The transportation industry was forever changed when the Motor Carrier Act of 1980 deregulated the interstate trucking industry. The support for deregulation was mixed. Those who were opposed were concerned about the financial impact on the monopolies they held on certain lanes and regions. Others applauded it. The deregulations that followed allowed companies like Estes and JB Hunt to become transportation giants, but one of the most significant impacts was the ability for many small trucking companies to throw their hat into the transportation ring. Since then, these smaller trucking companies, including owner operators, have managed to keep up with the bigger players, but new regulations pose a threat to their existence.
Now let’s fast forward. Most will agree that today’s technological advances have had a positive impact on the industry as a whole from both a profitability standpoint and more importantly, from a safety and compliance one. Technology has helped level the playing field for many small to mid-size companies to incorporate and implement Transportation Management Systems (TMS) systems to help manage their fleet operations, control costs, and continue to save their thin profit margins that affect the trucking industry as a whole. However, one area that many have yet to embrace is the implementation of electronic logging devices (ELDs).
It is estimated that nearly 50 percent of commercial trucks do not use ELDs, but the FMCSA has mandated that all commercial vehicles use them by December 2017. Many owner operators and small to mid-size trucking companies oppose the ELD mandate due to the cost, not just to implement the system but to maintain it and stay compliant. If they don’t, they face significant fines. To make matters worse, many shippers are considering making it policy that they will only use trucking companies that have implemented ELDs in all of their vehicles, and require that they show proof so they can continue as an authorized carrier.
The debate has been ongoing since the “Moving Ahead for Progress in the 21st Century” bill or more commonly known as MAP-12 was enacted in 2012. What, if any, will the impact be when the mandate takes effect on December 2017? By definition the ELD mandate’s sole purpose is to make the trucking industry safer, by using technology to track a drivers status, and ensure the motoring public is protected from the many devastating accidents that have claimed the lives of so many over the years. To even hear that there is an argument or push back for this mandate would make anyone scratch their head and question motives. However, safety is not what is at the core of the arguments by so many including the Owner-Operators Independent Drivers Association (OOIDA), who filed a lawsuit in hopes of blocking the mandate. The suit was last heard by a three-judge panel with the U.S. Court of Appeals for the 7th Circuit in Chicago on September 23rd 2016 and is currently awaiting final decision. OOIDA argues that the rule itself does not specifically define how the data gathered by ELDs can and could be used other than for log tracking purposes, and how the cost associated with the new ELD rule could possibly put so many of them and smaller sized companies out of business.
Many in the industry feel that its history simply repeating itself and a move back to the days before deregulation, such that only large companies will be able to afford to stay compliant. The argument continues that it’s the service and competition garnered by having the owner operators and smaller companies operating that keeps the larger companies honest and transparent. It is also noted that drivers’ pay has fallen dramatically since trucking deregulation in 1980, with wages dropping approximately 62%. While the verdict is still out and the possibility that the ELD mandate could be dropped all together, one thing we can all agree on is that technology will not only continue to play a part in the industry but continue to dictate the direction that transportation and logistics is heading today and into tomorrow.
A study of public truckload carriers who adopted ELDs in 2010 and 2011 revealed a 6 to 8% drop in utilization during the implementation period. After implementation, carriers were able to gain back 2 to 3% of the utilization they initially lost. In addition, transitioning to ELDs will have the largest impact on smaller carriers. This is significant as FMCSA estimates 99% of freight carriers are “small entities.” A recent poll of almost 1,500 owner-operators found that 37% are planning to retire or look for other work due to ELDs. An additional 11% are planning to only run short haul-hauls as short-haul drivers are exempt from the ELD rule.
What are your thoughts on the current and proposed pending regulations and how you feel technology currently is and could affect the transportation industry going forward?