The trucking world can be confusing at times and no where else is this more obvious than the trucking world's use of the term mile.
Since the default pricing variable for trucking is the mile, it has always been in the carrier's best interest to line up their expenses (or inputs) to match this variable. The largest expense for trucking companies is driver compensation. For those people outside of trucking, it would be natural to assume that:
- Driver picks up load; and
- Drives X miles to deliver load; and
- Gets paid for all of those miles. The end.
Here is where it gets confusing, a ‘mile' at one company does not necessarily equal a ‘mile' at another. In fact, there are three main types of mileage calculations utilized by trucking companies, and the differences between them, depending on origin and destination can be significant. This has long been a point of frustration with drivers, making it difficult to not only understand what they will be paid, but it also makes it difficult to compare compensation amounts between companies.
Source: SONAR – MILTR.VCFOO, MILTR.RCFOO, MILTR.FCFOO
Let's start with the most accurate mileage type first – Hub miles. The way to think of Hub miles is simply the total miles the truck is driven in the process of delivering a load. The word ‘hub' is a reference to the hubodometer, a measurement device which was installed on a truck's axle back when odometers were not considered reliable instruments. Today, that's not the case, and the odometer is considered the source of truth for reporting hub miles. The miles travelled are stored in the tractor's ECM and transmitted to various databases used by trucking companies via various wireless and manual methods. In recent years, there has been a growing trend of companies starting to pay drivers based on hub miles, as the competition for experienced, professional drivers has increased.
The next type of mile on the spectrum of accuracy, are Practical Miles. The starting point in the calculation of practical miles is locating the nearest U.S. Post Office for both your origin and destination locations. Using the base information, services such as PC Miler (Trimble) or Intelliroute (Rand McNally) calculate the most likely (or practical) mileage based on truck-specific/designated routes. Practical mile calculations place a higher priority on interstate highway routes over toll and secondary highways. Progressive fleets have been using practical miles for decades, for the purposes of calculating driver compensation. Using practical miles as opposed to hub miles, allows carriers to establish a benchmark target or standard for each load, and a natural incentive not to deviate from that target.
The final and oldest mileage type (for the purposes of freight hauling) are Short Miles. Short miles, otherwise known as HHG (Household Goods) miles are still used today by some carriers, even though the mileage deviation from hub miles can be as much as 15%. HHG miles were originally developed by the Department of Defense, as a way of establishing an upper limit on the cost of moving servicemen and women across the country. Short miles are similar to practical miles in that the base calculation starts with the distance between the nearest post offices within each zip code area. However, this is where the similarities end. With short miles, the calculation to determine mileage does not take into account the most efficient (interstate highways) route for getting from origin to destination. It simply provides a low-end benchmark for the least number of driveable miles between two points, regardless of infrastructure or typical congestion.
Since driver payroll is a multi-variable calculation, it is possible for a driver to make more money, while being paid based on short miles. Likewise, it is possible that a driver could get paid less with hub miles, relative to other carriers on the same routes. Drivers must understand their base rate per mile, the mileage type, plus any bonuses, per diem pay, and benefits to truly evaluate or benchmark their compensation with other carriers. Conversely, it is in the carrier's best interest to educate their drivers on their ‘effective' compensation rate per mile.
Image Sourced from Pixabay