Over the last four-to-five years, shippers seemed to have had the run of the market. But with the electronic logging device (ELD) mandate in effect, that tide is likely to turn. That’s at least how Drew McElroy, CEO and co-founder of Transfix, sees it.
“ELDs are changing the economics of trucking in such a way that the smart carriers who really understand their costs are just saying, ‘I can’t do this,’” McElroy explained. “‘I can’t wait five hours on average to be loaded every time.’”
In the past, carriers would just bill shippers for that detention time.
“Yeah, that used to work, but that just doesn’t work anymore because carriers aren’t going to bill enough to recoup their lost revenue,” he added.
So in order for them to survive under the ELD regulations, McElroy stressed that shippers really need to focus on improving detention time for carriers because now those hours are counting against drivers’ hours of service (HOS).
“Anybody who’s been in this business for more than five minutes knows that things happen – somebody falls behind schedule and they’re in detention, or there’s weather, or whatever it might be,” McElroy told Trucker. “The trick is, does the shipper actually care and want to help and actively think about the operations of their vendors? Or do they just say, ‘Yup, sorry, get to the end of the line, that’s too bad.’”
“The sort of old-school, combative mentality in a world where truckers have more control and we all have access to the data to understand what’s actually happening, I think the less that’s going to work,” he added.
However, McElroy noted that in the long-term, the upheaval and pain felt because of the impact of ELDs might not necessarily be a bad thing. What might end up happening is an attempt to make things more efficient, which would benefit everyone, he said.
“It makes the total cost lower because the waste is taken out of the supply chain,” he emphasized. “Over the long-term it can cause folks to truly understand the cost of waste and therefore remove it. I think that will create a lot of opportunity. But I think in the short term, people are just feeling the pain.”
For most of 2018, McElroy, like many others throughout the industry, anticipates freight rates will continue to rise as they have been. Ultimately, he added, what happens in 2019 will be determined by the carriers.
Then what about the carriers, drivers?
When it comes to how drivers have been impacted by the mandate, McElroy noted his perception of reality is changing.
“While I don’t think this is the end of days or anything, it has caused more pain within the carrier base than I anticipated,” he said. “I think the main reason for that is not people classically running illegally or anything like that; what’s really causing the problem is the stuff at the margins. What used to be a one-day trip for 550 miles, if you’re in the wrong market today, you’ll make that trip in about 510 [miles] and then have to shut down.”
He explained that for many drivers it means an extra half or three quarters of a day involved in load shipments.
“Obviously, the majority of the driver sentiment is pretty negative, and I can understand that,” McElroy said. “Drivers have, as we all know, the toughest existence and profession of anybody on the planet. So when you add more burdens from an income-earning standpoint, the more they see it as Big Brother intruding on them, and the more bothered they are.”
“I also get the other side,” he added. “This is 2018, and people want to know that trucks are safe and where their goods are.”
But at the end of the day, McElroy hopes to see an overhaul of the trucking and logistics supply chain, because right now, it is “incredibly wasteful,” he noted.
“That kind of ‘normal’ reality has been allowed to persist for a variety of reasons,” he stressed. “But many of them stem from trucking companies and individual drivers not having much power, and their time being perceived as cheap. And frankly, the shippers have been able to get away with it.”