Are you losing money with Activity-Based Compensation?

Activity-based compensation has been touted as a way for fleet managers to increase delivery and driver productivity while managing labor costs. Private fleets are particularly embracive of this model as a means of reducing overall operations costs. See Gary Petty’s article from the National Private Truck Council (NPTC) and Fleet Owner magazine. But how can you ensure that the activities you have defined are accurately measured? Do you know what the cost variance is between one activity’s compensation rate and another?

Many Cadec customers are using their Mobius TTS and Series 100 on-board computers (OBCs) to aid in their ABC program. Yes, on-board computers are commonly implemented to improve safety or increase fleet and driver productivity. However, driver safety can also be calculated into a compensation plan. Speeding, excessive idle, HOS violations are negatives that can be built into the ABC.

ABC rewards efficiency, which is often very difficult to measure accurately. On-board computers provide a level of accuracy that simply cannot be obtained by manual processes. Mr. Petty agrees in his article, stating “Using on-board technology is critical. Managers analyzed data on 3,000 trips to and from their stores to set the standards for the ABC program.”

Without accurate data, your ABC program may be costing you more than you think. For example, one Cadec fleet management customer incorporated a driver incentive program that would measure the time from arrival to departure at each delivery stop. The goal was simple; improve efficiency to allow for more stops in a day. Drivers were incented to make their deliveries within a certain amount of time. Originally, the driver would call their dispatcher when they were leaving the site. When the customer began using the on-board computer’s GPS and geofencing technology, they found that drivers were often calling in 1-3 minutes before they actually left the site in order to hit their incentive window. By eliminating these inaccurate incentive payments, this customer was able to reduce payroll by over $800,000 across 450 drivers.

The geofencing features can also help identify if/when a driver has reached a pickup/delivery location, but may still be in drive mode, waiting in line for their load. Accurate identification of when a vehicle enters and exits a site is essential when implementing ABC programs, and while some drivers will look for ways to cheat the system, once implemented, drivers embrace the use of on-board systems and use them to their advantage to improve their overall productivity.

Author: Gerry Kirouac