Every minute a truck sits idle at a pickup or delivery location is a minute of lost money for trucking companies — and with the new Hours of Service (HOS) rules affecting productivity, the situation is even more urgent today. That’s why the most important thing a shipper can do to be a “shipper of choice” for carriers (besides paying them on time) is getting their trucks back on the road as quickly as possible.
Shippers and carriers have adopted a punitive approach to discourage delays: if a shipper delays a truck (power unit and/or trailer) beyond a certain time limit, it pays a detention charge. According to a Accessorial Benchmarking Study conducted by Transplace, most shippers allow a $60 per hour detention charge (if a power unit is involved), typically paid in 15 minute increments, with a maximum fee of $600. But the fee doesn’t kick in until after two or more hours of “free detention time” (81 percent of the shippers surveyed reported 2 hours of free detention time, with another 14 percent reporting between 3 and 5 hours). If just a trailer is involved, the most common detention charge is $50 per day, after 120 hours of free detention time.
Is the current detention charge system working? In other words, is it motivating shippers to work harder to get trucks back on the road as quickly as possible?
The study doesn’t say how much shippers pay each year, on average, in total detention charges, or whether the total is trending up or down. But since many shippers use drop trailers, the power unit detention charge probably doesn’t come into play very often. And for detained trailers, $50 a day after five free days probably doesn’t add up to very much either, especially compared to fuel surcharges and total transportation costs.
In addition, the study revealed that 27 percent of the shippers surveyed don’t publish detention charges with power unit, and 56 percent don’t publish detention charges associated with trailers, which suggests to me that detention charges is not a high-priority metric for them.
Therefore, what are detention charges actually accomplishing in terms of driving continuous improvement? Is the current system motivating shippers and carriers to work more collaboratively together?
Maybe it’s time to rethink detention charges, and instead of making them more punitive, perhaps taking an incentives-based approach would be better.
For example, my wife and I have learned that threatening to take things away from our kids if they don’t do their chores — “If you don’t empty the dishwasher, you won’t get to watch TV this afternoon”– is less effective than providing them with incentives — “If you empty the dishwasher, you’ll earn another 50 points toward the 300 you need to get that toy you want.”
Can shippers and carriers implement a similar system, where the incentives are, for example, a reduction in base rates or receiving top priority in capacity allocation? What about CPG manufacturers and retailers — is it time for them to rethink chargebacks too?
The bottom line, whether you agree with me in this case or not, is that you should always review your metrics and question them. Why are we measuring this? What actions are we taking in response? Is this metric even relevant any more? What’s our ultimate goal and are we taking the best approach, and measuring the right things, to help us get there?
Post a comment below and share your perspective on this topic.
