Detention pay: short-term expense driving long-term savings
By Alex Riemersma, Ally Logistics Pricing Analyst
Chances are, if you’re reading this, you are already well-aware of the concept of detention in the trucking industry, as well as many of the costs and benefits of paying this accessorial.
For the uninitiated, detention is a cost incurred by shippers to be paid to carriers who are “detained” and must wait for freight to be prepped. Industry standards assume a two-hour loading time. After that, shippers are expected to pay a fixed rate for every hour that a truck is detained without being loaded. Typical detention charges range from $25-100 per hour, on average. Detention simply exists to help compensate drivers for lost time.
When necessary, paying detention is a cost saving measure in the long run.
DETENTION IN THE EYES OF THE CARRIER
After two hours, drivers begin tracking their detention time which they will later submit to the shipper seeking compensation for time spent waiting to be loaded.
It is understandable to think that carriers enjoy earning money by charging detention. After all, they are being paid to put their truck in park and wait. However, drivers make money when they are driving. Often, detention pay does not make up for what they would have made by loading or delivering as originally scheduled.
It is a simple equation: if the rate per mile (per hour) a driver is paid to move another load exceeds the hourly rate of detention, then they are losing money while their wheels are not moving.
Adding to this, because drivers have strict limitations on the number of hours they can work in a day, the time and earnings lost while collecting detention at a shipper cannot be made up. In most situations, neither the carrier nor the shipper benefit from long load times.
Detention simply lightens the financial burden placed upon the carrier while they wait to be loaded.
CREATING EFFICIENCY
Everyone loses money when a truck driver is detained. Shippers and receivers with high loading times will pay detention fees while drivers lose their potential to earn. Creating efficiency in the loading/unloading process can trim detention expenses substantially, keeping both the shippers and carriers happy.
One method for creating efficiency is extending facility hours. Adding weekend or evening hours can go a long way in decongesting a facility. Longer hours allow for staggered appointment times, keeping the flow of trucks moving in a more efficient manner. While extending facility hours requires more personnel, the cost of adding employees is more than offset by reduced detention related expenses.
Another possible remedy would be to facilitate a drop trailer program. Drop and hook practically eliminates detention from the equation as truck drivers can simply pick up an already filled trailer or unhitch and keep moving.
Labor optimization and proactive planning are the two overarching themes to preventing unnecessary spending on detention related expenses.
HOW MUCH DETENTION PAY IS ENOUGH DETENTION PAY?
For many companies, paying detention is an unavoidable expense. The largest shippers/receivers in the country have so many trucks moving in and out of their distribution centers, it is inevitable that in some cases, trucks will wait longer than two hours to be loaded/unloaded.
So, how much should a driver be paid for their time spent waiting?
The answer is likely a number close to their rate per mile for the load. As established earlier, drivers lose money while their truck is not moving. If a carrier is aware that they will be facing long load/unload times at a customer’s facility, they may choose to reject the load. Detention risk is one of the many variables a driver considers when agreeing to haul a load.
However, a driver may be willing to subject themself to detention risk if the hourly rate of detention does not diminish their earning potential.
DETENTION AS A LONG-TERM COST SAVING MEASURE
A shipper may choose to minimize their detention expenses by paying a smaller rate to carriers per hour spent waiting. In the short term, this will save money. But over time, carriers will recognize the facility, avoid it, or charge a premium on the frontend to mitigate their detention risk.
Either way, the customer’s attempt to save money on detention will result in increased expenses elsewhere.
Ultimately, the more a shipper or receiver can accommodate a driver, the easier it will be to get a truck into that facility at a better rate. Dedicated relationships will be formed with trustworthy carriers if they feel that their time is respected. A shipper/receiver with efficient load and unload times, fair hourly rates for detention, and flexible appointment windows will set themselves apart from their competition.