Commentary: Jeff Tucker, CEO, Tucker Company Worldwide (tuckerco.com)
Life three months into ELDs has been thrilling, to say the least. Full enforcement is just a week away, and when that happens, we’re likely to see a bigger effect in many areas. As a broker we are in a unique position to evaluate the impact from both the carrier and shipper perspective. As the entire over-the-road marketplace struggles to make sense of current conditions, prepare for the future, and learn the new normal, here are some anecdotes we’ve compiled so far.
One of the most significant impacts of the ELD mandate has been the sticker shock of short hauls. Generally, drivers are paid by the mile, so it makes sense that drivers want to secure hauls that allow them to drive 400-500 miles per day, in order to make the best of their time on the road and the biggest paycheck. Before the mandate, drivers might have been willing to take a chance on a short regional move to keep moving. Under ELDs, they’re much more hesitant. Many carriers simply refuse short hauls. So what can you do if you have to ship short haul? Firstly, prepare to pay more. Secondly, your accuracy and your ability to turn the driver around so that he isn’t waiting at your dock, or your customer’s dock is paramount. Running out of hours on a short haul guarantees the driver’s next load picks up late or is missed entirely, so the carrier may be unwilling to handle future loads.
As carriers upcharge shippers for shorter moves, the location of distribution centers becomes more important than ever. Most DCs were set up to reach the general population overnight, so budgets will be impacted, and will influence where future warehouses are located – and ultimately cause shippers to rethink the number of warehouses they utilize.
Parking is also at a premium. Even with stricter adherence to hours of service, drivers are willing to stop well short of their maximum hours if they can secure safe parking and amenities at a truck stop. This further exacerbates the capacity situation.
ELD adoption is still an issue. According to the Bloomberg/Truckstop Quarterly Truckload Survey conducted by Truckstop.com and Bloomberg, 28% of truckers have yet to become compliant – to the tune of about 868,000 drivers. Trucks that are found not compliant after April 1st will literally remain stuck on the side of the road for a mandatory hours reset, and then allowed to proceed to its next stop, only. At that point, the truck may not move again until an ELD is installed!
Shipper uncertainty around 2018-2019 transportation budgets is high. One auto manufacturer client we’ve spoken to saw its 2017 transportation spend at 500% of budget (give that a moment to sink in). General Mills’ stock tumbled this week, after revealing it exceeded its transportation budget. This will be the first of many corporations revealing such an impact.
Shippers who haul into major retailers also have compliance fees to worry about. Gone are the days of 3-day windows – many retailers have shifted to 1-day mandates. Shippers looking for flexibility in the supply chain have found that the demands of today’s market have made it more restrictive than ever, with compliance fees putting another significant hit on their bottom line. They’re also pushing LTL to partly empty truckloads, to ensure higher on-time percentages.
To make money matters worse, carriers are no longer tolerating long offload times, and are weeding out any locations that typically rack up detention charges – further limiting carrier options. Other carriers are assessing much higher accessorial charges to recoup time lost. Those charges ultimately get passed on to the shipper – resulting in yet another blow to the budget, and probably inflation down the line.
Shippers have also hurt themselves by using transportation as a stepping stone for staff. Fewer companies have seasoned transportation professionals in positions of leadership, leaving a significant void of institutional knowledge that’s gained from tenure. The sixth sense you need to be effective can really only be found with those on the ground, in the thick of it, listening to their brokers, carrier partners and drivers. An experienced transportation department can much more easily digest and react to changing market conditions. Plus, with their specific skill set, they can identify cost-saving measures and educate their organization on ways they can become a more attractive shipper to secure more capacity.
In regards to the bid process, we’re finally seeing the tide turn (again) from procurement handling bids, to transportation handling them, where it belongs. Procurement teams are usually unfamiliar with transportation costs, and have treated lanes of freight as commodities, completely ignoring opportunities for round trips, continuous moves, drop trailers, and the value in long-term partnerships that have withstood the toughest of times. They won’t admit as much in mixed company, but every transportation department knows it to be true! In many cases, today’s enormous budget overruns are directly attributed to procurement practices, and not transportation.
We are still in uncharted waters as we wait to see what will happen once ELDs are enforced, but we think it’s safe to say that capacity challenges will continue for the rest of this year and well into 2019, as driver productivity is reduced and the market struggles to normalize. In the meantime, we’ll be keeping our ear to the ground to help make sense of these conditions for our shipper partners, and continue to focus on relationship-building with our stable of carriers and our committed customers.
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