On eve of ELD era, US shippers brace for disruption

On eve of ELD era, US shippers brace for disruption

One possible impact of the ELD mandate is that older drivers retire rather than learn the new technology, adding to the driver shortage. Photo credit: Shutterstock

The electronic logging device (ELD) mandate — arguably the biggest regulatory edict to hit trucking since the introduction of the commercial driver’s license (CDL) in 1986 — is barreling toward drivers, motor carriers, brokers, and shippers, with only days left until the rule takes effect Dec. 18.

As of that date, more than 3 million truckers will be required to replace paper logbooks that have been used to record a driver’s on- and off-duty hours since the 1930s, when the federal hours of service (HOS) rules were introduced, and to use some form of ELD.

The goal is to improve highway safety by reducing driver fatigue through stricter enforcement of the rules, limiting truckers to 11 hours of driving time and 14 overall on-duty hours per day. The rule’s effect will be felt far from the truck cab, though, and it could hit shipper docks hard.

There is widespread concern among shippers that the ELD mandate will lead to reduced truck capacity in 2018, by driving an unspecified number of drivers and small carriers out of the business and by cutting into the time drivers can spend on the road each day and week.

That disruption in truck utilization could remove 2 to 5 percent of available capacity, according to most sources, though others believe the impact will be greater. In fact, the impact for shippers could vary from lane to lane, depending on how efficiently the shipper operates.

“Any inefficiencies will be exacerbated by the rigidity of the ELDs,” Randy Mullett, founder of Mullett Strategies said during a Nov. 14 webinar by NASSTRAC and TranzAct Technologies. He said small carriers that “have been the shock absorber of this industry” may shut down.

The trucking industry is far from prepared. Although many large trucking operators already use ELDs or older automatic onboard recorders, several surveys have shown tens of thousands of small trucking firms have balked at purchasing and installing the devices.

A recent survey by Fleet Owner magazine found just 53.5 percent of trucking companies expected to be ready for the rule, and only 33.7 percent of those polled were “fully compliant” now. Out of the 46.5 percent that said they were not ready for the mandate, 11 percent told Fleet Owner they were not even investigating how to comply with the Federal Motor Carrier Safety Administration (FMCSA) regulation.

Barring unforeseen intervention by Congress or the White House, the rule will take effect this month as announced two years ago, after more than a decade of attempts to require electronic logging (an initial “electronic onboard recorder” rule was struck down by a federal court in 2010).

The initial impact of the ELD mandate will not be as abrupt or painful as once feared, however, owing to some late-hour decisions by federal regulators and a group representing state law enforcement agencies. But the long-term effect of the ELD mandate still will be substantial.

“The collaboration required across shipper and broker, carrier, and receiver is going to have to be taken to a level we haven’t had before,” Eric Lien, senior vice president of corporate development at Arrive Logistics, said at the JOC Inland Distribution Conference last month.

The switch to electronic logging will make it tougher, although not impossible, for drivers to cheat the clock and “run hot,” violating HOS rules to meet pickup and delivery deadlines. Electronic logging will help reveal just how prevalent such cheating is on US highways.

“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 and Wisconsin state trooper.

The ELD mandate will reduce daily driving time for those drivers that habitually stretch their hours by falsifying logs, he said at the JOC Inland conference. Truck drivers that have not installed ELDs yet, he said, “are most likely the biggest offenders in terms of false logs.”

As the initial ELD deadline, draws near, evidence shows Seidl’s “epidemic” is spreading. The number of false log violations reported by the FMCSA rose 11.5 percent in fiscal year 2017, which ended Sept. 30, and is up almost 20 percent over the past five fiscal years.

“Why is this law in place? Because people die when some truck drivers work too hard,” Seidl said. “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.”

There are plenty of drivers who disagree. Many support the efforts of the Owner-Operator Independent Drivers Association (OOIDA) to delay or block the rule. An effort in Congress to stop the rule, led by Rep. Brian Babin, R-Texas, also has been ineffective, at least to date.

“Our organization won’t throw in the towel on this issue,” Todd Spencer, executive vice president of the OOIDA, said in a videotaped message shown at the JOC Inland conference. “We still think it’s a bad law that won’t result in any improvement in highway safety,” Spencer said.

From the opposite side of the debate, American Trucking Associations president and CEO Chris Spear called for “certainty.” In another videotaped message to JOC Inland, he said, “This rule has been debated, legislated, and litigated. Come Dec. 18, this mandate will go into effect.”

‘Phased in’ enforcement

When the mandate does take effect, it will do so slowly, and with a light touch. Federal regulators and state law enforcement are delaying penalties for drivers and carriers caught without ELDs after Dec. 18 in steps meant to help those carriers struggling to comply.

In August, the Commercial Vehicle Safety Alliance  (CVSA) said state inspectors would 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,” CVSA said.

The CVSA’s action alleviated fears that thousands of truckers could be placed out of service for not having ELDs starting Dec. 18, stranding freight a week before Christmas. That holiday logistical nightmare would likely have sent spot market truckload rates through the roof.

The FMCSA softened the enforcement blow further last month when it revealed those citations will not count against a trucking company’s Compliance, Safety, Accountability or CSA “score.” The agency broke that news during a Nov. 17 public hearing in Birmingham, Alabama.

That is significant, as CSA “points” for logging violations could prove more troublesome to carriers and drivers than actually being ordered off the road. Many shippers and freight brokers closely track carrier’s CSA status, and some will not use carriers with high scores.

Speaking at the Nov. 17 public hearing, FMCSA deputy administrator Cathy Gautreaux said the agency “cannot arbitrarily change the compliance date,” according to Commercial Carrier Journal. A phased in approach to enforcement, however, will soften the start of the ELD era.

“CVSA member jurisdictions have used this phased in approach in the past when implementing a significant change in regulatory requirements,” said the CVSA, which represents state and provincial law enforcement agencies in the United States, Canada, and Mexico.

“The CVSA board of directors, in consultation with FMCSA and the motor carrier industry, agreed that the phased in approach to implementation of the ELD requirements outlined in the North American Standard Out-of-Service Criteria will help promote a smoother transition.”

That does not mean truckers without ELDs can or should ignore the rule until March 31. Citations and fines could still be issued at an inspector’s discretion, even if they do not add points to a driver’s record or affect a carrier safety score. And they will do both, starting April 1.

On Nov. 20, the FMCSA promised to publish “guidance” on ELD enforcement, and on how motor carriers can best use the short-haul logbook exemption for CDL drivers working within a 100-air-mile radius and non-CDL drivers operating in a 150-air-mile radius.

That exemption frees drivers from logging requirements, let alone electronic logging, as long as they stick to that air-mile radius, starting and ending their work day in the same location, and work less than 12 hours. That makes it an option for local drayage drivers and less-than-truckload pickup and delivery drivers — if shipper demands for detailed information on freight do not make an onboard computer capable of electronic logging a necessity.

The agency also announced a 90-day temporary waiver from the ELD requirement for transporters of agricultural commodities, and said it would issue guidance for agricultural haulers and on the “personal conveyance” provision, which covers personal use of trucks.

“FMCSA has listened to important feedback from many stakeholder groups, including agriculture, and will continue to take steps to ease the transition to the full implementation of the ELD rule,” Gautreaux said in a statement.

The gradual approach to enforcement probably means the immediate impact on available truck capacity and pricing will be light. But as regulators, state inspectors, and police add sharper teeth to the rule, starting in the second quarter, the scope of its impact will become clearer.

The biggest loss of capacity may come not from drivers exiting the business but from the loss of what one logistics operator called “wiggle room” when it comes to recording HOS — in other words, falsifying logs. Seidl said the practice is more widespread than many might think.

“Would you stay at a truck stop for 10 hours if the only difference was a piece of paper and a pencil?” he asked. “Let’s say no. I’m going to stay there 8 hours. That gives me two additional hours of driving. Two hours a day, five days a week, that’s 10 hours a week.”

Multiply that by 10 drivers, and that company is picking up an additional 100 hours a week. “Last time I checked, that’s [the equivalent of] a driver and a half,” Seidl said. That 100 hours is also the equivalent of a 14 percent productivity boost that 10-truck carrier will lose with ELDs.

The impact for shippers will be “like the weather,” said Derek Leathers, president and CEO of truckload carrier Werner Enterprises. “It will be very different and localized by shipper,” he said during a webinar jointly sponsored by NASSTRAC and TranzAct Technologies Nov. 14.

“We’ve had conversations [with shipper customers] about their freight network and what percentage of their freight moves on non-ELD-compliant companies,” Leathers said. “They’ll say 15 percent. Then I ask what does it look like on a lane-level, and they generally don’t know.”

In individual lanes, shippers may find as much as 80 percent of their freight moves on non-compliant trucks, he said. “That’s a sign they have operational inefficiencies in those lanes they need to take care of,” said Leathers, whose company has used electronic logs since 1998.

“I hear two common complaints from truck drivers, probably more strongly stated by those without electronic logs. The first is shippers delay me too often and I don’t feel properly compensated,” he said. “Second, I’m always being asked to do things that are untenable.”

An example might be waiting hours to be unloaded and then being ordered off the receiver’s property despite not having enough time left on the daily clock to drive to a parking lot. “Detention” time drivers spend at shippers and consignees must be addressed, he said.

“Shippers will have lanes that will simply be undeliverable if they don’t start addressing origin and destination inefficiency,” said Leathers. “That’s a bigger problem than the transit times” between origins and destinations, which will likely become longer as the ELD era unfolds.

The economic slowdown of 2015 to 2016, along with “bloated” inventories, “masked the fact that we haven’t made enough progress on these issues,” Leathers said. “Detention time needs to be addressed, and truck drivers need to be paid if they’re sitting at docks,” not just driving.

Shippers that do not address inefficiencies could see some serious rate hikes. Leathers said the impact, again, will vary by lane and by shipper, with some rates staying flat and some rising by double digits. “In the medium to long-term, we’ll run more efficient supply chains as a result.”

“In terms of rates, we’re seeing a 6 to 10 percent increase,” Thayne Boren, general manager at Truckstop.com, said at JOC Inland, referring to contract rates. “As we head into next year, our economists are predicting rates could soar as much as 20 percent in the next peak season.”

“In March 2014 there was a year-over-year change of 25 percent in spot rates and that didn’t even have the ELD thrown in,” said Lien. “If the ELD transition doesn’t normalize quickly, we could have a strong first half of the year and 2018,” he said, referring to motor carrier pricing.

The shipper’s stake

Much attention has been given to the direct impact of the ELD mandate on truck drivers and their employers, and less to the indirect effect the rule will have on shippers. But shippers are slowly waking to the prospect that ELDs could crimp their supply and distribution networks.

Shippers need to examine the lengths of their routes and their delivery promises to make sure there is no disruption to their supply chains during the transition to ELDs, speakers said, but that is just the start. They will also need to adopt more “best practices,” Lien said.

“That’s making sure the load is ready at appointment time, making sure there’s flexibility around drop and hooks, making sure you’ve got appropriate staffing during shipping and receiving hours, making sure there’s parking for drivers. These are just best practices,” he said.

“If the ELD mandate brings a higher frequency of best practices, that’s just fantastic,” said Lien.  

Yet a sizeable number of shippers, 20 percent according to a joint survey of shippers and logistics providers by JOC.com and several partners, have done nothing to prepare for the mandate, which takes effect Dec. 18. Those shippers could see sizeable rate hikes.

Contact William B. Cassidy at bill.cassidy@ihsmarkit.com and follow him on Twitter: @wbcassidy_joc.