How Hurricanes & ELDs Are Raising Trucking Rates

Devastating storms, increased demand and new Electronic Logging Device (ELD) regulations have hit critical mass causing a capacity crunch and rates to hit new highs. All indications point to carrier fleets holding all the cards when it comes to contract negotiations entering 2018.

Below we will cover how ELDs and the devastation left in the wake of a series of hurricanes may see shippers paying a lot more for spot and contracts rates on their less than truckload (LTL) and full truckload shipments (FTL)

What are ELDs?

According to the FMSCA " The electronic logging device rule – Congressional mandated as a part of MAP-21 – is intended to help create a safer work environment for drivers, and make it easier and faster to accurately track, manage, and share records of duty status (RODS) data. An ELD synchronizes with a vehicle engine to automatically record driving time, for easier, more accurate hours of service (HOS) recording."

Beyond safety, ELDs do have a number of benefits such as :

Allowing carriers to know driver availability in real-time, allowing them to accurately plan loads around available HOS

Eliminating paperwork which can be inaccurate and lack immediate visibility

Save drivers time by automating processes they'd previously had to manually track

Avoids data tampering

Aside from electronically tracking drive time, ELDs will make skirting HOS regulations much more difficult. HOS regulations are as follows:

11-hour driving rule – In a 24 hour period a driver may drive up to 11 hours total before they are required to take a 10-hour break. The 11-hour clock only ticks while the truck is being driven.
14-hour on duty shift rule – As soon as a driver changes his status to On Duty or Driving to start his day, a 14-hour clock starts ticking. This clock doesn't stop ticking , even if the driver switches to Off Duty or Sleeper Berth. Once the 14 hours is up, the driver must take a 10-hour break before driving any more . That leaves drivers with 3 hours to fit in breaks and manage time lost waiting at ports or loading/unloading freight. Anything beyond that sacrifices time from their 11-hour total drive time.
Many carriers contend that this is going to create a huge cost burden for them as this is not how their truckers currently operate. Confining driver time to a strict 14-hour window limits the driver flexibility that operators used to have. What this means is that their routing structure must change to accommodate the ruling. That means less driver availability in a trucking market that is already experiencing a driver shortage.

Implementation is also not without its costs. Carriers have to install ELDs on every active truck within their fleet. President and owner of Bluegrass Transport, Barry Mcgarrh tells Tristate Homepage, "Installation will cost around $20-30,000 for their fleet of 32 and there will be a monthly fee of $1,500"

Fleet Owner reports that a letter from J.B. Hunt Transport Services advised customers to brace themselves for rate hikes: "This is one of the highest periods of turbulence and volatility in supply we've ever experienced, and we don't think it will abate anytime soon. We predict our cost environment will be fluid and more responsive to the supply of drivers and capacity, as well as the additional constraints anticipated by the upcoming ELD mandate. With the expected impact of these conditions, we advise budgeting for transportation cost increases that may reach 10 percent or more."

With hurricane relief efforts still in full force, ELDs aren't the only thing causing rates to skyrocket. As trucks are being diverted to aid recovery efforts and restock store shelves, increased demand in other regions along with a rapidly growing economy and fast approaching holiday season have caused spot rates to ascend to 2-year highs.

The JOC reports, "Over the next few months, as much as 7 percent of the US truck fleet could be diverted from normal commercial activity to disaster relief and reconstruction efforts, according to Truckstop.com. That would suddenly tighten a shipper's capacity belt by several notches."

While the hurricane relief efforts may not be as much of an issue moving into the new year, right now they're causing spot rates to soar and making carriers reluctant to commit to long term contract rates.

Fewer drivers and higher operating costs for carriers all add up to increased rates and lower capacity for shippers. Given the high likelihood that both service and rates could change drastically as we move into 2018, shippers may need to explore new or expanded partnerships to keep their supply chains from experiencing interruptions. Now, more than ever, it is crucial that you contact your carriers and see where they are at with their ELD compliance and to discover what their rate outlook is for 2018.

Has your supply chain been affected by the hurricanes? Are your carriers prepared for the impending ELD deadline? How drastically will your cost and service change in 2018? Contact a trusted freight adviser at Aborn & Co. today for a free consultation.