MISSISSAUGA, Ont. –When times are good and things are easy, even the worst–run business can survive, but its when companies are put under stress that’s when they evolve and demonstrate their success.
During the View from the Top panel at Transportation Media’s 2014 Surface Transportation Summit, three transportation executives outlined the challenges they are facing and explained what they are doing to solve them.
Rob Penner, Bison Transport
As executive vice-president and COO of Bison Transport, Rob Penner sees three top issues facing the trucking industry: driver challenges, equipment issues, and the changing freight network.
Like other trucking executives, Penner cited the driver shortage as a pressing concern, but said the company isn’t so badly affected that it is willing to put just anybody in the driver’s seat. Out of every 100 applications Bison receives, the company typically finds 5 or 6 job seekers attractive enough to offer them a thorough interview or a roadtest. And it usually only hires 1 or 2 of that small subgroup.
According to Penner, Bison has a turnover rate of approximately 18% and the company forces about half of that number. Of the 9% the company lets go, about half are dismissed before their first year of employment is over. Roughly a quarter of Bison’s turnover is due to drivers retiring, dying, or leaving the business due to disability.
Perhaps surprisingly, given his concerns about the driver shortage, Penner said “driver utilization has been a challenge.” Although Bison added 100 drivers over the past year, it didn’t add any tractors to its fleet. “It takes more drivers to do the same job today,” said Penner, adding that now there are multiple drivers required per truck.
Pay strategies are also top of mind at Bison. Whereas in the past, drivers would earn 90-95% of their pay based on mileage. Today that figure is down to about 60%. “Mileage-based pay is not where the business is going,” said Penner. How long a load is on a truck and how much revenue each truck can generate per day, are they key factors, not the mileage per day.
“The driver is the only way we are going to make money,” said Penner.
Beyond the driver, Bison also pays considerable attention to its service offerings and areas it feels it can offer specialized services. It looks for the same in its partners. Saying that most trucks are similar in terms of cost and technology, Penner explained that Bison looks to purchase equipment from suppliers that offer the best service networks in the geographical areas in which the trucks operate.
Ian Murray, CP Intermodal
Like Penner, Ian Murray, managing director of intermodal marketing for CP Intermodal, identified “intermodal driver capacity as a significant issue across North America,” especially for last-mile delivery services.
On the rail side of the business, Murray identified congestion and slower travel speeds as major problems that North American rail companies are facing, particularly in the US.
To ensure it isn’t affected by those issues, CP is investing in its own infrastructure. It has spent $1.2 billion, with 75% of that money going into track repair and construction, with the goal of “improving the throughput of the network.
“We’re going to get the capability to produce velocity and speed,” said Murray. He added that money spent on making infrastructure more efficient means the company doesn’t have to spend as much money on rolling stock and assets.
CP has also invested significantly in its second western route which runs from Winnipeg to Edmonton, and by building this capacity, it allows the company to double track speed on its main line and turn cars faster.
“The investment comes back to us in velocity and speed and predictability.”
CP has also made arrangements with CSX to run double stacked trains to Chicago, in another effort to increase network capacity.
Murray said the company is looking to produce 50% growth over the next 4 years.
Douglas Harrison, Versacold Logistics
With approximately 40% of the cubic capacity in the temperature-sensitive 3PL and warehouse market, Versacold understands that it needs to spend money in order to keep on top of the changing industry. According Versacold president and CEO Douglas Harrison, the company has invested $24 million in new equipment technologies and facilities upgrades.
“The trend in food and healthcare is growing complexity in regulations, in Canada, cross-border and globally,” said Harrison, adding that recall management–where products can be tracked, traced, identified, and retrieved–is of increasing importance.
The temperature-sensitive industry is also working in an increasingly complex global supply chain environment. More food is being produced in single product facilities in one part of the world and being shipped across the globe, and it is only through the increase use of technology that this is possible while temperature controls are maintained.
“We spend a lot more on remote sensing so we can guarantee the safety and quality of the food product,” said Harrison.
One of Versacold’s biggest expenses is energy, but it’s not one that can be reduced by gaining efficiencies. Freezers and cold storage must be maintained at precise temperatures, and the electricity required to run the coolers is a constant. While rates for electricity tend to be regulated by the provinces, Harrison said they are “increasing far above the rate of inflation,” as are workers’ wages.
Harrison told the crowd there is one other significant challenge in the industry: the RFP process.
“RFPs are an impossible way to do business,” he said. “You can’t have a dialogue with an RFP.”