Logistics News

Many owner-operators ill-prepared for December ELD mandate, new report says

With the Dec. 18 deadline for mandatory electronic logging devices (ELDs) quickly approaching, there is concern that a majority of the 3.5 million affected trucks have yet to procure or install the required devices.

With the Dec. 18 deadline for mandatory electronic logging devices (ELDs) quickly approaching, there is concern that a majority of the 3.5 million affected trucks have yet to procure or install the required devices.

While most of the large truckload and less-than-truck fleets have been using these devices for years, shippers should be concerned that smaller fleets and owner-operators are behind the curve on this.

A new report says this delay in compliance is bound to cause a shakeup – and possible capacity crunch-- for the trucking industry and shippers in the coming months.

The mandate is expected to have a “serious, though not devastating effect” on long-distance trucking and shippers, according to a new report by IBISWorld, a Los Angeles-based global industry research firm.

Although many independent operators have threatened to strike or quit if the rule goes into effect, IBISWorld says it doesn’t expect such serious action to pan out, at least on a large scale. Large carriers rely on subcontracted sole proprietors to help move freight. So IBISWorld predicts if drivers quit and the driver shortage grows, trucking companies will start paying more for subcontractors, which will bring owner-operators back into the fray.

In the short term, IBISWorld expects that shipping prices will rise moderately, but much of this increase is not expected to occur until after peak shipping season (October through December).

“In the long-term though, shipping prices will revert to being primarily dictated by fuel costs, according to IBISWorld Procurement Research Analyst Ashley Cruz, who wrote the report.

However, the ELD mandate will help reduce overhead and depreciation costs for carriers, Cruz reports, tempering future price growth.

“The Federal Motor Carrier Safety Administration (FMCSA) insists that ELDs will save trucking companies a collective $1.6 billion per year by limiting paperwork costs and enhancing fuel efficiency,” Cruz told LM. “However, most carriers and independent operators claim that the mandate will increase their compliance costs. This will mean higher prices for businesses procuring trucking services.”

The FMCSA is moving toward the Dec. 18 implementation date in the face of two pieces of legislation now before Congress. On would delay implementation two years. The other would order the Department of Transportation to analyze whether a full or targeted delay in ELD implementation and enforcement would be appropriate.

It is certainly possible Transportation Secretary Elaine Chao could order a delay. Recently, the DOT squashed plans to require sleep apnea screening for truck drivers and train engineers. Those rules were promulgated under the Obama administration. The Trump administration has been cutting or eliminating many of those proposals when it can.

The ELD mandate was specifically exempt from an executive order for federal agencies to freeze new regulations. In June, the Supreme Court declined to hear OOIDA’s petition to strike down the mandate on privacy grounds.

On July 18, a new bill was introduced in the House of Representatives that would extend the deadline for compliance to 2019. However, the bill has not yet made it out of committee and is considered an unlikely path to success for opponents of the mandate, especially before the existing deadline in December. The bill to automatically delay the implementation two years that was introduced by Rep. Brian Babin, R-Texas, who says it has 38 co-sponsors.

Another impediment to full implementation is the fact that it is estimated 70 percent of the commercial motor vehicles that fall under the ELD rule are not equipped with ELDs yet, according to IBISWorld. The American Trucking Associations reports that there are 3.496 million Class 8 tractors on the road today.

In 2015, the FMCSA  mandated that all commercial interstate vehicles install an electronic logging device to ensure compliance with hours-of-service laws. The idea was to fight fatigue caused by drivers who work excessively and evade HOS rules through the use of paper logs, often referred to as “comic books” by the drivers themselves.

The FMCSA insists that ELDs will save trucking companies a collective $1.6 billion per year by limiting paperwork costs and enhancing fuel efficiency. However, most carriers and independent operators claim that the mandate will increase their compliance costs.

For example, IBISWorld says ELD provider Omnitracs LLC estimates that new devices will cost carriers between $199 and $2,200 per truck, plus a monthly service fee of $20 to $60 per truck.

For a carrier with a fleet of 10,000 trucks, the service fee alone amounts to between $2.4 million and $7.2 million annually, not including the one-time costs associated with procuring and installing the ELD devices, which must be hard-wired into the trucks’ engines.

IBISWorld says owner-operators, which already generate razor-thin profit margins, “often do not have the capital to purchase a new device outright.” Many ELD providers are offering a financing program for their products, but owner-operators only require one ELD each, and thus “do not meet the quantity threshold” to be given financing options, the report said.

Moreover, owner-operators are often subcontracted by larger trucking companies, and they do not have enough pricing power to increase their rates to cover the higher costs. These drivers fear that electronic devices will allow their contracting companies to exert more pressure and take advantage of independent drivers. This dynamic will likely exacerbate tensions that already exist between these two groups over whether full-time owner-operators should receive employment status and benefits, IBISWorld concluded.

IBISWorld anticipates that the combination of higher costs and stricter oversight will cause some industry operators to exit the market. That would exacerbate the current driver shortage, and force larger carriers to boost driver wages and invest in additional hiring efforts.

Altogether, these trends will increase trucking companies’ operational costs, prompting them to pass these increases on to buyers in the form of higher prices. In fact, IBISWorld estimates that the price of national trucking services will rise 6.2% in 2017 alone. That figure is about twice as high as most Wall Street analysts estimate trucking costs will rise this year.


Article Topics
ELD   FMCSA   Regulations   Trucking   All topics


Comments
You must be logged in to post a comment. Login.

 
Latest Logistics News
Transportation Predictions That Will Shake-Up the Supply Chain Industry In 2018
Dan Clark, Founder and President of Kuebix, gives his annual vision of what he sees happening in the transportation and supply chain industry including; tax reforms, decreased capacity, higher rates, and…

Home Depot Considers Buying $9 Billion XPO Logistics So Amazon Doesn’t
If Home Depot were to make an offer, one main impetus would be to keep XPO out of the hands of Amazon, which the home improvement retailer believes has also considered buying the logistics company, according…

CSX Provides Surface Transportation Board with Update on Precision Scheduled Railroading Progress
In a letter to leadership at the United States Surface Transportation Board, CSX CEO James Foote outlined the progress the Jacksonville, Fla.-based Class I freight railroad carrier has made in its ongoing…

The Five Ways 3PLs Can Retain Their Employees
Creating a positive work environment can help your 3PL improve its operational performance.


 

24|7 Pro Team

The 24|7 Team is your direct pipeline to solutions for your business challenges. It's your opportunity to have supply chain and logistics experts look at your specific challenges and needs, and give you free, no-obligation advice, solutions, and information.

The 24|7 Team will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

1
  Choose a topic for your RFP

Transportation RFP/RFI

The Transportation RFP is your direct pipeline to solutions for your transportation challenges. It's your opportunity to have logistics experts look at your specific transportation challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect software or system can be an indomitable challenge. Using this transportation/TMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your Request for Proposal list.

Warehouse/DC Management RFP/RFI

The Warehouse Management Systems (WMS) RFP is your direct pipeline to solutions for your WMS challenges. It's your opportunity to have logistics experts look at your specific WMS challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request.

Choosing the perfect WMS solution can be an indomitable challenge. Using this WMS RFP will simplify the task of creating a database of likely partners, building your knowledge base, and preparing your WMS Request for Proposal list.

Supply Chain RFP/RFI

The Supply Chain RFP is your opportunity to have logistics experts look at your specific challenges and needs, and receive free, no-obligation advice, solutions, and information. It simplifies finding a pool of likely partners, building your knowledge base, and preparing your Request for Proposal list. The companies in the Logistics Planner have agreed to respond to your request for in-depth information and follow-up, and your request is totally confidential.

Software/Technology RFP/RFI

The Software/Technology is your direct pipeline to solutions for your logistics information technology challenges. It's your opportunity to have logistics experts look at your specific technology challenges and needs, and give you free, no-obligation advice, solutions, and information specific to your request. Whether it's WMS, TMS, Mobile or Cloud, our pros can help.

The companies listed below have agreed to respond to your request for in-depth information and follow-up. Your request is totally confidential.

Executive Education RFI

The Logistics and Supply Chain Education RFI can help you identify the schools, coursework, continuing education, distance learning and certification opportunities available from leading logistics educational institutions.

Upgrade and improve your logistics and supply chain skillsets. Whatever route you choose—advanced degree, executive education, certification or distance learning—the time and money you invest in your education today can pay off in continued career success tomorrow. Contact leading universities and professional institutions for the information you need to prepare for the future.

Third Party Logistics RFP/RFI

This 3PL Request for Proposal (RFP)/Request for Information (RFI) can help you find the 3PL and 4PL providers that can meet your specific 3PL service challenges and needs. The 3PL companies below will provide free, no-obligation third-party logistics advice, solutions, and information.

Ask your 3PL questions, you'll get answers. Simply complete the information, and detail your 3PL challenges. Then, check off the third-party logistics companies that you want to review your request.

1. Choose an RFI topic.
2. Enter your contact information and challenge.
3. Select companies and optional categories.
4. Submit.


2

Your Information



Your Challenge, Problem or Request *

3

Select Transportation Companies

  • Select All

  • 3Gtms
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Kuebix
  • Landstar
  • Legacy Supply Chain Svs.
  • One Network
  • Pitt Ohio
  • Purolator
  • Quintiq
  • SEKO Logistics
  • SMC3


Select Relevent Categories

  • Air Freight
  • Intermodal
  • Motor Freight
  • Ocean Freight
  • Rail Freight
  • TMS

Select Warehouse/DC Management Companies

  • Select All

  • 3PL Central
  • Apex Supply Chain Tech.
  • Honeywell Intelligrated
  • Kuebix
  • Legacy Supply Chain Svs.
  • Swisslog
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Auto ID & Data Capture
  • Automation
  • Conveyors & Sortation
  • Lift Trucks
  • Packaging & Labeling
  • Pallets & Containers
  • Shelving & Racking
  • WMS

Select Supply Chain Companies

  • Select All

  • 3Gtms
  • 3PL Central
  • Amber Road
  • Apex Supply Chain Tech.
  • APICS
  • BluJay Solutions
  • CSX Trans. Intermodal
  • Frontier Business
  • Kuebix
  • Legacy Supply Chain Svs.
  • Logility
  • One Network
  • Purolator
  • Quintiq
  • SMC3
  • Synchrono
  • TAKE Supply Chain
  • Westfalia Technologies
  • Zebra Technologies


Select Relevent Categories

  • Global Trade
  • Inventory Management
  • Risk Management
  • Sustainability

Select Software/Technology Companies

  • Select All

  • 3GTMS
  • 3PL Central
  • Apex Supply Chain Tech.
  • BluJay Solutions
  • Honeywell Intelligrated
  • Frontier Business
  • Kuebix
  • Logility
  • One Network
  • Quintiq
  • SMC3
  • Swisslog Logistics
  • Synchrono
  • TAKE Supply Chain
  • Zebra Technologies


Select Relevent Categories

  • ERP
  • Sales & Operations
  • Sourcing/Procurement
  • Optimization
  • Transportation Mgmt
  • Warehouse Mgmt

Select Executive Education Choices

  • Select All

  • Graduate Courses
  • Online/Distance
  • Executive Education
  • Certifications
  • Undergraduate
  • Seminars
  • Associations
  • Conferences
  • Tradeshows


Select Third Party Logistics Companies

  • Select All

  • 3PL Central
  • Landstar
  • Legacy Supply Chain Svs.
  • Purolator
  • SEKO Logistics
  • Westfalia Technologies


4
 

24|7 Company Profiles