TORONTO, Ont. – You can’t bring shippers and carriers together under one roof without talk turning, sooner or later, to the contentious subject of requests for proposals (RFPs).
It would be like Thanksgiving dinner without the turkey. So it’s no surprise that talks at this year’s Surface Transportation Summit, as in past years, once again returned to RFPs.
“This tendering process, in my opinion, they’re a waste of time,” said Rolly Uloth, president of The Rosedale Group. “You get these huge tenders of 6,000 lines, you’re the incumbent, you put in your rates then you’re told in round one that you’re 25% high and you should rebid. This goes on and on. You may get told you’ve been awarded five lanes but then the freight never shows up. We’re not interested in the tendering process.”
Uloth said Rosedale will participate in few RFPs.
“In the tendering process, everything is one-sided,” Uloth contended. “There are fines for being late, fines for being early.”
However, Martin Pede, director, logistics and supply chain with Glencore Canada, reminded carriers that large shippers have no choice but to tender freight.
“We are a large company that has to engage in the tender process,” he said. “It’s actually a legal requirement for larger organizations to engage in tenders. So that type of process isn’t going away, for many companies.”
He also said the tendering process allows shippers to get a feel for market rates if they’re not in touch with it.
Ken Rosenau, director of operations for Rosenau Transport, said pricing pressure has been especially intense in Western Canada, where shippers connected to the oilpatch have been demanding 20-30% reductions in freight rates.
“Most of us in this room don’t have 20 points to begin with,” he said. He added, however, that conditions in western Canada – especially in Fort McMurray – are improving.
Still, carriers are having trouble increasing, and in some cases even sustaining, rates because there’s an abundance of capacity.
“We’re not seeing a capacity issue at this point in time,” confirmed shipper Heidi Syer, division freight manager, Canada, with PepsiCo.
“There doesn’t seem to be a lot of concern out there amongst shippers,” agreed Michelle Arseneau, managing partner, GX Transport. “Nobody seems to be worried about it. Nobody’s struggling like they were a couple years ago.”
But carriers were quick to remind shippers in attendance that can change quickly. Arseneau said more shippers should be planning for capacity to tighten next year when electronic logging devices (ELDs) are mandated in the US. Earlier in the day, trucking economist John Larkin said the legislation could pull 3-5% of US trucking capacity out of the market due to an inability or unwillingness to comply.
“Capacity is going to get really tight, really fast,” warned Trevor Kurtz, general manager, Brian Kurtz Trucking. He said many carriers will be unable to absorb the cost of implementing ELDs or fully complying with hours-of-service rules.
He also said carriers will like be cautious about adding extra capacity.
“We agreed (at Kurtz) in 2008 when things died off and everyone right-sized, that we would only grow when rates would allow us to grow,” he said. “With respect to growth, we’ve been really cautious. In years past we were way too quick to grow. If it’s not going to be profitable, why grow?”
Arseneau agreed. “When we have an opportunity to secure more business we make sure a contract is in place – a decent length contract – so we can manage that and will add capacity to our fleet as that business comes on-board, as opposed to adding it and hoping the business will come.”
Carriers on the panel stressed the need for stronger partnerships between shippers and carriers. This means being realistic when it comes to fines that are levied for missed deliveries.
“The fine thing, and the appointment times that are out there, they just don’t add up,” Arseneau said. “You can’t predict traffic on the fly or when another shipper or receiver is going to tie you up. So if you are at an appointment and you are there on time and the shipper held you up for three hours and that makes you late for your next appointment, you are going to get fined for the next one. You’ll get $50 an hour waiting time but that doesn’t add up to the $1,000 fine you’re going to get on the next appointment. So the math doesn’t add up.”
Valerie McSween, vice-president, eastern region, for 3PL Mactrans Logistics, was empathetic.
“I haven’t met a carrier that intentionally decided not to make a delivery on time,” she said. “There is no other mode out there that matches the service level that trucking does.”
And PepsiCo’s Syer said she feels fining carriers is unproductive, and prefers to implement systems and technologies that can help improve on-time delivery rather than simply fining carriers.