How to cope with US trucking’s short-haul sticker shock

How to cope with US trucking’s short-haul sticker shock

Life three months into electronic logging devices (ELDs) has been thrilling, to say the least. Full enforcement is just a week away, and when that happens, we are likely to see a bigger effect in many areas. As a broker we are in a unique position to evaluate the impact from the carrier and shipper perspective. As the entire over-the-road marketplace struggles to make sense of current conditions, prepare for the future, and learn the new normal, here are some anecdotes we have compiled so far.

Short-haul sticker shock

One of the most significant impacts of the ELD mandate has been the sticker shock of short hauls. Generally, drivers are paid by the mile, so it makes sense that drivers want to secure hauls that allow them to drive 400 to 500 miles per day, in order to make the best of their time on the road and the biggest paycheck. Before the mandate, drivers might have been willing to take a chance on a short, regional move to keep moving. Under ELDs, they are much more hesitant. Many carriers simply refuse short hauls. If you have to ship short haul, firstly, prepare to pay more. Secondly, your accuracy and your ability to turn the driver around so that he or she is not waiting at your dock, or your customer’s dock, is paramount. Running out of hours on a short haul guarantees the driver’s next load is picked up late or is missed entirely, so the carrier may be unwilling to handle future loads.    

As carriers upcharge shippers for shorter moves, the location of distribution centers (DCs) becomes more important than ever. Most DCs were set up to reach the general population overnight, so budgets will be impacted, and will influence where future warehouses are located — and ultimately cause shippers to rethink the number of warehouses they utilize.

Parking is also at a premium. Even with stricter adherence to hours of service, drivers are willing to stop well short of their maximum hours if they can secure safe parking and amenities at a truck stop. This further exacerbates the capacity situation.

ELD adoption is still an issue. According to the Bloomberg/Truckstop Quarterly Truckload Survey conducted by Truckstop.com and Bloomberg, 28 percent of truckers have yet to become compliant — to the tune of about 868,000 drivers. Trucks that are found not compliant after April 1 will literally remain stuck on the side of the road for a mandatory hours reset, and then allowed to proceed to their next stop only. At that point, the truck may not move again until an ELD is installed.

Shipper uncertainty around 2018 to 2019 transportation budgets is high. One prospective customer reported that its 2017 transportation spending increased 500 percent over its budgeted amount in 2017. General Mills’ stock tumbled this week after revealing it exceeded its transportation budget. This will be the first of many corporations revealing such an impact. 

Extra charges abound

Shippers who haul into major retailers also have compliance fees to worry about. Gone are the days of three-day windows — many retailers have shifted to one-day mandates. Shippers looking for flexibility in the supply chain have found that the demands of today’s market have made it more restrictive than ever, with compliance fees putting another significant hit on their bottom line. They are also pushing less than truckload to partly empty truckloads, to ensure higher on-time percentages.

To make money matters worse, carriers are no longer tolerating long offload times and are weeding out any locations that typically rack up detention charges — further limiting carrier options. Other carriers are assessing much higher accessorial charges to recoup time lost. Those charges ultimately get passed on to the shipper — resulting in yet another blow to the budget, and probably inflation down the line.

Shippers have also hurt themselves by using transportation as a stepping stone for staff. Fewer companies have seasoned transportation professionals in positions of leadership, leaving a significant void of institutional knowledge that is gained from tenure. The sixth sense you need to be effective can really only be found with those on the ground, in the thick of it, listening to their brokers, carrier partners, and drivers. An experienced transportation department can much more easily digest and react to changing market conditions. Plus, with their specific skill set, they can identify cost-saving measures and educate their organization on ways they can become a more attractive shipper to secure more capacity.

Regarding the bid process, we are finally seeing the tide turn (again) from procurement handling bids to transportation handling them, where it belongs. Procurement teams are usually unfamiliar with transportation costs, and have treated lanes of freight as commodities, completely ignoring opportunities for round trips, continuous moves, drop trailers, and the value in long-term partnerships that have withstood the toughest of times. They will not admit as much in mixed company, but every transportation department knows it to be true. In many cases, today’s enormous budget overruns are directly attributed to procurement practices, and not transportation.

Capacity challenges to continue well into 2019

We are still in uncharted waters as we wait to see what will happen once ELDs are enforced, but we think it is safe to say that capacity challenges will continue for the rest of this year and well into 2019, as driver productivity is reduced and the market struggles to normalize. In the meantime, we will be keeping our ear to the ground to help make sense of these conditions for our shipper partners, and continue to focus on relationship-building with our stable of carriers and our committed customers.

Jeff Tucker is CEO of Tucker Company Worldwide.