Assuming the US economy continues to grow, shippers are in for a rude awakening in the ELD era: double-digit truck transport rate hikes.
The first day of a new era in trucking seems much like any other day. Truck drivers hit the road early this morning, many long before the sunrise, and drivers that began their work day last evening ended them at dawn. Shippers and receivers across the United States were preparing to ship loads on freight docks or getting ready to send goods onto stores or even homes.
Truck drivers started their day with pre-trip safety checks before climbing into the cab and getting on the road. Once on the clock, they have 11 hours to drive and 14 hours to work. What is different on Dec. 18 is those drivers now are required by law to record their duty status usingelectronic logging devices (ELDs), not the paper log books used since the 1930s.
This is a day long anticipated by many safety advocates and dreaded by many — although far from all — truckers. Many of the largest trucking companies already have ELDs installed in their truck cabs and have trained drivers on how to use them. As a result, they are more efficient trucking operators, and they are ready for whatever this day, and the months ahead, may bring.
However, for smaller trucking companies and independent truck drivers, the story can be very different. There is no way to know how many small trucking companies — those operating fewer than 20 vehicles or even one to six trucks — began the work day today not in compliance with the federal ELD rule. Based on the most recent surveys, the odds are it is a fairly high number.
Starting now, truck drivers stopped by police or stopping at weigh stations may receive citations for not having an ELD installed. That will not put them out of service or count against federal safety scores, but it could cost them money. The real impact of the mandate will be felt when state and federal officials begin putting non-compliant drivers out-of-service April 1.
If freight demand remains high in the second quarter, and truckload capacity tightens, shippers may see transit times stretch out by hours or days as electronic logging eliminates the wiggle room to fudge their record of duty service reports that truckers enjoy with paper logs. That wiggle room can add up to a lot of hours, whether drivers cheat occasionally or recurrently.
The implications extend well beyond the truck cab. The ELD mandate presents a three-dimensional challenge for shippers that often think in a two-dimensional, transactional mode. The interconnected, multimodal nature of supply chains means the loss of productivity in one link of the chain, the long haul, could be exacerbated by inefficiencies in other links.
That means the impact of missed deliveries or inaccurate demand forecasting could be amplified once freight ends up in a long-haul tractor-trailer, and after it is delivered for final distribution. And the mandate arrives at a time when big box and e-commerce retailers are demanding more precision in on-time delivery and fulfillment from their vendors.
This is as “Y2K” moment for trucking, said James Sembrot, senior director of logistics strategy for brewing company Anheuser-Busch. He refers to the Year 2000 problem, which threatened to crash computers globally that had not been reprogrammed to handle four-digit year dates. The feared disaster did not happen, because extensive preparation worldwide avoided disruption.
Many truckers, shippers, and their logistics partners are by no means well prepared for ELDs. For one, there is no one “fix” that can be applied universally across trucking and across supply chains. Second, the ramifications of the mandate for shippers may be very real, but they are not as readily identifiable as the citations, fines, and out-of-service orders truck drivers may face.
Anheuser-Busch is one of those companies that is heeding warnings of potential supply chain disruption, if not today, down the road, and has been working with motor carriers and technology partners to reduce driver detention and speed freight and get better visibility into its inventory in motion. Sembrot believes ELDs will reveal “inefficiencies” that hurt shippers as well as drivers.
“We think the entire shipping system will benefit from the visibility that can be enabled through ELDs,” Sembrot said. “There’s a clear safety play. Better visibility will drive better behavior and compliance with regulations, and that we will fully support. More visibility into inefficiencies in loading and unloading will lead shippers and receivers presented with data to take action.”
There are causes of delay beyond a shipper’s control, however, starting with congestion. In 2015, truckers experienced 996 million hours of delay on US highways as a result of congestion, the American Transportation Research Institute said earlier this year. That is the equivalent of 362,243 commercial truck drivers sitting idle for an entire working year.
“The part of the trip that takes place on the road is getting tougher, thanks to congestion and highway traffic in general,” Sembrot said. For shippers, “it’s at point A or point B you can drive improvement in the journey, not when the driver is traveling between them. We’ve spent a lot of time with our carriers on how do you get them [drivers] in and out [of facilities] faster.”
For every Anheuser-Busch, there are many other companies, especially smaller to mid-sized shippers, that have not done as much preparation, if any, for the implementation of the ELD mandate. That was clear in a survey conducted by The Journal of Commerce, shipper group NASSTRAC, Truckstop.com, and the Transportation Intermediaries Association this autumn.
The survey results indicate some shippers are slow to heed the warnings of double-digit transportation rate hikes, or expect the overall price hikes will not be that dramatic. They also show many shippers, one-fifth of those surveyed, have done nothing to prepare for the ELD mandate. “Shippers are in for a rude awakening,” one logistics provider surveyed said.
They have already felt a sharp jab to their transportation budgets. “Pricing for trucking is growing ever stronger and continuing to gain momentum,” Donald Broughton, principal of Broughton Capital and analyst and commentator for Cass Information Systems, said this week. A stronger US economy has pushed truckload rates up year over year the last eight months, he said.
Shippers should expect the implementation of the ELD mandate to keep the burner beneath truck pricing hot, pushing up rates in 2018, said Satish Jindel, president of SJ Consulting Group in Pittsburgh. “Shippers should realize the rate increases will give them safer driving conditions on the highways. Wouldn’t they rather pay a few pennies more and not be hit by a truck?”
Beyond rate increases, shippers need to watch for a “thickening” of their supply chains, for next-day deliveries that become two-day runs and two-day runs that take three days. Truckers expect to lose anywhere from 2 to 8 percent of productivity, meaning miles driven, as they shift from paper logs to electronic devices, partly because of training requirements and unfamiliarity with the new devices, partly because fewer chances to cheat means fewer miles driven.
“Cheating? Everybody’s done it,” Ed Ferguson, a retired truck driver and driver recruiter, told JOC.com, especially to get home more quickly or to recover hours lost to being stuck in congestion or at a receiver’s dock. His former company, a mid-sized truckload carrier, installed ELDs several years ago, and that changed how drivers were paid and dispatched.
“Now a lot of drivers are making shorter runs, almost relays,” Ferguson said. He said the company also began paying some drivers by the hour, as well as by the mile. “If they ran out of hours, we hired a driver to go out and pick them up and drive the truck back to the terminal.” Importantly, he said, the ELD mandate puts the onus on the dispatcher to closely track hours.
In 2018, keeping track of time, and turns, will become more critical at every point in the supply chain, from port terminal gates to truck terminals to a shipper customer’s docks. Ultimately, the ELD mandate is about managing time safely, starting, but not ending, with the driver. “Just learning how to manage their time is going to be the biggest thing,” said Ferguson.
Published on JOC.com (https://www.joc.com)
William B. Cassidy, Senior Editor | Dec 18, 2017