KANSAS CITY — The cost of truck freight, if available, has jumped from 5% to 15% and much more in some cases since the U.S. Department of Transportation’s Electronic Logging Device (E.L.D.) rule went into effect Dec. 18, 2017. While it is hoped a 90-day exemption, which expires March 18, for agricultural products will be made permanent, nearly all other shippers are affected, and ultimately consumers will pay more for anything moved by truck, which is 70% of the nation’s freight volume by weight.
The greatest impact on truck freight since December has been on spot loads. In some cases, shippers say they have paid double the usual rate to entice a trucker to take a short-notice load. Others indicate loads that before could be made in a day, routes from 400 to 600 miles, now are taking one and a half to two days because of downtime required by the new rules. In other cases, especially where the freight cost is covered in the contract as part of the delivered price, shippers are “eating” the higher freight charges until current contracts expire, thus cutting into margins.
One marketing executive for a major beet sugar processor said last week freight was expensive, and “it’s all I’m working on.” Other anecdotal reports indicate an increase in missed or delayed deliveries, and several cases of shippers not able to find trucks or drivers at any price.
The Commercial Motor Vehicle Safety Enhancement Act mandated that all commercial motor vehicles replace paper logs with E.L.D.s. The device records driving time and monitors engine hours, vehicle movement, speed, miles driven and location and provides the data to state and federal inspectors.
Under the D.O.T. Hours-of-Service rules, commercial operators may only drive for only 11 hours and may only be on duty for only 14 consecutive hours in any 24-hour period. Once the limits are reached, the driver must immediately stop and wait 10 hours before moving again, with the E.L.D. recording everything and downloading the data to the D.O.T. for enforcement.
The more stringent driving rules have exacerbated a long-standing driver shortage, which the American Trucking Associations (A.T.A.) last year estimated at an all-time high of 50,000 and growing to 174,000 by 2026. The shortage especially affects long-haul drivers, who are aging out of an industry that is not attracting as many younger drivers, and it’s the long-haul routes that are most affected by the E.L.D.s.
The current freight shortage and rate hikes are affecting all sectors of commerce but are especially of concern for livestock and produce. While longer hauling times affect the shelf life of perishable produce, they are even more critical for livestock. There already is a 150-air-mile exemption from the point of pick up for agricultural products, but that doesn’t cover nearly all routes. The American Farm Bureau Federation is seeking clarification from the D.O.T. on the 150-mile exemption as it relates to E.L.D.s.
The A.T.A., the nation’s largest trucking organization, supported the E.L.D. mandate as ushering in “a new era of safety and efficiency for our industry” that will allow truck drivers to spend less time on paperwork and reduce logging errors while reducing truck crashes.
But many disagree, suggesting E.L.D.s favor the largest trucking companies and potentially harm the livelihood of smaller companies and owner/operators, which combined make up most of the U.S. trucking industry. They also suggest truckers may drive faster (although not necessarily speed as E.L.D.’s record speed) to make deliveries, which may increase safety risks, as would keeping older trucks that are exempt from the mandate on the road longer.
While the unsettled truck freight market may calm down in the months ahead, the higher rates are expected to continue. And the added costs are expected to be passed on to consumers.
“We’re going to pass it through, and hopefully the consumer is going to pay for it at some point,” Thomas P. Hayes, president and chief executive officer of Tyson Foods, Inc., said on a recent earnings call.
Many also expect the changes to bring about a fundamental and massive change in logistics, suggesting the days of calling late in the week for a “couple of weekend loads” will be a thing of the past as truck drivers are more constrained by the E.L.D.s and younger drivers appear averse to working weekends. That could have an impact on the “just-in-time” inventory management favored by many manufacturers, which in turn could force those manufacturers to carry larger inventories, which would be less costly to hold than shutting down a plant when raw materials are lacking. There certainly is much at stake and many unknowns about the full impact of E.L.D.’s.