Shipping Costs Encounter More Volatility as Regulatory Fallout Becomes Clear
Spend Matters welcomes a guest post from Jim Haller, Program Director of Transportation Services at NPI (www.npifinancial.com), a spend management consultancy, focused on eliminating overspending on IT, telecom and shipping.
Recently, NPI cited stricter driver regulations as a force shaping carrier’s pricing and service strategies in 2014. According to a study released by the American Transportation Research Institute (ATRI), changes in legislation regarding Hours of Service (HOS), which went into effect in July 2013, as well as a growing driver shortage, are at the very top of carriers’ lists of concerns.
ATRI’s research paints a clearer picture of the fallout that has stemmed from HOS changes:
- Carriers cite an average loss of 7.5 minutes to 30 minutes per week per driver due to HOS rule changes
- The cost impact across the transportation industry is an additional $95.06 million to $376.94 million, in addition to a net loss of $1.6 billion in driver compensation
- 80.1 percent of carriers surveyed said they’ve lost productivity on account of the HOS changes
- Nearly 50 percent of carriers now require more drivers to maintain the same freight-hauling capacity
- 22.7 percent of carriers said they’ve raised driver pay to help offset these productivity impacts
Unfortunately, the productivity burdens imposed by tighter HOS regulations also impact carrier capacity. As the industry predicts a growing driver shortage, and more regulations take effect, carriers will continue to be hesitant in their decisions to increase capacity.
So, what can shippers expect? One thing is certain – carriers cannot absorb the financial impact of recent regulatory changes. These costs will be passed on to shippers throughout 2014 and into 2015. Tight capacity, on the other hand, will also give carriers leverage to charge more for their services.
“What can I do to offset these cost increases?” It’s a question every shipper should be asking. Preparation, contract and cost optimization are the most effective ways to keep shipping costs in check amidst the volatility in today’s carrier landscape.