4) Fewer Good Roads to Owner Operator Business Success
Todd Spencer, vice president of the OOIDA cited “government regulations” among the key reasons why the owner-operator “micro carrier” no longer has a viable business model, one that’s both profitable and sustainable over the long run for most players.
Even the staunchest advocates of the owner operator industry have their doubts and most all agree that the realizing any economic benefit to maintaining authority is incredibly tough and getting tougher for even the most experienced and savvy operators.
Even OOIDA’s Spencer recognizes that traditional lease arrangements are no longer serving the interests of owner-operators and that the prospects for positive business outcomes for “fledgling micro carriers” were less than great—of those starting out, fully a third, he says, will fail within the first year and leave the business.
According to Spencer, the CSA program is a primary culprit. The CSA program, he explains, is impacting every motor carrier out there except for the largest. Because shippers will increasingly make decisions on CSA scores, those with only one truck are at a distinct disadvantage because they aren’t inspected frequently enough to create a score in the first place.
Hours of Service regulations are also working against the owner-operator business model as well. "I can tell you that hours of service changes have previously had a negative productivity impact for over-the-road drivers,” he explains. Citing a recent change that prevented drivers from splitting their rest periods he noted that prior to that over 5% of owner-operators were women drivers; after the rule change, OOIDA research revealed the number dropped to 3%.
Similarly, a key provision in the law was a limit to the use of a 34-hour "restart." Drivers have a 70-hour-a-week cap on how much time they can be on the road. Previously, drivers were able to reset the cap to zero after taking 34 consecutive hours off.
As a result says American Transportation Research Institute, more than 80% of motor carriers experienced a productivity loss, with nearly half saying they require more drivers to haul the same amount of freight—translate that to one drive and one truck and the reality of it all becomes a bit clearer.
An article appearing in Business Insider noted "Smaller 'owner/operator' firms are increasingly dropping by the wayside as the cost of operations and maintenance are simply becoming too expensive to stay in business," according to Paul Pittman, a planner at a North Carolina-based logistics company. "As controls continue to tighten, many of the existing drivers currently employed are turning to other areas of employment simply to get off the road and escape some of the regulations implemented to govern their operations," said the planner.
As a result, according to a survey from the American Transportation Research Institute, more than 80% of motor carriers have experienced a productivity loss, with nearly half saying they require more drivers to haul the same amount of freight.
Compounding the ill effect of OOS regulation on owner-operator business viability is the growing issue driver’s face from abuses by shipping brokers who play fast and loose with detention fees. DAT the On-Demand Freight Marketplace offered data from the responses of 257 carriers. According to the survey’s findings detention fees usually range from $30 to $50 an hour after the driver has been detained for more than two hours, but based on responses, say DAT, those same carriers plus 50 brokers who were also surveyed agree that’s the price, but only if the carrier is actually lucky enough to collect it!
Two-thirds of the brokers say DAT, only paid detention when they were able to collect a fee from the shipper or consignee. “When a broker is able to collect from the shipper, they were twice as likely to pay detention fees to the carrier,” explains DAT.
But those fees are just a drop in the bucket compared to how much that detention time actually costs says DAT. “One owner-operator,” says the firm, “cited a $1,900 loss due to two loads he was unable to accept because of a lengthy detention at a receiver’s dock.” At the end of the day these uncertain and random costs are simply unsustainable – accept by larger firms and the most successful owner operators with most lucrative routes.