The Perfect Storm… For Higher Rates!

The ELD Mandate is now official and on the road. The ELD replaces the paper log books that a driver used to log their work, and time off, to meet the FMCSA rules and regulations pertaining to a drivers’ hours of service. ELD is short for Electronic Logging Device.

As with a lot of the FMCSA rules and regulations, which suits behind a desk whom have never driven a truck enact, it’s having unintended consequences. One of these unintended consequences now appears to be driver pay.

Personally, I know a lot of drivers that have stepped away from trucking as they knew the ELD would ultimately cut their pay. I too expected this to be an issue. As a driver gets paid by the mile, the inability to get the miles previously afforded them, they just aren’t making as much money.

This has now started a domino affect and exasperated the driver shortage problem. To attract and/or retain drivers, carriers must adjust driver pay so that a driver can earn at least the same amount prior to the ELD’s. So now the carrier is forced to pay more, for less. This alone increases the CPM (cost per mile) significantly for a carrier.

Historically, at least since deregulation, there was always a trucking company that would drop their rates to get a load. They’d adjust their operational costs or hope they’d make it up on the next load. Now, there just aren’t any more adjustments to be made as that well is dry. For the first time that I can remember all (large and small) carriers are on the same page, rates must go up!

But it doesn’t stop there, the economy is good, and manufacturing is up, but capacity is down. Capacity is the number of trucks available to haul a shipper’s load. Now a shipper is seeing a double-whammy as, due to a capacity shortage, they are paying more to get a truck PLUS meet the needs of a carrier to increase driver pay to retain/recruit drivers.

Through this adjustment period, this new norm, I hope that all trucking companies have learned that they set the rate, not the shipper. For far too long carriers have let shippers dictate the rates, often by low balling their competition to get the load. The ball is finally in the trucking company’s court, I just hope they don’t give it back.

As rates are forced up by trucking companies, brokers are able to pay more, and everyone wins.

Thanks, and talk soon…