The Ongoing Impact of Electronic Logging Devices on Trucking

By Michael Rofman

March 27, 2019

ELDs are here to stay. Since the federal electronic logging device (ELD) mandate took effect on December 18, 2017 the American trucking industry has been undergoing a long period of adjustment.

While there were initial concerns about the overall effect of ELDs on the industry, the van load-to-truck ratio, which hit a peak of 9.9 in both January and June has since dropped. Similarly, the national average van rate was $2.08 per mile for the first three weeks of December, below the high set immediately following the ELD mandate taking effect, but still higher than before the mandate.

All of this shows that the trucking industry is adjusting to the new regulations.

It’s important to keep in mind that ELDs are in place due to safety concerns, particularly for mid- and long-range drivers. A 15-18 hour day is no longer possible for a trucker – which improves the safety of the transport. Lost hours are being substantially replaced by the higher per-mile rate. Paired with the tight labor market in the industry, truckers are potentially more in demand than ever before.

On the other side of the equation, shippers are having to substantially rethink their supply chains. The reduced individual hours of a trucker mean that the lengths of many deliveries have been extended. What used to be a one-day turnaround has become two or even three days. Because it may take longer to receive goods, shippers need to be properly stocked in terms of inventory. The new sweet spot are moves under 450 miles, so they can be completed in a day.  No longer can they turn 500 miles in one day.

By leveraging the right technology and expertise, supply chain efficiency can be substantially improved and this challenge addressed. For example, our team has assisted many clients in this space with reducing lead times, optimizing inventory levels, and determining the true cost to operate.

One valuable area to explore is 3PL solutions, where more services can be added at one destination to lessen the burden. Another option is to make use of different modes of transportation like barges or rail, which will ease compression.

Moving into the future, we expect to see ELDs being used as proof to shippers of detention times. If a driver arrives to deliver a load in a certain time window, and are delayed because the warehouse isn’t ready for them, tracking the truck means the trucking company can charge the receiver detention rates because of these better records. This will help both drivers and shippers, because it will encourage better efficiency and point out issues in the transport chain.

Shippers should also be ready for an increasingly tight labor market and increased costs. One factor adding to the shortage of drivers is the FMCSA, which is planning on auditing the medical records of truck drivers because, when the ELD came out, they discovered that medical professionals were inappropriately signing off on their medical records, leading to the loss of commercial licenses.

In this environment, we are regularly seeing truckers increasing rates by 30% when re-negotiating contracts and where contracts don’t exist. These costs will have to be passed on to clients or offset with greater efficiencies.

Despite the volatility in the U.S. and global shipping and financial markets, our transportation economy continues to be strong. It is important to take advantage of this opportunity to adjust to ELDs because a downturn in shipping to lead to the loss of even more truckers and even tighter margins for those companies who didn’t address supply chain and technology concerns while profits were high.

 



Disclaimer of Liability

The information provided here is for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation.

Mazars USA LLP is an independent member firm of Mazars Group.


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