What a difference a day makes: Where rates could spike

| August 10, 2017

Previously in this series:

ELDs’ capacity squeeze assumption no. 2: Flight from the industry

Will owner-operators and other drivers leave the industry in large enough numbers to produce a significant capacity shortage in the spot market, driving up rates? ...

Where to look for the most likely ELD effect on rates? High-volume lanes between 500 and 750 miles, which DAT analyst Mark Montague calls the “dangerous lanes.” It’s those where load/unload hiccups or in-transit delays easily can extend a one-day haul into a second day.

“Today a lot of those lanes can be done in a day – not that illegal if you creatively log,” he says. “So all of a sudden, you’ve got something that’s an absolute. Shippers will have to change the supply chain, use more team drivers for stuff.”

That’s possible. Or drop/hook situations for small fleets and owner-operators who can swing it with extra owned or leased trailers could mitigate the issues on either end, depending on length of haul.

Mark White of Old Time Express typically doesn’t bid with his customers on lanes that are longer than 650 miles any more after his company’s e-log transition four years ago.

“You can’t do it in one stretch with a single driver,” he says. “You end up having to take more than one break on the roundtrip, and it just ties your truck up. And the customer doesn’t end up wanting to pay the premium that it would take to offset that extra time.”

There’s some evidence more owner-operators are thinking like White. In broker negotiations, they’re digging in when it comes to time, thinking about rates in days rather than miles.

“They have to,” says Barton Logistics broker Criss Wilson, who himself has seen loads that might well have gone for one-day prices get negotiated like they’re two-day loads as owner-operators’ thinking shifts ahead of ELDs. “Before ELDs, they could work the system,” he says. “The ELDs will get rid of any flexibility that the driver had. If the [appointment times on either end] don’t add up, you’re going to pay for it. I don’t think the world’s largest big-box retailers have figured that out yet.”

This slightly edited graphic came from broker Criss Wilson, who did an analysis of his own book of freight business in four recent weeks. When load characteristics fit any one of these categories, “it was enough to really hurt” Barton Logistics’ margin, he says. “If you put all three together, we were really upside down.”

The strong spot market rates this spring noted by DAT didn’t have much to do with ELDs – yet, says Montague. But Wilson, speaking in the midst of the recent upturn, attributed the tightening market to carriers’ changed calculus, partly due to ELDs or the expectation of them.

Carriers “won’t tolerate pickup and delivery times” that aren’t fine-tuned to their schedule, he said. And if you get in a bind and have to negotiate on the day of pickup, “you’ll get eaten alive.” More often, truckers want loads booked a day or two ahead as time management becomes more important.

ELDs’ capacity squeeze assumption no. 1: Fewer miles

Examining the assumptions behind the varying predictions of the post-ELD mandate demand situation. If some predictions come to pass, there’s reason to believe rates may ...

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