As the economy continues to combat the impact of the COVID-19 pandemic, fleet executives must continue to do more with less and are tasked with increasing efficiencies, complying with regulatory mandates, meeting customer expectations, and saving money. Brian Holland, president and CFO of Fleet Advantage, shared his expertise about the buy versus lease debate, managing maintenance and repair (M&R) costs, as well as some of the biggest motivators for fleets to adopt new safety technologies.
FleetOwner: What type of fleets do you work with? And what are fleets' biggest concerns when they are looking to modernize their asset-management plan?
Brian Holland: Fleet Advantage works with for-hire and dedicated transportation fleets, however, it primarily provides services for private fleets within several industries, including 28 of the top 100 fleets in America.
Fleet Advantage’s philosophy looks at functional versus economic obsolescence, meaning how many years can fleets run their trucks versus how many years should they run their trucks by utilizing [tools that identify] the point at which a truck costs more to operate than to replace with newer equipment.
In recognizing the need for an optimum operational strategy to accomplish agile scalability (especially during the COVID-19 era), many fleets focused on innovative truck lease structures that offered shorter life cycles for their trucks. Shorter life cycles afford organizations the chance for drivers to operate newer, safer, more emissions-friendly trucks. As a result, many of these businesses are [experiencing] lower maintenance and repair costs, lower fuel expenditures, reduced emissions, and lower costs associated with accidents.
FO: Discuss the lease versus own debate. Is it more advantageous for fleets to lease their assets or own them, particularly in the COVID-19 era?
BH: It is evident by the cash flow in Fleet Advantage’s recent Lease vs Ownership Analysis that there is a significant cost-savings opportunity for organizations that switch to a shorter life cycle leasing procurement strategy. In addition, there is an after-tax advantage to leasing tractor equipment.
Fleet Advantage analyzed the total costs associated with purchasing an asset, including the upfront cost of the equipment, depreciation expense, tax expense, and the resale of the truck asset at the end of its useful life resulting in an immediate $67,714 cash outflow. In comparison, the total cash outflow associated with leasing a truck asset are the fixed annual costs in the form of lease payments resulting in a net present value of $62,182, leading to an after-tax advantage of $5,531 toward an organization’s bottom line.
FO: What are some of the biggest motivators for fleets to acquire new trucks?
BH: Safety, fuel economy, and the reduction of CO2 emissions. According to Fleet Advantage’s recent benchmark survey, 71% of transportation fleets have implemented blind spot mirrors as advanced safety features, while 66% have implemented front and rear disc brakes. Roughly 50% of fleets said their trucks are 2017 models or older (some fleets have as many as 3,000 trucks older than 2017 models).
This is critical since many OEMs have adopted advanced safety systems on 2018 and newer models as standard features, such as collision avoidance and lane departure warnings. Trucks that are 2017 models and older likely do not have these safety technologies and cannot be retrofitted with collision mitigation.
The survey also showed that 11% of fleets estimate they have saved more than $1 million in crash avoidance by upgrading to newer trucks with advanced safety features. These types of safety technologies have led to safer roads for drivers, passengers and other motorists, and have lowered accident costs. This is especially important since trucking fatalities recently reached the highest level in the past 30 years, with the average cost of each heavy-duty truck crash reaching $17.5 million.
More organizations are making changes to the life cycle of their trucks to benefit from newer units that offer more fuel efficiency and overall total cost of ownership (TCO). A recent analysis of truck life cycle data shows that fleet operators are now realizing a first year per-truck TCO savings of $16,856 when upgrading from a 2016 sleeper model-year truck to a 2021 model. Fleets can save $5,084 per truck in fuel in the first year, a 15% increase in fuel economy and reduction of CO2 emissions. Preserving a cleaner environment has again been in focus recently, with rules adopted by the Air Resources Board calling for the reduction of diesel truck exhaust in and around California’s ports.
FO: Maintenance and repair costs represent a large area of expense for fleets, and equipment that is not properly maintained can erode a fleet’s financial picture. How can fleets leverage data to make sure their assets are always up and running?
BH: The bottom line continues to drive many upgrade decisions, and fleet executives are paying closer attention to the costs associated with servicing an aging vehicle. Data and analytics play a significant role today in determining how and when to upgrade into newer trucks to reduce maintenance costs.
The industry’s changing mindset and shift toward newer trucks comes with a shift to replace trucks more frequently, which impacts M&R costs significantly. In a shorter life cycle program, the maintenance strategy turns to preventive rather than reactive (breakdowns and recovery). Additionally, when a fleet meets its warranty threshold, costs associated with that truck immediately spike, thus making shorter asset life cycles more cost-effective. Fleets that run their trucks on a seven-year life cycle instead of four years spend an additional $34,379 on maintenance per truck compared to four-year maintenance costs.
FO: What are your fleet customers’ thoughts when it comes to widespread adoption of electric and hydrogen fuel cell trucks?
BH: We believe many fleets are taking a wait-and-see approach to electrified technology. While there have been more news headlines discussing electric and hydrogen fuel cell Class 8 trucks, the benchmarking survey revealed that 30% said they do not see these widely in service for another 10 years (a year ago, 36% said they would not be widely used for another 10 years). Another 62% pointed to the same time frame for autonomous trucks. Only 3% of survey respondents believe autonomous trucks will be widely used by fleets within the next three years.
With that said, however, innovation changes everything. Forward-thinking fleets will be well positioned to take advantage of newer technologies as they become available and more mainstream.
Driver wages and benefits remain a top cost for commercial carriers and a top concern for drivers, who are becoming more and more difficult to find. To further compound an already big issue in the industry, trucking’s longstanding per-mile, activity-based compensation structure for drivers can be not only inconsistent, but it can be incredibly confusing at times.
A recurring theme in the American Transportation Research Institute’s (ATRI) “Operational Cost of Trucking” analysis, driver compensation has consistently represented the highest percentage of a fleet’s cost per mile. According to ATRI’s 2020 analysis, in 2019, private fleet drivers were paid approximately $1.35 per mile in combined wages, benefits, and bonuses, while for-hire drivers were paid an average of 69.3 cents per mile in combined wages and benefits.
Combined driver wages and benefits for for-hire fleets decreased slightly in 2019 from an all-time high of 77.6 cents per mile in 2018; however, bonuses for drivers universally increased, with retention bonuses increasing more than 80%, ATRI noted.
Overall, data from the latest American Trucking Associations' (ATA) Driver Compensation Study shows that, in general, driver pay has climbed as rising demand for freight transportation services has increased the competition for increasingly scarce drivers.
According to ATA Chief Economist Bob Costello, the most recent survey, which includes data from more than 100,000 drivers, shows that fleets are boosting pay, improving benefit packages, and offering incentives to recruit and retain safe and experienced drivers. ATA's study shows that the median salary for a truckload driver working a national, irregular route was more than $53,000, a $7,000 increase from ATA’s last survey, which covered annual pay for 2013. A private fleet driver saw their pay rise to more than $86,000 from $73,000 or a gain of nearly 18%, ATA stated.
The National Transportation Institute (NTI) tracks more than 125 different attributes of the pay package for company truck drivers and owner-operator compensation changes in the industry. NTI works with fleets to help them navigate driver wages, accessorial pay, benefit costs, and personnel policies—everything from pay per mile and per hour to 401(k) plans and detention pay/policies.
Leah Shaver, NTI’s CEO and president, said compensation is so confusing for drivers, partly, because the onus is on them. Essentially, if drivers want to earn more, they need to do more. However, managers must understand that certain elements that can impact pay outcomes are out of their drivers’ control.
“When you think about just how many attributes there are, from a driver perspective, it’s pretty easy to get overwhelmed and confused as to what the metrics are to reach certain incentives and goals,” Shaver told FleetOwner. “What steps do you have to take to achieve a bonus? What type of skills do you need to make the desired outcome? All of that can contribute to confusion as well.”
Shaver emphasized the importance of fleets using processes to report metrics back to their drivers weekly.
“Private fleets have a growing number of pay packages that have a mileage and hourly combination,” Shaver said. “If we’re not there yet [in the for-hire sector], that’s OK. But we have to be able to report back to drivers and managers regularly what the outcomes were, what we missed, and what we need to do better in order to reach those outcomes.
“We have always shared with the industry that the transparency in pay and in schedule that exists at private fleets is what supports their ongoing low turnover rates,” Shaver continued. “Even if the for-hire fleet industry doesn’t convert their pay method from an activity-based pay, if nothing else, it’s sharing the pay outcomes frequently and allowing drivers and the operations team to work together to help a driver meet the metrics they need to meet their minimum weekly expectations. We need to increase the communication about the pay, and that’s a transparency issue.”
Driver feedback
In its latest trends report, real-time truck driver feedback provider WorkHound found that pay was the fourth most common theme of all driver feedback in 2020. And more than half of the comments regarding pay were negative, explained Max Farrell, WorkHound co-founder and CEO, during a trucking roundtable discussion on pay and culture.
“The industry assumes that this is mainly because of drivers demanding higher pay,” Farrell pointed out. “WorkHound data shows that it’s more nuanced than that. While some drivers are unhappy with the pay rate, some comment about pay because they need assistance navigating complex pay systems. Drivers are also concerned about being expected to do a lot of work that is uncompensated or fear that they aren’t getting enough work to meet their financial objectives.”
WorkHound data reveals that when drivers clearly understand their pay and how it works, they are more satisfied with their work and ultimately the fleet they haul freight for, Farrell said.
During WorkHound’s roundtable discussion, Phil Wilt, American Central Transport (ACT) president and COO, said driver feedback via WorkHound has helped the fleet better address confusion around its pay strategy.
“We don’t want to be all about paid, though, because the minute you do that, you’re losing,” Wilt said. “To me, it’s total compensation. We work hard on being transparent with what we say, what we do and why we do the things we do, but we also work hard on listening. We have to put ourselves in the shoes of a driver; they’re on the front lines doing the hard work.
“Pay has to match our culture; our culture has to match our pay,” he continued. “To me, they are so interrelated that I don’t really know where one starts or one stops. To me, it’s the whole experience that goes beyond your mileage pay.”
Part of that experience for ACT is taking driver feedback seriously when it comes to conditions at shipper facilities. Rather than just looking at revenue or freight volume, ACT looks at what might be considered “unfriendly freight" for its drivers. That could mean freight outside of the company’s primary lane that would preclude a driver from getting home on time. Or, if the carrier finds that a customer isn’t adhering to a contract, their treatment of drivers is not acceptable, or they are not turning the freight as fast as they need to be, ACT will take its business elsewhere.
“It’s hard to tell someone you don’t want to haul their freight,” Wilt said. “But we are at a point that that’s what we’re doing, and I see it in our metrics, in our deadhead, and in our load count.”
Shippers, in turn, are realizing the value of drivers in today’s operating climate. Shaver told FleetOwner that in a week’s time, she was approached by three major household shippers reacting to driver capacity concerns. They wanted to know how they could ensure drivers are being treated fairly at their facilities.
NTI has a program called Top Pay Carrier Certification, in which NTI measures fleets’ annual earnings for drivers, benefits, retirement offerings, and overall company stability before deeming the company a rewarding career choice for a professional driver. Shaver is also exploring one shipper’s request that NTI develop a Top Pay Carrier Certification endorsement—similar to what the U.S. EPA’s SmartWay verification is for emissions reduction and efficiency—to inform shippers which carriers prioritize drivers, as well as the outcomes they need to stay in the industry.
Detention time
For fleets that want to retain any good driver, unproductive time, like detention time, must be monitored. And that’s particularly important because it’s out of a driver’s control.
However, according to NTI’s Shaver, it’s not only the actual detention time that drivers need to be compensated for. There is often a built-in waiting period until detention kicks in. There is an accepted two-hour window in the industry as a standard, but some companies are as high as four hours or longer before detention pay kicks in, she explained.
“Knowing that unpaid, unproductive time is such a trigger for disruption in a driver’s paycheck, monitor detention, pay [the driver] automatically, and deal with the bill collection on the fleet side,” Shaver said.
By listening to its drivers, North Carolina-based Ezzell Trucking has been able to turn around driver concerns regarding detention time and pay. The carrier, which specializes in bulk wood residual hauling, utilizes 95 full-time drivers and a handful of owner-operators that run under its authority. The fleet of all day cabs runs most of its miles east of Interstate-95 in North Carolina, Virginia and in parts of South Carolina.
Ezzell Trucking uses WorkHound’s driver feedback app to make sure that drivers are aware of any pay changes, new programs, or any company-wide concerns. The company also relies on drivers to inform management when something needs to change at a customer location.
“We know that a driver’s time is valuable,” Catherine Ezzell, president of Ezzell Trucking, told FleetOwner. “Based on our folks’ feedback, we were able to improve our waiting time pay structure so in case the driver gets detained at the customer site, a driver needs to be compensated for it. We tell the drivers all the time, ‘You’re not making any money if the wheels aren’t turning, but neither are we, so we want you out there moving.’”
Data from electronic logging devices (ELDs) and other telematics products also provide transparency as to how long drivers have been detained at a shipper’s facility. This data can empower carriers to increase levies or surcharges to the shipper and give some of that revenue back to the driver, noted Chris Henry, vice president of customer experience and recognition programs at CarriersEdge.
“It is not the driver’s fault that they are delayed; they would rather be driving, so they should be compensated, in my opinion, from minute one,” he stressed. “If you’re on duty, you should be paid. It’s not a controversial statement, but it’s something that can be difficult in the free market.”
Overall, the industry has seen a trend where more trucking companies are paying their drivers detention time before the two-hour default. Plus, more and more companies are beginning to leverage load rating functions or apps that give them clout with shippers.
“I don’t think carriers have ever been in a better position in terms of having access to the data to hold shippers accountable,” Henry said. “For the most part, shippers are stepping up and asking for this information, but there are still some out there that haven’t taken the role of the driver as seriously as they should.”
Ryan Camacho, director of strategy and business development at Axele, a transportation management system (TMS) for truckload carriers in the U.S., pointed out that TMS technology can also help drivers guarantee they are being compensated fairly and when payments will come through. Axele’s TMS also allows carriers and drivers to include detention hours.
“Historically, [detention pay] used to be a mess, where it was, ‘he said, she said,’” Camacho noted. “Then, ELDs came into the picture, leaving an audit trail of where the truck was and for how long. We are tracking ELDs, and carriers can document what the detention time is going to be, so it just auto populates.”
Pay trends
Because activity-based driver pay can be inconsistent, some fleets are considering guaranteed pay. But that also comes with various concerns, priorities, and needs.
If a trucking company, for instance, sets a guarantee too low, both the driver and the operations department might aim slightly lower in their own goals, which can impact productivity, NTI’s Shaver explained. Setting a guarantee too high could also adversely impact productivity.
“Sometimes drivers feel like they are capable of doing better than the minimum guarantee,” Shaver said. “They want to know that they are eligible to earn more and that the guarantee isn’t a ceiling, but that it’s just a cushion to make sure they are taken care of.”
In general, even though the per-mile pay structure makes sense for trucking, it’s also partly what has led to people’s reluctance to join the driver workforce, CarriersEdge’s Henry pointed out. That’s when guaranteed pay can be most appealing.
“They, number one, can’t get clarity on what their paycheck is going to be from week to week, and as a result of that, they can have large fluctuations in their compensation, which could lead to other issues,” Henry said, noting that drivers can have challenges where bills aren’t lined up with their paychecks, or they have trouble acquiring credit.
Data from ELDs and other telematics products can help provide more transparency for drivers and fleets when it comes to pay.Photo: Getty Images
One perk of guaranteed pay that comes up in the CarriersEdge Best Fleets to Drive For survey results is without all the compensation fluctuations, drivers have peace of mind that they can take care of their expenses and their livelihood.
“That’s the line in the sand I want to make about compensation,” Henry said. “It’s not necessarily paying the driver more, it’s about consistency of pay.”
Henry added that carriers can leverage ELD data to provide a guaranteed base compensation while also including benefits and various performance bonuses for drivers who are productive and safe.
“The argument that it’s not a well-paying job is unfounded,” Henry noted. “This year, the average (annual) compensation for the first time ever eclipsed $70,000. We have many fleets reporting that their drivers are making more than $100,000. The biggest issue is home time and consistency of pay, making it hard for drivers to budget, obtain credit, and get a leg up.”
Although per mile is the most common payment method, Axele’s Camacho suggested drivers are getting paid in many ways. For instance, drivers can be paid for empty miles, loaded miles, total miles, planned miles, actual miles, and contracted miles.
In most cases, the payment structure compensates by loaded miles, so carriers will track that mileage, aggregate it, and it gets contributed to driver pay. However, because of today’s market, Camacho explained that some fleets are moving toward a hybrid model of pay where drivers are paid a flat rate per mile and a percentage of the load they are hauling.
Benefits and bonuses
Over the last year, NTI has seen interest from drivers about when health care and insurance benefits take effect. Shaver noted that 60 days is the average for benefits to kick in for a driver.
“We have a growing and emerging trend of starting benefits at day one,” Shaver said, adding that NTI has also seen a jump in sign-on bonuses and referral bonuses.
“We see a huge increase of spend at fleets to attract drivers. We’re seeing pay increases at base pay for all levels of tenure for drivers, as well as pay increases throughout their tenure,” she explained.
One of the obvious complications with sign-on bonuses is a driver who chases the next hiring incentive. Another, Shaver pointed out, is that sometimes companies frontload the pay package with a sign-on bonus.
“We find that drivers stay longer when we are recruiting them for the appropriate wage in that market, and accelerating their pay appropriately by tenure, by earnings, and outcomes that are necessary to be recognized in the job, i.e., safety incentives, fuel incentives, productivity incentives, etcetera,” she explained.
Ezzell Trucking customers pay the carrier by the ton since the company hauls bulk, so drivers are also paid by the ton. Over the past five years, the company’s compensation has increased for the average driver by about 150%, Ezzell explained.
The carrier also offers free insurance benefits for all full-time employees, a full 401(k) retirement account, and a chaplaincy program, where full-time employees receive an employee-assistance benefit.
Ezzell Trucking runs a fleet of daycabs and pays drivers by the ton.Photo: Ezzell Trucking
Ezzell Trucking no longer offers sign-on bonuses for new drivers but instead offers a driver recruiting bonus. “We feel that our best advertising is through word of mouth, and our best hires are through word of mouth,” Ezzell said. This year, the company started offering any employee who refers a driver that comes on board a chance to win a significant payout around Christmas.
The first prize for that drawing is $10,000, the second prize is $7,500, third prize is $5,000, and fourth prize is $2,500.
“We have a recruiter bonus program in addition to the drawing for a total of $1,000 paid out over a period of time,” Ezzell added. “We have safety incentives and safety bonuses that drivers can qualify for based on their driving habits.”
Ezzell Trucking also offers monthly and quarterly safety awards that are based on in-cab safety camera footage and drivers that attend quarterly safety meetings who haven’t had accidents or exhibited poor safety behaviors within that quarter. In turn, the company has seen a drastic decline in safety incidents overall.
The moral of the story when it comes to pay is that listening to drivers and bringing transparency into the driver pay structure can go a long way for commercial fleets.
"strategy" - Google News
June 23, 2021 at 09:03PM
https://ift.tt/3xOMgMH
Modernizing a fleet's financial strategy | FleetOwner - Fleet Owner
"strategy" - Google News
https://ift.tt/2Ys7QbK
https://ift.tt/2zRd1Yo
Bagikan Berita Ini
0 Response to "Modernizing a fleet's financial strategy | FleetOwner - Fleet Owner"
Post a Comment