How to Avoid Getting Fired by Your Transportation Service Provider in 2018

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Published November 30, 2017

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The new Electronic Logging Device (ELD) rule, which requires electronic logging devices to be installed in tractors and used by drivers, is being met with a great deal of uncertainty by most shippers and transportation service providers.  Although not a new technology, it will be a requirement starting December 18, 2017.  Tompkins International’s team has spoken with several brokers, owner operators, and shippers to understand what to expect with the new ELD mandate.  What actions has your company taken to understand the impact of ELD on your logistics operations?  Tompkins has derived insight into key areas to help you look at the impact on your operations.

Availability of Drivers

Tompkins estimates there will be industry consolidation with small service providers unable to invest in the technology and will opt to exit the market and/or sell their assets to a competitor.  The large asset-based companies will invest in the technology and pass the costs onto their customers.  Carriers may become more selective in the lanes they choose to service.

Select individual owner-operators have indicated they will not have the interest or desire to purchase the ELD unit or learn how to use one.  As a result, a percentage of drivers have planned to retire from the industry.  Tompkins believes this most likely will have less than a 3% effect of the overall number of drivers available.  As the turnover is already high in the industry, 100%, the actual impact of this will be difficult to measure.  Tompkins believes the effect will be minimal due to the following reasons:

  • How the ELD will be enforced, which yet remains unclear for most drivers.
  • Understanding the implications if the driver does not have an ELD installed or is not using what is installed.
  • As with most people, to quit a job requires serious thought and planning for alternate sources of income.

The greatest impact on driver availability will be the time the drivers are allowed to drive.  Drivers will require more time to transport the same load, limiting the number of loads they can deliver.  This will affect everybody in the industry, although the actual impact will be for shipments greater than 500 miles and shipments that require longer loading times.

  • Currently, if a driver is close to their destination, they will continue the extra one to two hours of driving to arrive and unload the trailer.  This will no longer be allowed.  Current one-day trips will now be two-day trips.  The greatest cost impact, will be in the 500-700 mile shipments, or multiples thereof.
  • The impact of the transition from a one-day to a two-day driving time will impact most shipments.  Although a shipper may only ship within a 500 mile radius, most likely the driver will deliver to destinations outside the radius and his time is at a premium.  The rates will go up, because the overall availability of the drivers’ hours have decreased.
  • Brokers indicate the largest asset-based transportation service providers will be the first to adopt ELD technology, as they will be the first to be scrutinized by regulators.

Cost of Shipments

Select service providers have already adjusted rates for next year based on product shipped and distance. 

  • “We have increased our fees to our customers from $30 to $300 for select origin and destination pairs.  The increases were based on how long the product took to load and where it was going,” Owner Operator, Midwest. 
  • “Our main service provider has already increased our rates from $1.80 per mile to $2.15 per mile.  We are currently losing money on all our shipments until we deliver all current orders,” Enterprise Shipper, Southeast.

In general, many service providers, especially brokers, were unsure of the effects of the ELD on driver availability and transportation costs.

Cost Increase in Port Services

Imports handling will also be subject to cost increases.  Ports notorious for requiring drivers to wait for loads may cause shippers to think twice about using that port.  Currently, depending on the service provider, there is a port detention time charge of $80-125 per hour after two hours.

  • Ports that do not use carrier appointment tools will be affected the most.  For instance, Long Beach requires carrier appointments, which helps reduce the detention time.  Brokers indicate Seattle is the worst port in country with drivers having to wait up to 10 hours for loads.  Drayage companies that serve the Houston port have also experienced wait time issues.
  • Tompkins believes costs for drayage will increase by 20% in the next year.  Charges for detention will also be enforced more diligently.  In addition, there will be detention charges for any wait times, not only for those greater than two hours.
  • Shippers will also become wise to inefficient ports.  Costs will be looked at holistically and once they receive significant detention time charges they may look to different ports to import product.
  • As drivers will now have the options to pursue higher paying loads, they may decide not to offer drayage services.

Fired Customers

Tompkins has worked with clients that have found that they have been fired by their transportation service provider.  Tompkins conducts process re-engineering programs for warehousing and production operations.  Re-engineering programs include establishing standard operating procedures for late production and carrier communication, as well as solutions to eliminate bottlenecks.  “We found in the past, the driver would wait.  Now they leave or give us significant driver retention charges.  A couple of them will not do business with us anymore,” Enterprise shipper.

Tompkins recommends shippers look at their distribution networks, now.  Supply chain managers should have detailed discussions about forthcoming price increases with their current transportation service providers.  It will be important to establish what is required to minimize service disruptions.

Areas to consider in your supply chain network include an analysis of the following: 

  • Where is there currently limited options for service providers? 
  • How strong are your relationships with your service providers? 
  • Do you currently have issues with dropped loads? 
  • Where should you create partnerships with select brokers and owner-operators? 
  • Do you need to conduct a transportation a network rationalization? 
  • How can you lower your transportation costs today to counter the increase in costs eminent next year?

Tompkins works closely with shippers and 3PLs, evaluating the entire logistics operation to increase service, reduce inefficiencies, and lower costs.

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