Impact of Safety Rating on the profit of a Company

Updated on:
22.08.2022
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10 min

In any transportation business, rules are crucial not only for the organization of work but also for ensuring safety and security. Anything that involves risks can be eliminated by following certain norms and standards. The logistics market in the USA operates according to well-established rules. If you intend to become a part of this market, you will also have to follow certain rules and restrictions, which will help your business become successful and profitable.

In the USA, it is widely believed that the rules are the same for everyone because the primacy of order and reputation in the US market has been established for a long time. If you want to become a part of this business environment, it will be necessary to learn the basic rules and follow them to join the logistics business.

What Is Safety Rating?

Safety Rating is evidence that safety and security within one particular company complies with generally accepted standards. The main source of safety standards is the FMCSA (Federal Motor Carrier Safety Administration), an agency that regulates the work of the transportation business in the United States.

In order to declare their company as responsible and reliable, trucking business owners must present some mandatory parameters. This applies to things like management, employee recruitment, and the condition of the equipment. Zero percent rating is considered to be the best. It indicates, in particular, that the carrier complies with such parameters as:

  • driver's license standards;
  • financial policy;
  • compliance with the rules for transferring unsafe materials;
  • logging of accidents and reporting;
  • regular inspections, repairs, and proper maintenance of vehicles.

There are three Safety Ratings. Among them:

  • satisfactory;
  • conditional;
  • unsatisfactory.

Satisfactory indicates that the company, its employees, and the equipment are in excellent state. This indicator is considered to be the highest and it gives company owners zero percent rating.

The conditional rating is evidence that the company is on the verge of following main  safety rules, but there are certain problems. The conditional rating is a kind of warning to a company that it does not fit into certain standards. You can continue your work, however, the lenders, insurers, and brokers with whom you cooperate will be aware of your status. 

Therefore, it is important to follow the rules and regulations and improve your Safety Rating.

The unsatisfactory Safety Rating indicates that all major safety protocols have not been followed. In this case, the company is given a period of 45 to 60 days to ensure that all necessary changes are made and the rating is changed.

In order to find out your Safety Rating, you need to pass a compliance check. Some other cases also require this procedure. Among them there are the following:

  • a request to change the Safety Rating to the Federal Motor Carrier Safety Administration;
  • possible violations of the rules need to be analyzed;
  • scheduled security checks.
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How The Safety Rating Is Formed?

If the company violates the rules, it is fixed and certain points are attributed to each case. They are presented to both the driver and the company. After the verification procedure, the carrier company is assigned a rating.

In case the final rating is unsatisfactory, the Federal Motor Carrier Safety Administration bans the activity from the company. If the carrier still continues to work, there is a punishment for it.

With effort, you can appeal the rating and earn the trust of the authorities. In order to do this, you need to replace the manual or make a major overhaul. Using this method, you can make the workflow more stable, which can help you in changing the decision for the better. In addition, the severity of impairment also influences the outcome. In FMCSA, the sum of all points of violations is divided by the severity of violations, and, as a result, the sum of the rating of companies according to certain indicators comes out each month.

How Does Safety Rating Affect Profits?

Safety Rating affects not only the profit but also insurance. It has a bad effect on the company's work with brokers, as they analyze the Safety Rating when they consider a request for insurance renewal. They also check the company's violation index, and, based on it, a certain price for the rate is set. If you have a zero-percent security rating, then the price will be lower. Also, brokers check the reliability of the carrier, company’s work experience, and how trustworthy it is in general.

The Safety Rating affects the profit mainly because it determines what loads the broker will provide to you. If your rating is unsatisfactory, the company may refuse to cooperate with you or give you cargo that is more expensive. You don't need to take those risks in your work. If you establish yourself as an unreliable carrier company, it will be hard to work with partners.

In addition to profit, Safety Rating impacts insurance and factoring. Insurers pay attention to the Safety Rating because it tells them about the unreliability of the carrier, non-compliance with rules, the lack of competent driver instruction, and excessive risk. That is, Safety Rating is also important because if the result is unsatisfactory, it will be extremely difficult for you to get insurance. In factoring, if you decide to choose a company for cargo lending, you will be faced with the fact that they will also check your Safety Rating. To cooperate with such a company, you will need to fill out a number of documents, and the Safety Rating is one of them.

Thus, in order to successfully cooperate with any partner, you need a satisfactory rating. It indicates your reliability and that you are safe to cooperate with. Moreover, the FMCSA rating is concrete proof of this. By simply following safety rules and complying with standards, you can ensure success and profits in your business.

How to improve security with TMS?

The TMS, or transportation management system, is a flexible and powerful tool that can assist you in ensuring safety in your company. As in other aspects of any transportation business, in the field of safety, competent management is the key.

Equipment/Transport Registration Data Accounting

Data management is one of the important aspects of security. Transport registration data will help you to have a clear picture of the state of transport and documents for it. It is also essential for safety management.

Driver Certificates Accounting

Driver certificates are also important for ensuring safety. Without the drivers’ responsible attitude to their trucks, you can bear significant risks. The transportation management system can assist you in checking driver's certificates in your company.

Driving Licenses Accounting

Having clear data on driving licenses, you will not get into trouble if there is something wrong with this type of documentation and your partners may notice it. By adjusting and updating the information in time, you will gain control over it and will be able to ensure that all the driving licenses are in proper condition.

Driver Training Programs

Compliance with the standards training programs for drivers also affects the Safety Rating. To ensure a high Safety Rating, a good reputation, and profit in the future, you need to pay attention to this aspect. The transportation management system will help you administer the process.

Logistics (Transportation),
Education
Transport Learning Management System: Case
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Conclusion

Safety Rating is evidence that your reputation includes reliability and compliance with the rules and regulations. Without strict accordance with generally accepted standards, you will not be able to fit into the reality of the US market, and, accordingly, this will affect your profits. In order to get a satisfactory Safety Rating result, simply follow the regulations.

If you get an unsatisfactory result, do not be discouraged. By taking some simple steps and improving the overall state of the company, you can get an appeal and improve the rating. The Safety Rating depends on simple measures, and if you take them, you can improve the reputation of your company.

With the help of the TMS system, it will be easier for you to organize processes and get a satisfactory outcome. The system will assist you with digitizing important tasks, and your task will only be to monitor your company’s compliance with safety rules.

Max
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Of course, this will require some financial investment from you at the beginning of the path to automation, but over time, this approach usually fully pays off. I can talk about it in detail.
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