Supply Chain News: It’s Wait and See on Impact of Looming ELD Mandate

A Variety of Factors Moving Against Shippers as We Head into 2018 Dec. 11, 2017 SCDigest Editorial Staff At one level, it couldn’t come at a worse time. The looming Dec. 18 mandate requiring all over the road truck drivers to use an electronic logging device, or ELD, comes when freight volumes are kicking into higher gear, making truckload capacity increasingly tight. The fear is that that once implemented, the use of ELDs will in effect reduce capacity, frankly by eliminating the ability of carriers or individual drivers to cheat on meeting hours of service (HOS) rules by fudging manual, paper-based logs. Some also believe the requirements will force some carriers to leave the industry. Such paper logs have literally been around since the 1930s, when federal hours of service rules were first implemented. Just how large that impact will be is a big unknown. Estimates by various industry pundits have been in the 2-5% range. Most large carriers have been using ELDs for years – it is small and some mid-sized carriers, as well as independent drivers – where the impact will be felt, a group that makes up a large percentage of total industry capacity. Others say the 2-5% impact range is low, especially on some specific lanes. And it makes intuitive sense that carriers and drivers that have yet to install ELDs are more likely to be those that do cheat on paper logs. “I think false logs have been an epidemic, from the 1930s until right now, and they’re going to go away,” said John Seidl, a transportation consultant with Integrated Risk Solutions and a former FMCSA investigator, at an industry conference. Seidl also comment that “Why is this law in place? Because people die when some truck drivers work too hard. They work too hard because they don’t make a lot of money and shippers hold them up and they have to make up for lost time. In my view, the ELD is a godsend for the drivers.” Derek Leathers, CEO of truckload carrier Werner, recently said that some shippers may find as much as 80% of their freight in some lanes is moving currently on non-ELD compliance carriers, meaning they could see a big impact as the rule is enforced. The good news for shippers is that enforcement will be phased in. State inspectors will delay placing truckers out of service for failure to have an ELD until April 1, 2018. Instead, inspectors will issue citations to drivers “operating vehicles without a compliant ELD.”That move, announced earlier this summer, alleviated fears that thousands of truckers could be placed out of service for not having ELDs starting immediately on Dec. 18, stranding freight a week before Christmas, which would have sent spot market truckload rates through the roof. What’s more, in November the FMCSA announced those citations will not count against a trucking company’s Compliance, Safety, Accountability or CSA score, which many shippers use to determine a carrier’s eligibility to carry their freight. Still, the requirement is coming, and even at the lower ends of the impact estimates it may cause issues given the tight capacity seen in the industry. US GDP grew 3.3% in Q3, the government estimates, driving freight volumes higher. Total truckload moves in the third quarter set a record with 974,450 shipments, a rise of nearly 12% from the same period a year ago, according to the Transportation Intermediaries Association, an industry group that tracks freight hauling. That volume is sending rates higher. Spot van and refrigerated freight rates reached three-year highs in November as a monthly average. The number one factor impacting capacity is the on-going driver shortage. After declining earlier in the year, for example, driver turnover is now up again. Turnover at large truckload fleets rose 5% in the third quarter to a 95% annualized rate, according to American Trucking Associations John Larkin, noted transportation sector analyst for Wall Street form Stiffel, recently issued a research note in which he said it likely will be “a trucker’s market” in 2018. In the end, it will be well into 2018 before the impact can really be measured, but there is no question that a variety of trends are moving against shippers as we head into a new year.