Commercial Transportation Trends
Trucking has a tell-tale relationship with the U.S. economy. When trucks are busy moving freight, so are manufacturers and retailers; consumers are purchasing. When the U.S. economy slows, so do our trucks. With an annual 3.4 percent, anticipated industry growth through 2023, the U.S. economy is on a steady upward trajectory. As 2017 ends, several important commercial trucking industry trends and new, key regulations will drive the transportation industry in 2018.
Welcome, Electronic Logging Device. The new, Electronic Log Device (ELD) Implementation may have the single greatest industry impact in 2018. Instituted to hold drivers to the maximum 50 hours of service (HOS) a week, followed by two days off, ELDs aim to make the roads safer by automating HOS compliance. Carriers may no longer be able to haul as many loads as they used to, and all carriers regardless of size will have automated HOS with ELD equipment. Ultimately, the costs of new equipment and administrative work that goes with ELD will be passed onto the consumer. Roadside and port of entry inspections will begin serving ELD warnings in December, and all will be required to comply by April 2018.
Driver Shortage Leads to Increased Costs. According to the American Trucking Association (ATA), it takes 3.5 million truck drivers to haul more than 10.5 billion tons of freight across the U.S. annually. The ELD Implementation will undoubtedly further exacerbate the seven-year driver shortage, as will new challenges in training and retaining drivers. This lack of capacity across the industry is already forcing fleets to be more selective in the loads they take on, raise wages and charge customers more to haul their loads. Solutions including lowering driver eligibility requirements, including age, years of experience and more will continue to be explored in 2018.
Sprint the Last Mile. The rise of e-commerce has led to an increased demand for last mile deliveries to homes and small businesses. Heavy trucking will have to differentiate itself in the marketplace, or add a fleet of small vehicles to compete. Unique exposures for last mile carriers include tight delivery schedules subject to the customer late fees or penalties, a rise in supply chain risk and tighter margins.
Claims Severity Continues to Rise. While the industry has seen fewer accidents in the last decade, there’s been an explosion of claims payout. The average $1.25 million claim 10 years ago might garner $3 million today. Federal responsibility limits require truckers to retain $1 million minimum policy limits, but shippers are now requiring their vendors and partners to procure at least $2 million in coverage. The chief complaint? Negligent entrustment. Have you negligently hired someone with a reckless past, or brokered freight to a company who never had the ability to haul the load, or have you failed to employ the latest technology? You could be called out on negligent entrustment for any one of these and more.
A New Frontier for Cross-Border Business. While hauling freight into the U.S. from both Canada and Mexico increased in 2017, many carriers continue to rely on American truckers to complete a haul once they’ve crossed the border due to government scrutiny on cross-border shipments and trucks. In response, Canadian companies are establishing their own U.S. trucking entity or partnership that can complete the shipment and haul goods back to Canada. This could potentially open cross-border carriers to more liability when upholding U.S. safety and regulatory standards.
The Repercussions of Transparency. As more and more claims, safety and regulatory data becomes available to the masses online, litigation – and possibly even insurance rates – will rise. Many underwriters are currently using CSA scores, or a combination of a business’ federal violations and maintenance issues, to determine rates.
Staying on Top of Technology. What type of refrigeration equipment does your truck have? Are you in compliance with ELD? Shippers weary of liability want to know that their partners are doing everything possible to comply with product shipping requirements and federal regulations. Now is the time to consider driver management, equipment and fuel efficiency software.
2018 Growth and Beyond Even with these anticipated changes, trucking remains the cornerstone of the logistics industry, with over 70 percent of all U.S. freight moved on trucks. The 3.4 percent annual anticipated growth means that both transportation and our economy will expand in 2018. That’s great news for those carriers that can properly position themselves to meet it.