Mileage has traditionally been used by truckload carriers as the basis for pricing loads, billing customers and paying drivers. In this low-margin industry, however, time has always been the more important denominator.
Increasingly, motor carriers are converting to time-based measurements to create alignment between these critical business processes. As part of this effort many are using their data and information systems to create hourly and salary driver pay models.
Electronic logging devices (ELDs) were the impetus of this change by creating operational visibility of where time and money is being wasted. Beyond ensuring drivers are complying with hours-of-service rules, the technology captures a minute-by-minute record of the 14-hour duty cycle to see where time is used on productive and non-productive activities.
Prior to ELDs, fleet managers knew — and often expected — drivers would make up time lost when loading, unloading or stuck in traffic jams. Drivers fabricating paper logbooks that were pencil whipped in the office made it possible for mileage-based freight rates to be artificially aligned with mileage-based driver pay.
In the ELD era, fleet executives can no longer afford to price loads and bill customers solely on the basis of rate-per-mile. Using revenue per day is the more important measure for business profitability.
“We have to meet a revenue projection per day [for a truck], regardless if a load is 168 or 500 miles,” says Ed Nagle, president and chief executive of Nagle Companies, a 50-truck refrigerated carrier based in Toledo, Ohio, that services the East Coast.
Most costs for a trucking operation are fixed, he explains, except for maintenance, fuel and accessorial charges. Increasingly, many fleets that are paying drivers by the mile have to count their largest expense as a fixed cost if they have minimum guarantees for drivers’ weekly paychecks.
