“Mother of All Truckload Capacity Shortages” on Track for 2017

October 03, 2015 by Gina Roberts-Grey

If analysts are correct, 2017 is going to pick up where 2015 left off. According to transportation and logistics research group Stifel, Nicolaus & Co., 2017 is poised to be the year of the “mother of all truckload capacity shortages,” filled with a shortage of drivers, tightening capacity, and increasing intermodal volumes.

Federal regulations are believed to be to blame.

The Federal Motor Carrier Safety Administration’s (FMCSA) final electronic logging device rule is expected to be published by September 30, 2015. That rule will spell out the exact requirements companies will have to follow related to speed limiters and electronic logging devices (ELDs). It’s already known that fleets will have two years to implement certified logging devices and record hours of service regulations that will be specified.

Fleets already using electronic logging technology will have until 2019 to bring their equipment current with the FMCSA’s standards, once published.

Stifel forecasted this rule clarification could have a significant impact on the industry in two years.

“While many trucking companies may wait until the 11th hour to become compliant with these new rules, others are large enough that they will, as a practical matter, have to feather the new devices into their fleets in 2016 and then in 2017, evolve. Therefore, by 2017 we expect that somewhere on the order of five percent-plus of the industry’s capacity will vanish as carriers will no longer be able to reduce unit costs by driving too many hours and by driving faster than the posted speed limits,” Stifel said in an investment note.

And as violations that go unnoticed today, “truckload freight will spill over into the less-than-truckload industry in a more pronounced way and intermodal volumes will continue to grow as truck lines and railroads forge deeper, collaborative relationships,” the Stifel analysts said.

The FMCSA’s ruling is expected to put a financial burden on fleets. But waiting until the last minute to implement electronic logging devices might also tax budgets and cause unexpected financial strain. Waiting until 2017 to comply with the FMCSA’a ruling or 2019 to update current equipment eliminates the ability to roll out technology at a pace driven by the fleet, not the government. That could mean the need to jump into technology a company hasn’t budgeted for or is knowledgeable about. It also means pushing more papers and potentially spending more on fuel than if the fleet utilizes certified ELDs.

Either way, ELDs are right around the corner. And they’re sure to be costly.

A device will cost anywhere from $165 to $832 per year, according to the FMCSA. The FMCSA anticipates the total annual cost of ELD adoption to be $975 million, which includes all equipment for carriers and commercial truck inspectors, as well as inspector and driver training.

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