Freight Management

The Perfect Storm

Clearly the pendulum of pricing power rests with the carriers this 2018.  New data indicates that 2018 LTL rate increases are pressing up towards double digits, especially with the ongoing difficulties that carriers are facing with capacity and driver shortages.  In the Full Truckload (FTL) arena experts are predicting record numbers for spot truckload rates for dry van, refrigerated and flatbed freight.  The national average spot van rate set a record in January, up 15 cents compared with December and 59 cents higher than January 2017.  The spot reefer rate, at $2.66/mile, was 71 cents higher compared with January 2017.  And flatbed spot rate was $2.39/mile, 47 cents higher than last year.  Not since 2010 have we seen rates increase to these levels.

Driver shortage is the trucking industries most pressing concern at this time.  It is estimated that the industry is short 51,000 drivers.  Experts predict that if this trend continues, by 2026 the driver shortage will be somewhere around 170,000 drivers short.  With the freight market booming, along with a projected 2.7% increase in our gross domestic product, if things don’t change this shortage won’t only be devastating to the trucking industry, but to the U.S. economy too.  Another area that the trucking industry is struggling is that fact that when their industry is good and the economy is healthy, counterintuitively, driver retention becomes a struggle.  Recruiters for larger fleets are looking for people to fill new positions that offer higher pay.  The truckload fleet driver turnover rate was 81% in 2016 and it is predicted to be about 90% this year.

With the implementation of the Electronic Logging Device Mandate on 12/18/2017 carrier productivity is being negatively affected.  But even more troubling is that there are smaller carriers that quite simply are shutting their doors because they either cannot operate at a profit complying with the ELD mandate or simply cannot afford the ELD’s.  As of now truckers will be ticketed for non-compliance, but as of April 2018, when the grace period ends, carriers will be put out service for non-compliance.  Thus, adding the capacity issues that we are facing.  Furthermore industry experts are warning both shippers and third parties that these ELD devices could potentially be used in investigations against shippers and third parties over driver coercion* issues.  ELD’s will provide drivers with evidence of violations of the coercion rule.

There are, however, a few conditions that commercial drivers will need to be aware of:  If the driver is not going to make the proposed delivery time he or she must inform the carrier, shipper, and receiver that they cannot meet the proposed delivery time without violating hours-of-service regulations or any other regulatory requirements that drivers are subject to.  However, if the other party(s) fail to respond to the notice from the driver, drivers can file a written complaint to the FMCSA with supporting documentation and data from the ELD.  If the FMCSA receives a written complaint, they have to investigate the violation.  And while carriers are used to being visited by the FMCSA inspectors for safety audits, shipper and third parties are not.  Another area in which shippers should be aware of, that it also can be considered coercion if the driver is required to repeatedly respond to satellite or similar communications received during their sleeper berth period or their 30-minute break period.  The driver cannot be required to do ANY work during these periods of rest.  Thus a driver that is required to respond either verbally, electronically, or otherwise he or she will be deemed as performing work duties.  But here’s the kicker . . . since the mandate kicked into gear, truckers have informed industry leaders of the many problems they have experienced in relation to the devices, including several vendor-wide systems failures, faulty GPS tracking, inaccurate recording of duty statuses, engine disablements, speed irregularities, abysmal customer service from manufacturers, and a worsening truck parking crisis.

*Coercion occurs when a motor carrier, shipper, receiver, or third parties threatens to withhold work from, take employment action against, or punish a driver for refusing to operate in violation of certain provisions of the Federal Motor Carrier Safety Regulations, Hazardous Materials Regulations, and Federal Motor Carrier Commercial Regulations.  Coercion may be found to have taken place even if a violation has not occurred.  An example of coercion is when a motor carrier terminates a driver for refusing to accept a load that would require the driver to violate the hours of service requirements.  In summary – if a driver is pressured into “bending” the hours-of-service rules or regulatory requirements, it will be termed as “coercion”

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