A Catalyst for Supply Chain Profitability

Building a Major League Commercial Driver Management Program

Baseball and a Quality Commercial Driver Management Program - a lot in common

 

If you were about to build a baseball team and you wanted to compete to reach the top of the league, how would you go about it? Current major league practices include:

  • spend a significant amount of time and resources scouting players,
  • strong internal development programs,
  • make a team that the best players wanted to play for,
  • Use analytics in developing game plans,
  • Screen for physical condition and personality. We don’t want to pay a salary if we have to offload a player (anyone else remember Troy Tulowitski and the Toronto Blue Jays? We’ll pay you 7 million to take him and put him on your team. Ouch)

So, just how do I somehow manage to draw a parallel to a professional baseball team and hiring professional drivers?  Well, grab some popcorn, a can of your favourite beverage and let’s see if I can make a connection.

1 we would spend a significant amount of time and resources scouting players

The pool of commercially licensed drivers is limited. As is the pool of professional baseball players. Of the entire pool of professional ballplayers, only a very small percentage make it to the big leagues. If you have been in transportation for any length of time at all, you will have seen, there are drivers who are simply outstanding at their occupation (go witness a truck driving championship to see drivers who can control a rig to within mere centimeters), and there are others who, if it weren’t for a fact this is a profession where poor performance can be deadly, it would be funny at their sheer incompetence – multiple attempts to back into loading docks, jumping curbs, unable to back into a spot at a truck stop.

Which driver do you want in your truck, on your insurance? The likelihood you will find a superstar by accepting the first candidate with the appropriate license class might look like this for the baseball scout :

Scout: “So, have you played ball before kid?”

Baseball wanna be “Sure did, I was an all-star in high school and college. I hit .326 and had an era of 1.09 over 6 seasons”

Scout:” Sounds good – sign here. You start tomorrow. You can be the opening pitcher.”

Baseball wanna be: “Awesome, thanks’. As he walks away, to himself “Wow, that was easy. He didn’t even ask me where I played.  Phew”

So, how well do you think that hire would work out for the team? Didn’t see the guy bat, throw a ball, field a ball or run the bases, or find out how he interacts with the rest of the team.

This would be, AZ driver comes in, fills out an application and shows driver’s license. The company hires him/her and puts him/her in a truck. We have no idea how well they control the vehicle, do they understand the regulations?  Does (s)he show up on time, and how does he/she relate with dispatch and the customer. We could call this driver Pandora – because we are waiting to see what comes out when we open the box.

Statistically speaking, based on what we already know about the ratio of poor drivers to good drivers, chances are we do not have an all-star.

2. we would develop strong internal development programs.

Mike Trout, Tim Anderson, Cody Bellinger, Mookie Betts – every day they hit the batting cages and listen to the batting coach give them pointers on how to infinitesimally improve their swing.  Guys who are already the most talented, the best in their field, get coaching and development every single day to improve what they do. And each of them will go through slumps, loose that edge at some point – be that microsecond off and turn that out-of-the-park-rocket into a limp fly ball. So, why would we think that once a driver is hired, (s)he can’t benefit from additional development? We should be out there frequently, looking for opportunities to improve, advancements in technology and training that can make us better at what we do. Our team should be embracing these opportunities to become the best professional they can be. And if (s)he thinks that there is nothing that (s)he can be taught……well, I think to ask them about Mookie, or offer to pay for them to enter a truck driving championship. They win, great! Awesome reputational capital. They lose, you have your opening for development. Either way, the company wins.

I have been doing my job for over 30 years. I like to think I do it fairly well, and based on the feedback I get, it's just possible some of that is true. But I try to learn something every week – to get better at just one thing I do. Learn from one more mistake. Otherwise, I get rusty, I lose my edge. If I don't act this way, someone else learns what I didn’t, and they now have something to offer their customers I don’t. That is not acceptable to me.

3. we would try to make a team that the best players wanted to play for.

Rarely do you hear a player complain if they get transferred to the NY Yankees or the Dodgers.  What about the Miami Marlins, with its empty stadiums? Or the San Diego Padres with one of the worst winning records for the last 10 years?  A professional has a lot of pride wrapped up in whom they represent, and how well they do in their league. So it's natural they want to play for a winner – one with the money for the latest technology, the best equipment, and the choicest games – the pride of success.  It’s no different with a professional driver. If your fleet has 10-year-old International’s with 900,890 kms on them, which driver is more likely to want that as their office for 13 hours a day, 5 days a week? If you were choosing – would you choose a carrier with safety bonuses, benefits,  new, well-maintained trucks, one that was recognized by the industry as a Top Fleet Employer or an operation that offered you a worn-out dirty truck, no incentives and didn’t try to get recognized or promote their image?

4. And we would pay close attention to the analytics in developing our game plans.

So, here is where it all comes together – and where if I haven’t lost you because you like baseball, I encourage you to stick out the 7th inning stretch as I throw some stats at you.

According to a study from the Virginia Tech Transportation Institute [i]

 “it was found that 7 percent of the drivers were not involved in any crashes, near-crashes, or incidents, while the worst 7 percent were involved in at least three crashes or minor collisions within a 12-month data collection period” The study noted that “Primary findings indicated that unsafe drivers exhibited more hard deceleration, acceleration, and swerve maneuvers during baseline driving than did the safe drivers. Results also indicated that risky driving behaviors such as traveling at inappropriate speeds and improper braking may increase drivers’ relative crash risk above that of normal driving. “

Enter telematics and their ability to instantly identify when a driver has a harsh acceleration, hard stop, or harsh turn. Now we are reverting to our coaching scenario above – have a talk. Let’s review the dashcams footage and use this as an opportunity to coach and develop this team member. With effective intervention, you have the opportunity to eliminate up to 3 accidents. According to the Federal Motor Carrier Safety Administration  [ii] when we take the direct costs:

Cargo Damage; Vehicle Damage; Injury Costs; Medical Costs; Loss of Revenue; Administrative Costs; Cost of Insurance Increases; Towing Costs; Storage of Damaged Vehicle,

and the indirect costs

Loss Clients or Customers; Lost Sales; Meetings Missed; Salaries Paid to Employees in Accident; Lost Time at Work; Cost to Hire or Train Replacement Workers; Loss of Personal Property; Vehicle Replacement; Damaged Equipment Downtime; Accelerated Depreciation of Equipment; Accident Reporting; Increased Public Relations Costs and Government Agency Costs,

we’re looking at $148,279. 

Notice the indirect costs. You are not recovering those from your insurer. But even if you claim $100,000 from your insurer, in today’s market you run the risk of huge increases in your premiums, or a refusal to renew. That remaining $48,279 is coming from your general revenues.   If you have a profit margin of 8%, it will take over $603,000 of revenue to recover that money. And that is one accident – remember, the drivers in the study who exhibited the unsafe behaviour were 7% more likely to have 3 or more crashes in a 12 month period. That is a possible $1,800,000 in revenue required to cover those costs (all numbers in $US$).

I’ve been talking a really long time here, and the truth is, I have hardly even started to talk about addressing the items in my opening pitch. This last section really only spoke to one aspect of your driver selection criteria. It is bigger than that. But I need to bring this to a close before you finish your popcorn and hit the big X in the top right corner.

So, I will only speak about 1 more aspect. A Really big one. And what’s most challenging about this one for most carriers is it is almost all indirect costs – unless you know where to look, you don’t know it’s there. And that is driver turn over.

I’d love to tell you that given the current condition of turnover in the market I was able to find a recent, definitive study on the cost of driver turn over. But, I wasn’t. If you have one, please, share it with me I’d love to have it to update what comes to follow. Here is what I was able to find. A study from 1998 – more than 20 years ago, when wages and insurance were a significantly smaller part of our expense line items[iii]. Regardless, I am going to use this report and adjust for the cost of inflation to show what the numbers would look like in today’s numbers. Factoring for inflation, we are looking at $1.58, 2020 dollars, for each $1.00 in the report.

There were 15 carriers in this study. These carriers ranged in size from 32 to 9,463 trucks.

The average cost of turnover per driver for these carriers was US$13,010 ($16,913 CDN); with a range from US$3,544 ($4,607 CDN) to US$32,751 ($42,576. CDN).

For reasons of brevity, I am only going to list the costs centres that were used in this study.  If you want the full study, send me a note and I will send it to you in pdf

  • Entry and Exit Administration
  • Cost of Advertising
  • Staff Labor Costs
  • Testing Fees
  • Recruitment Costs
  • Orientation Costs
  • Training Costs
  • Referral/Sign-On Bonuses
  • Fixed Asset Costs Due to Idle Equipment
  • Monthly Cost of Interest on Trucks and Trailers
  • Monthly Cost of Depreciation on Trucks and Trailers
  • Monthly Cost of Insurance on Trucks and Trailers
  • Profit Loss Due to Idle Equipment
  • Gross Profit Percent
  • Other Costs
  • Safety / Insurance / Legal
  • Equipment Maintenance
  • Production Loss Due to New Drivers

 

This is the true contribution to costs for driver turnover. And a great example of what I refer to as Iceberg costs – 90% of these costs are not visible – that is, you don’t make an accounting entry for these costs when you have driver turnover – but they are still there leaching away your profitability.

So, now do an exercise: How many drivers turned over in your operations last year? Estimating where your organisation falls on the cost spread, from $3544 US ($4607 CDN) to $32,751 ($42,577 CDN), multiply the number of drivers times your selected cost per.

How many accidents last year in your fleet:  Multiply that by $62,762 (48,279 *1.3 for CDN)

Add to that, the number for your driver turnover.

As a (very conservative) example, let’s say you are a 25 truck fleet who had 3 accidents and a 20% turnover ratio. Those two costs would look like this:

Accident, deductible and hidden costs, $62,762 * 3 = $188,288.00

Driver turn over, 25 *.3 = 7.5 * (average from study) $16,913 = $126,847.00

Total costs for these two factors = $315,135.00

Want to find out more, or discuss how a comprehensive driver management program can address these and other costs? Send me a message.

 

[i] Title and Subtitle Comparing Real-World Behaviors of Drivers With High versus Low Rates of Crashes and Near-Crashes. Klauer, S. G., Dingus, T. A., Neale, V. L., Sudweeks, J. D., and Ramsey, D. J. February 2009

[ii] From the article: https://www.iol.co.za/business-report/opinion/human-cost-of-truck-accidents-can-be-prevented-1774847#.VNuS4kIyHAN

[iii] The Costs of Truckload Driver Turnover, Upper Great Plains Transportation Institute. Julie Rodriguez, Michael Kosir, Brenda Lantz,

Gene Griffin, Janice Glatt