ELD Mandate: More Changes for Shippers Than Carriers
Much has been written regarding the anticipated impact of the forthcoming electronic logging device (ELD) mandate on truckload capacity. However, comparatively little has been said about the actions shippers can take to mitigate the potential negative effects of the mandate on their supply chains. As the implementation passed earlier this week, shippers should look beyond the perceived compliance rate of their existing carrier base and focus on removing other supply chain inefficiencies, thereby, naturally reducing ELD-related costs and risks. Taking a holistic, long-term approach—often with the help of an experienced 3PL provider—can address the challenges posed by the ELD mandate, and beyond.
The ELD mandate is simply a mechanism that helps the FMCSA more effectively enforce existing hours-of-service (HOS) regulations. Violations can lead to fines, out of service penalties, increased insurance costs, and intervention by the FMCSA.
As the ELD mandate causes less-compliant carriers to improve or exit the market, the remaining carriers (which necessarily prioritize safety compliance) will refuse or otherwise penalize freight that forces them to choose between on-time delivery and HOS violations. These carriers will choose freight from shippers and receivers with schedules and waiting times that permit profitability without risking violations. Over time, this selection process will favor the efficient, organized shippers and receivers, irrespective of current contractual relationships. In essence, the ELD mandate will force shippers to emphasize the value of carriers’ time.
In a tight market for carrier capacity, shippers that improve efficiency will therefore lower their costs and attract the best, most-compliant carriers. Conversely, inefficient shippers will bear additional costs associated with these choices, whether in the form of higher fees or less reputable/experienced carrier capacity (and the additional costs associated with that less-experienced capacity). Importantly, carrier contracts will be of limited value in this reshuffling.
The higher fees are somewhat obvious. For example, a 400-mile run that would have been completed in a day might now take two unless loading times are reduced. Shippers will start paying for that. Similarly, shippers may find that their desired transit times require team drivers or additional fuel, further increasing their transportation costs. The risks associated with less reputable or experienced carriers, while perhaps less obvious, are no less real. Carriers that can’t command efficient shippers probably will be less reliable, less likely to meet delivery windows, or more likely to damage freight or have it stolen.
On the bright side, a shipper–by its own actions–can increase the rate of compliance among its carriers and decrease the costs associated with that compliance by, for example: providing ample lead time on pickups with flexibility on pickup dates and hours; understanding the current market conditions and recent fluctuations; considering the use of drop trailer pools rather than live-loading and unloading; sharing relevant information with intermediary and motor carrier vendors, etc. A shipper also might employ mode optimization (truckload, intermodal, LTL) and align warehouse pickup schedules with product flow patterns, each of which is a big part of this battle. Also, shippers generally should learn to more freely discuss transportation schedules with their receiving customers. A receiver that “needs” a particular load by a particular time on a particular date might reconsider if meeting that need might encourage a carrier to risk HOS violations, impose fees, or yield the business to less reliable carriers. In the post-mandate world, these efficiencies will effectively lower that shippers’ line haul rate, reduce its delivery times, and limit its supply chain disruption.
Of course, carriers and intermediaries share responsibility with shippers and receivers in the endeavor of safely getting the right goods to the right place at the right time. In order to meet the challenges of a changing market, shippers must be both tactically agile and strategically savvy. Perhaps the surest route to a sound strategy is by seeking to create true partnerships with providers. 3PLs can be particularly useful in this regard, as a solid 3PL partner will take a long-term view of your transportation needs and collaborate with you to create a customized solution that reduces costs, improves service, and mitigates risk.
Ideally, such a partnership would include open and proactive communication to provide clarity on volume commitments and priorities. In addition, implementing a transportation management system (TMS) to capture and analyze shipment data and to provide visibility to KPIs is critical. The combination of proactive partnership and actionable business intelligence and drives continuous improvement to help shippers tackle the challenges of today and of tomorrow.
Dan Broderick is general counsel at AFN Logistics, a dynamic third-party logistics provider. Dan has over 12 years of experience in legal, planning, and operational roles in the transportation, telecommunications, government contract, and energy industries.