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Until recently, tracking and predicting failure rates for trucking companies was as simple as watching fuel prices. However, a new development is associated with a rise in bankruptcies across the board: electronic logging devices.
Donald Broughton of Avondale Partners has tracked bankruptcy filings by trucking companies for the last 28 years and has tied increases in bankruptcies to rising fuel costs and falling demand for freight services. However, starting in 2013 bankruptcies increased in every quarter even when fuel costs and demand remained constant. This year alone, 390 trucking companies employing more than 10,000 trucks closed their doors in the first quarter – more than twice as many as folded during the same period last year.
The majority of trucking companies that closed last year reported a recent audit by the FMCSA which led to their adoption of electronic logging devices. Though ELDs are credited with increasing long-term efficiency and driver safety, their initial adoption typically creates a difficult transition period. The carriers that folded during their first quarter of ELD use were unprepared to compensate for drops in utilization and driver pay.
Despite this troubling trend, the data support Broughton’s contention that ELDs create a net benefit to trucking companies that can survive the initial slump. Moreover, the exit of so many carriers from the industry creates a gap that can give remaining trucking companies greater control over their pricing – and a pretty solid guarantee of payment.
Carriers exploring the adoption of ELDs or other potentially costly investments should shore up their cash flow before making a move. Trucking factoring can provide immediate funding that carriers can use to pay drivers and cover transitions to new technology – including ELDs! Contact Factor Finders to learn more about factoring for truckers and to request a free quote.
