Just-in-time delivery – the North American supply chain inventory strategy aimed at receiving goods only as they are needed in the production process – is expected to come under pressure once the ELD mandate takes effect in the U.S. and, later Canada.
Shippers can expect JIT delivery costs to increase significantly once the ELD mandate hits, simply because they will no longer be able to pressure transportation providers to bend hours of service compliance to meet the tight freight scheduling demands of JIT-based supply chains, reports Fleet Owner.
In a presentation last month, John Larkin – managing director and head of transportation capital markets research for Stifel Capital Markets, says analysts are already seeing the effects of a capacity crunch ahead of the Dec. U.S. mandate, especially in light of the recent hurricanes Florida and Texas.
“Here we are; there aren’t enough trucks, turned-down loads are way up, spot rates are astronomical in some parts of the country, [and] trucks are flocking to the high rates – which [is] leaving other parts of the country with too few trucks,” he pointed out. “I think this is the wakeup call that shippers needed, especially those that were so harsh on everyone back in 2015 and 2016.”
That’s going to have some impact Larkin believes, but more regarding the elimination of what he calls “marginal carriers” than it will be on reduced productivity of those that don’t have ELDs now.
He says bluntly: “The way some carriers have competed is to cheat … They’re running 14 hours when they’re supposed to be running 11 hours.”
Thus the time required to legally carry freight shipments by truck is going to expand – and it will and cost more to conduct such shipments. The end result, however, is drivers getting paid more while also operating more safely at slower speeds.
All in all, says Larkin, an evolutionary change to our supply chain practices is in the making, placing a higher value on compliant transportation services.
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