One of the many side effects of the long-awaited electronic logging device (ELD) final rule issued by the Federal Motor Carrier Safety Administration (FMCSA) late last year is how the trucking industry will cope with expected declines in productivity as ELDs are adopted.
Getting over the so-called “learning curve” is not a short process either, as Derek Leathers, president and COO of Omaha, NE-based Werner Enterprises, explained during a presentation last September at the annual FTR Transportation Conference.
“Some 60% of the industry does not have [ELDs], and those early adopters suffered a 3 to 5% productivity hit—and it took 12 to 18 months to get it back,” Leathers said.
Werner’s experience with electronic logs dates back to 1998, when first implemented by the carrier, on up to 2004, when FMCSA granted it an exemption from paper logbooks.
“But the 60% that have not adopted ELDs will likely take a 5 to 10% productivity hit. Put in the wash, that is a significant loss of capacity,” Leathers emphasized at the FTR meeting. “And some won’t be able to recover from that.”
The industry won’t feel it early on when the mandate is implemented, Leathers believes; it will be with the second part, the “last wave” of carriers to adopt ELDs, when the cost and productivity burdens may be too much for some to bear.
“There’s a long learning curve with ELDs, and you have to find that ‘snap back’ when productivity recovers,” he explained. “But for some, once they lose 4 to 5% productivity, they don’t come back.”
Such productivity issues revolve around so-called unassigned truck moves such as maintenance technicians conducting vehicle road tests, yard moves governing activity in and around freight terminals and parking lots, and personal conveyance status for drivers.
“The ELD is required to maintain GPS once per hour while in motion and [record] GPS at every log in/log out point, capturing both location and direction information,” noted Tom Cuthbertson, vice president of regulatory compliance for Omnitracs.
Yard moves are a whole different category as they are a manual event drivers are allowed to use, he said. Typically, once a vehicle exceeds 5 mph, that starts the drive time clock. But that doesn’t apply in yard moves or when in personal conveyance mode.
“It has not been defined in [the rule] what a yard move consists of,” Cuthbertson explained.
That’s but one reason why John Larkin, managing director and head of transportation capital markets research at Stifel Financial Corp., believes smaller carriers could face added competitive burdens as they begin adopting ELDs by the implementation deadline of December 2017.
Since many smaller trucking and logistics firms suffer an inherent cost disadvantage as they lack purchasing economies and scale efficiencies, he said, the incremental cost of compliance with the cacophony of motor carrier rules and regulations often can push smaller operators out of an industry segment altogether.
“This is exactly how we expect this onslaught of regulations will impact the transportation and logistics industry,” Larkin explained. “The compliance costs associated with all the … regulations will simply make many of the smaller firms less economically viable or not economically viable at all.”
Let’s hope the opposite ends up proving true where the ELD learning curve is concerned.
