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Shippers, not just truckers, need electronic logging plan

Apr 17, 2016 at 07:23 AM CST
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Brian Fielkow

A perfect storm is coming to the trucking industry, and it’s certain to impact shippers and intermediaries nationwide. The storm has two components: the federal mandate requiring all trucks to operate with electronic logging devices (ELDs) and the exodus of major insurers from the trucking liability market.

As of Dec. 18, 2017, carriers and drivers who use paper logs or logging software must integrate ELDs into daily operations. An ELD is to a truck driver what a “black box” is to an airplane. With it, a driver’s duty status is more easily tracked and managed since the ELD synchronizes with a vehicle engine to automatically record hours of service.

In the past, carriers could mask hour violations by using two sets of paper logs. With the “black box” on board, every ride beginning late next year the trucking industry will be on a more level playing field.

How does the ELD mandate effect shippers? December 2017 seems like a long time away, but the reality is it’s just around the corner. This is especially true considering the amount of trucking companies that aren’t ELD compliant.

Shippers are encouraged to thoroughly vet their current carrier’s logging platforms and if they aren’t utilizing ELDs or plan to, create a transition plan. Carriers suggesting ELDs are a negative should be a red flag. Now that ELDs are the law shippers should work exclusively with carriers who have, or will have ELDs.

If a shipper trusts its freight assets to non-asset based companies they should be asking the intermediaries what they are doing to prepare. This guarantees that contract carriers are or will be compliant. This base level of due diligence should be performed by shippers on asset-based carriers and brokers if they want to avoid accusations of entrusting freight to a non-compliant carriers. Worst-case scenario, this could lead to a truck being shut down mid-route by law enforcement.

Shippers can only benefit from this mandate. Carriers should know exactly where their trucks are to avoid misrepresented load status. Consider an accident: All parties need to be able to access location, rate of speed and deceleration. All parties will benefit from being able to prove arrival time, free time, detention time and departure time, allowing carriers to be compensated fairly for lost time.

At the same time as ELDs come on line, major trucking company insurers, such as Zurich and AIG, are no longer writing many forms of trucking liability risk because of rising accident award costs and high profile claims. The onset of ELDs will not have much impact on this exodus. Many of the best companies have been using ELDs for quite some time and they already run safe. All these devices will do is cause the marginal to poor operators to either upgrade or get out of the business.

While these types of companies may improve somewhat, the changes might not be enough to counter liability costs that continue to rise. With insurers pulling out of the market, there will be less choice for carriers. The remaining insurance companies will have the ability to charge higher rates even for the best operators, and greater luxury to select the safest truckers for their risk portfolios. As a result, unsafe trucking companies simply won’t be able to secure insurance.

Of course other insurance carriers are likely to attempt to fill this void; it’s hard to predict what the landscape will actually look like over the coming years. One thing is certain from my point of view — loss frequency must decrease or insurance costs will continue to rise regardless of the insurers in the market.

Shippers should perform due diligence on their trucking vendors. The level of diligence ultimately is up to the shipper, but no matter the circumstance a shipper should not trust its cargo to a trucking company that is “sight unseen.” Low bid on a trucking rate board, without any proper diligence, is not a wise strategy in today’s evolving market.

Shippers also will want to track closely insurance certificate expirations to obtain new certificates well in advance of the expiration date. This will allow the shipper to verify that coverage is intact and ensure that, if an insurance company has changed, there is no material downgrade in the creditworthiness from the prior to the new insurer. After all, insurance coverage is only beneficial if the underlying insurance company can pay its claims.

By adding ELDs and increased liability costs to well-known systemic challenges such as a worsening driver shortage, an increasingly complex and aggressive regulatory environment and higher capital costs/barriers to entry, the trucking industry finds itself confronting a perfect storm. Shippers and truckers alike must follow Jack Welch’s advice and “Change before you have to.”

Brian Fielkow is CEO of Jetco Delivery, a leading Gulf Coast trucking and logistics company serving small business to fortune 500 companies since 1976 which has utilized and unconditionally benefitted from ELDs since 2008. Fielkow is also the author of two books on business excellence and culture, 2014’s “Driving to Perfection” and the forthcoming “Leading People Safely” (September 2016).