ELD Implementation and Enforcement Leading to Spike in FTL and LTL PricesPosted On 23th January 2018
The electronic logging device (ELD) mandate recently went into effect and is having an immediate impact on the trucking market.
In 2015 the Federal Motor Carrier Safety Administration (FMCSA) declared standards for ELDs. An ELD is hardware that connects directly to the truck’s engine and logs H.O.S. – hours of service – automatically. So unlike with a handwritten logbook, there is no way to “fudge” those hours. The goal of course is to prevent accidents caused by exhausted drivers. However, there are many excellent drivers who complain that the ELDs are arbitrary and unfairly impact their bottom line. Fleets expect to drive on average 15% fewer hours, which is a huge cost to the industry, and carriers are already passing these costs along to shippers.
In the spot market we see it immediately. For example, we have aCT to MA truck that in December moved for $1300. As of January 1st, drivers are demanding $2600. In another example, Buffalo NY to Hartford CT used to be $1400. Now the carriers want $2400 to $3000-it is crazy!
While some lane prices have risen by 50%, it remains to be seen if the increase is sustainable. But worse than that, there is a shortage of carriers even willing to do the short haul because their drivers want to drive the maximum number of miles possible when they are being paid by the mile.
The impact on the freight markets is already profound and inflationary as drivers and equipment are immediately less productive. There will be an increased demand for LTL-volume common carrier movements and truck/rail movements, and even some push into expedited by cargo van and air shipments as shippers get caught with no other viable options at times.
Another long-term effect will be to make driverless trucks even more economically preferable. There are startups – such as ShipChain – that have declared their intention to have a Track & Trace Platform that integrates with the new ELDs by the first quarter of 2018. Perdue Farms is partnering up with ShipChain to test their system and the whole idea is to manage it with a blockchain network.
ELDs will help enable the master re-organization of the supply chain that technologists imagine. In the here and now, shippers should expect to accommodate the fewer number of drivers available to them. We recommend to choose FTL trucking companies and booking trucks well ahead of time because there is a much smaller cushion of carrier capacity available for the first quarter of 2018 than there was in 2017.