Shippers Ready to “Bear the Brunt” of Higher Trucking Rates for Electronic Logging Devices

The tightest truckload market in at least four years will be further exacerbated by the long-awaited mandate next month that trucks are outfitted with electronic logging devices which the government says will crack down on drivers working excess hours behind the wheel.

“There are two components to this,” Mark Rourke, executive vice president and COO of Schneider National, the nation’s second-largest TL carrier, said.

“One is how well will people adapt? When you go from paper to electronic (logs), your business model changes. The second component is how many (independent) drivers change? How many participants leave the marketplace?”

Most truckload executives and brokers say the productivity hit on ELDs will be in the 4-to-7 percent ranges.

Most of the larger TL carriers - the J.B. Hunts, Werner Enterprises, Schneider’s of the world - have long ago implemented their mega fleets with the devices which they say aid in productivity, route management, billing and other planning areas.

“The impact will be on those carriers with 10 or fewer trucks,” said Transplace CEO Tom Sanderson. Approximately 90 percent of the trucking industry is comprised of fleets with 10 or fewer trucks, according to American Trucking Associations.

They are lifeblood of truck brokers,” Sanderson said of smaller carriers. “(If they’re not in compliance), that could exacerbate the spot market further.”

That could affect truck brokers because it will make it harder for them to cover freight. But at the same time, the shipper will be paying more in higher rates.

“So from a financial standpoint, I think brokers will work out quite well in a tight market. At the end of the day, it’s shippers who bear the brunt of increased prices - not the broker.”

Implementation is set to begin Dec. 18. At the beginning, it will be in two phases – fines starting in mid-December, then violators placed out of service starting next April 1. That is unless a last-second Hail Mary congressional objection is upheld.

The Owner-Operator Independent Drivers Association is one of 31 organizations in the coalition asking to delay the rule for two years. Industries represented include agriculture, pyrotechnics, utility contractors, livestock and several others that say they will be negatively affected by the mandate.

“The electronic logging device mandate is written so broadly that it has far-reaching implications well beyond the traditional trucking industry,” said Todd Spencer, executive vice president of OOIDA.

The group supports a bill proposed by U.S. Rep. Brian Babin, R-Texas, that would delay the ELD mandate for two years. Babin’s bill, H.R. 3282, the ELD Extension Act of 2017, would postpone the current implementation date until December 2019.

The coalition says the mandate should be delayed until the Federal Motor Carrier Safety Administration addresses numerous unresolved issues identified by impacted stakeholders.

OOIDA says there are “significant technological and real-world concerns” that have not been addressed by FMCSA. Among these concerns cited by OOIDA was a lack of certification of devices, connectivity problems in remote areas of the country, cybersecurity vulnerabilities, and the ability of law enforcement to access data.

But Lane Kidd, managing director of the Trucking Alliance, which has pushed for ELDs for at least the past six years, said ELDs, will “unquestionably reduce truck driver fatigue” and aid highway safety.”

“ELDs will reduce large truck accidents on our nation’s highways,” Kidd said.

ELDs will make it easier for law enforcement to verify how many hours a driver has been behind the wheel. Further, Congress has voted numerous times to require electronic logging devices, ELDs.

“The federal courts have upheld their congressional action,” Kidd added. “Yet OOIDA and other groups continue to ignore these facts, suggesting the rule may not happen and are now taking their members perilously close to having their trucks taken out of service for not installing them.”

Some major truck brokers say the advent of ELDs will just place a further premium on brokerage services able to secure capacity in a tight market.

“Anytime there is change or disruption in the market it creates opportunities and challenges for companies like us,” Jeff Tucker, president of Tucker Company Worldwide, told Logistics Management.

“It comes down to what are your relationships with your carriers? This can be a tremendous opportunity for brokers.”

Tucker advised shippers to develop strong relationships with a core group of carriers and truck brokers to get through tight markets such as this.

“Some shippers have a flawed network and only think of brokers as a safety net. They should have a relative handful of trusted brokers along with core TL carriers to more easily weather storms like this.”

Tucker noted that less than 1 percent of TL carriers have more than 500 trucks. “If the 1 percent gets tight and you don’t have 4-6 brokers in your core program, you’re going to be paying through the nose for capacity when the ELD mandate takes effect,” he said.

Related: 3PLs & Freight Brokers Clambering to Offer Shippers Deals in Tight Capacity Truckload Spot Market