In an article published on August 6th, William Cassidy from the JOC wrote an article: ELD Surprise: Costing Supply Chain Time, Not US Truckers, where he outlined some of the impacts from the newly enforced Electronic Logging Data (ELD) requirements that have been put on the trucking industry in the US.  While to some this may be a reference to some arcane trucking regulation, these regulations create some fundamental changes to the internal logistics system of the largest economy in the world.

After some period of anticipation about the impacts of these newly enforced national trucking regulations, this is a good summary of some of what has been anticipated for some time.  To refresh for those that don’t follow these things, the US Federal Motor Carrier Safety Administration’s (FMCSA) final Electronic Logging Data rule was published December 2015 and the first compliance deadline was December 2017.  The mandate applies to over three million drivers on the road today in the US and simply stated, ELD is an electronic solution that allows professional truck drivers and commercial motor carriers to easily track Hours of Service Compliance, which provides an 11-hour driving limit after 10 consecutive hours off duty.   All commercial drivers required to keep a Record of Duty Status (RODS) must use an ELD to document their compliance with HOS rules.

The new ELD rule adds certain technical and performance specifications that define exactly what the device must feature.  For example, an ELD must:

  • Connect to the truck’s engine to record if the truck is in motion
  • Graphically display a Record of Duty Status, so a driver can quickly see hours in a day
  • Provide data in a format that’s standardized and can be transmitted to law enforcement

In the JOC article, Cassidy makes the case that the effect on truckload capacity is “seen more in emerging time constraints on shipping lanes rather than a loss of truck drivers”.   Prior to ELD implementation, there was a lot of speculation about the impacts of ELD and if it would cause a reduction in the number of registered trucks, due to a loss of competitiveness and profitability.  The data hasn’t shown that – that a gross loss in trucking capacity hasn’t been because of fewer trucks, but rather because of challenges due to the impacts of tighter HOS enforcement.  Requirements for more frequent driver stops has a produced a net loss of  trucking capacity. Overall, these dynamics have increased trucking costs by about 20% and an associated increase the cost of ground shipping.

The current fast-growing US economy and higher volume levels are expected to further tighten time constraints through 2018. These challenges have been masked to an extent by the robust economy, but higher shipping costs are impacting some shippers in a significant way. This is expected to level-out in 2019 as the effects of ELD are fully absorbed and with the possibility of a cooler economy.

Broadly speaking, GLDPartners sees the impacts of higher costs to some specific supply chain verticals that move goods over shipping lanes that are over 400 miles, where the impact of HoS is felt the most. Truckers are forced to stop for rest at the 11-hour mark, or earlier in some cases if they need to find suitable truck stop or truck parking facilities. This has had meaningful time and cost impacts to shipments that are just at or beyond the legal trucking range – say for routes like the Port of Los Angeles to Salt Lake City, or the Port of Charleston to Memphis. For inland markets that are situated in locations that are just beyond the HoS limits for a one-day dray to the nearest load-center seaport like Albuquerque, Salt Lake City or Indianapolis, this will have important implications to competitiveness for international shipments. For international supply chains that rely on inbound or outbound cargo movements, they are faced with higher shipping trucking expenses. These dynamics may suggest that with proper intermodal access, alternatives via rail may even be more attractive.  From regional economic perspectives, it will be critical for some inland regions in the US to create more mature business strategies to assure they are competitive to support global supply chains.  For some coastal or near coastal regions, these effects may provide a new attractiveness for some supply chains, from either a shipping cost or transit time perspective, or both.

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GLDPartners is an international investment and advisory firm that specializes in revenue and infrastructure development projects at and around high-opportunity airports, seaports and strategic trade and logistics hubs. The firm supports global manufacturers and companies with retail distribution operations with network design strategy and facility location analytics. GLDPartners’ clients and market perspective is global and the firm is headquartered in Scottsdale, Arizona, with offices in New York, Washington DC, Wisconsin and in the UK.