TORONTO, Ont.–The CSCMP held its State of Transportation Event Thursday October 9th at the Toronto Marriott Airport Hotel. Transportation Media Editorial Director Lou Smyrlis moderated a panel featuring David Bradley, CEO of the Canadian Trucking Alliance, Mark Seymour, President/CEO of Kriska Transportation, John Ferguson, President and CEO, SCI Group, and Michael Gullo, Director, Policy, Economic and Environmental Affairs, with the Rail Association of Canada.
Smyrlis asked the panel if the RFP process was continuing to dominate the relationship between shipper and carrier, and whether it was improving relationships.
According to Seymour, RFPs “are the impetus of conflicting priorities on the shipper side. I am more learned about why they exist- to test the market, and to ensure competitive pressures ensure the best price for the service. But all too often all they are really trying to do is leverage price,” he said.
Seymour said that carriers are trying to build engineered solutions “and that takes time. We’re forever on our heels waiting for the next RFP. Shippers may not get the best engineered solution as result,” he added.
RFPs are too often price focused, and “don’t ask the right question. My wish would be that RFPs would take place every two to three years and that shippers and carriers would sit down on the anniversary of every contract, and bring data and credibility as to why the carrier needs more. I think that is reasonable and fair and would strike a very fair balance,” Seymour said.
Added Ferguson: “We have to go with procurement processes from time to time. Often it’s a rigid process. We strive for strategic long term relationships.”
When asked what is driving the consolidation trend in the trucking industry, CTA’s David Bradley said it “hasn’t had an impact in terms of pricing. The pressures have been somewhat temporal. Right now I would characterize things as being more strategic.
There are a hell of a lot of truckload companies for sale today that may not fit with some acquisitions strategies. The next ten to twenty years will be interesting to see where the consolidation and deconsolidation trends come from,” he said.
Bradley also commented that he doesn’t see a lot of interest from American companies in acquiring Canadian ones-at least, not in any meaningful sort of way.
“It may be a good thing for carriers here that Canada is still viewed as a foreign country. Our drivers know how to deal with the border, but US carriers are not prepared to make the same effort for a relatively small marketplace. This doesn’t mean there won’t be some private investors,” he said.
Capacity in the trucking market is another huge concern for shippers, but as Bradley indicated, the trucking industry “is not a homogeneous market. While there is greater confidence than there was, people are still cautious in terms of expanding their fleets. There is slower replacement. The big issue is the driver shortage. Even if you wanted to expand and grow organically this is keeping a natural lid on things. In central Canada where things have been slower to come back we are still in an equilibrium state, and I think that’s going to continue,” Bradley said.
The next round of greenhouse gas reductions comes in 2018, and the trucking industry “is getting tired of being the guinea pig. Last time around we saw a major prebuy to beat what was coming. Now a lot of carriers have gotten a lot smarter about managing capacity,” Bradley said.
“When we talk about equipment there are a lot of reasons one should invest in new equipment, and there are many reasons why people are not doing it. Technology should be in every investment portfolio to help make better decisions,” Seymour said.
The driver shortage, and its effects on the capacity situation, “may be the best thing to happen to the trucking industry,” noted Bradley.
“Here in central Canada there has been zero real growth in driver wages in twenty years. Drivers want to be paid for all their time. Too often everybody else’s inefficiency falls in the lap of the driver,” he said.
“Shippers and carriers have conflicting priorities, and there is nothing wrong with some healthy tension. The blurred line where you go from healthy tension to tense tension is really hard to see-it’s tough being a carrier and it’s tough being a shipper,” Seymour said.
In the wake of the 2013-2014 “60-year winter” combined with a bumper grain harvest, and following legislation put in place by Ottawa mandating grain moves for Class 1 railways, Smyrlis asked RAC’s Gullo what actions the rail industry is putting in place to prevent backlogs ahead of the next harvest.
Gullo said there was a lack of understanding last year about the potential grain crop. This was combined with a terrible winter where temperatures dipped for a period well beyond the 25 day average.
The grain industry was also grappling with the removal of a single desk operator (the Canadian Wheat Board).
“Both railways have aggressive programs in place on velocity and productivity, and a large margin of capital investments will be reinvested in the network on these,” Gullo said.
Canadian Pacific will also be providing a dedicated grain fleet, he added.
Regarding the federal government’s move to change the interswitching provisions for short line railroads from 30 km to 160 km in some areas of the Prairie provinces, Gullo said that those “have the ability to harm the rail industry. Introducing shorter haul moves is not necessarily the way to go if the aim is better velocity. Congestion has an adverse effect on velocity,” he said.
Gullo also criticized the lack of process in the way the interswitching provisions were pushed through.
“It’s not a model that reflects proper public policy,” he said.
The answer is supply chain collaboration, he said, and “foresight in orders. It’s understanding the long term, and the ability of rail to scale up. It’s about forecasting data and collaboration, something that has been possible in other sectors, Gullo added.