As the trucking industry continues to broadly install and learn to use the ELDs (electronic logging devices) required by the FMCSA (Federal Motor Carrier Safety Administration), there are beginning to be large disparities in the way the devices are impacting capacity via mode. Carrier size is a challenge to ELD adoption, with smaller carriers struggling more than larger carriers, but equipment type is proving to be a larger challenge than carrier size.
Truckers that are pulling dry van trailers still face challenges as they learn to re-optimize asset utilization but they are proving to be the most successful of all the truckload modes. Reefers face larger challenges and are still struggling to adapt. Flatbed carriers are struggling and failing to adapt as solutions such as ‘drop and hook’ that are relatively easy for dry van and possible for reefer are difficult, if not impossible, for flatbed truckers.
The capacity constraint produced by ELDs reached its worst point in February for dry van. Demand growth has stayed strong and is continuing to exceed capacity, but capacity is recovering as carriers are pre-planning a driver’s schedule out for the next 48 to 72 hours. The use of additional trailers and giving favorable treatment to customers who allow loading and unloading of equipment without the truck (or driver) being present, is putting even small carriers on the road to asset utilization recovery. We will continue to monitor this closely and should point out that demand still exceeds capacity more than it did at the peak in 2014, however, the improving asset utilization trend is equally significant.
Similar to dry van, the capacity constraint produced by ELDs reached its worst point in February for reefer. Also similar to dry van, demand growth has stayed strong and is continuing to exceed capacity, and capacity is recovering as carriers are pre-planning a driver’s schedule out for the next 48 to 72 hours. Smaller reefer carriers are also seeing benefits on the road to asset utilization recovery.
That said, reefer carriers face two significant challenges that dry van does not: a new reefer trailer is more than two times the cost of a new dry van trailer; unloading, and especially loading, a reefer trailer requires far more monitoring than dry van. The driver, or someone else who can be held responsible, must make sure the door is only opened when the unloading process is about to begin/closed as soon as the loading process is finished; and the temperature must be set to the appropriate level. This reality of the reefer industry has historically driven much lower trailer to tractor ratios (1.4 – 1.6 to 1) than are common in the dry van industry, where trailer to tractor ratios are often 2.5 – 3.0 to 1. Put another way, even if a reefer carrier can work with a customer to yield more customer monitored loading and unloading (without the truck or driver present), the lower trailer count puts a limit on the amount of utilization that can be recovered through ‘drop and hook.’
Unlike dry van and reefer, the capacity constraint produced by ELDs for flatbed carriers became severe in February and has only continued to become worsen. Similar to dry van and reeefer, demand growth has stayed strong and is continuing to exceed capacity, but capacity is not recovering as pre-planning a driver’s schedule is not the issue. The use of additional trailers for most flatbed loads is just not an option. Yes, the flatbed trailers are more expensive than dry van trailers, but the cost of the trailer isn’t the constraint. The driver must be involved in the tying down/securing the load - ‘drop and hook’ is extremely rare in the flatbed industry. So, to the extent a trucker’s 14 hours a day are impeded by loading and unloading time, that capacity is not being recovered. We see no easy solution to the current situation and expect flatbed rates will continue to skyrocket until flatbed driver pay reaches a level adequate to attract a material amount of new talent to the industry, or the industrial economy in the U.S. cools. Stay tuned…