US electronic logging rule heralds supply chain challenges, changes

William B. Cassidy, Senior Editor | Dec 11, 2015 6:23PM EST

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Opinion on the highways about the looming electronic logging mandate is divided, with some drivers welcoming the end of paper logs and others saying they’ll park their trucks and turn in the keys before using an electronic logging device or ELD to track their on- and off-duty hours.

“It’s like being a child who needs a babysitter,” a truck driver with 35 years behind the wheel told Mark Willis of Sirius XM’s Road Dog Trucking News program Dec. 10, the day the final rule on ELDs was released. “I’ve never cheated on my log, and I don’t think it’s necessary.”

The potential complexity of new technology concerned the driver, who called the show anonymously. “If I can’t understand how to use it, I’ll have to leave the industry,” he said. The next trucker to call the daily news program, however, had a very different outlook.

“I say bring it on,” said a driver who went by the handle “Shipwrecked.” “If they want to leave, I’ll take their freight and make more money.” When his company first installed ELDs, “I was dead set against them,” he said. “Now I think they’re the best thing since sliced cheese.”

Whether truck drivers love ELDs or loathe them, almost all of them will have to swap paper logbooks for electronic logs within two years. The publication of the final rule mandating ELDs in the Federal Register early next week will start the clock ticking on a December 2017 deadline.

The rule affects approximately 3 million truck drivers who now use paper logbooks to record their daily record of duty status or RODS. ELDs will not be required on 2000-model-year or older trucks, and tow-away drivers and local drivers that don’t use logbooks are exempt.

The Department of Transportation estimates the ELD requirement will cost the trucking industry about $1.8 billion, with the actual electronic devices representing $1 billion of that cost. The DOT estimates net savings of $1.7 billion, thanks to reduced paperwork costs.

The department also believes mandating ELDs will cut the number of truck crashes by 1,844 a year, on average, avoid 562 injuries annually and save an estimated 26 lives a year. The number of large truck crashes would be cut by more than from the 3,906 fatal crashes reported in 2013.

Unless the Owner-Operator Independent Drivers Association can delay or overturn the rule through a court challenge, as it did with a previous version of the mandate in 2011, various types of electronic devices will replace the paper logs U.S. truck drivers have used since 1938.

That’s an historic and momentous change that will have repercussions far beyond the truck cab. The ELD mandate will affect shippers and logistics companies as well as drivers and carriers, squeezing truck capacity driving up trucking costs and potentially rates as early as 2016.

The ELD mandate is the third leg of a regulatory stool the Federal Motor Carrier Safety Administration has been hammering together for years, starting with the Compliance, Safety, Accountability initiative and the 2013 truck driver hours-of-service regulations. ELDs will help enforce the hours-of-service rules and provide data to support CSA.

An overarching goal is to move data collection and enforcement toward the dynamic, digital, real-time environment of the 21st century, and away from the static, paper-bound, post-audit regulatory world of the 20th century. In theory, that will help FMCSA proactively identify and root out those carriers and drivers that habitually violate safety regulations and threaten lives on U.S. highways.

The mandate will not only eliminate those carriers that only survive by operating illegally, pushing drivers to keep going well beyond their hours of service limits, it will also force carriers that comply with the rules, by and large, to tighten and improve their operations.

Shippers will have to take another look at their distribution operations, focusing on pickup and delivery appointment times and their own customer service requirements. If they’ve turned a blind eye to hours-of-service rule breakers in the past, they could lose an eye in the future.

The ELD mandate doesn’t come alone. The Federal Motor Carrier Safety Administration released a rule prohibiting driver coercion last month that extends its authority to shippers and brokers and enlists the Occupational Health and Safety Administration’s enforcement muscle.

In short, the slack created by a more opaque than transparent window into hours of service compliance is being snapped tight. A more “rigid” U.S. transportation network with less flexibility will emerge as ELDs put a hard digital time stamp on truck drivers daily and weekly schedules.

Another truck driver who called Willis raised an example: What happens if an accident or congestion delay a truck to the point where the driver can’t deliver the load within the 11-hour daily driving limit? “What am I supposed to do, stop in the middle of the road?” he asked.

The ELD actually doesn’t change what that driver and his or her employer is supposed to do in such a situation. What the electronic log does do is prevent them from cheating by falsifying a paper logbook entry to make it seem as if the driver had started driving later in the day.

Most likely, with an ELD tied into a dispatching system that monitors and manages driver hours, that trucker’s employer would have known of the delay and directed that driver to a rest stop or other point where another driver could either take the load or the trailer to the customer.

That would require having that other driver and tractor and knowing the exact remaining hours and locations of all available drivers and trucks within that trucking company’s motor pool. That means more equipment, more drivers and, at least initially, higher costs and lower utilization.

And that’s why transportation analysts and trucking executives expect truck capacity to be cut somewhere between 3 and 5 percent once motor carriers begin installing ELDs. That’s a serious reduction in capacity for an industry with utilization rate in the mid to high 90 percent range.

Wall Street investment research firm BB&T Capital Markets noted estimates are “all over the map,” with some as high as 5 to 10 percent. Companies that are late adopters of ELDs and lack back-office support and dispatching software may stand to lose even more capacity.

“They won’t have the systems they need to snap back” after first installing ELDs and improve driver and vehicle utilization, Werner Enterprises President and Chief Operating Officer Derek Leathers said at the 2015 FTR Transportation Conference in Indianapolis in September.

The introduction of ELDs could begin to tighten truck capacity, which “loosened” substantially in 2015, by late spring or early summer 2016, BB&T Capital Markets said in a Nov. 17 investor note. “ELDs could change the tenor of rate discussions,” the firm’s stock analysts said.

“We believe more shippers will bundle their 2016 rate discussions around an eye towards what 2017 capacity might be like,” BB&T said. The firm believes “more fleets than not will begin an orderly process to install ELDs within about six to nine months” of the final rule’s release.

Shippers will not only have to worry about rates, but about avoiding driver coercion and synchronizing pickup and delivery times with the available driving hours of their carrier partners. With coercion penalties as high as $11,000 a pop, ignorance will be anything but bliss.

“I’ve met shippers who are giving their freight to carriers who will haul it in a 13- to 14-hour run,” Mark DiBlasi said, president and CEO of Roadrunner Transportation Systems in Cudahy, Wisconsin, told JOC.com last summer. “They turn a blind eye to it, but they know it’s going on.”

ELDs alone won’t stop coercion by carriers or shippers. They won’t even stop the endemic hours-of-service cheaters immediately. But the hard data they provide, with log data tied to engine information, will provide hard-to-controvert factual evidence to support coercion claims.

Shippers that “turn a blind eye” to hours-of-service violations in order to speed freight to their customers may get more than a vision test from OSHA and FMCSA if ELD data backs up a truck driver’s coercion complaint. And their carrier partner could get a black eye, too.

The availability of that data is why short-term pain caused by the introduction of ELDs could translate to long-term gains. Putting logging devices that connect to engines and other onboard systems in millions of tractor-trailers will bring about an unprecedented “data explosion.”

The amount of data transmitted to and from trucks, whether downloaded at terminals or shared from the road, will increase exponentially, Mark Kessler, general manager for trucking at onboard computer and ELD provider PeopleNet, said at the SMC3 Connections Conference last June.

Once ELDs are widely adopted, truck drivers, carriers and their customers will experience two waves of benefits. The first wave will be based on more efficient utilization of the current transportation network. That’s a direct one-to-one gain in efficiency from new technology.

The second wave will come as that data is used to innovate and find new ways to improve efficiency. “I think people will get more creative about how they use ELD data to dispatch better,” said Tom Cuthbertson, vice president of regulatory affairs at Omnitracs.

The use of drop-and-hook trailers, already on the rise thanks to tighter hours-of-service requirements introduced in 2013, is likely to increase, as well as the use of team drivers and relay drivers as carriers look for more efficient ways to keep freight in motion.

Companies that are already using ELDs, large and small, already claim benefits. “I think they’re the best thing that ever happened,” Ed Ferguson, lead driver recruiter at Watsontown Trucking, a truckload carrier in Milton, Pennsylvania, that has onboard computers in most of its 325 trucks.

The ELD “makes the driver and the company run legal,” said Ferguson, who has more than 30 years of driving experience. “Dispatchers are watching drivers’ hours on the screen right in front of them, and drivers will call up and say, ‘hey, I’m getting down to two hours,’” he said.

If drivers run out of hours, “We go out and get them,” Ferguson said. “They’re not going to be stranded out there 50 miles from home.” And if drivers initially lose some miles, software that optimizes the carrier’s network, not just individual routes, can find more miles for them.

“They should have done this 50 years ago,” Ferguson said. “The log book came out to protect the driver. A lot of drivers don’t realize that.” With an ELD, “the company can’t force a driver to go over the (11-hour) threshold. It shows up right away. The driver can’t cheat on the logs.”

Best of all, “it makes the dispatchers own this,” he said. And although shippers aren't responsible for dispatch, they'll own a piece of the responsibility for regulatory compliance, too.