Controlling Your Costs in a Post Hours of Service World
Over the last four weeks, we’ve highlighted the changes, impact and best approaches to adjust to the new Hours of Service (HOS) Regulations that were rolled out on July 1, 2013. Net, net the impact of these regulations will be:
- Increased capacity constraints
- Increased stress on an infrastructure that is already pushed to its full capacity
- Greater volatility in the performance of carriers
As a shipper, this all translates into higher costs and greater disruption in your supply chain,unless you take the steps to proactively prepare for and manage your trucking operation going forward.
Whether you utilize a private, dedicated fleet or if you’re brokering, you must focus on two important issues:
1. Safety Standards
Safety has always been important to driving profitable results through your supply chain. With the HOS changes it’s now crucial. You need to ensure that your carriers excel in safe operations for two important reasons.
First, mistakes going forward are more costly than ever. The nature of today’s trucking business means that trucking companies must maximize the utilization of their fleets more than ever. Anything that negatively impacts their capacity will have major disruptive effects on you.
Second, safety is a key clue into the operational effectiveness of your carrier. As the “broken window theory” highlights, a company that has anything less than a pristine safety record is most likely cutting corners elsewhere. And those are corners that you simply can’t risk being cut.
2. Focus on Cost – Not Price
It’s always dangerous to buy from someone who says they are manufacturing antiques. In today’s trucking business, the formula for making money is relatively simple. When a company offers to cut their prices, you must ask what else are they cutting? Are they letting their equipment age beyond what is wise? Are they paying their driver’s less (which leads to greater turnover, unpredictability and poor performance)?
Now more than ever, the mantra in selecting and managing your carriers must be win/win, or no deal. Rather than selecting the carrier that offers the lowest rate per (fill in the blank), choose the one that can:
- Increase the efficiencies of your company
- Eliminate redundancies in your supply chain
- Provide insights and knowledge to enhance the productivity of your supply chain
If you’re looking at these insights and saying to yourself, “Well, this is nothing new,” we agree with you! The key to success isn’t so much in finding a new way to operate, but in focusing on the core operational ideas that have always been the keys to success.