Rate Spikes

Rates spiked immediately after the ELD mandate took effect. We set a load:capacity ratio record.  The mandate was defintely a factor. So was the weather. We had a major storm hit the great lakes area. Frigid weather hit the midwest. As always happens, some drivers shut down for the holidays. There is no doubt that some drivers stayed home to protest the mandate. Others waited until the last minute to comply and hit a snafu. These were all factors.

The ELD mandate will place upard pressure on rates, but I believe that the spike is temporary. In any business, hope for the best, but plan for the worst. In other words it is OK to go look at the new boat, but hold off on buying it. Don't count on long term higher rates to make the payments. 

Traditionally rates have been based on miles. We are able to predict costs fairly accurately. The price of fuel is usually the biggest variable. On spot market loads you know how much your fuel is going to cost and can set rates accordingly. Long term contracts usually include a fuel escalator. 

I have yet to earn my PHD in Economics. I do have 15 smemster hours in college macro and micro economics. When you include being an owner operator for the last 17 years, my guess is about as good as anyone's at this point. Prices are mostly based on supply and demand. ELDs limit supply, but only to a point. Eventually smart companies will learn how to maximize driving time and hence supply. What is going to become more valuable is time. ELDs and the 14 hour rule limit the amount of time to about 2 hours per day before it cuts into drive time. Keep in mind that even a 5% cut in the availability of ton miles will increase the price of those ton miles more than 5%. Prices go up when you have 4 trucks for 5 loads. Trucking costs can be a small percentage of total cost. A shipper is not going to let a $500 profit sit on the dock to save $50 in transportation costs.

Here is what I think will happen long term. Time will become more valuable. When time was fairly unlimited, that time had little value. Limit that suply and the cost rises. Yet, as any driver can tell you, this industry wastes a lot of driver time through dock inefficiency. Shippers don't want to pay that cost. They will look for ways to get trucks out of their docks faster rather than pay detention rates. 

In my old warehouse days - back when trailers could only fit 20 skids. We pre staged orders. It cost us money to hold up a driver. We unloaded trailers, and then put freight away after the driver left. I don't recall ever having a driver sit for an hour past their appointment. If this happens, don't look for rates to skyrocket. Look to spend less time at the dock.

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About Jeff Clark

Jeff Clark of Kewaunee, WI has been driving a truck for 24 years. He has been an owner operator for 11 years.

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