Telematics Transformation: Part Three—Getting Value Now and in the Future
on Sep 5, 2019
Regulations mandating ELD devices in trucks have impacted companies and the industry. Here we look at those impacts and at key actions fleet owners can take to generate value from their ELD investments.
In Part Two of this series, we examined some best practices for complying with ELD mandates. Here in Part Three, we look at what fleet owner should do to extract value from their investments.
Getting Value Now and in the Future
Those who view the ELD mandate strictly as a burden without an upside, often delay implementation as long as possible, and invest the least amount possible. That is shortsighted, as there is potential for a very respectable ROI by making the right investments. You don’t necessarily have to pay a lot for the device itself, but it pays to invest the time to create a vision of where you want to go and then do the homework to select the best solution provider to help take you on that journey.
Those who have already bought an ELD device (that is most US carriers and fleets), can build on their investment now, by expanding the services and value they are getting out of the system. Here are some actions to generate value from your ELD investments, now and in the future:
Create a cross-functional steering committee … and bold vision!
If you don’t already have a cross-functional group to create a vision and roadmap, now is the time. The value-add uses, where the real ROI is generated, requires a bold vision, support from the top, and cooperation across the enterprise.
It is critical to get buy-in from drivers and avoid a rebellion. Have healthy driver participation on the steering committee, communicate often, listen to and address concerns. Change takes effort for all, but that effort is worth it.
Find and partner with the best solution provider
There are many providers of ELDs and related software, but they are not all created equal. Take the time to find the right solution provider who you can partner with to help you go the distance. In part seven of this series, we outline key characteristics to look for when selecting a solution provider.
In particular, Canadian carriers should not wait until the last minute. The sooner you start, the more time you will have to create the steering committee, agree on vision and goals, set up training programs, evaluate and select solutions, acquire, implement, and test. By allowing enough time, the transition will be smoother, and you can start learning, improving and extracting benefits from your investment.
The same urgency applies to US carriers who are still using AOBRDs. The December 2019 deadline is looming. Waiting until the last minute is a recipe for headaches—not having enough time to select the right system or resolve all the inevitable transitional issues that arise, potentially resulting in costly non- compliance.
Impact of the ELD Rule on Companies and Industry
Impact of the ELD Rule on Individual Companies and Drivers
Consequences of non-compliance
Drivers without an FMCSA-compliant certified ELD device are placed out of service for up to 10 hours. After that, they may be allowed to finish their current delivery, but cannot be dispatched again until they install a certified ELD device. The average failure to comply fine has been $2,867 per offense.1 On top of that are the loss of revenue and towing fees. If investigators determine there is a pattern of non-compliance for a fleet, fines may be assessed on every truck in the fleet.
Impact on CSA SMS scores
ELD violations can have a significant negative impact on the CSA score. There are 22 ELD violations2 that impact the CSA score. Furthermore, ELDs can be used to monitor and improve driving habits, reducing the chances of speeding tickets and other moving violations that can have a large negative impact on the CSA score. Shippers and brokers often take into account a carrier’s CSA SMS score,3 as a measure of the carrier’s safety record, when selecting a carrier for hire. Thus, carriers are incented to maintain a good score, not just because of potential fines, but also because of the potential for loss or gain of business. Furthermore, CSA scores impact the associated ISS (Inspection Selection System) score. A better ISS score increases the chances for a bypass at a weigh station, saving the carrier time and money.
The CSA score (and thereby ELD violations) also impacts insurance rates. A higher CSA score (i.e. more violations) can lead to higher premiums, and in some cases even denial of coverage. Conversely, a low CSA score can bring lower insurance rates. In addition, some insurers are offering discounts on premiums for qualifying truckers who voluntarily share their ELD data.4 These discounts can be significant for drivers/fleets whose ELD data shows they drive more safely than their peers.
Significant carrier/fleet performance improvement opportunities ELD devices, combined with the right software and process changes, has the potential to help carriers reduce fuel consumption, decrease maintenance costs and breakdowns, improve driver safety, decrease cargo theft, improve fleet utilization, decrease dwell times, and provide much better visibility to customers and all stakeholders. We discuss these in more detail in part four of this series.
Reduced paperwork for drivers
Estimates of reductions in administrative work from the adoption of ELD vary from 15 to 45 minutes per day, per driver. At a pay of $20/hour and savings of 30 minutes per day, that equates to about $2,000 to $2,500/year5 of increased productivity per driver.
Broader Impact of the ELD Rule
HOS compliance improved
According to a study by three universities,6 HOS compliance has improved since the mandate. The number of intentional HOS violations dropped from 6.0% to 2.9%. For owner-operators, HOS violations dropped from 10.7% to 6.0% percent during strict enforcement. Large carriers’ violation rates were already under 1%.
Accident rates virtually unchanged
Weekly crash rates changed from 1,717 crashes per week before the mandate to 1,703 after, about a 1% reduction.7 However, owner-operators committed 35.3% more unsafe driving violations after the rule went into effect.8 Without that increase in unsafe driving, there may have been a greater reduction in crashes.
Transit times increased, effective capacity reduced, rates up
With stricter compliance to HOS rules, transit times increased, particularly on 450-550 mile lanes, where transit times increased by about 16%.9 Many of these have gone from being one-day routes to becoming two-day routes.10 Overall loss of ‘market hours’ was about 3%.11 The demand for truck capacity exceeded the supply, driving up rates significantly (though the imbalance and rate increases were not due solely to the ELD mandate).12 The increased rates helped carriers absorb some of the reduction in capacity and the cost of implementing ELD programs. Rate increases moderated in the second half of 2018.
Carriers and shippers/consignees start to collaborate
Stricter adherence to HOS (driven by ELD adoption) combined with tighter capacity has provided some impetus for shippers and consignees to better understand the impact their operations have on carriers’ performance and HOS compliance. When tight capacity forces carriers to make decisions on who to serve first, shippers are motivated to try and become the ‘shipper of choice.’ While that balance of power will shift as demand and supply fluctuate, ELDs will continue to provide precise data about detention and turnaround times at different consignees’ facilities. Those metrics can inform dialogs between the parties on how to decrease dwell times, for the benefit of all.
3CSA (Compliance, Safety, Accountability) is the FMCSA’s data-driven safety compliance and enforcement program. One of its core components is the Safety Measurement System (SMS), which the FMCSA uses to measure the severity of safety issues, identify carriers with potential safety problems, and prioritize interventions required. -- Return to article text above
4 Progressive Insurance launched their ‘Smart Haul ELD’ program in 2018, offering usage-based insurance to owner-operators and small fleets. It includes a minimum 3% discount on their existing policy. Additional savings may be granted, based on how safe the fleets’ driving is compared to truckers doing similar work. -- Return to article text above
6 In this study, researchers from Northeastern U., U. of Arkansas, and Michigan State examined millions of driver inspections from January 2017 to September 2018 and looked at all the crashes submitted to the FMCSA during then. -- Return to article text above
8 One theory about why the increase in unsafe driving occurred is that, since owner-operators were less compliant with HOS regulations before the ELD mandate, they also experienced the biggest impact on their capacity due to the ELD mandate pushing them to better comply with HOS regulations. Thereby, some owner-operators may have tried to partially compensate for this loss of capacity by speeding and driving more aggressively. We would not expect a big change in accident rates for larger carriers when the ELD mandates took effect, since they were already largely compliant with HOS regulations. It should be noted that nationwide data analyzed by Vigillo found that speeding violations for the industry overall went down dramatically upon implementation of ELDs. -- Return to article text above
12 In 2018, dry van and reefer spot rates were up 30%, flatbed spot rates increased 25%, while contract rates increased more than 15%. The supply-demand imbalance and rate increases cannot be attributed to the ELD mandate alone. The economy, driver shortages, and other factors play major roles. Analysts predicted the market will soften in 2019. -- Return to article text above
To view other articles from this issue of the brief, click here.