Shippers and trucking companies are concerned about a potential loss of capacity and productivity that could push up pricing when truck drivers are required to use electronic logging devices (ELDs), but they’re not expecting a massive capacity crunch following the mandate.
The impact of ELDs may unfold more gradually than some shippers and carriers expect, and could depend on how the federal requirement is enforced from state to state. But the impact of the rule is hard to predict, and the mandate is expected to hit some sectors of trucking, such as truckload and drayage, harder than others.
“I don’t think this is going to be the ‘mother of all capacity crises,’ but there will be a short-term effect,” Bob Biesterfeld, president of North American surface transportation at C.H. Robinson Worldwide, said April 6 at the 2017 Transportation Intermediaries Association (TIA) conference.
“Our estimate is there will probably be some minimal impact to overall capacity — if it’s a 2 or 3 percent reduction I think it’s a short-term issue,” Biesterfeld said at the Las Vegas event. However, “there will be fear of a capacity crisis,” and that could be enough to push up rates.
The loss in productivity reflects an expected drop in truck and driver utilization, as more precise measurement of driver hours of service requires more precise planning and routing. In other words, there’s less “flexibility” for motor carriers and drivers in recording on-duty time.
Scofflaws will no longer be able to keep two sets of logbooks because duty status records will be kept current within the electronic device and will be much harder for carriers to falsify.
Large trucking companies already using ELDs say they suffered initial productivity losses. “Our experience was a 4 percent drag on productivity when we implemented e-logs back in 1998,” Craig Callahan, senior vice president of sales at Werner Enterprises, said April 11 at the NASSTRAC Shipper Conference in Orlando, Florida.
“That’s the experience of a big company with enough scale to be able to transform things,” Callahan said. “Some of the small companies are going to struggle with that. It’s not the front-line expense, but the ongoing implementation and training that are going to cause trouble.”
“There’s going to be a loss of productivity and that will affect capacity,” Rob Kemp, president of K-R Sales and DRT Transportation, both third-party companies, told NASSTRAC. Capacity already “is almost at an equilibrium at times,” Kemp said. Kemp sees the ELD mandate and a healthier economy combining to crimp capacity.
“If we see a 2.5 percent pickup in gross domestic product, and some guys exit the trucking industry because of the ELD mandate, we could see some tightening,” he said at the Orlando event. “But we look at ELDs as an opportunity too. Visibility is super important.”
“There’s new technology out there to provide better visibility at the shipment level and a lot of it can be driven by the ELD,” Kemp said. The federal mandate, which takes effect Dec. 18, “is an opportunity to get improved visibility and that’s something the shipper community wants.”
Improved visibility is certainly on the wish list of Brian Morgan, senior director of logistics and process excellence at Leviton Manufacturing, and so is securing capacity ahead of any "ELD effect."
"Part of our mitigation planning is making sure we have more than one option," Morgan said at NASSTRAC. "We utilize a dedicated fleet and I think you’ll see more shippers look at that as an option."
"As long as we need trucks, they’ll put more trucks on the road," Scott Joseph, managing direct at scrap shipper Reserve Management Group, told the TIA when questioned about ELDs and capacity.
What’s not clear at the moment is how many companies and drivers will not have electronic logs installed in truck cabs by the deadline and how federal regulators and state officials will deal with them. Surveys by Truckstop.com have shown smaller carriers are still largely using paper logs.
“It seems there are lot of small guys who are going to wait until the last minute,” Ben Schuchart, vice president of brokerage at Schneider National told the TIA. “Some guys may opt out. But guys with over 50 trucks, they have an ELD plan and they’re preparing to make the change.”
The vast majority of trucking companies operate from one to six trucks, and many of them are owner-operators opposed to the ELD mandate. The Owner-Operator Independent Drivers Association last week took its challenge to the regulation to the US Supreme Court.
The association is appealing a ruling from the US Court of Appeals for the Seventh Circuit, which rejected its claims the ELD mandate is unconstitutional in a three-judge panel decision last December. In January, the full court declined an appeal to revisit that panel ruling.
Barring intervention by the high court, it’s likely the rule, which was mandated by Congress in the 2012 transportation spending law and not singled out for revision by the Trump administration, will take effect as scheduled. Its impact then will depend on enforcement.
The final rule did not set specific penalties or set an out-of-service threshold for ELD violators. Instead, it relies on the existing schedule of civil penalties currently used for logbook violations, including failure to keep a log.
The ELD mandate “will be enforced by roadside inspections, followed up by compliance reviews,” Jack Van Steenburg, assistant administrator and chief safety officer at the Federal Motor Carrier Safety Administration (FMCSA), told the TIA event. “Our penalties are set by Congress.”
That means front-line enforcement will be handled, as it is now, by state police. A police officer will decide what type of penalty to issue to truck drivers still using paper logs past the December deadline.
Under those penalties, a person or entity that “fails to prepare or maintain a record” is subject to a maximum civil penalty of $1,194 for each day the violation continues, up to $11,940. That provides an idea of the scope of penalties that could be applied for not having an ELD.
However, as the FMCSA notes in its rule, “numerous factors, including culpability and history of prior offenses, are taken into account.” The agency will use its Uniform Fine Assessment software “to assure civil penalties are assessed in individual cases in a fair manner.”
By law, “we have to look at the gravity [of the violation], the finances of the company, the likelihood of it [the violation] causing an accident,” Van Steenberg said. Based on current enforcement processes, it may take some time to get noncompliant truckers and carriers off the road.