Capacity crunch and rates

by Mike Millian

The ink is barely dry on the U.S. electronic logging device (ELD) mandate that took effect Dec. 18, 2017, and the Gazette 1 posting of Canada’s proposed ELD mandate, and already we are hearing and seeing signs of major change and disruptions to the immediate and long-range future of our industry.

For the carriers heading into and out of the U.S., we are hearing from more than just a few, that loads that were hard to come by just months ago are suddenly in abundance.

In a lot of lanes, heading in both directions, the freight available exceeds the capacity. For the first time in a long while, load boards are full, trucks are full, and freight is being delayed getting to its destination as a result of too few trucks being available for the loads that need to be handled.

All this while hard enforcement has yet to begin. (The U.S. FMCSA is under a soft enforcement period until April 1, during which no out-of-service orders are being handed out, and points for violations are not yet assigned to a carrier’s safety profile).

Once out-of-service orders come into play, we are likely to see a further tightening of capacity on U.S. lanes. Is the tightening of capacity really a result of ELDs, or just a small blip on the radar? While no one can say for sure with the extremely short timeline since the mandate has come into effect, the increase and associated talk in the industry is hard to ignore.

We are hearing from carriers in the industry that were prepared, that they are being overtaken by load offers they were not receiving before. We are hearing from shippers that a lot of loads, especially LTL loads, are seeing major shortages of trucks to haul them.

Some of the reasons being given include: volume of work has gone up; carriers don’t have the capability currently; or the drop or pick is too far out of route (the assumption being with the new ELD rule, a delivery or pick-up that was being done prior, can not be legally done under the ELD mandate).

The good we are seeing out of this in the short-term, from a carrier perspective, is rates are heading northward, and in some cases, significantly. On some lanes we are hearing of 50% rate increases, while in almost all lanes we are hearing of at least 5% increases.

Many carriers, in anticipation of this, and to ensure they were able to keep their drivers on-board and attract new ones, had already adjusted their pay rates upward. Carriers who had prepared, and were ready for the mandate, are currently reaping the rewards.

Those that didn’t plan are suffering, experiencing driver shortages, and either parking their trucks willingly, or being forced to due to the shortage of drivers. For those who were unprepared and non-compliant with the law, the ELD mandate, in the short-term at least, seems to be doing exactly what I, and many others in the industry had hoped for: a removal of those in the industry who were undercutting rates by not complying with the hours-of-service regulations.

Is the news all good? Of course not. As a diehard Maple Leafs fan, a Mike Babcock line comes to mind: “Have no doubt, there will be significant pain.”

If the short-term indications are correct, we will see a further tightening of capacity, we will see a real driver shortage, and we will see increased consumer costs as a result of long-overdue increased freight rates.

As always though, the carriers in the industry who were prepared and ready for the mandate long before they were required to be will come out ahead. For carriers that operate in Canada only, and are not yet affected by the ELD mandate, let what is occurring south of the border be a lesson. Begin preparing now. Check your routes, make sure they can be legally completed, research ELD providers, pick the one that best suits your needs, train your operations staff, your IT staff, and your drivers.

Once this is done, turn on the switch before you are required to, iron out the bugs, work with your staff and be ready long before the Canadian mandate is in play.

Those who are prepared will reap the rewards; those who are not will feel significant pain. But really, isn’t that how it should be?

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  • The shippers and receivers do not have enough parking. One receiver is renting a lot to park four dropped trailers and four O.T.R. trucks at over $7,000 per month The New York food terminal is telling driver’s to leave with no hours left. There needs to be more flexibility a d a lot more parking before these new rules come to Canada or freight costs are going to cause a recession A better solution would be to make O.T.R
    Drivers with 200,000 km or 3000 hours of experience make at least 1.9 times the min wage of there home province and overtime after 10 hours per day or 50 hours per week and any drivers needing to take 24 hours off get a company paid hotel room
    I was at a recruiting event for my company.younh drivers were not interested in giving free time at docks. Other jobs were paying $23 to $30 per hour.