ELDs Will Impact Shippers As Well As Carriers

How Will YOU Be Affected?

Overview

The Federal Motor Carrier Safety Administration (FMCSA) now requires that all trucking company tractors be equipped with Electronic Logging Devices (ELDs), which will record driving time and hours of service. However, it’s not just trucking companies that must comply with these laws: this affects shippers and their customers as well. This ELD mandate is one of the largest since deregulation in 1980.

Background

Drivers (as a requirement) have tracked their operating hours for years, but many carriers still have their drivers use paper logs. While the ELD mandate enforcement will solely be a safety measure to stop drivers from logging incorrect hours, it will also affect shippers and customers.

Results

When this change is implemented, shippers will see a dramatic effect in a few areas of their operation:

  • Decreased capacity of available trucks
  • The resulting increased rates from lower capacity
  • Changes to shipping and receiving policies
  • Increased shipper liability
Capacity

Capacity will decrease when some small- and mid-sized carriers, which often run on the edge of the rules, don’t comply with the ELD mandate. It has been estimated that only 25% of the trucking industry uses installed ELDs. Mostly of small carriers comprise the remaining three-quarters, as they usually can’t make the technological investment.

These late or non-adopters will more than likely eventually fall by the wayside or a larger competitor will acquire them.

Rates

As a sort of domino effect, full adoption of ELDs will impact capacity, which will then affect trucking rates. While capacity shrinks, rates will climb. With carriers running into a shortage of drivers to haul freight, they will require higher rates to compensate for the unused overhead they have. Smaller carriers and owner operators may need to tie up their trucks for an extra day.

This will also affect inventory costs. Depending on freight terms, adding an extra day in transit will add one more day of holding costs for the shipper as well. Thus, manufacturers may adjust their production schedules and hold more inventory so lines do not shut down.

Policies

Some shippers and consignees may need to revise their shipping and receiving policies. Shippers will have to take a harder look at their distribution operations. Consignees may also need to be a bit more flexible on receiving to accommodate the driver breaks and shutdowns that have been commonly overlooked up until this point. Strategic planning and partnerships must take place between shippers and carriers to help businesses stay competitive.

Liability

Not only will the ELD mandate affect carriers’ operations directly, but the shippers must abide by the rules as well. As part of the requirement, one stipulation forbids coercion on the part of the shipper. Shippers that have ignored what their trucking company or 3PL is doing could face fines. Shippers can no longer claim ignorance as an excuse.

Recommendations

In advance of the year end, there are several things that shippers can do:

  1. Shippers should work with their shipping and customer service departments to get ahead of this. Waiting until the last minute to discuss policy and distribution could be far costlier when capacity vanishes and rates spike.
  2. Shippers should begin a discussion with their trucking companies and 3PLs. They are preparing for this with their other customers. Ensure asset carriers and 3PLs only use trucks that are equipped with ELDs.
  3. Shippers should foster a partnership with their carrier. It’s reasonable to assume that non-compliant companies will fade away, so carriers need to make sure they have a trustworthy partner. Develop shipping plans and alternative plans with them. Also, involve customers in the discussions. Try and make everything as transparent as possible, that way nothing comes as a surprise to anyone.

Some early planning for the ELD mandate will keep a shipper compliant and the freight running efficiently. Contact Celadon today and we’ll figure out how our expertise can drive your business forward!

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