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Electronic Logging Devices (ELD) and Their Impact on the Trucking Sector

Electronic logging devices (ELDs) are an electronic solution connected to a truck’s engine to record Hours of Service (HOS) compliance and keep Record of Duty Status (RODS) while the truck is in motion, per the Federal Motor Carrier Safety Administration (FMCSA). A driver will be able to log in and select their driving segments status—on-duty, off-duty or on-duty/not driving—and can access the number of hours drove in a day. This device eliminates paper log books and relieves pressure to drive beyond the legal hours (60 to 70 hours for 7-8 consecutive days) of service limits.

The deadline for mandatory installation of ELDs is is December 18th, 2017. Two separate legislative efforts in Congress to delay the mandate to 2019 are likely to be unsuccessful. Per the American Transportation Research Institute (ATRI), truck drivers beyond the legal 60-70 hours of service are ~45-50% more likely to be involved in an accident than those in compliance. Tracking hours of service on ELDs can prevent such violations. Per the FMCSA from a cost perspective, ELDs would save trucking providers a collective USD ~1.6 billion annually due to savings on paper log books and fuel.

However, despite the ELD benefits, commercial transportation providers are not in favor of the devices, as they would increase compliance costs. There are about ~3.5 million trucks which have not yet procured ELD device installation in their trucks. Per a recent survey, only about 33.7% of fleets have finished installation, while another ~19.8% are ready to procure and implement it. Therefore, only about ~53.5% of fleets are opting into ELD whereas the remainder of trucks have yet to begin implementing it. For example, Omnitracs LLC, an ELD provider, has estimated the device cost to remain between USD ~199 to USD ~2200 per truck, along with the monthly service cost of USD ~20-50 per truck. Excluding large trucking providers, the device cost be a challenge for owner operators and smaller trucking companies. They do not have a huge bargaining power to hike transport rates and cover costs, due to their business originating from larger commercial transportation providers and a lack of network efficiency as compared to larger carriers.

The impact of ELD costs could force smaller trucking companies or owner operator to exit the transportation market. This could lead to fewer trucking carriers and a driving capacity crunch at approximately ~60%. However, major transportation companies could raise the wages of trucking drivers and prevent a driver shortage in the trucking sector. Because of these and other factors, per IBISWorld, freight cost is expected to rise by ~6.2% in 2017 alone. Also, per other sources, there could be a ~4% rise in contract rates and ~15-20% in spot markets.

To offset the impact of the ELD mandate, shippers should engage with a 3PL service provider to keep freight constantly moving without delay or interruption due to fewer available carriers. Shippers can guide drivers to increase driver efficiency and streamline operations—reduce loading/unloading time, reduce delivery wait and provide legal parking at pickup/delivery locations.

According to GEP, the impact of ELD will be higher in H2 2017 due to the dramatic drop in trucking capacity and the freight rate increase and 2018. It is expected to affect US buyers, as trucking hauls about ~70% of tonnage carried by all modes of transportation and represents 81.2% of the total revenue earned by all transport modes. However, the implementation of ELD systems should ensure fewer accidents and safer transportation of cargo.

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