industrial Relations and a United States Marine Corps veteran.  David resides in Hendersonville, TN with his wife Bonnie, and is the father of five grown children.

NASTC is an association representing 2100 full truckload, long haul, irregular route, for-hire carriers in the continental United States and Canada.  There are approximately 42,300 power units in the group and 50,000 employees and drivers.  The home office is located Gallatin TN.

More information about NASTC is available on its website at www.NASTC.com.

Fuel Cost Impact on Supply Chain

GUEST COLUMNIST:

Chelsea (Chip) C. White. Ph.D.

H. Milton and Carolyn J. Stewart Chair

Schneider National Chair in Transportation and Logistics

Chaired Professor in Transportation and Logistics in the School of ISyE,Georgia Tech      

Let me get started by making a few general comments and stating a few simple principles that might be useful in this morning’s discussion.

• As we all know, total product cost includes both production cost and logistics cost, where logistics cost is primarily due to inventory and transportation costs.  We also know that it often makes good sense to spend more on logistics in order to save an even greater amount on manufacturing by manufacturing off shore and then shipping to the customer market.  This is an argument for globalization.
  


• But what generates logistics costs?
  • Of course we know that transportation costs go up with the cost of fuel and labor.
  • But there are two other principles that we need to keep in mind.  Assume for a moment that as transportation costs rise, that we want to keep the same level of customer service (as measured by, for example, the likelihood of a stock-out).  Then two principles come into play:
    • First, the longer the lead time, the higher the logistics costs, where lead-time is the length of time it takes to move freight from origin to destination, for example, from a manufacturing site in China to a retail store in Baltimore.
    • Second, the greater the variability in lead time, the greater the need for larger inventory buffer stock, which generates higher inventory holding costs.

Thus, both lead time and lead time variability are critical issues in determining total logistics cost.

• These comments lead to three related remarks:
  • The first is that international border crossings generate increased lead-time variability – no surprise here.
  • Second, congestion (created in large part by an infrastructure in the U.S.that is insufficient to meet demand) generates not only longer lead-times but also greater lead-time variability.  Thus, congestion is really doubly insidious.  I don’t think we fully appreciate the negative impact on productivity due to congestion at ports, at rail heads, on highways, etc., and this should be more of a concern than it is.
  • Third, awareness is relatively new and just emerging regarding the extent of lead-time variability in long, global supply chains.  Basically, lead time variability for supply chains that cross international borders and oceans can be surprisingly large.

What do these comments mean in light of some of the topics for today’s conference call?

First, let’s consider supply chain design.  As fuel prices go up, we would expect to see supplier footprints moving closer to the U.S. domestic market.  What we’ve been seeing are increases in NAFTA trade, Maersk reducing its workforce, and anecdotal evidence that supports this expectation.  It appears that supply chains are being re-designed to accommodate not only higher fuel costs but also the growing awareness that global supply chains create more lead-time variability than initially realized. 

With respect to mode selection and more generally mode selection mix.  Due to rising fuel costs, we would expect shippers to increase their use of lower cost modes (e.g., use barge services instead of rail, intermodal instead of truckload, truckload instead of less-than-truckload) in order to reduce exposure to rising energy prices, even at the expense of lower service quality (i.e., longer lead-times and greater lead-time variability) and we’re certainly seeing this.    Although it is not clear which mode is benefiting the most from these mode shifts, it appears that rail is at least one beneficiary.

With respect to mode mix.  A clear beneficiary is All-Water-Service to East and Gulf coast ports from Asia Pacific, primarily through the Panama Canal.  There are several reasons for growth in AWS; I’ll mention three:

• The first – an obvious one - is the increased cost of moving goods across the land bridge (due to increased fuel costs and other costs associated with a congested infrastructure).
• The second is labor issues.
• Importantly, the third is the significantly improved service quality of AWS over the last several years. 

A result would be a shift from long haul trucking and rail to mid and short haul trucking for the last mile as goods enter the U.S. at ports that are closer to the U.S. customer base east of the Mississippi.

Let’s note, too, that although the completion of the 3^rd set of locks for the Panama Canal is years away, it will help to further increase the desirability of AWS.

Regarding inventory strategy.   Much of what we have said thus far would indicate a need for additional buffer inventory and hence a growth in inventory holding costs.  However, this assumes inventory levels are currently right sized (following, for example, lean inventory principles).  In reality, distribution centers typically hold more inventory than they need in order to protect against stock-outs.  This leads to the first of two (of perhaps many) ways that I see to reduce the impact of rising energy costs:

• The first is to work harder on right-sizing inventory levels as we re-design and transition to our new supply chain structures and eliminate truly unnecessary buffer stock.
• The second way of mitigating increased fuel cost is to get better at using information technology and the resulting real-time data to help turn the phrase ‘trading information for inventory’ into a reality.  We’re just now learning how to extract maximum value out of real-time supply chain data, which we’re inundated with, and we need to learn this faster.

One parting remark.  As expected, we are seeing a reduction in capacity occurring (witness the Jevic suspension of operations and the rise in bankruptcies), and capacity reduction is helping to sustain and in some cases improve yields for survivors, which also is expected.

Green Policy

Let’s be honest.  For most of us our Green Policy is motivated by the green color of money, not the re-greening of our planet.  The reduction in CO2 emissions as a result of industry fuel conservation efforts is a benefit derived primarily from our financial, not environmental, concerns.

Nothing wrong with that.  As executives, we have fiduciary responsibility to our stockholders and/or owners, and social responsibility to the communities in which we operate.  Reducing fuel consumption serves both of those purposes.

However, the time will soon come when our shippers demand that we have a broad, comprehensive Trucking Green Policy; one that goes well beyond the single focus of fuel conservation. Unfortunately, most truckers today are a far distance from having such a policy.

To illustrate the gap, ask yourself this:  “How many of the truckers that have joined SmartWay recycle bottles from their Coke machines and paper from their printers?”  When the motivation to make change shifts away from financial gain, we tend to lose interest in the environmental opportunity.

Developing a comprehensive Green Policy will take time and in some areas involve additional costs. Most of us will probably agree that Shippers will eventually require all carriers to have such a policy, so developing and easing into 'Green Trucking' now might be a good strategy.

Here are some example areas that could be considered for your Green Policy:

·         Recycling – bottles, paper, batteries, metals, fluids. Take discarded electronics to approved recyclers – not landfills.

·         Waste Reduction Policy

·         Energy efficient fixtures, appliances

·         Water Conservation – low flow fixtures, minimal use training

·         Storm Water Audit and Policy

·         Company Car Policy based on high mileage or hybrid vehicles

·         Vendor selection based on environmental factors

·         Employee education on resource conservation

What are Drivers Saying About Your Company?

If you aren't aware of Internet based Truck Driver Forums, you should be.

These electronic forums serve as opportunities for drivers to post their thoughts (and more importantly read the thoughts of other drivers) concerning the good and bad points about working for current and past trucking company employers.

Not important?  Think again.  Some of the recent posts on The Truckers Report (Link to Truckers Report) concerning trucking companies have approached 100,000 views.  That's a lot of potential drivers influenced towards or away from your company.

In this forum, there are two areas of particular importance:

• Report a Bad Company here
• Discuss Your Favorite Trucking Company here

Without revealing to which area a particular company was listed, here are some of the stats:

• Swift - Views:   76,859
• TMC Transportation - Views:  97,799 
• Schneider National - Views:  66,979
• J B Hunt - Views:  44,054
• etc...

Virtually every large carrier can be found at this and other forums.  So what should a carrier do?   If you are sincerely interested in improving Driver Recruiting and Driver Retention, here's my recommendations:

1. Monitor Driver Forums on a regular basis.
2. Respond to those posts that are inaccurate.  Be honest and up front with forum members.  Identify yourself as a company official wanting to 'set the record straight'.
3. Be honest and up front with yourself.  Take note of the consistent complaints and find ways to fix them.

Capacity - Are Truckers to Blame?

Speaking at ATA's National Accounting and Finance Committee in March of 2008 Kevin Knight, Chairman and CEO of Knight Transportation explained that the 2006 pre-buy of tractors added excess equipment into the market and caused equipment utilization to drop by 5-6% for carriers.   Much of the Trucking Capacity decline we have been experiencing is the result of our own buying initiatives.

In July of 2006 I wrote a Letter to the Editor of  Transport Topics ( letter ) that addressed the same issue -  over buying of fleet can lead to capacity issues and depressed used truck pricing.

The point is this:  As an Industry, we created much of the over capacity that plagues us today (obviously the economy plays a large part also). 

The follow up question is this:  As an Industry, are our current actions laying the ground work for future under capacity?

Consider the following:

• Trucking companies are selling equipment overseas to reduce depreciation/lease costs and improve revenue/truck performance
• Governor setting set backs designed to conserve fuel have reduced driver productivity
• Truckers have significantly reduced orders for new equipment - Truck manufacturers report greatly reduced sales for the first 6 months of 2008 compared to same period last year (Sterling down 48.1%, Volvo down 17.5%, Freightliner down 32.9% to name a few)