right_division Green SCM Distribution
Bookmark us
SCDigest Logo

Focus: Transportation Management

Feature Article from Our Transportation Management Subject Area - See All

From SCDigest's On-Target E-Magazine

- July 1, 2013 -


Logistics News: New Hours of Service Rules Started Monday, What will the Impact on Productivity Really be?


This is Key Question, as Answer will Impact Wages, Costs, Driver Shortage and More; Keeping Drivers Whole

SCDigest Editorial Staff


With the hope for a favorable court decision before the July 1 deadline for the new Hours of Service rules for truck drivers now ended, the US trucking industry, primarily truckload carriers, must now apply the new rules and gauge what the actual impact will be on fleet and driver efficiency.

The American Trucking Associations (ATA) filed suit in Federal Appeals court this Spring to have the new HOS rules thrown out, on the grounds that the changes further restricting drivers' ability to work and drive would add tremendous cost to the economy and undue burden onto drivers. The ATA brief at the time called the rules "arbitrary and capricious" while providing minimal possible safety and health benefits, and questioned the validity of the cost-benefit analysis the Federal Motor Carrier Safety Administration (FMCSA) had used to evaluate the proposal.


The ATA was hoping for a favorable ruling before the July 1 start date for the new rules, and had also asked the FMCSA to delay enforcement until a decision in the case was reached, but neither event occurred.

SCDigest Says:

As overall industry trends towards regional truckload carriage, more use of rail for the truly long haul moves, etc., continue, the impact of the new HOS rules will be less today than it might have been a decade or more ago.
What Do You Say?
Click Here to Send Us Your Comments
Click Here to See Reader Feedback

Starting today, truck drivers will have to stick to a schedule that requires taking a 30-minute break in the first eight hours of driving, and see a new maximum workweek of 70 hours from 82, with a "restart" of those 70 hours with a 34-hour break once a week.

FMCSA and consumer group believe this will lead to a reduction in truck-related accidents and deaths.

Critics of the new rules note truck safety has already been increasing for years, and question that these changes will lead to any real further improvement, while costing the industry and shippers billions of dollars annually.

But just how much will that hit really be? That's the key question, for several reasons. First, it could help move the current driver shortage, now in what might be called a significant but not crisis state, further down the path of becoming a major problem for the industry. Whatever level the hit to driver productivity in the truckload sector turns out to be, the new rules will in effect increase the need for new drivers by an equivalent percentage - at a time when most trucking companies are struggling to fill tractor seats already.

Rosalyn Wilson noted two weeks ago in the annual State of Logistics report she authors that carriers were estimating such hits to productivity at between 2 and 10%. Something in the middle of that, perhaps around 5%, appears to be the sort of consensus estimate.

In FMCSA hearings in Spring of 2011 prior to the adoption of the new rules at the end of that year, with enforcement schedule for today, Don Osterberg, Sr. VP of Safety and Security at carrier Schneider National, said the tools Schneider has built to model its network showed a likely hit to productivity of about 5%, consistent with the consensus.

Of course, if Schneider or any other carrier has to hire more drivers to move freight the same number of miles, its costs will rise - and carriers will surely be looking to shippers to close that profit gap in the form of higher rates.


Mike Regan, president of TranzAct Technologies and a keen observer of the transportation industry, thinks the economy is an important wild card here.

"I think the new rules will have a significant impact if - and this is a big if - the economy ever really picks up," Regan told SDigest. "Specifically, if we have sustained growth in GDP of 2.5% for enough consecutive quarters that people are convinced that the recession is in fact really over, then we will see freight movement pick up."


Regan serves on the board of a publicly traded trucking company, and says he has talked with senior executives from several other large truckload carriers. He says the overall industry consensus is that this will take 5% to 7% capacity out of the market - and that some carriers (such as CRST) have said it will reduce their tandem teams by 7% and their sole drive runs by 9% to 12% in terms of productivity.

But there is also a second and less obvious potential force from all this that could also move wages and costs higher - the impact the new rules might have on a driver's take home pay. Since most drive are paid on per mile basis, if the new rules constrain the amount of miles a driver can achieve each week, it will reduce that take-home pay in a market that is already struggling to offer high enough wages to attract and retain drivers.

Schneider's Osterberg said that his company would have to pay drivers an extra $3000 per year to keep them whole from the changes. The choice would either be another upward push on rates from such increases, or an acceleration of losses in the driver pool if the carriers fail to act to keep take-home pay even.


Regan notes that "How do you make up for that cut in compensation? You can increase the mileage rate, but if driver compensation represents 60% to 65% of a truckload carrier's variable cost structure, any adjustment has to flow through to increased rates/charges for accessorial services."


This is where the state of the economy and freight volumes come in.


"If the freight markets stay relatively flat, will the shippers pay those increases?" Regan says. "But if capacity is tight and shippers are in essence "bidding" for trucks, then the carriers will ask for and get sizeable increases."

HOS Impact Likely to be Less than Predicted, One Expert Says

Are predictions of a loss of driver productivity in the mid-single digits, which seems to be the consensus opinion right now, too severe?

(Transportation Management Article Continued Below)



Some might remember that there were even more dire predictions for productivity losses from a significant set of HOS changes that began in 2004, while the actual impact turned out to be much less, for reasons that aren't completely clear other than a lot of pundits and carriers used some erroneous assumptions in their calculations.

Thom Williams, a former trucking industry executive and now head of AmherstAlphaAdvisors, a consulting and investor in the trucking sector, believes the same thing is likely to happen with this round of HOS changes as well.

"While some experts have been saying the new HOS regulations will work to reduce available capacity by 5% or more, I believe the final number will come in far below that, perhaps as low as less than 1.5%," Williams told SCDigest.

Williams cited three factors in this assessment:

1. "Entrepreneurial" drivers and their employers will continue to produce and accept "creatively written" (i.e., falsified) hours of service records, at least until electronic on-board recorders (EOBRs) populate every heavy-duty commercial vehicle operating within the United States.

2. Two-thirds of truck ton-miles are incurred within the eastern one-third of the US, where the average length of haul is much less than 500 miles, and two-thirds of all truckload transport assignments nationwide involve origin to destination haul lengths of less than 550 miles. Given that, it's clear that the new HOS and 34 hour restart mandate won't deter much of this activity, which is the lion's share of truck transport. Put another way, it's the long-haul, coast-to-coast drivers (themselves a disappearing species) who will experience the most difficulties complying with the new rules.

3. Very few large trucking companies generate fleet-wide weekly truck mileage productivities equal to or exceeding 2,500 miles per week, which itself is just 500 miles per day on a 5-day work week or 50 hours of weekly driving (assuming 50 mph). If carriers skillfully dispatch and manage their drivers they could put them off duty and at home at least from 7 pm Friday through 7 pm Sunday, in full compliance with the new regulations and with no loss of production or capacity.

In other words, as overall industry trends towards regional truckload carriage, more use of rail for the truly long haul moves, etc., continue, the impact of the new HOS rules will be less today than it might have been a decade or more ago.

The impact on the industry from a 5% productivity hit versus a mere 1.5% one would be substantial - and in the end turns into a multi-billion question, the answer to which we should know soon. We'll keep you posted.

How big an impact do you think the new HOS rules will really have? As high as 5-6% - or a mucj lower level, as Williams expects? Let us know your thoughts at the Feedback button (for email) or section (for web form) below.



Recent Feedback

These new rules have nothing to do with safety. It's about big business lining their pockets. I run coast, I always have. I don't see any benefit in these rules. If you have the ability to restart your 70 more than once a week, you should be more rested. What's wrong with that? The 30 minute break rule is total BS. Everything implemented July 1st should be deleted. 

owner operator
Group One inc
Jul, 01 2013

You forgot to factor in the mandatory 30 min break. First, the driver has to find some place that is safe for his vehicle. Then he has to find a spot in that location to safely park his truck and trailer. That burned anywhere from 15 minutes to 30 minutes. NOW he gets to sit for 30 minutes.  Now the load is going absolutely nowhere. Do this routine EVERY DAY. A truck that is governed at 65 mph, averages 60 mph. So just the 30 minutes alone has cost that driver 30 paid miles. That is not including the time he has lost finding a parking place.  Parking for 73 feet of tractor and trailer is already at a premium and hard to come by.  Now you want to add to THAT problem exponentially. At .42 cents per mile that driver will lose $88.20 per week (not including the variable time lost of finding the parking place and putting truck and trailer into that same spot).

You all forget that to make up for their possible losses, the trucking companies are going to pass this on to the drivers in the form of lower pay per mile.  When that truck is not rolling, it is not making anyone money.

Bret Bowen
Jul, 04 2013