PAGE 36 - Truck News

2008
From slumping rates to shifting client
relationships – an in-depth look at the
maze of challenges that lie ahead
PLUS:
Leading shippers and carriers
debate the industry’s toughest
issues in our Second
Annual Issues Roundtable
Sponsored by Shaw Tracking
2008
2008
From the founding Sponsor
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Shaw Tracking has established economic
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Shaw Tracking continues to support the
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Sponsor of the annual “Shipper-Carrier
Issues Roundtable” was a great way for
Shaw Tracking to be able to support the
dialogue among all aspects of the supply
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THE PANELISTS
Larry Jensen
senior manager procurement,
Ryder Transportation
Management
18
MOTORTRUCK
Scott Smith
president,
J.D. Smith & Sons
Peter DiTecco
president,
Armbro Transport
Scott Johnston
president & COO,
Yanke Group
2008
Our Second Annual
Shipper-Carrier Roundtable
PART I
he downturn of the North American economy is
T
testing the relationships forged by shippers and carriers in recent years.
g for the
Lining
Shippers and
carriers debate the
industry’s top issues under
the shadow of an economic slowdown
Doug Munro
president,
M-0 Freightways
Bob Ballantyne
president,
Canadian Industrial
Transportation Assoc.
MODERATOR
Lou Smyrlis,
editorial director
Transportation Media
So how do shippers and carriers view the issues facing
them in 2008? Are there significant degrees of divergence?
That’s what we wanted to find out in putting together our
second annual Shipper-Carrier Issues Roundtable.
Our roundtable participants had a great deal to say and
we will share their insights with you over the course of
the next two issues. In Part I of our Issues Roundtable our
panelists speak about their economic outlook for 2008
and the related issues of rate trends, imbalances and capacity.Watch also for video clips of their comments in special installments of our new Web tv show Transportation
Matters, available on www.trucknews.com.
BIG Transportation Media, through its ownership of
both motor carrier and shipper publications, is in the
unique position of being able to see issues from “both
sides of the fence.” We consider it our mandate to foster dialogue between buyers and providers of transportation services. Our annual Shipper-Carrier Issues
Roundtable, which is published in both our carrier and
shipper publications, is a step towards that goal. It allows
buyers and providers of transportation services across the
country to gain a more well-rounded understanding of
the issues at hand.
This roundtable would not have been possible without the support, once again, of Shaw Tracking and I wish
to thank this highly respected industry player for its support. I would also like to thank all the roundtable participants who took time out of their hectic schedules to
make this roundtable a possibility. As with past participants, these individuals were specifically chosen because
of the high-esteem with which they are held within the
transportation industry and their insightful and honest
contributions certainly showed why.
I think one of the most impressive developments in
transportation management I’ve witnessed over the almost two decades that I’ve been reporting on the industry is the willingness of forward-thinking shippers and
carriers to truly appreciate their interdependence and
work together to resolve issues in a manner beneficial to
both. I hope the strain placed on the shipper-carrier relationship by the slowing down of the economy does not
make for a setback in that evolution, particularly because
it is the carriers and shippers who work well together that
are most likely to get a jump start on the eventual resurgence of the North American economy.
Lou Smyrlis
NOV/DEC 2007
19
Issues Roundtable
MT: There is certainly a whole list of issues that can be discussed
whenever one brings shippers and carriers together but I would like
to start by looking at your individual situations. For your organization what do you see as the top issue going into 2008?
Johnston: Very definitely the weakening of the US dollar and
the strengthening of our dollar has decimated manufacturing
and shipping southbound so there is a huge imbalance of demand relative to capacity.
Ballantyne: The members of the Canadian Industrial
Transportation Association are pretty varied. Some of them
are thriving with a high Canadian dollar and some of them
are suffering from it.The capacity-infrastructure issue is something we are all going to have to face up to over the next few
years, even if there has been some softening of the trucking
market over the past few months.
DiTecco: We are a regional carrier, hauling in
Ontario and Quebec so
the Canadian dollar is an
issue. I think the concern is
that our customers and
our customers’ customers
are suffering, therefore demand is down.
2008
ing the greatest impact going into 2008.
Munro: We are a domestic carrier so we haven’t been affected by the Canada-US dollar and balance issues but my concern is the economy for 2008. As just pointed out, the other
issue is with Alberta and the cost push and lack of labor out
there. A rising tide lifts all ships and we have benefitted from
the boost in the economy and now the economy seems to be
headed the other way so it could be a tough couple of years
ahead.With a slower economy there will be more competition
and more excess capacity.
MT: The American Trucking Associations chief economist Bob
Costello is actually thinking there is a 40% chance of recession in
the US next year. I’ve heard other economists who were even less
optimistic about next year. But I would like to look at the positive
end of things. We know the North American economy is slowing
down, when do you think
things will pick back up and
what signals will you be
looking for?
Jensen: I agree that the
US economy is not going
to grow in 2008; it’s going
to be pretty stagnant. But
we can’t be trying to export products from
Canada to the US when
our dollar is at a value
higher than theirs, so
hopefully there will be a
correction and hopefully
sooner rather than later.
Smith: We are also more
regional in nature. From
the warehousing operations we have, the dollar is
probably beneficial to us
but where the dollar impacts us even without
A VIEW FROM BOTH SIDES OF THE FENCE: Place shippers
and carriers in the same room and you’re bound to get some
crossing the border is that
Johnston: The US and
differences of opinion. But what this year’s participants all
we are seeing some tradiCanadian dollars need to
agreed upon was that continued success in the more
tional cross border carriers
stabilize. I think the
pushing into other areas of turbulent financial times ahead will require innovative thinking. Canadian dollar right now
is over its strength. I don’t
the market place. What’s
think that any investor is confident in investing in the US infraalso on our radar for next year is the health of some of the shipstructure so they come to Canada to invest and it bolsters our
pers and being a little more careful and cautious about receivdollar. There is also a US election coming up in November of
ables and the quality of the revenue.
2008 and I think the impact of that will take time to work its
way through. And there is George Bush announcing the seekJensen: Certainly capacity is an issue which is driven by
ing out of alternative fuel sources, which has impacted the canola
the Canadian dollar and the US dollar exchange rate and
and corn sector which cascades over into the livestock sector and
the fluctuations in the currencies. The shortage of equipyou get this ripple effect. Some of these things that have taken
ment in the central states coming back into Canada because
place all at the same time need to work their way out over the
of the lack of exports of dry goods going down is also an
next 18 to 24 months.
issue. We’re also experiencing this in Alberta where we’ve
got so much volume going in to northern Alberta and next
to nothing coming out. So capacity I see as the issue havBallantyne: I would echo those comments. Until the US elec20
MOTORTRUCK
2008
tion is over I think there will be some uncertainty.Also the housing situation in the US and the impact it has had on housing in
the US is a factor and will affect Canadian lumber to some extent. And this whole business about the volatility of fuel is
another issue that has now been around for a while but I don’t
know when that’s likely to settle down. As long as that volatility is there that will add to uncertainty. I would think we are looking at a period of uncertainty of at least a year.
“We need to work in longterm relationships with our
carriers, we’ve got to work
with the best-in-class
providers and to help
them balance their
imbalances in lanes.”
– Jensen
DiTecco: I’m going to choose to believe
the economist I heard from the Royal Bank
at the Toronto Trucking Association’s economic overview. He’s suggesting that we
are reading a lot of headlines. Economists
like to look at the fundamentals and he
says the fundamentals of the US economy
are not that bad. If they have a recession
it’s going to be a technical recession – two
quarters and that will be the end of it.
Certainly as far as Ontario is concerned,
when the Japanese auto plants come on
stream in 2009 they will boost the manufacturing sector. He believes the dollar,
based on fundamentals, is overpriced and
we should expect it back to around 95
cents by around June or end of 2008.
Smith: I think there is a bit of a sky is
falling mentality right now and in some
cases the weakening of the US dollar will
certainly help precipitate some of the
manufacturing industry within the US in terms of exports. We
are certainly seeing that with more opportunities of US companies finding the Canadian marketplace attractive. I think the
Canadian economy, although imbalanced, still has significant
strength. My feeling is that if there is a downturn it would be a
relatively short term one.
MT: So the message there is that although the ceiling may be a little lower than what we’ve become accustomed to the last few years,
the sky is not falling. Let’s talk about the west for a minute. What’s
your view of the strength of the Western economy?
Johnston: I think the West is suffering somewhat of a dichotomy between the energy sector and the pulp and paper sector.The pulp and paper sector in northwestern Ontario, northern
Saskatchewan and Alberta and British Columbia has been virtually decimated by the drop of the US dollar. Any exports currently taking place have moved to the cheapest mode, which is
boxcar , if the mill is still open at all.The energy sector is so strong
that they are basically absorbing all of the available labor and resources in the marketplace. Alberta is a huge consumer market
Issues Roundtable
right now. I know retail outlets that surpassed their annual budget by the month of May.There is little manufacturing in Alberta
and everything that comes out of Alberta comes out in a pipe.
So there is a huge imbalance and it’s having a ripple effect on
headhaul rates and capacity out of the US getting to Alberta. If
you’re going into Alberta you are likely going to have to reposition yourself all the way back to the US Midwest and unless you
can bolster that and see the return on the headhaul you can’t afford to do it.
Smith: You have to consider the pace of the change. Hopefully
there will be a settling. If people can get their head around the
Canadian dollar being valued a (US) $1.10, then a 95-cent dollar won’t look as bad.
MT: You touched on the subject of rates and I want to explore that
issue next. Larry you mentioned the fact there is not as much freight
moving southbound and that is obviously placing some pressure on
rates. Our research is showing that the upward pressure on truck
rates we experienced in recent years has definitely dissipated. Is
there a smart way for both carriers and shippers to handle the current situation?
Munro: That’s a difficult question to answer because a lot of it
is market driven. I’m a little bit pessimistic about the economy.
I think it would be nice if carriers and shippers could work cooperatively to deal with improving efficiencies rather than to
drive down rates to below cost, which is what happens typically in such situations. When times get tough it seems it’s every
man for himself and shippers look to wherever they can get rate
relief because they are under cost pressure themselves within their own organization. So I don’t
know that there is an easy answer to this. From
a carrier perspective, it’s keeping our commitments to a minimum during the tough times and
not getting tied in to imbalances trying to manage around those rather than reducing rates to the
point where it’s unprofitable.
MT: The conversation the last few years has been
around the shipper-carrier relationship becoming
more integrated and sophisticated and therefore
shippers relying on their carriers a lot more than in
the past to provide a wide suite of quality services
and therefore being careful not to base everything on
price. Doug brings up a good point. When things get
tight, does all that go out the window or have shipper-carrier relationships come to a point where both
sides are willing to look at the issue in a more intelligent manner?
“When times get tough it
seems it’s every man for
himself and shippers look
to wherever they can get
rate relief because they
are under cost pressure
themselves within their
own organization.”
– Munro
DiTecco: The carriers that are sitting at this
NOV/DEC 2007
21
Issues Roundtable
table are not the low-price suppliers. We provide service and
each company here is known in its market place for providing
service and quality.We aren’t competing down at the bottom of
the market place. Our customers are all well known in Canada
and we’ve had them as customers for many years. They appreciate and they demand great service and together we have been
able to provide that. So are you going to get a big rate increase?
No, but I think with our customers when we negotiate we look
out for each other because if we are not in business they don’t
have the service.And if they are not competitive then we won’t
have their business. Depending on where you are positioned as
a carrier and the customers you deal with, you will be able to
come to something that is tolerable. It also depends on the length of contract you will be trying to negotiate.
MT: Are we back to looking at one-year contracts
or is there still willingness to work out longer deals?
Larry, Ryder buys a lot of transportation, how does
that look on your end?
Jensen: Everything we do we try to do it as a
long-term partnership. Every new customer implementation where we are doing carrier management is a two-year agreement. The intention
“Are you going to be
is that the rates go in place and we hold them for
able to get a big rate
the two-year period. There is a 60-day escape
increase? No, but
clause. In the event that the world changes, for
depending on where
example with exchange rates, the carrier has the
you are positioned as
opportunity to communicate that to us so that
a carrier and the
we can roll up our sleeves and together we can
customers you deal
find a solution. If we can, we take the increase
with, you will be able
and roll it on to the balance of the two years. If
to come to something
that is tolerable.”
we can’t , because we don’t think it’s fair, then
– DiTecco
we part ways and go back to the marketplace.We
need to work in long-term relationships with our
carriers, we’ve got to work with the best-in-class providers, and
to help them balance their imbalances in lanes.
Johnston: Our traffic department has never been busier responding to RFPs. Contracts in a lot of cases don’t seem to be
worth the paper they are written on. No sooner do you sign it
than you find there is rate action taking place and you are back
revisiting the customer. Probably in 85% of the RFPs that we’ve
responded to the incumbent carrier that had the business resecures the business but what the shipper has been able to do is
rationalize the rates to a market level. From a carrier’s standpoint
I don’t know why anyone would sign an agreement based on the
volatility of currency and crude. US receivables when you cash
them in at a Canadian bank aren’t worth what they were worth
three months ago. I don’t know why you would go beyond one
year and in a lot of cases a lot of the rates we are putting in place
22
MOTORTRUCK
2008
are for three or six months. Speaking back to the Alberta situation, if you don’t reposition back to Wisconsin then you feel that
any revenue replacing empty miles is better revenue than nothing.We are seeing dry van rates out of Alberta and Saskatchewan
at the 85-cent level. But when a carrier’s full truckload direct expense without fuel is about $1.10-$1.14, one cannot sustain
moving a fleet at 85 cents or 95 cents in Alberta. Out of principle many carriers choose not to. Before succumbing to those rate
levels you might as well run empty and force the market to
where it needs to be to sustain the supply chain that everybody
is going to rely on unless they are going to turn out the lights and
move out of Alberta.
MT: Yanke is one of the carriers that offers several modal options.
Do you see this as an opportunity to move more freight intermodally because you can do it at a lower rate?
Johnston: What we see is a complete shift from a modal
standpoint. In North America the Baby Boomers are at the
peak of their earning potential. At the
same time we are very materialistic and
we’ve chosen to unquestionably give
our kids everything that they have ever
dreamed of. The big box stores see that
opportunity and in order to capitalize
on it seek out the cheapest cost of labor
and lowest-cost of landed product and,
unfortunately, Canadians in order to
buy that are willing to do so at the expense of their neighbors’ employment.
We see more and more goods coming
“What we see is a
from the Pacific Rim. The cost competcomplete shift from a
itiveness as opposed to buying those
modal standpoint. We
goods from Pennsylvania or Ohio is that
see more and more goods
the transportation segment has to be at coming from the Pacific Rim.
We see our intermodal
a very low cost. We see our intermodal
business growing, we see
business growing, we see pick and pack
pick and pack distribution
distribution and fulfillment in
and fulfillment in
Vancouver growing and there is no
Vancouver growing.”
doubt much of the manufacturing in
– Johnston
southern Ontario and in the US has either moved to Mexico or to China. The Chinese one-child
family law is going to create some problems within about 10
years, however, and I think you will see labor and manufacturing shift from China to India.
MT: Bob, some of the largest shippers in Canada are part of your organization. I know that from 2003 to about 2006 they were concerned
about where rates were going. I’m assuming they are not as concerned
right now but long term where do you think rates will be going?
Ballantyne: You’re right, they have been concerned but as
2008
everybody noted things have softened and they don’t see the same
price pressures over the next 12
months or so. But, just going back to
the whole issue of shipper-carrier relationships, what we try to get across
to our members is that you don’t do
yourself any favors if your suppliers
are losing money. We try to encourage them to take a longer term view
in dealing with carriers in all modes.
I suspect one of the problems logistics people face is that senior management in most companies that
“What we try to get across
buy transportation services haven’t
to our members is that you
had that logistics experience as they
don’t do yourself any favors
have moved up the management
if your suppliers are losing
chain and they don’t really quite unmoney. We try to encourage
derstand the implications of putting
them to take a longer term
too much price pressure on their view in dealing with carriers.”
carriers.The smart ones, as you men– Ballantyne
tioned, understand that it isn’t just
price it’s price and service. So if you are a shipper, the people
you are selling to are looking for reliability of delivery.There has
been a lot of pressure on reliability of service. Smart shippers are
going to understand that they want their carriers to remain viable so they can continue to have that reliability.
Issues Roundtable
Smart buyers are wanting to make sure they maintain a quality
relationship. If you are going to get delisted over saving $10 on
a load you may want to think twice about that.
MT: Capacity right now, obviously, isn’t the concern it was a few
years ago but how far away are we from capacity becoming a problem once again? I’ve read about US carriers already laying off
owner/operators. When the economy picks back up how quickly are
they going to be able to bring people back in? Are we setting ourselves
up for yet another capacity crunch like we saw by the end of 2003?
Jensen: It is a concern to me as a buyer of transportation and
I do have capacity problems today on certain lanes and I see it
getting worse. We have more and more drivers at the 55 to 60
year-old range retiring in Canada as well as in the US. But I have
also seen some pretty creative and innovative Canadian carriers
who work with US domestic carriers to reposition loads.The US
carrier may not be interested in running into Canada but may
be interested in running some of his imbalance loads up closer
to the border and work with the Canadian carrier to bring it into
Canada. So they are taking advantage of the downturn of the
economy in the US and matching it up with northbound needs
for a win-win situation.
Johnston: It’s somewhat like poking a bear with a stick. For
a domestic US carrier looking at the limitations of ACE, FAST
and trying to get their operators approved to come into Canada,
we now have a strong dollar relative to them sourcing traffic
MT: Bob makes an interesting point about shippers perhaps not alin Canada in Canadian dollars and seeing the upside at a US
ways understanding the pressure they are placing on their carriers
bank. The other is the proximity of the major centres of
by pushing for low rates. Can we make the argument the other way
Canada; they are all basically within one hour of the US boras well: That some carriers by not understanding exder. So when we talk about capacity and the lack of
actly how different rate levels affect their own profsouthbound freight availability, a Canadian carrier
itability, perhaps because they are not tracking it
can hardly run 50% empty miles to go source US
well enough, are putting pressure not only on themnorthbound traffic. But the US carrier coming into
selves by low-balling rates but also on the industry
Toronto, Calgary, Vancouver has the ability to basioverall?
cally run one hour and then participate in domestic
US transportation. Whilst we’ve tried to bolster the
US northbound rates once you have to get beyond
Smith: I think trucking by nature always has
the $1.70 a mile, all of a sudden the large US TL carhad fairly low barriers to entry and there have
rier says how much did you say? And they start to
been commodity providers that don’t know the
think we can go to Canada for that and they get a
implications of their pricing and that creates a
10-cent upswing on the Canadian dollar they didn’t
buyer beware situation. I think the purchasing
have six months ago. My concern is that the US carmodel sometimes is difficult because it often is
“I think the purchasing
riers have an unfair advantage based on the proxnot an enterprise function that considers the
model sometimes is
imity of domestic US business being only one hour
whole business.You have someone in a corner ofdifficult because it often
from any major centre in Canada.
fice that is judged by how low they can get the
is not an enterprise
rates and often at risk to the business. Just a few
function that considers
NEXT ISSUE: See your next issue of Motortruck
years ago there were shippers talking about sethe whole business.”
Fleet
Executive for the conclusion of our Issues
curing quality capacity.You see a little bit of that
– Smith
Roundtable. See also the Web TV section on
also when there is a downturn and there is untrucknews.com for video coverage of the roundtable.
certainty in the marketplace about which carriers will make it.
NOV/DEC 2007
23
2008
Rates
pricing pressures
Hard times mean there’s freight bargains to be had,
but smart shippers are looking towards closer partnerships
By Harry Rudolfs
reight recession is an ugly term,
but the Canadian trucking industry is struggling with a very sharp
downturn in business. And the outlook
continues to look gloomy, at least for
the first half of 2008.
Canadian carriers moving freight
along north-south lanes were already
off-balance because of the trickle-down
effect resulting from the downturn in
US housing starts, down 40% from
2006.The uncertainty was compounded by the recent sub-prime mortgage
scandal and its repercussions which
continue to send shivers through the
US economy. But the major problem
is the violent upsurge of the Canadian dollar.
As of this writing, the Loonie is sitting at $1.07 and has appreciated 25%
in the last 12 months over the US
greenback. Some analysts suggest that
it should level off at $1.10 in the coming months, and others think it will settle back to a 90 cent level, but who can
tell? Some pundits had predicted parity
with the US currency in 2008, but nobody saw this coming.
The malaise surrounding the falling
US dollar is directly responsible for the
dearth of Canadian manufacturing and
consumer goods heading into the US.
Until two years ago, international carriers
could count on readily available loads
heading into the US and a backhaul waiting nearby to bring their units home
again.Today, Canada-bound loads are still
obtainable but the problem is getting
equipment in place to service the American shippers.This has created a shift in
the established revenue stream as backhauls have become front hauls, resulting
F
in a highly competitive atmosphere with
Canadian carriers slashing rates to get
equipment into the US.
“I’m seeing that the rates are holding
but if anything they’re going to drop,” says
Norm Mackie, vice president of operations for Mackie Moving Systems of
Oshawa, Ont. “We have clients, mostly
automotive, who pay in US dollars. If the
Canadian dollar stays where it is, going
forward, we’ll have to keep them on the
high side. But there’s a threshold you can
get to where the American carriers jump
in who are just as competitive.”
Daniel Pascau, assistant fleet manager
of Normandin Transit of Napierville,
Que., provides another example where
the high Canadian dollar has cost jobs in
trucking and manufacturing.“In the past
furniture used to cost less up here including the price of transport. Now it’s
cheaper to make it in the US.”
As an LTL carrier located just north
of the Quebec-US border, Normandin
Transit seems well situated to move
goods between the two trading partners.
But Pascau cites increasing pressure
from desperate trucking companies.
“I’ve lost customers because they’re no
longer interested in service, just price.
They (other carriers) are undercutting
to keep themselves going, but they can’t
go any lower. We’re trying to stay competitive but you can’t send out a truck
that doesn’t make any money.”
Stan Dunford, chair and CEO of
Contrans Income Fund in Woodstock,
Ont., is pessimistic about the coming
year. “I don’t expect 2008 to be any better than 2007 and this year has been
quite a struggle,” he says. “If you talk to
an economist, they’ll tell you the economy is on fire and unemployment is as low
as ever. But I don’t have a customer that
isn’t hurting.Thank goodness only 20% of
our customers pay in American dollars.”
According to Dunford, “Seventy five
percent of Canadian trucking is van load
trucking and that’s where the blood bath
is going to be. If you’re hauling all-automotive, you’re dying.”
At least fuel surcharges are now an accepted part of doing business and few customers squabble over having to pay them.
However, accessorial charges, like waiting
time,loading,demurrage and customs clearance fees, could be more contentious when
volumes are thin. Some clients may balk at
paying these fees when they can find a discount carrier willing to waive them.
NOV/DEC 2007
25
Rates
However, shippers negotiating freight
contracts can take heart in the fact that
fuel and accessorial charges have become
more standardized across the board, making it easier to compare freight bids between carriers.
Hard times mean bargains are available among companies with poor fundamentals and cash flow. “The big players
continue to make strategic purchases in
specific areas,” according to Dan Goodwill
of Goodwill and Associates, a Toronto
transportation consultant.“Consolidation
has been going along for 25 years certainly and we’re starting to see the giants having very full portfolios. The big American
players are coming into their own and becoming very prevalent across the country.
UPS, Yellow and others offer a variety of
services, and FedEx has just opened LTL
terminals in Canada.”
Allan N. Robison, president and CEO
of Reimer Express Lines Ltd., thinks consolidation is good to a degree.“You’ll continue to see big carriers buying more
carriers. This allows for synergies of size.
They can buy insurance and fuel cheaper
and those things do help,” he says. “As far
as the customer goes, it can be good for
them because it means they can service a
bigger territory.”
Freight moving east-west through
Canada is subject to imbalances as well.
Steady volumes are moving into Alberta
but little back-freight is coming out, leaving trucks sitting in truck stops waiting for
return loads. Some eastern carriers chose
to send their units through to Vancouver
rather than have them sit idle.
But it’s not all doom and darkness out
there. Many regional carriers with strong
niches are coping quite well. “Domestically, it’s still a good market place,” says
Robison, “with some parts of Canada
doing quite well, like BC, Alberta and
Saskatchewan, while some other areas are
having problems. The north south routes
are not as busy as they were but we’re still
having trouble finding long haul drivers.
The demand may have eased because of
the churning in the industry, but it has
not gone away.”
26
MOTORTRUCK
2008
Gary Coleman, CEO of Big Freight
Systems of Steinbeck, Manitoba, thinks
that good drivers are crucial to the success
of a motor carrier. “The driver shortage is
going to get worse as the front end of the
baby boomer bubble starts to retire. The
guy that owns the driver is the guy who
will own the freight,” he says.
“Today it’s still the shippers that dictate what happens on the shipping side.
But that will all change in the next 10-15
years, with shippers collaborating with
carriers in true partnerships. Progressive
shippers are seeing the real value of working with a carrier as a true extension of
their logistics and manufacturing arms.”
David Savelli of Home Depot Canada
is one transportation manager who understands the value of working closely
with carriers. Presently he uses two core
carriers to service all of Canada, along
with a handful of preferred ones to fill in
the gaps. “We want to be efficient and
that’s the key,” he says.
“At one time we had 30-50 carriers servicing our stores. Now we limit it to three
appointments per day, so we look at consolidation (of freight) as a way to decrease
the number of trucks on the road. As far
as road carriers go, we know they are hurting to get into the US so we have that built
into the contracts to help them. The key
to building a relationship is not to find a
new one just because rates go up.”
A good working partnership is also key
when contracts are up for renewal, according to Ginnie Venslovaitis, transportation manager for Unilever Canada.
“We usually look to our carriers for rate
increases every year. But we want to know
what’s driving those costs and how we
can fix those costs,” she says.
Venslovaitis ships 80% of her freight
by rail and 20% by road, but admits to
having an ongoing problem with the railroads. She’s even had to pull some accounts off the rails and give them to
trucking firms. “It depends if you want to
have the freight next month or not,” she
says. “Wal-Mart has to get their shampoo
on time. But our partners usually manage
to work around the problems by having
staff available to strip the containers when
they finally arrive.”
Robison of Reimer is also unhappy
with rail service that shows no improvement in the near future. “We use intermodal but we expect to use less of it in
2008,” he says. “Service isn’t where it’s
meant to be.”
But Dan Einwechter, chair and CEO
of Challenger Motor Freight of Cambridge, Ont., sees intermodal as one of the
bright spots in today’s trucking environment. “I used to think the only way to
ship was by truck, but now I know better. I’d double my intermodal use if I
could,” he says.
Murray Mullen, chair and CEO of
Mullen Group Income Trust Fund, believes that rail service will eventually supplant most long haul trucking moves.
“Intermodal will dominate the long haul
freight business, forever. This change, in
my opinion, is irreversible due to the
competitive advantage rail has over truck
and the continued driver shortage issue.”
Overall, in these uncertain times, it was
difficult to get projections from the executives and managers I consulted. But
Larry Jensen, senior manager of logistics
procurement for Ryder Transportation
Management is willing to stick his neck out.
He expects freight rates to increase
5-6% in 2008 on average. Jensen also adds,
“The average length of haul will fall drastically. Carriers who used to run long
haul south to USA are now running the
Windsor/Quebec City corridor. Better to
run short lanes than to sit drivers.”
As far as volumes go, some shippers, at
least, foresee strengthening volumes in
2008.According to Venslovaitis, Unilever
Canada expects a 5-7% increase. “That’s
a dollar value but that usually translates
into more cases on the truck,” she says.
Times may be tough, but what’s that
old saying? One thing we can count on is
well-managed trucking companies sticking around for some time to come. “The
demand for trucking services will always
be needed,” says Reimer’s Robison. “We
always go through these cycles and we’ll
always be here.”
MT
Provincial Outlook
2008
no time for sitting tight
Canada’s provincial trucking associations highlight their concerns and their focus for the year ahead
By Julia Kuzeljevich
whole to look at improving trade opportunities,” said Burleton.
The data has not been lost on Canada’s
provincial trucking associations, which have
been ramping up efforts to meet the challenges ahead.
strong Canadian dollar, weaker
southbound volumes, snags and
quagmires at the border and on the
road to it. Welcome to more of the same
in 2008.
While the coming year unfortunately
will not look much different from this one,
2008 may at least bring the promise of
greener fleets and better roads.
According to economist Derek
Burleton, associate vice president, and director, economic studies, TD Bank
Financial Group, the steady rise of the
Canadian dollar, coupled with high energy costs, will likely mean a dampening of
the economy well into 2008.
“Overall, Canada’s regional economies
are seeing a shift of reliance from the US to
international markets, but the US will continue to be the lifeline of the Canadian economy,” said Burleton.
“Alberta’s economy will lose some
steam, cooling off to a growth rate of about
3% into 2008 (down from 4% this year)
A
28
MOTORTRUCK
tied to cost pressures, labour shortage, and
shortage of materials,” he said.
British Columbia, Saskatchewan and
Atlantic Canada appear to be benefitting in
some ways from Alberta’s losses. BC and
Saskatchewan anticipate healthy job growth
as the cost of living in Alberta grows and jobs
spill over to the neighbouring provinces.
Atlantic Canada, meanwhile, has seen a
renewed flurry of activity in energy, utilities, construction and manufacturing, with
New Brunswick leading.In Nova Scotia the
forestry sector continues to decline.
“In Ontario and Quebec, in 2008 we
predict continued lean times with contraction in manufacturing,” said Burleton.
And all of the provinces face broader,
long-term challenges with regard to infrastructure.
“There are optimistic signs that the government is getting the message about this
challenge but it’s a long term issue. Border
fees and infrastructure are huge setbacks.
There’s still a need for the provinces on the
British Columbia
According to British Columbia Trucking
Association president Paul Landry, southbound volumes in the province were already
slowing down even prior to a significant rise
in the dollar. But on the jobs front, with
Alberta’s economy cooling slightly, Landry
said that carriers in BC are finding it a bit
easier to get qualified workers. He said the
BCTA is pleased with funding commitments
to improve infrastructure in the province.
These include improvements to the Trans
Canada highway, the South Fraser perimeter road, key east-west and north-south
routes Highways 10 and 15,and bottlenecks
removed at Kicking Horse Pass and Kelowna.
On the environmental front, Landry has
made several recommendations to B.C.’s
Select Standing Committee on Finance and
Government Services that he said would
provide financial incentives to encourage the
trucking industry to step up its efforts to reduce greenhouse gas and smog emissions.
“We’ve indicated our strong desire and
willingness to work with government on environmental initiatives.We want government
to provide more regulatory flexibility
(weight forgiveness for APUs, and super singles). We’ve also requested that government
consider financial incentives for the acquisition of new trucks and for legacy fleets, such
as forgiving sales tax for new equipment,
waiving first year registration or licensing
fees,etc.) While it’s difficult to say what their
response will be we wanted them to understand the industry’s resistance to acquiring
Provincial Outlook
new equipment,” said Landry.
BCTA has been pushing for minimum
truck driver training that would be available
through a coherent and consistent training
system of approved institutions. The program would consist of pre-Class 1 licensing
and on-the-job training by employers who
also have to meet certain standards.
Approved driver trainees would be distinguished from regular Class 1-licence holders.At press time, the standard had received
approval in principle by the province’s
Industry Training Authority (ITA).
“The next step is to begin working on
the program itself for their consideration.
This process will probably take us to
February 2008.We’ve engaged a consultant
to help us define the skills and knowledge
required. We’re hoping by late spring to
have approval from ITA where we can
30
MOTORTRUCK
2008
move on and offer the program for Fall
2008,” said Landry.
He stressed that such a program would
need a strong commitment from employers.
“While the smallest of companies would
struggle to be involved in this program hundreds have enough trucks and infrastructure to deliver mentoring and on the job
training,” added Landry.
Alberta
According to Mayne Root, executive director,Alberta Motor Transport Association,the
trucking industry, like most other industries
in Alberta, continues to have recruitment
problems in all aspects of the industry from
drivers to mechanics to office staff.
“We are competing with all of the other
industries, some of which are able to pay
better,even for general labour-type jobs.For
drivers,insurance requirements and training
costs make it difficult for younger people to
get into the industry as they need to be over
21 and have the proper class of license just
to get started and, at that time, they certainly aren't qualified to jump into a tractor
trailer unit and hit the road. The company
then has to provide them with on-the-jobtraining and mentoring to get them to the
point that they can safely operate the equipment and handle the freight,” he said.
In the late 90s the association, together
with industry,developed the Transportation
Training & Development Association to address the need to attract more people to the
industry and provide the required training
for them to be successful.
“In 2007 we received final approval from
Advanced Education and Alberta Infrastructure & Transportation to conduct a pilot
Provincial Outlook
project for a college level course for professional drivers.Red Deer College and driving
schools in Edmonton, Calgary and
Lethbridge are working together to provide
in-class and behind the wheel instruction
for the multi-week course that is eligible for
student funding. Unfortunately, conditions
were placed on the program to not include
the Class 1 training and license.As a result,
we are having difficulty getting students for
the pilot project.
“The employers have adjusted their rate
structure and benefit plans to maintain their
current driving staff and to attract other,mature people to the industry.In addition,they
have had to adjust their shift scheduling to
better appeal to new entrants. Some carriers have also begun hiring foreign workers,
where possible.
Another challenge is that the drilling
32
MOTORTRUCK
2008
sector has slowed considerably over the
last year.
“I have heard that as few as 27% of rigs
are working this year compared to 2006.
This means a slowdown in the hauling of
pipe, equipment and supplies to that industry but that is the only sector that has experienced a slowdown.I am still getting calls
daily looking for companies who can carry
goods within the province,nationally and internationally.We do not see this slowing into
next year. The border security issues continue to add cost and time to highway transportation going south and coming back into
Canada and many companies have completely pulled out of the international market but the rest are doing what they have to
to meet the constantly moving and more
demanding requirements.”
With regard to infrastructure, said Root,
Alberta has been fortunate to have a wellestablished highway network but they are
now encountering difficulty in keeping it
properly maintained and upgraded.
“At last note from the province, they are
several hundred million dollars behind on
this. With the availability of more funding
being announced in the last few months,we
have seen an increase in the number and
scope of projects being started – Calgary
& Edmonton ring roads, Highway 63 to
Ft. McMurray, improvements to the
Highway 3 corridor in southern Alberta,several interchange upgrades throughout the
province,etc.These projects may be causing
some traffic delays now but will result in
safer and better highway systems.”
Saskatchewan
According to Al Rosseker, executive direc-
Provincial Outlook
tor,Saskatchewan Trucking Association,the
province is facing an acute driver shortage
with many companies making use of the
Saskatchewan Immigrant Nominee
Program (SINP), which allows Saskatchewan to nominate applicants,who qualify under criteria established by the
province, to the federal government for
landed immigrant status.
“It’s a longer process than we’d like,”said
Rosseker. “We also have the largest truck
driver training school in Saskatchewan,
which trained 1200 drivers last year.”
There are also lots of initiatives to bring
in new candidates from First Nations communities. While Rosseker said there isn’t a
groundswell,it’s a step in the right direction.
“There are members of our association
working almost exclusively in the north (of
the province),” he noted.
Southbound volumes have also not been
good for the province. “We’re not going to
hurt as much as Ontario but goods aren’t
moving. Some of the commodities are still
flowing but the stronger dollar is making
them more expensive,” said Rosseker.
The association, which in 2007 celebrated its 70th anniversary,has set out some
key priorities for 2008.
“We would like to develop more partnerships with training entities. We’re also
branching out with a pilot project on heavy
equipment training as there is a shortage of
skilled operators there too. There are so
many components to trucking and a wealth
of opportunity in the industry,”said Rosseker.
At press time, the province of Sask-
34
MOTORTRUCK
2008
atchewan also announced a primary weight
corridor network called Clearing the Path
(CTP),with aim to increase primary weight
access on municipal roads throughout the
province for a more integrated transportation network.
Manitoba
Bob Dolyniuk, Manitoba Trucking Association’s executive director, said that there
is currently excess capacity in the province.
“The auto, pulp and paper and BSE
(bovine spongiform encephalopathy) crisis
have meant a shift in market focus for carriers.They have looked to other markets to
keep their trucks busy,”he said.“We’ve been
in this situation for over a year with excess
capacity southbound and even domestically,” he added.
It has destabilized pricing and Dolyniuk
said he expects a shakeout ultimately.
“Some carriers have just walked away
from certain routes.”
With excess capacity, admittedly, some
of the pressure is off the driver shortage,but
Dolyniuk said the issue is not on the back
burner and only means the association is
looking harder at the question of making its
membership more efficient and productive.
MTA members are actively involved in
the immigration nomination program.
Manitoba Public Insurance is also launching
a $5 million program over the next three
years to train 250 new entrants per year for
the industry,he said.Dolyniuk said that centres such as Winnipeg are well placed to attract business with the promotion of trade
corridors like the Asia Pacific Gateway.
“As the cost of living rises with wages in
Alberta, it’s less compelling to locate consolidation and distribution centres there,
where the wage scales are competing with
the oil industry.”
Manitoba has announced $4 billion in
funding over 10 years to fund infrastructure.They’ve also committed $400 million
over five years for bridges.
“These have not had the attention
they’ve needed,”said Dolyniuk.“But if these
projects don’t go through during this timeline, the funds will go back into general expenditures and not into infrastructure.”
On the environmental front, Manitoba
is looking at an ethanol and biodiesel mandate over the next few years.
Ontario
According to David Bradley, president,
Ontario Trucking Association, the tight capacity situation of a few years back has evaporated with the flight of the Canadian dollar,
combined with woes in the domestic auto
manufacturing industry.
“Whenever you have an over-capacity
situation in a competitive marketplace you
will see downward pressure on rates and
that is what is happening in the trucking industry. Many carriers are trying to keep
equipment that would otherwise be parked
up against the fence on-the-road or retain
their drivers for when things do eventually
turn around. Personally, while shippers are
doing what they can to reduce transportation costs -- and they have the upper hand
2008
in rate negotiations for now -- I do not see
the current rate situation as sustainable over
the longer term,” he said.
“Operating costs continue to go up and
must be paid for; the economic cycle will
eventually begin to turn up again at some
point; and the demographics of the driving
force clearly point to a deepening driver
shortage in the future, which is perhaps the
single most significant factor impacting capacity levels. For now though, its batten
down the hatches,” said Bradley.
On the infrastructure front in Ontario,
the Ontario Trucking Association noted that
while the province has done a pretty good
job in maintaining highway budgets at or
above a billion dollars per annum for the
past number of years, the needs in Ontario
are great.
“The problem is that the infrastructure
gap is so great. It also takes an excruciatingly long time to get approvals for highway investments.The Windsor situation is but one
example. Both the federal and the provincial governments have committed to having
the Detroit River International Crossing report completed by the end of this year and
I think it is important that we hold them to
this deadline.We have already seen how easily delays can add up to several years.
Moreover, once the report is in, it is imperative that the politicians at Queen's Park
and Ottawa actually follow-through on the
recommendations. The time for consultation and new proposals is over. On the
broader infrastructure front the challenge is
always to ensure a proper balance between
transit (which is presently very much in
vogue) and highways,” said Bradley.
He said that OTA fully expects the
Ontario and Quebec governments to introduce legislation on speed limiters before
the end of 2007. The plan would be for it
to become law by the Spring and fully operational by January 2009.
“The industry's economic goals have
never been as aligned with the environmental agenda as they are now. CTA is
working towards some sort of rebate program for enviroTrucks as early as the 2008
federal budget.There will also be a role for
the provincial government, not only in
terms of financial incentives but also in
terms of some flexibility in the weights and
dimensions standards to accommodate
things like wide base single tires, aerody-
Provincial Outlook
namic fairings and APU's without payload
penalty,” said Bradley.
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Provincial Outlook
haps the single largest issue on OTA’s agenda
could be the outcome of federal-provincial
discussions aimed at harmonizing the provincial sales tax and MJVT (multi-Jurisdictional
Vehicle Tax with the GST.
“It would be great for the industry if that
were to happen,” said Bradley.
Quebec
The government of Quebec is embarking on
a road network modernization that includes
the creation of an agency specializing in managing overpasses and bridges and the funding
thereof. It is also launching a road network recovery plan,the introduction of new methods
and new practices to monitor the network,
and dissemination of complete,permanent information in real time for all citizens.
Quebec’s Minister of Transport, Julie
Boulet, announced these initiatives following
a report of the Commission of Inquiry on the
De la Concorde Overpass in Laval,which collapsed on September 30, 2006.
The government’s objective is to restore
83% of the roads and 80% of the structures to
good condition within 15 years. A total of
$11.6 billion will be invested over the next
four years to complete the first five-year plan,
29% or $3.5 billion of which will be allocated to conservation of structures. For conservation of roadways, over $2.9 billion, the
equivalent of 25% of the budget, will be allocated to improve the network.
"The construction and management of
structures are increasingly complex all over
the world.To stay on the cutting edge,we have
to specialize,” said Boulet.
The Quebec trucking industry,meanwhile,
has spent a large part of 2007 dealing with a
Transport Quebec ban on heavy trucks from
135 bridges and overpasses, following the
Ministry’s release of a list of structures requiring inspection.
Double trailer trucks were banned from
the listed highway structures, and trucks that
normally require special permits to haul heavy
loads were not allowed to request clearance.
Marc Cadieux, president of Quebec's
trucking association, said the ban has affected
transportation costs,with trucking and the end
consumer shouldering much of the burden of
increased rates due to detours imposed on
2008
trucking companies. Cadieux said the industry was essentially paying for years of infrastructure neglect.
Transports Quebec recently lifted travel
restrictions on 31 of some 55 recently inspected bridges and overpasses. At press
time, the Ministry had determined that no
further intervention will be necessary for 29
structures while some 21 would need significant repairs. Of five more that were inspected, the level of intervention needed
has yet to be determined. Some 60 more
structures are still to undergo evaluation and
the timeline for that is proceeding normally, said the Ministry.
While the Quebec Trucking Association
(ACQ) has welcomed news from MTQ
about the infrastructure initiatives, still on
the table is the issue of whether or not trucking companies can be compensated for the
extra costs they’ve been subject to. To recoup costs,noted the ACQ,they would have
to demonstrate gross neglect on the part of
the Quebec government.
Meanwhile, Canada, Ontario and Quebec have also signed an MOU to develop the
Ontario-Quebec Continental gateway and
trade corridor, which aims to optimize the
connections between air, marine, road and
rail transportation to better meet current and
future demands in transportation.
Atlantic Provinces
According to executive director, Peter
Nelson, the high Canadian dollar is affecting
the forestry sector in New Brunswick and
Nova Scotia,but the manufacturing sector in
the Maritimes, which he said often gets left
out of the mix, has also been affected.
Meanwhile Saint John, NB, is becoming
an energy hub, with the possibility of a second refinery being constructed there and a
second or even third nuclear reactor at Point
Le Preaux.
“We’re all facing the same issue,” said
Nelson of the Atlantic provinces.“We’re in a
global war for qualified workers, whether for
the oil and gas sector of for trucking,even into
the administrative positions.”
The upside, he said, is that all of these
(initiatives) are a draw to win workers back
from Alberta.
“Hopefully the boom will assist other sectors in recruiting,” he said.
Nelson said that in many parts of the
Atlantic provinces you are seeing manufacturing pulling out because the market is not
there.This is exacerbated by problems such
as tolls and the costs of Marine Atlantic
ferry system.
“Day & Ross could take a 53-foot van load
of french fries to Vancouver and never pay a
toll the entire way,whereas going from Borden,
P.E.I. to Newfoundland will cost you $500 in
tolls. The phrase ‘the $8 head of lettuce’ in
Newfoundland was coined here,” he said.
“Newfoundland is a consumer and not
much more comes back from there, and this
is true in many parts of Atlantic Canada. We
have a stagnant or declining population base,
and we’re increasingly not a market for shippers, producers and manufacturers, which in
the end reduces choice for Atlantic Canadians. We’re at a tipping point costwise,”
said Nelson.
In summer 2007 the president and CEO
of Cianbro Corp. put forth a proposal for an
east-west toll highway in Maine that would
run from Calais to Coburn Gore and that
would reduce travel time, costs and fuel emissions for the 1000 American and Canadian
trucks that travel through Calais daily. For this
alternate to be considered as a feasible route,
though,New Brunswick would be required to
twin the highway from Point le Preaux to St.
Stephen and Quebec would have to build a
new highway.
“But we won’t use the road unless it’s
easier for us to get into or out of the US,”
said Nelson.
And with the increased bureaucracy at the
border, an issue for trucking overall, this isn’t
a likely scenario anytime soon.
Nelson added that trade-promotion initiatives such as Access Atlantica, (with the
Atlantic provinces,Quebec and several northeastern States) and the recently announced
Saint John Gateway project, are promising if
they can meet the needs of the various modes
of transport.
“The pitfalls of gateway projects are that we
could bring all sorts of containers in through
the ports but they’d still be stuck at the border,” says Nelson.
MT
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