Unless you’ve been living in the proverbial rock for the last 18 months, you are certainly aware of the upcoming requirements for virtually all carriers to install and utilize Electronic Logging Devices (ELDs) to record a driver’s Hours of Service (HOS) while working.While the mandate does not alter the current HOS requirements, the use of ELDs will prevent drivers and carriers from cheating on their logs in order to make it to a destination on time.

Delays during unloading and loading plus highway traffic are the most common reasons for “altering” paper logs. Carriers must compete for a shipper’s business and often the cost of strict compliance has meant the loss of business for a carrier, not to mention a loss of income for the driver or owner-operator. Carriers are unwilling to risk disappointing their customers, particularly when there are competing carriers who were willing to “bend” the rules in order to provide the expected service.

How will ELD’s impact truckload capacity?

While it’s difficult to precisely quantify the impact of the ELD mandate, estimates from industry analysts and trucking company executives rage from a 3%-6% reduction of truckload capacity, with some estimates going all the way up to a 10%. On average, that may not seem like a whole lot. But one needs to dig a bit deeper to fully appreciate the details.

In a 2016 survey by Transplace, over 80% of carriers with 250 trucks or more in their fleet had already implemented ELDs, and the remaining carriers were in the process of implementation. So again, one might think that this issue may not be all that big a deal, since all the major carriers seem to have already installed ELDs or are about to install them.

But it is a different story for smaller fleets.In the survey, only about a third of the fleets under 250 trucks had implemented ELDs. An even greater percentage (38%) had no immediate plans to do so. Large fleets that have already implemented ELDs note that it took some time for them to re-engineer their networks and operating procedures in order to adapt to the strict limitations of ELDs. But large fleets have the network density that smaller carriers lack, so many of the smaller carriers will struggle to adapt.

Al Lacombe, Director of Safety and Training at Dupre’ Logistics noted in a recent interview that Dupre’ first began implementing automatic onboard recording devices in 2006 and by February of 2007 had installed the equipment on all of their 560 trucks. Lacombe mentioned that initially there was resistance from drivers, but “within 90-120 days”, both drivers and dispatchers supported the technology because it reduced disputes between drivers and dispatchers. “We focused on accountability, and the technology enabled safer operations.”

Despite the positive impact of ELDs, many small carriers are still hoping the mandate gets overturned or delayed. The Owner-Operator Independent Drivers Association (OOIDA), an industry group that represents small carriers and independent owner-operators filed an appeal to the US Supreme Court just this April to block implementation of this mandate on the basis that ELDs constitute warrantless surveillance on drivers and as such, is a violation of their fourth amendment rights.

It’s a small (Fleet) world after all

What makes these facts more important is that the vast majority of carriers (~90%) have six trucks or less. These carriers are most at-risk when the ELD mandate goes live this December. Many of these smaller carriers are dependent on a single customer for the majority of their revenue. Shippers often depend on a local “hip pocket” carrier as the primary option at a given plant or warehouse. Because of the carrier’s dependence on a single shipper, they tend to have a much more “flexible” orientation towards Hours of Service. Shippers who enjoy such relationships currently need to understand how and when these carriers are going to implement ELDs.

Spot market shippers are vulnerable

Shippers that rely heavily on the spot market are more at risk of disruption that those that have fixed or “contract” rates with carriers. With the slowdown in truckload volumes in the last two years, many shippers have found the spot market to be preferable to longer-term contract rate agreements. But don’t expect that to last forever.Industry analyst Noel Perry stated recently in an FTR and Associates webinar that

“…the spot market tends to be much more volatile, with the 4% increase in contract rates translating “easily” to a 15-20% upswing in spot pricing.

“There’s a real exposure if you’ve got a lot of spot business,” Perry said.”

On the opposite end of the spectrum, shippers that utilize dedicated capacity have the least amount of risk.Not only that, dedicated fleet solutions offer exceptional visibility – a key capability in today’s demanding customer environment. Improved visibility is certainly on the wish list of Brian Morgan, senior director of logistics and process excellence at Leviton Manufacturing, and so is securing capacity ahead of any “ELD effect.”

“Part of our mitigation planning is making sure we have more than one option,” Morgan said at NASSTRAC [A trucking industry conference]. “We utilize a dedicated fleet and I think you’ll see more shippers look at that as an option.”

Not just the carrier’s problem

Current Federal regulation prevents carriers from harassing drivers into violating HOS regulations.Of course, not many employees are willing to file a complaint with their employer if they desire to remain employed, so complaints are rare.The new mandate includes a “Coercion” clause that expands the scope of harassment to both shippers and 3^rd-Party logistics companies. The DOT has noted that shippers and 3PLs will no longer be able to claim ignorance, and will be subject to up to $11,000 in fines per incident of coercion.

What should shippers do?

While there’s still time to act, shippers need to be asking the following questions :

1. For your truckload carriers, ask them what is their plan to comply with the ELD Mandate? How much of the freight that they handle for your company is riding on trucks without ELDs currently?
2. What amount of our truckload freight currently rides with carriers who have yet to implement ELDs?
3. How much of our truckload freight spend is spot vs contract rates?

Steps shippers can take to minimize impact

1. Implementing a drop trailer program
2. Improving our appointment scheduling for loading and unloading
3. Offering flexible receiving and shipping hours
4. Implemented a Dedicated Fleet operation

The ELD mandate will impact capacity and ultimately rates, but the impact will be felt unevenly throughout the truckload shipper community.

Take action now to make sure that you are not one of those shippers.Need some help?

Reach out to your Dupré Logistics contact. We are always forward-thinking, and you should be too.