Truck shippers still wising up to post-ELD reality

Truck shippers still wising up to post-ELD reality

For trucking companies, third-party logistics providers, and shippers alike, the lack of progress in this area after a year spent stressing the need for greater collaboration is disappointing. Photo credit: Shutterstock.com.

MEMPHIS — Despite more than a year of talk about “shippers of choice” and “driver-friendly freight,” many shippers and consignees have yet to adapt to the changing requirements of the electronic logging era. The most work needs to be done on not detaining drivers, trucking and logistics executives at the Transportation and Logistics Council’s annual conference said Monday.

“We’ve had to work with shippers and consignees to make sure they understand the impact they have on drivers,” said Doug Frank, senior vice president of procurement at logistics provider Geodis. “Some have understood, but there’s a lot still to be done.” And much of that has to be done at the consignee level, the carrier’s customer’s customer, rather than the shipper level.

For trucking companies, third-party logistics providers, and shippers alike, the lack of progress in this area after a year spent stressing the need for greater collaboration is disappointing. It’s also a stumbling block to the type of cost savings through greater efficiency that carriers and shippers hoped would result as compliance with the electronic logging device (ELD) mandate became widespread.

Consignees have been slowest to adapt to the ELD era, with lengthened transit times and constraints on existing capacity, speakers at the TLC conference said. They’ve been quick, however, to penalize suppliers, carriers and truck drivers for late deliveries. “If they deliver late, consignees either penalize them financially or put them to the back of the line,” said Frank.

Talking with a consignee customer about the need to change its business practices to reduce its costs is a tricky proposition, as many carriers could tell their shipper customers.

“When you engage consignees on a business risk standpoint, they start to get it,” said Jeffrey L. Meyer, group manager of transportation for Nestle Purina Petcare. “Some are very set in their ways and you can only coach so much. We’ve had some successes, but are we at the place we want to be? No.” At least, he said, the ELD mandate has shippers and consignees talking.

“This was a call to arms to do the things we should have been doing,” Meyer said. “The key is you now have that dialogue. You can keep chipping away at it. If you get the right ear, they will start listening.” The catalyst for that often is cost. Customers will start to listen when they see an impact of their actions on their costs, or when they can share in supply chain savings.

Dropping trailers

For some consignees, however, there are built-in obstacles to making the type of changes their shipper suppliers would like to see. For example, not having space for drop trailers.

“We had one customer that would have really benefited from drop trailers but they didn’t have a shag truck” to move equipment within their yard, Meyer said. “We talked with them and determined they didn’t need one. We’d have a carrier drop a trailer and agree to return and take the trailer out by a certain time. You have to get creative on ideas of how to free up capacity.”

There’s no doubt the ELD mandate had an impact in 2018, starting with a collapse in truck capacity after the rule took effect in December 2017. Truck rates shot up, with spot rates and contract rates hitting historic highs by mid-2018. The first half of the year was marked by volatile pricing, extended transit times, late deliveries, and widespread dislocation of equipment.

By the second half, as shippers began paying higher rates, and carriers and drivers grew used to working with ELDs, the constraints that bound the trucking market began to loosen. But supply chains remain taught and more susceptible to disruption than they were before the mandate. In effect, the digitization of driver logs left supply chains less flexible and more brittle.

In the ELD era, “we have diminished ability to recover from hiccups, such as delays from previous stops,” said Meyer. “Those hiccups can include congestion, especially on the East Coast, where we’re seeing a lot of that, and mechanical breakdowns.” With the loss of flexibility in terms of driver hours, “we’ve lost the ability we had to recover from each of those.”

The ELD mandate didn’t reduce the number of hours truckers are allowed to drive, but it did reduce the hours many of them were able to drive. “The ELD doesn’t lie,” said Frank. “When the wheels are spinning, the ELD logs the driver as driving. The ‘sweet spot’ decreased. No longer can they turn 500 miles in one day. We find they now prefer 250- to 450-mile loads.”

Geodis did not see the driver exodus many observers predicted would occur under the ELD mandate. Instead, carriers lost productivity because of lost driving time. “In fact, we had to add more drivers,” said Aaron Schmidt, branch manager at trucking company NFI Industries, which operates about 3,500 tractors. NFI was already using ELDs before December 2017.

Even so, the company had to evaluate the overall impact of the regulatory change on its operations. “As a carrier, we thought a lot about how we were going to need to expand our base of drivers, add equipment, change our footprint, evaluate the business we were currently running,” Schmidt said. “Did we have the right number of drivers to manage that business?”

Tweener lane exposure 

NFI expected that the so called “tweener” lanes — those 450- to 650-mile runs that fell between same-day and next-day service — would be most affected by the ELD mandate and tighter hours-of-service enforcement. “The 650-mile run probably goes away and we’re staying under that 500-mile mark a little more than most of the shipper community would like,” he said.

Even shorter lanes were affected. “Most of our drivers are going out and back in the same day,” he said. “If we’re in highly congested areas and we’re moving 250 to 300 miles out, and we need to come back and do the same run tomorrow, maybe that’s going to become a problem.” In fact, many shippers have reported higher costs and delays on lanes of that length.

But the ELD has helped NFI become more efficient. “Probably not just us, but the carrier community probably uncovered some efficiency that wasn’t visible with paper logbooks. We were able to squeeze a little bit more out of our equipment in a driving day,” said Schmidt. One way to get that “bit” is through expanded use of drop-and-hook trailer operations.

“One of our most challenging points is going out and making a delivery and coming back empty. We want to fill as many of those backhauls as we can,” Schmidt said. “The easiest way to cut waiting times and get more loads is drop and hook opportunities. We’re establishing trailer pools in certain locations and looking for shippers who can help us manage that backhaul.”

The headhaul, he said, “is important, but the backhaul has become just as important. If we can find opportunities that work on both ends, we can manage those hours as efficiently as possible.”

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



Comments

I'd be curious to see how shippers with temperature controlled cargo are approaching these challenges differently than those without temperature controlled cargo. It's hard to drop and hook if a trailer needs to be conditioned down to refrigerated temperatures before loading; it can be done, but it's not as simple as with a dry van. For my organization, I know we'd love to be able to drop and hook more, but there are just so many challenges to it at various facilities because of the temp controlled aspect. Plus, carriers who meet your criteria for hauling expensive/sensitive cargo may not "live" nearby, so they may not be able to readily drop trailers. We have a plant that does have a carrier nearby who meets our criteria, and the drop-and-hook program we have there works phenomenally even with temp controlled cargo.