Shippers should be trying to lock in rates

Shippers should be trying to lock in rates this summer before the impact of ELDs tightens capacity.

According to a recent article in Transport Topics, US truckload carriers have too much capacity and as a result are facing a weak pricing environment. Many large fleets have idle capacity waiting for an improvement in the economy. It may be a while. Considering roughly 25% of all trucking is for retail consumers, Amazon itself is biting into trucking profits.

Surprisingly, driver turnover is down to 71% which is the lowest level in 6 years. Is 71% turnover a good number, in trucking it is. Imagine if 71% of your company workers up and left every year. This turnover rate, while high is comparing to over 100% turnover just a few years ago. You can expect turnover to rise due to Electronic Logging Devices [ELD] scheduled to be mandated by the end of the year.

Likewise, ELDs will have the net effect of decreasing capacity due to driver’s inability to skirt hours of service regulations once those ELDs are installed throughout the fleets. If that prediction comes through, truckers should be in the driver’s seat when it comes to pricing. In another angle to ELDs, shippers and receivers who delay drivers at their facilities could see their rates rise or have detention penalties. Intermediate length hauls may see a marked increase in rates due to the inefficient way the driver’s time is used.

Third Party providers such as brokers use the spot market to move shipments. The spot market has been paying better than the contract market for many truckers. That trend should continue but will also be adversely affected as ELDs are installed. Freight brokers traditionally use smaller carriers to move their shipments, arguably small carriers are the backbone of modern brokering. Once ELDs are in the trucks of smaller carriers, that pinch in miles run will take its toll on brokers.