Executive Briefings

Carriers, Shippers Mitigate Losses From HOS Rules, But Worry About Round Two

Productivity losses from the new hours-of-service rules have been less than anticipated, thanks to efforts by shippers and carriers, but both sides worry about additional changes that may be on the way.

The new hours-of-service (HOS) rules for truck drivers that went into effect a year ago this month have strained some processes and relationships and certainly have put upward pressure on transportation costs. But the rules also have been a catalyst for operational improvements and, overall, shippers, carriers and drivers appear to have adjusted well to their first revision in more than 50 years.

That adjustment may be sorely tested, however, as the final chapter in this story plays out. Later this year, the Federal Motor Carrier Safety Administration (FMCSA) must respond to a court-ordered remand that vacated the new rules just six months after their implementation, and all parties remain extremely wary about what additions or recissions will be forthcoming.
After the July 2004 court ruling, Congress stepped in to keep the new HOS regulations in effect through Sept. 30 of this year. By that date, FMCSA must address concerns raised in the decision from the U.S. Court of Appeals for the District of Columbia in a challenge brought by Public Citizen, a consumer advocacy group. While the court struck down the rules on the basis of only one issue-the FMCSA's failure to take into account the effect of the change on drivers' health-it was bluntly critical of nearly every aspect of the HOS rulemaking.

FMCSA cannot comment on its deliberations, but spokesman Dave Longo confirms the obvious: that the agency "is reviewing the current rule with a view toward revising various aspects according to the court's recommendations." In a separate rulemaking, FMCSA also is considering whether to require the use of electronic onboard recorders to track driving time, an issue that originally was proposed as part of HOS changes, but was dropped from the final rules due to cost concerns and lack of equipment standards.

Within industry, there is no enthusiasm for another round of HOS changes-not surprising given the time and work that went into complying with the latest revision. Schneider National of Green Bay, Wis., the nation's largest truckload carrier, says that it spent $5.7m to convert to the current HOS rules. The real worry, though, is that satisfying the court's objections could mean another productivity hit.

Public Citizen, the plaintiff in the court case, advocated a nine-hour driving limitation and a 12-hour break between duty shifts. "You can do the math in terms of productivity if that happened," says Scott Arves, president of transportation at Schneider. "That would make driving jobs even less attractive and make good drivers even harder to find. If a driver only sleeps for seven or eight hours and he is away from home, what is he going to do for the remainder of a 12-hour break? Drivers are not going to want to sit in a truckstop for four hours."

Carriers are not embracing the idea of electronic onboard recorders either, though this requirement would likely not generate much of a fight if it helped prevent further erosion of working hours. "We would be supportive of trip recording technology to monitor driver compliance if it were applied universally across all carriers," says Arves.

Still unanswered is whether the new rules have reduced truck accidents-their intended goal. Enforcement efforts did not begin until last spring and "it is just too early to know" the safety impact, Longo says. He adds, however, "anecdotal information is very positive."

Essentially the new hours were designed to reduce fatigue by putting drivers on a more natural 24-hour work/sleep cycle. A 14-hour on-duty period (formerly 15 hours) must be followed by 10 hours of rest (formerly 8 hours). A 14-hour duty shift may include up to 11 hours of driving time (formerly 10 hours). One major change is that once the clock starts on a duty shift, it cannot be stopped, except by a substantial rest period in a sleeper berth. This means that breaks and wait times at a dock can no longer be logged as "off duty." Another major change is the 34-hour "restart" rule, which resets a driver's hours to zero after 34 hours of continuous off-duty time.

Productivity Losses
When these rules were first announced, truckload carriers, in particular, warned of significant productivity losses and accompanying cost increases for shippers and receivers that kept drivers waiting or that required extra time to load and unload. Instead of the 5 percent to 7 percent productivity loss originally predicted, however, Schneider estimates that the impact on productivity actually has been in the 2 percent to 4 percent range. "But that would have been much higher without mitigation efforts on the part of Schneider and its customers," says Arves. He says Schneider is "very pleased" that its average wait time is down 40 percent over last year.

Tom Sanderson, president of Transplace, a 3PL based in Plano, Texas, reports a similar experience. "I do not think that there has been nearly as much of a decline in truckload carrier utilization as was anticipated," he says. "That's because shippers have gotten much more focused on reducing the idle time that drives speed at the loading and receiving docks." This has not been done out of the goodness of their hearts, he adds. "There has been a pretty strong economic incentive to take those actions in the form of detention charge increases." It used to be that almost every carrier would allow two hours free time for processing a load, he notes. "Now many carriers allow only one hour."

There is no question that the HOS changes came at a good time for carriers-in the midst of a capacity crunch that dramatically shifted market forces in their favor, giving them the pricing power required to enforce increased detention and accessorial charges. According to a recent study by Boston-based Aberdeen Group, "New Strategies for Transportation Management," detention rates for delays are up as much as 100 percent and stop-off charges have increased from $40 to as much as $400. Moreover, carriers have become much more aggressive about allocating limited capacity to customers that are "driver friendly."

Wake-up Call
This turn of events was a wake-up call for many shippers, who had become accustomed to a trucking environment where supply exceeded demand. "For the past four or five years, companies have been able without too much problem to reduce their freight costs year over year," says Beth Enslow, vice president of enterprise research at Aberdeen. "But that has all changed." Hours of service are not the only reason, but when coupled with fuel surcharges and general rate increases (some of which reflect increasing driver pay), many shippers found last year's freight costs to be 15 percent to 25 percent over budget. "Even more significant than cost is the service impact," says Enslow. "If a company is not able to get enough capacity at the end of the month or during a holiday week to serve its customers, that really gets executive level attention.

"The key message out there today is that if you want to find capacity and manage down rate increases, then you need to do a number of things to make it easier for carriers to do business with you," she says. That includes preparing freight so that it is easy to load and unload, using more drop trailers instead of live loading and giving carriers visibility to upcoming capacity needs, she says. Aberdeen estimates that only about 15 percent of shippers have adopted these recommended operational changes, but the message seems to be getting through.

"I've been out visiting carriers at their locations, talking to their upper management and selling our company to them."
- Wayne Johnson of American Gypsum

Wayne Johnson, director of logistics for American Gypsum Co. in Dallas says he has seen the role of the logistics manager change dramatically, particularly over the past 18 to 24 months. "Now you are out selling your company's freight movements to trucking companies," he says. "That is what I have been doing for the last two years-I've been out visiting carriers at their locations, talking to their upper management and selling our company to them. And I've been finding out what we need to do as a company to improve our sellability."

American Gypsum has to work harder at this than some because its freight is inherently difficult for drivers, since it must be loaded on flatbed equipment and then covered with heavy tarps. "One thing a driver does not want to do is to tarp a load," says Johnson. To address this issue, American Gypsum has started using trailer pools at many of its facilities. A driver can drop a full trailer and pick up another that already has been loaded and tarped. This also indirectly helps owner-operators or small carriers that do not participate in trailer pools, Johnson says. "We are able to load those drop trailers at more opportune times for us, which means the live-load drivers have fewer trucks to compete with for dock space and less time to wait."

American Gypsum now is considering adding tarping machines at some plants, says Johnson. "We simply want to make ourselves more attractive than our competition when it comes to loading trucks."

Bill Parry, vice president of logistics at Giant Eagle, a mid-Atlantic grocery chain based in Pittsburgh, Pa., acknowledges that the grocery business has been notorious for keeping drivers waiting. "But I think the industry has really come a long way toward improving that," he says.

Eagle has added unloading services at all its facilities in recent months and has expanded its drop trailer program, Parry says. It also has worked with vendors that were delaying trucks making pickups. "We had some vendors that were having problems and we sat down with them and worked on how to change practices," he says. In some cases this meant dropping a trailer at the vendor's location. "And sometimes we needed to find a different carrier that was a better fit for the vendor's operations," he says.

Scheduling realistic dock appointments for carriers is another action many shippers are taking in order to get trucks in and out more quickly. "It used to be that shippers would schedule equipment in at the same time," says John Gentle, global leader of carrier relations at Owens Corning in Toledo, Ohio. "It would be a matter of whoever got there first would get unloaded first and the others would have to wait." The new way, he says, "is to think about what time you actually need to have the driver there and to schedule appointments accordingly." Many companies still have work to do in this area, he says, "but certainly a lot of people have changed and enhanced their receiving and shipping and this has had some very positive economic impacts and helped us get through this change."

"With a good appointment process, a shipper is setting itself up to succeed," says Russ McGregor, director of product management at Manhattan Associates, an Atlanta-based vendor of supply-chain execution software. "It is saying, OK, with this schedule I expect to be able to receive all the freight or distribute all the freight I need to on this particular day, but I also am doing it in such a way that I am going to efficiently turn those drivers." Many shippers give carriers access to a web-based, self-service appointment-scheduling tool. "Self-service does not mean the shipper loses control," McGregor says. "But it is a lot more efficient that sending a fax or making a phone call."

Watching Your Wait
The appointment process ties into another important key to success: keeping track of how long drivers spend at a facility. While carriers keep close tabs on this, McGregor says it also is important for shippers to track the time spent by drivers at both their and their customer's facilities. "Whenever you are paying the freight, you need to keep track of what is happening," he advises. "Otherwise you won't have the information you need to work through issues with the carrier."

It is easy for friction to develop around detention charges unless the shipper has a way of confirming that a driver actually was detained. Jerry Ulm, president of RHC Logistics in Fostoria, Ohio, provides an example. "We try to work with drivers and if someone is running early or late for an appointment we will try to work him in," he says. "But we have had carriers try to charge us for a load not being ready when the driver arrives at 1 p.m. for a 2:30 p.m. appointment." Ulm, who also manages a private fleet, says this type of activity is limited to "a very small number of carriers." He adds, however, that this is not the case with fuel surcharges, which he says often exceed actual costs. "Shippers are going to have a long memory on this," he says, "especially those that have private fleets, because we know what the costs are."

Keeping Track
Enslow underscores the importance of measuring dwell times. "Leading companies are measuring turnaround times at both their own facilities and the facilities of their suppliers or customers where they are responsible for transportation," she says. "Most companies find that there is a pretty wide disparity across facilities and once you start to measure and benchmark, you can ensure that the under-performers start to catch up. The real key here is that if you can show improvement and you have hard data, then you can go back to carriers and show them why they shouldn't be raising rates as much for you as for less efficient customers."

In some cases carriers are making their data available to shippers. Lance Craig, president of Craig Transportation Co., Perrysburg, Ohio, and chairman of the Truckload Carriers Association, says his company gives daily feedback to customers on how they are turning trailers, including drop trailers. "As long as we provide that service for them they tend to jump on the inefficiencies," he says.

Another way shippers are trying to be better partners is by giving carriers visibility to their upcoming capacity needs.

"Leading shippers are taking their sales forecast and translating that into how many trucks they will need over the next two to three weeks and sharing that information with carriers," says Enslow. "That being said, most carriers don't yet do a very good job of taking a capacity forecast and reserving capacity for that shipper. Nonetheless, she says, this practice gives a shipper "the moral advantage" in the capacity allocation game.

Paul Rizzo, director of logistics at Pepsi Americas, Purchase, N.Y., says his company employs this practice. "If we are going to need 10 loads a week for the next month or so from Munster, Ind., to Morton, Ill., we will go ahead and book that freight," he says. "This affords the carrier the knowledge that he has the utilization he needs and that ultimately translates into lower rates. It's really common sense. Instead of trying to trick your partner into rate concessions, you say, 'let's plan our transportation together.'"

Some shippers also appear to be changing their freight mix as a result of the new HOS rules, moving shipments to less-than-truckload or private fleets that used to go as truckload stop-off freight. "Smart shippers have started re-evaluating their weight break-points," says Pete Stiles, vice president of LeanLogistics, a transportation management software company based in Holland, Mich. "Stop-off charges now might be greater than the incremental LTL charge, so those weight break-points become very important," he says.

Jim Staley, president of LTL carrier Roadway Express, Akron, Ohio, says that it's hard to get a feel for how much new LTL business is because of the hours-of-service and how much is simply due to the overall environment of tight capacity or the upturn in the economy. "It's true that we have seen a fairly significant increase in our tonnage over 10,000 pounds per shipment, which we would start classifying as truckload freight. We have increased that business in our system by close to 15 percent. Some of that, I think, would come from HOS concerns and some from just the general lack of capacity and the economy being pretty good."

Ulm says he believes shippers with private fleets are evaluating whether to move more freight in-house. "We are looking at increasing the size of our fleet as we speak and I feel certain that is something that is happening industry-wide," he says.

Gary Petty, president of the National Private Truck Council, agrees that "many private fleets are growing." In the current marketplace, he adds, "it can be a great advantage to manage your own capacity."

Not everyone agrees with this assessment. "We certainly have not experienced that," says Staley. "I can't think of a single account where we have lost any portion of business because a shipper was moving back to private carriage."

More shippers may be forced in that direction, however, if revisions to the HOS rules further restrict available capacity. In the meantime, shippers are starting to investigate other options. "Government not only has a responsibility to ensure safety on the highways," says Gentle, who also is chairman of the National Industrial Transportation League's Highway Transportation Committee. "Government also has a responsibility to make sure we can get our goods to the marketplace."

In an environment where you cannot build more roads or create more drivers, he says, that leaves only one place to look for productivity gains-equipment. "We are going to have to do something regarding truck size and weights," he says. "No question." Gentle notes that U.S. weight limitations are well below those in Canada and Europe. "I know there are issues around safety and I respect all of those, but we can figure this out," he says. "It's a matter of having some minds that are willing to look at the problem."

Cabotage is another issue impacting productivity that the government needs to address, Gentle says. "We have Canadian drivers and will soon have Mexican drivers that can deliver a load in the U.S. but then have to go directly back to their country, often driving empty. We can't have that anymore."

Finally, he says, something must be done to improve intermodal transportation. "Intermodal is really good at moving trailers but then they bring all the trailers into one yard and that is really bad. We need multiple intermodal gateways for this mode to be effective. Government has a big role to play here as well."

The new hours-of-service (HOS) rules for truck drivers that went into effect a year ago this month have strained some processes and relationships and certainly have put upward pressure on transportation costs. But the rules also have been a catalyst for operational improvements and, overall, shippers, carriers and drivers appear to have adjusted well to their first revision in more than 50 years.

That adjustment may be sorely tested, however, as the final chapter in this story plays out. Later this year, the Federal Motor Carrier Safety Administration (FMCSA) must respond to a court-ordered remand that vacated the new rules just six months after their implementation, and all parties remain extremely wary about what additions or recissions will be forthcoming.
After the July 2004 court ruling, Congress stepped in to keep the new HOS regulations in effect through Sept. 30 of this year. By that date, FMCSA must address concerns raised in the decision from the U.S. Court of Appeals for the District of Columbia in a challenge brought by Public Citizen, a consumer advocacy group. While the court struck down the rules on the basis of only one issue-the FMCSA's failure to take into account the effect of the change on drivers' health-it was bluntly critical of nearly every aspect of the HOS rulemaking.

FMCSA cannot comment on its deliberations, but spokesman Dave Longo confirms the obvious: that the agency "is reviewing the current rule with a view toward revising various aspects according to the court's recommendations." In a separate rulemaking, FMCSA also is considering whether to require the use of electronic onboard recorders to track driving time, an issue that originally was proposed as part of HOS changes, but was dropped from the final rules due to cost concerns and lack of equipment standards.

Within industry, there is no enthusiasm for another round of HOS changes-not surprising given the time and work that went into complying with the latest revision. Schneider National of Green Bay, Wis., the nation's largest truckload carrier, says that it spent $5.7m to convert to the current HOS rules. The real worry, though, is that satisfying the court's objections could mean another productivity hit.

Public Citizen, the plaintiff in the court case, advocated a nine-hour driving limitation and a 12-hour break between duty shifts. "You can do the math in terms of productivity if that happened," says Scott Arves, president of transportation at Schneider. "That would make driving jobs even less attractive and make good drivers even harder to find. If a driver only sleeps for seven or eight hours and he is away from home, what is he going to do for the remainder of a 12-hour break? Drivers are not going to want to sit in a truckstop for four hours."

Carriers are not embracing the idea of electronic onboard recorders either, though this requirement would likely not generate much of a fight if it helped prevent further erosion of working hours. "We would be supportive of trip recording technology to monitor driver compliance if it were applied universally across all carriers," says Arves.

Still unanswered is whether the new rules have reduced truck accidents-their intended goal. Enforcement efforts did not begin until last spring and "it is just too early to know" the safety impact, Longo says. He adds, however, "anecdotal information is very positive."

Essentially the new hours were designed to reduce fatigue by putting drivers on a more natural 24-hour work/sleep cycle. A 14-hour on-duty period (formerly 15 hours) must be followed by 10 hours of rest (formerly 8 hours). A 14-hour duty shift may include up to 11 hours of driving time (formerly 10 hours). One major change is that once the clock starts on a duty shift, it cannot be stopped, except by a substantial rest period in a sleeper berth. This means that breaks and wait times at a dock can no longer be logged as "off duty." Another major change is the 34-hour "restart" rule, which resets a driver's hours to zero after 34 hours of continuous off-duty time.

Productivity Losses
When these rules were first announced, truckload carriers, in particular, warned of significant productivity losses and accompanying cost increases for shippers and receivers that kept drivers waiting or that required extra time to load and unload. Instead of the 5 percent to 7 percent productivity loss originally predicted, however, Schneider estimates that the impact on productivity actually has been in the 2 percent to 4 percent range. "But that would have been much higher without mitigation efforts on the part of Schneider and its customers," says Arves. He says Schneider is "very pleased" that its average wait time is down 40 percent over last year.

Tom Sanderson, president of Transplace, a 3PL based in Plano, Texas, reports a similar experience. "I do not think that there has been nearly as much of a decline in truckload carrier utilization as was anticipated," he says. "That's because shippers have gotten much more focused on reducing the idle time that drives speed at the loading and receiving docks." This has not been done out of the goodness of their hearts, he adds. "There has been a pretty strong economic incentive to take those actions in the form of detention charge increases." It used to be that almost every carrier would allow two hours free time for processing a load, he notes. "Now many carriers allow only one hour."

There is no question that the HOS changes came at a good time for carriers-in the midst of a capacity crunch that dramatically shifted market forces in their favor, giving them the pricing power required to enforce increased detention and accessorial charges. According to a recent study by Boston-based Aberdeen Group, "New Strategies for Transportation Management," detention rates for delays are up as much as 100 percent and stop-off charges have increased from $40 to as much as $400. Moreover, carriers have become much more aggressive about allocating limited capacity to customers that are "driver friendly."

Wake-up Call
This turn of events was a wake-up call for many shippers, who had become accustomed to a trucking environment where supply exceeded demand. "For the past four or five years, companies have been able without too much problem to reduce their freight costs year over year," says Beth Enslow, vice president of enterprise research at Aberdeen. "But that has all changed." Hours of service are not the only reason, but when coupled with fuel surcharges and general rate increases (some of which reflect increasing driver pay), many shippers found last year's freight costs to be 15 percent to 25 percent over budget. "Even more significant than cost is the service impact," says Enslow. "If a company is not able to get enough capacity at the end of the month or during a holiday week to serve its customers, that really gets executive level attention.

"The key message out there today is that if you want to find capacity and manage down rate increases, then you need to do a number of things to make it easier for carriers to do business with you," she says. That includes preparing freight so that it is easy to load and unload, using more drop trailers instead of live loading and giving carriers visibility to upcoming capacity needs, she says. Aberdeen estimates that only about 15 percent of shippers have adopted these recommended operational changes, but the message seems to be getting through.

"I've been out visiting carriers at their locations, talking to their upper management and selling our company to them."
- Wayne Johnson of American Gypsum

Wayne Johnson, director of logistics for American Gypsum Co. in Dallas says he has seen the role of the logistics manager change dramatically, particularly over the past 18 to 24 months. "Now you are out selling your company's freight movements to trucking companies," he says. "That is what I have been doing for the last two years-I've been out visiting carriers at their locations, talking to their upper management and selling our company to them. And I've been finding out what we need to do as a company to improve our sellability."

American Gypsum has to work harder at this than some because its freight is inherently difficult for drivers, since it must be loaded on flatbed equipment and then covered with heavy tarps. "One thing a driver does not want to do is to tarp a load," says Johnson. To address this issue, American Gypsum has started using trailer pools at many of its facilities. A driver can drop a full trailer and pick up another that already has been loaded and tarped. This also indirectly helps owner-operators or small carriers that do not participate in trailer pools, Johnson says. "We are able to load those drop trailers at more opportune times for us, which means the live-load drivers have fewer trucks to compete with for dock space and less time to wait."

American Gypsum now is considering adding tarping machines at some plants, says Johnson. "We simply want to make ourselves more attractive than our competition when it comes to loading trucks."

Bill Parry, vice president of logistics at Giant Eagle, a mid-Atlantic grocery chain based in Pittsburgh, Pa., acknowledges that the grocery business has been notorious for keeping drivers waiting. "But I think the industry has really come a long way toward improving that," he says.

Eagle has added unloading services at all its facilities in recent months and has expanded its drop trailer program, Parry says. It also has worked with vendors that were delaying trucks making pickups. "We had some vendors that were having problems and we sat down with them and worked on how to change practices," he says. In some cases this meant dropping a trailer at the vendor's location. "And sometimes we needed to find a different carrier that was a better fit for the vendor's operations," he says.

Scheduling realistic dock appointments for carriers is another action many shippers are taking in order to get trucks in and out more quickly. "It used to be that shippers would schedule equipment in at the same time," says John Gentle, global leader of carrier relations at Owens Corning in Toledo, Ohio. "It would be a matter of whoever got there first would get unloaded first and the others would have to wait." The new way, he says, "is to think about what time you actually need to have the driver there and to schedule appointments accordingly." Many companies still have work to do in this area, he says, "but certainly a lot of people have changed and enhanced their receiving and shipping and this has had some very positive economic impacts and helped us get through this change."

"With a good appointment process, a shipper is setting itself up to succeed," says Russ McGregor, director of product management at Manhattan Associates, an Atlanta-based vendor of supply-chain execution software. "It is saying, OK, with this schedule I expect to be able to receive all the freight or distribute all the freight I need to on this particular day, but I also am doing it in such a way that I am going to efficiently turn those drivers." Many shippers give carriers access to a web-based, self-service appointment-scheduling tool. "Self-service does not mean the shipper loses control," McGregor says. "But it is a lot more efficient that sending a fax or making a phone call."

Watching Your Wait
The appointment process ties into another important key to success: keeping track of how long drivers spend at a facility. While carriers keep close tabs on this, McGregor says it also is important for shippers to track the time spent by drivers at both their and their customer's facilities. "Whenever you are paying the freight, you need to keep track of what is happening," he advises. "Otherwise you won't have the information you need to work through issues with the carrier."

It is easy for friction to develop around detention charges unless the shipper has a way of confirming that a driver actually was detained. Jerry Ulm, president of RHC Logistics in Fostoria, Ohio, provides an example. "We try to work with drivers and if someone is running early or late for an appointment we will try to work him in," he says. "But we have had carriers try to charge us for a load not being ready when the driver arrives at 1 p.m. for a 2:30 p.m. appointment." Ulm, who also manages a private fleet, says this type of activity is limited to "a very small number of carriers." He adds, however, that this is not the case with fuel surcharges, which he says often exceed actual costs. "Shippers are going to have a long memory on this," he says, "especially those that have private fleets, because we know what the costs are."

Keeping Track
Enslow underscores the importance of measuring dwell times. "Leading companies are measuring turnaround times at both their own facilities and the facilities of their suppliers or customers where they are responsible for transportation," she says. "Most companies find that there is a pretty wide disparity across facilities and once you start to measure and benchmark, you can ensure that the under-performers start to catch up. The real key here is that if you can show improvement and you have hard data, then you can go back to carriers and show them why they shouldn't be raising rates as much for you as for less efficient customers."

In some cases carriers are making their data available to shippers. Lance Craig, president of Craig Transportation Co., Perrysburg, Ohio, and chairman of the Truckload Carriers Association, says his company gives daily feedback to customers on how they are turning trailers, including drop trailers. "As long as we provide that service for them they tend to jump on the inefficiencies," he says.

Another way shippers are trying to be better partners is by giving carriers visibility to their upcoming capacity needs.

"Leading shippers are taking their sales forecast and translating that into how many trucks they will need over the next two to three weeks and sharing that information with carriers," says Enslow. "That being said, most carriers don't yet do a very good job of taking a capacity forecast and reserving capacity for that shipper. Nonetheless, she says, this practice gives a shipper "the moral advantage" in the capacity allocation game.

Paul Rizzo, director of logistics at Pepsi Americas, Purchase, N.Y., says his company employs this practice. "If we are going to need 10 loads a week for the next month or so from Munster, Ind., to Morton, Ill., we will go ahead and book that freight," he says. "This affords the carrier the knowledge that he has the utilization he needs and that ultimately translates into lower rates. It's really common sense. Instead of trying to trick your partner into rate concessions, you say, 'let's plan our transportation together.'"

Some shippers also appear to be changing their freight mix as a result of the new HOS rules, moving shipments to less-than-truckload or private fleets that used to go as truckload stop-off freight. "Smart shippers have started re-evaluating their weight break-points," says Pete Stiles, vice president of LeanLogistics, a transportation management software company based in Holland, Mich. "Stop-off charges now might be greater than the incremental LTL charge, so those weight break-points become very important," he says.

Jim Staley, president of LTL carrier Roadway Express, Akron, Ohio, says that it's hard to get a feel for how much new LTL business is because of the hours-of-service and how much is simply due to the overall environment of tight capacity or the upturn in the economy. "It's true that we have seen a fairly significant increase in our tonnage over 10,000 pounds per shipment, which we would start classifying as truckload freight. We have increased that business in our system by close to 15 percent. Some of that, I think, would come from HOS concerns and some from just the general lack of capacity and the economy being pretty good."

Ulm says he believes shippers with private fleets are evaluating whether to move more freight in-house. "We are looking at increasing the size of our fleet as we speak and I feel certain that is something that is happening industry-wide," he says.

Gary Petty, president of the National Private Truck Council, agrees that "many private fleets are growing." In the current marketplace, he adds, "it can be a great advantage to manage your own capacity."

Not everyone agrees with this assessment. "We certainly have not experienced that," says Staley. "I can't think of a single account where we have lost any portion of business because a shipper was moving back to private carriage."

More shippers may be forced in that direction, however, if revisions to the HOS rules further restrict available capacity. In the meantime, shippers are starting to investigate other options. "Government not only has a responsibility to ensure safety on the highways," says Gentle, who also is chairman of the National Industrial Transportation League's Highway Transportation Committee. "Government also has a responsibility to make sure we can get our goods to the marketplace."

In an environment where you cannot build more roads or create more drivers, he says, that leaves only one place to look for productivity gains-equipment. "We are going to have to do something regarding truck size and weights," he says. "No question." Gentle notes that U.S. weight limitations are well below those in Canada and Europe. "I know there are issues around safety and I respect all of those, but we can figure this out," he says. "It's a matter of having some minds that are willing to look at the problem."

Cabotage is another issue impacting productivity that the government needs to address, Gentle says. "We have Canadian drivers and will soon have Mexican drivers that can deliver a load in the U.S. but then have to go directly back to their country, often driving empty. We can't have that anymore."

Finally, he says, something must be done to improve intermodal transportation. "Intermodal is really good at moving trailers but then they bring all the trailers into one yard and that is really bad. We need multiple intermodal gateways for this mode to be effective. Government has a big role to play here as well."