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Friday, August 29, 2014

New Trucking Rules May Increase Procurement Costs

Credit: Bill Longshaw at FreeDigitalPhotos.net

Credit: Bill Longshaw at FreeDigitalPhotos.net

The U.S. Department of Transportation’s new rules regulating the time truck drivers spend on the road took effect July 1.

Enacted by the Federal Motor Carrier Safety Administration (FMCSA), the rules lower the work-week maximum for drivers to 70 hours from the previous maximum of 82, to reduce the potential for fatigue-related highway accidents. FMCSA estimates the regulations will annually prevent 1,400 crashes and 560 injuries and save 19 lives.

While nobody challenges the need to assure safe driving conditions for truckers, concerns are being raised about the cost of the regulations, as higher transport prices could result. By reducing the miles each truck covers in a week, productivity as measured by deliveries could be cut by 2 to 10 percent, some trucking experts maintain. If fleet owners seek to make up for this loss with more trucks on the road, it would add costs to deliveries, which would be passed on to businesses and consumers.

It’s difficult to say if this concern gets much traction. The new rules only apply to 15 percent of drivers, mostly long-haul truckers. And according to the American Transportation Research Institute, just 2 percent of drivers had been working as much as 82 hours per week.

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The fewer miles that result from mandatory downtime, however, could be an economic burden for drivers who are paid by the mile, and this may also affect delivery costs.

The trucking industry has had 18 months to implement the rules (they were first announced in late 2011), and the transitional costs come to $320 million, according to the American Trucking Association.

Even FMCSA concedes that the rules entail major costs, which it calculates at $500 million. However, it estimates that improvements in driver health will benefit the industry by $470 million and fewer large-truck crashes will yield $280 million in savings, resulting in a net gain of $250 million.

Of course, no one will really know the real economic impact of the regulations for some time. One point is clear, though: they are bound to be part of future supply chains and logistics negotiations. As a result, procurement managers should confer with logistics experts and others who understand trucking in their organizations and determine how supply contracts might be structured to assure an equitable distribution of any added costs that result from the new rules.

 

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