Why A Drop in Productivity Might Actually be a Good Thing

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While it might seem counterintuitive, the trucking industry is staring down the barrel of a productivity drop that might actually be just the breath of fresh air the industry needs. After slogging through a slump in demand, the aging of the workforce and the lack of recruits to fill in the gaps, as well as the lack of much needed change to fuel surcharge rates, the industry has been flagging.

EPA regulations force trucking industry to figure out how to get spot rates back up

Of course, that’s not the only grim tidings that are on the horizon for trucking companies. With the EPA’s new phase 2 – greenhouse gas emissions regulations, the industry is left trying to figure out how to get spot rates back into levels of growth and profitability. Surprisingly enough, it’s the new Electronic Logging Devices which, to this point have been the source of much grumbling, that could actually change the shipping environment.

Trump is Sticking with the ELD Mandates

While Republicans tend to prefer avoiding government interference in private businesses, President-Elect Trump has so far stayed the course as far as the Implementation of ELD systems for truckers, making the switch from the standard paper logging over to an electronic means. This means that drivers will have little choice but to report their hours using the new system which keeps them honest and off the roads when it’s required.

What about training the drivers on how to use the electronic logging devices?

For many trucking companies, the fear is that complying with the new ELD regulations are going to cause an efficiency as drivers will need to be trained on the use of the devices, while other drivers will be forced to take their mandatory down time everyday. All told, this sounds like a bad thing, but here’s the kicker, the industry is getting closer to crunch time.

The Capacity Crunch

Having a “crunch” in capacity typically sounds like something the industry would want to avoid, but in this case it’s not. A crunch means a 100% capacity utilization rate which would give the industry something it hasn’t had in years, control over their rates.

“It won’t take much of a shift in capacity to change pricing dynamics, speakers here said. ‘A 1 or 2 percent shift in capacity could be an earthquake,’ said Brian Fielkow, president of carrier Jetco Delivery, said. ‘That shift and a little spark in demand will give you that ‘2014 feel,’ said an article from the JOC.

A small shift can be a capacity earthquake.

“Truck capacity tightened significantly in 2014 as freight demand shot up, spurred by sequential growth in US gross domestic product that exceeded 5 percent in the third quarter. After three quarters of growth below 2 percent, GDP climbed 2.9 percent in the 2016 third quarter,” according to JOC’s senior editor, William B. Cassidy.

While crunch time has been delayed, expected to happen sometime in the middle of next year, it does hinge on a few very important variables. “One is that the economy doesn’t slow down, and other is no delay in the ELD mandate” by the incoming Trump administration. “Our belief is there is not going to be any rollback of the ELD mandate, but what’s at it issue is the timing,” said Larry Gross, a senior consultant at FTR.

A Game of Wait and See

Currently, things are still up in the air as the dust from the Presidential race is beginning to settle. As Donald Trump begin to step into his role as the President of the United States, the trucking industry can only wait and see as to what the outcome will be.

How will Trump’s presidency affect the federal regulations that have been in place for 4 years?

However, it’s very unlikely that there will be any changes to the Federal Regulations that have already been put into place back in 2012. However, there is a slight possibility that Congress could decide to push the mandate back, so it’s simply a matter of seeing how everything will play out.

 

 

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