At Diversified Transportation Services we get calls each day with clients asking about rising transportation costs. Here are 3 main reasons why transportation costs, especially Truckload Transport, are going up.
#1. The Federal Motor Carrier Safety Admin (FMCSA) created the ELD mandate in Dec 2015 with a DEC 2017 deadline to comply. Simply stated, the ELDs are replacements for paper logs to ensure that drivers are driving on the road within the legal HOS - Hours of Service. There is a very good article that goes over all the details of the ELDs should you like to read all of it - just click ELD Facts.
With the ELD's in place, this limits the number of hours a driver may legally drive. So when a driver is a dock and sitting in his truck, he is essentially on the clock. If it takes a shipper an hour to load him up, then that is 1 less hour he can drive on the road. The same goes for getting unloaded. If it takes him 2 hours to get unloaded, he may be on the clock and then reduce the number of hours to get to his next pick up, and thus miss that pick up or have to roll that pick up to the next day. At times the driver may be able to count his loading or unloading as "down time" but there are rules in place for ensuring that he is actually not on the clock and is getting actual rest.
Since the driver is then limited by the hours he can drive and actually turn the wheels - keep in mind most Truckload and Line-haul drivers only get paid by the miles that they drive - he is limited by the number of miles he can then drive. For example, in the past the driver may be able to drive 2500 miles a week. But now with the ELD's, the driver may only be able to drive 2200 miles in a week. At that point the driver then racked up 12% less miles for that week then in the past. When that driver gets paid by the mile, which most do, he is than essentially taking a reduction of 12% in his pay for that week.
Question - Why should the driver take a pay reduction as he did not do anything wrong?
Clearly he should not take a pay cut. Thus another reason why transportation is going up as it is obvious in order to keep the driver, he needs to be paid more monies, and that added payroll needs to be recouped from shippers and receivers. Remember, this reduction in mileage is predominately from the ELD implementation so it is not the drivers fault, the carriers fault, or the 3PL's fault. The government mandated the ELDs.
With the above notes, costs are going to increase and we are not even in peak season yet. Supply and demand will always govern price in all verticals.
#2. Our industry has a driver shortage right now. Why can we not just get more drivers?
Another great comment that I hear often yet it is a huge challenge. Think about it this way-----How many of your friends have said, "I want to drive a big rig truck for a living". The drivers on the road right now, in my eyes, should be highly respected as we all need them. As a consumer myself I need them to deliver the goods that I need for our daily lives let alone our businesses. The drivers that are retiring are not being replaced fast enough by new drivers since not enough people want to drive a truck. It is a hard job and some will agree, not one that gets the thanks that it deserves. Drivers are away from their family and friends, they deal with all kinds of weather, and they deal with traffic, that costs them money. As a driver of a personal car on the road we should all give the Professional Truck Drivers plenty of space, flash our lights to make it easy for them to merge, and show them the respect they deserve.
So, not enough new drivers and the seasoned veterans are retiring sooner than we would all like.
#3. A strong U.S. Economy!
Right now we are in a strong economy and that is a good thing. We are manufacturing here in the U.S. again and the ports have millions of containers to move each month. This is a good problem to have with a strong economy so no one should be up in arms due to this fact.
So we essentially have a perfect storm with plenty of freight, almost to much one may say, not enough drivers, ELD's making it harder to run the miles to pick up and deliver everything each day and ensuring the drivers get a fair wage for the hard work that they do. When you combine all of these items it equates to higher overall transportation and logistics costs.
So, how do we work to drive costs down?
If you would like more information on how to reduce your overall transportation costs feel free to reach out to the team at Diversified Transportation Services at 310-521-1200 xt 170 for a quote or a more in depth analysis as it pertains to Truckload or LTL logistics.
Michael Doyle - Vice President of Sales and Marketing - Diversified Transportation Services
Whether you're a company looking to improve one facet of your supply chain, your entire supply chain, or simply looking for a transportation and logistics consultation, we can help.