On July 6, 2012, President Obama signed into law the Moving Ahead for Progress in the 21st Century Act (MAP-21). MAP-21 contained many clauses designed to support the Federal Motor Carrier Safety Administration (FMCSA) in their mission to reduce crashes, injuries, and fatalities involving large trucks and buses. Anyone who drives our over-crowded highways can surely get behind this mission, but the unintended consequences of these safer measures will be expensive and painful for virtually everyone.
The New Trucking Laws and Why They Were Implemented
In December of 2015, the new electronic logging device (ELD) rule was passed as part of the congressionally mandated MAP-21 Act. The rule states that all drivers must convert to the use of an electronic logging device (ELD) to create a safer work environment for drivers and make it easier and faster to track, manage, and share driving and total time on the road records. ELDs synchronize with a vehicle engine to automatically record driving time, making this chore easier and more accurate for drivers and trucking companies. The deadline to implement ELDs was December 18, 2017, unless you use an automatic on-board recording device (AOBRD) which grants an extension through December of 2019.
The old way of managing drive time was based on manual paper logs and the honor system. There are hours-of-service limits for every truck driver stating they can only drive 11 hours during any 14-hour time window; after 11 hours they must be off a minimum of 10 hours to rest before driving again. Furthermore, truckers can only drive 60 hours total in any 7-day consecutive shift or 70 hours total in any 8-day consecutive shift. Obviously, these rules are in place to prevent driver fatigue which can result in dangerous conditions on our highways.
Unfortunately, even though limits are in place they’re not always adhered to, mainly because of low wages and incentives which encourage drivers to work as much as they can regardless of the guidelines. The fact that truckers are willing to work more makes the industry extremely cost-effective which is passed down to customers in the form of competitive pricing. The switch to ELDs to improve safety rule compliance, while the right thing to do, will result in higher freight/shipping prices for every industry.
The State of the Industry and Predicted Outcomes
Currently, the trucking industry runs at 95-100% capacity almost every day meaning there’s absolutely no cushion. In the event of a disruption, the delays and impact will be widespread and difficult to quickly recover from. The three main causes for reduced supply in the transportation sector are:
- According to the American Trucking Association, staff shortages are projected at 50,000 less than needed to meet demand. Low pay rates are cited as the most common reason.
- Truck drivers are aging out, and due to the low rate of pay, younger workers aren’t interested in the profession.
- FEMA is paying a higher rate to haul equipment and goods to disaster sites which reduces the number of trucks available for regular rate hauls.
In Economics 101, we all learned the law of supply and demand which is exactly what’s at play here. The demand for trucking services is up, the supply or number of drivers and trucks is down. Unfortunately, the new ELD law will most likely further reduce the supply due to perceived reduced earning opportunities.
So why should you care? The average contracted trucking rates are forecasted to increase by 2-10% in 2018, while non-contracted rates start at a 10% increase and will climb even higher as demand grows. Limited capacity means trucking firms have the upper hand when it comes to negotiating freight rates.
The Impact for Businesses and Consumers
The new ELD law requires truckers to log hours which is forcing compliance and thereby shortening the run duration per project. Shorter runs lead to increased costs in labor, fuel, and logistics management. Get ready. The increased cost of freight projected will pass down in the form of higher prices for business and consumers. Whether it be for paper, office supplies, cereal, chicken, or frozen food, transportation keeps our economy humming. Rate spikes in the trucking world will hurt. The U.S. Department of Labor recently reported that underlying consumer prices increased 0.2% in February following a 0.3% increase in January 2018, proof this trend is already having a significant impact.
How to Protect Your Business
For those businesses who rely heavily on shipping and freight services, the best plan is to engage an experienced logistics firm with a wide network of carriers who understands the details, paperwork, and scheduling requirements necessary to be successful in this high-demand industry. This is not the time to attempt shipping logistics on your own, it could prove an expensive mistake that’s hard to recover from.
We’re ready to advise your company on the best shipping and freight logistics plan to ensure on-time deliverability and prevent sky-high rate hikes. Remember, at Three Dog Logistics we take the bite out of postage and freight. Contact us at threedoglogistics.com or call 410-284-5494 ext. 250 to schedule a complimentary consultation today.