There is a very fine balance between being competitive and covering costs, advises Allan Robison, President and CEO of Reimer Express Lines. In this exclusive interview he outlines how operating smart has helped Reimer survive and thrive during a period of upheaval for the trucking industry.
CT&L: This is Reimer’s 50th year in business. Not only are you one of the survivors of deregulation but your company is considered an undisputed market leader in its service offerings. In your view, what have been the key ingredients to your success? Robison: It’s true, if you take a look at the list of major LTL carriers in Canada before deregulation we are one of three carriers that is left. We consider that quite a milestone. And, of course, our parent company in the U.S., Roadway, is one of a similarly small list of carriers that made it through deregulation in the U.S. It speaks to the fact that we must be doing something right. Our founder, Dr. Donald S. Reimer, got this thing started in 1952 with very dedicated, hard-working employees and the vision to stay current with market needs. And that continues to be our success story. Our hard working employees and our continued vision of the future are the real factors.
CT&L: You have personally been part of the industry for a long time. What major changes have you seen in terms of shipper expectations about the service they expect from their core carriers ? Robison: When we were regulated we thought we were good managers but we really did things the way we wanted to do them. Our prices were fixed and the only thing we had to deal with was service, and the service was in some ways fixed because you only had a limited number of people competing against you. And for that reason carriers got to a point where they were pretty much dictating how the service was going to be, although it had to be reasonably good. In those years we thought we were doing well but we weren’t doing anywhere near what we are able to do today. Under deregulation, we are responding to customers’ needs and they are driving what we do. As long as we are smart enough to know what we make money at and what we don’t, we can do most anything they want us to do. We are much more sensitive to the needs of the customer than 20 years ago.
CT&L: From a shipper’s standpoint what is unique about what Reimer Express has to offer? Robison: We are the only large LTL carrier that covers all of Canada, all of the United States and all of Mexico. There is not another LTL carrier that provides seamless service in each of those countries. What we are giving to shippers is something they can’t get anywhere else. Along with that comes the most advanced communications systems in the market. We have state-of-the-art computers, we have EDI capabilities, all kinds of ways for customers to use our services. We have provided for our customers in Canada everything they would need to ship anywhere in North America and the world where we serve 65 foreign countries outside North America.
CT&L: What should shippers expect to see from Reimer in coming years. Are there other areas or markets included in your growth strategy that you could share with us at this point? Robison: Last year we started our service into Atlantic Canada. It’s what we felt needed to be done to complete the coverage of coast to coast in Canada. And that has been a great success story. We have increased from the beginning of the year up till now by 250% the amount of shipments we are handling in that area. We didn’t start with a huge operation but we are very pleased with how fast it is growing. We feel we are pretty well in the markets that we need to be. We are not going to be a carrier that’s going to serve every small community. We leave that to the smaller carriers, who do that quite well. What we will do is continue to serve the larger markets and then work with them to make sure we can cover every point in North America. Our emphasis in the coming years will be to improve our density. We want to gain business from within rather than worry about purchasing new companies or moving into new territories.
CT&L: Do you see yourselves going into value-added services such as warehousing? Robison: Carriers sometimes forget who they are. At Reimer and at Roadway we have made a decision that we are an LTL trucking company. If we find ourselves doing things that are not part of the core to our service, our heads turn and our core business starts to suffer. We have really stayed out of the 3PL area. We don’t see any reason to jump off into services that are not compatible with our core business.
CT&L: Heading into 2003 what do you see as the major issues likely to affect Canadian motor carriers? Robison: Pressing today is the security issue. Our border continually changes both in Mexico and in Canada and we have to stay on top of that. Also the new dangerous goods legislation that has required so much investment in training. The other thing that is of concern is the uncertainty of the market. Everyone is frustrated and stressed about where the economy is going and that has an effect on goods and people buying them.
CT&L: We noted a shortage of capacity during the summer months. Did you see the same and do you see it continuing into year-end? Robison: I don’t know if I would agree wholeheartedly with that. I would say that carriers were certainly busy,but they certainly still had capacity. When Consolidated Freightways went under, our business jumped significantly. Sure we still have capacity but it certainly took care of a big void that we thought was out there. Right now carriers are busy and although they are not at capacity they are much nearer to it than before. What that all means to the market is that freight rates are holding.
CT&L: You’ve written recently that "there is a very fine balance between being competitive and covering costs." How does Reimer ensure it maintains that balance? Robison: Reimer and Roadway are highly disciplined companies when it comes to rates. The Consolidated Freightways failure gave a message to a lot of customers real quick. CF towards the end was cutting prices significantly. We said to former CF customers that we’re happy to handle their freight but we’re not going to take it at CF’s levels. I was very pleased to see that most of them understood that. That event alone probably did more about raising rates than a lot of other things did. We’re very fortunate in that we have one of the best costing systems in the business. We handle thousands of shipments every day and we are able to determine the cost for each and every one of them. So we know right at the time the shipment is delivered whether or not we made money. A lot of people come to us and say here’s our freight and this is the rate we had with other carriers. We put it into the model and are able to tell if we should take it at that rate or walk away. Because we know our costs so well we are in a position to be able to sit down with our customers and to tell them which area is costing us the most and often times we can bring the cost down to a level where both of us win.
CT&L: Looking at it from a shipper’s point of view, how do they benefit from using a service provider that is adept a tracking its own costs? Robison: We find in our relationship with our customers it is not a case of walking in and saying we need a 5% increase because that’s the popular number for the day. We’re able to walk in and show them exactly what their account does and what happens to our costs, and for instance, how new regulations affect our costs.
CT&L: This dialogue seems quite sophisticated. Looking at the industry as a whole, when it comes to rates is the discussion between motor carriers and shippers as sophisticated as it needs to be? Robison: For many years there was not enough communication in that area. It was generally here is my number. Carriers who didn’t have the sophistication to understand their cost s
tructures may have known that overall their business was making or not making money but all they could communicate were general statements. It’s getting better. The costing systems that are available are evolving and getting better. But it will be a while before the industry, particularly the smaller and medium-sized carriers, will get to the kind of systems that we have put in place.
CT&L: Is that what has been causing the downward pressure on rates? Carriers couldn’t present a sophisticated enough argument and as a result shippers were able to dictate to them? Robison: It is a little of both. What you’re watching is an industry that is trying to mature. It’s still a young industry in a deregulated market concept. Carriers are still learning and starting to understand that a free-market is a different place than where we were before. Many carriers I think were under the impression over the years that if another carrier was hauling freight and charging a certain rate then certainly he must be making money on it. So they thought that they could take that business for the same rate or even a reduced rate and be fine. What they didn’t understand was that the other carrier was losing money on that freight because he didn’t know how to measure his costs. Our industry has suffered over the years and rates have been driven down because people didn’t know. But by the same token, in defense of the shipper, I think because of regulation our costs were high because we didn’t operate as efficiently as we do today and so we have been able to drive costs down and become more efficient. Now it’s a matter being paid for what we do.
CT&L: Prior to joining Reimer Express you spent time running a number of smaller and larger trucking companies and taking part in mergers and acquisitions. Despite a shrinking in the numbers of small fleets, the Canadian trucking market remains characterized by its great number of small- and medium-sized carriers. Do you see the pace of mergers and acquisitions picking up and the market consolidating? Robison: A few things have evolved over the years since deregulation. A lot of carriers thought that buying and merging was a way of getting to the market, getting the size they needed and the volume they needed. What comes with mergers and acquisitions, however, is culture change and lots of carriers have failed because they brought two cultures together and never quite made it work. What appears to work is situations such as Transforce, which has purchased carriers and left them alone to operate and make their own money without trying to merge cultures. We’ve done the same. Roadway allows us to manage our own operation in Canada. I think you will see more of that this year. I don’t think you will see the pace of mergers and acquisitions you’ve seen in the past because so many have failed. Our growth likely will come internally. I don’t expect to be going out, in the short term at least, to buy other carriers to gain market share. If there was an opportunity that made sense, we wouldn’t say no, but in the short term we don’t have such plans.
CT&L: Reimer was one of the first carriers to receive certification for Customs Self Assessment (CSA). But CSA is a program that also requires the importer to be certified and there is a general concern among carriers about how slowly importers have been responding to the need to be CSA certified. Did you have a similar experience with your own customer base and are you seeing any significant change in that as we head into 2003? Robison: Our experience has been similar. The customers themselves didn’t jump into this as quickly. We were ahead of everybody in getting our certification and working with Customs. FAST will probably replace CSA and where the big problem lies is in that the brokers will have to be involved as well, they will have to be CSA certified and have the ability to be transmit things through EDI. We think that may be a problem for some brokers and maybe even some customers, but I think when they see the benefits of FAST, such as express lanes, so you will see customers and brokers starting to come into it much quicker. They will see the value of getting their goods moved through Customs so quickly. I anticipate this growing next year even though it hasn’t grown as fast as we thought it would so far.
CT&L: You offer time-critical services to the U.S. and Mexico. Couriers have shown concern about the effect of some of the new security legislation on their ability to meet service commitments. Do you have such concerns for your time critical services? Robison: We have been very fortunate; our time-critical services have been very successful. We have offices at all border points we cross and our people walk every piece of freight through those borders. We are ahead of everybody else on that issue. Are we afraid of things slowing down? No, due to the changes we have made we are getting things through the borders pretty much as we did before. But it’s only because we have spent a great deal of money and effort in streamlining our border operation. I think the general industry has slowed down. They are not getting through as fast as they had in the past.
CT&L: Has your company worked out what impact all the new security requirements will have in terms of costs? Are these costs that shippers should expect to be passed on to them? Robison: Very definitely there are costs and because of our system we know exactly what they are. There will be charges that will be coming forth in the industry. You will see charges for border crossings, and increased charges for dangerous goods that hadn’t been there before because the new rules are so much more onerous than before and require a lot of work to ensure we do it right. And as you move into the U.S., they do a better job of enforcement on dangerous goods legislation, which means we have additional costs as well. We learned a long time ago that if we have to obey these laws, we have to be able to charge for the things that are required of us. We have to pass these charges on because there is no way that we can absorb them because they were costs that we didn’t invite.
CT&L: Reimer has made considerable investments in technology in recent years. Can you outline some of the key benefits to shippers created by this investment? Any other projects in the works? Robison: They are numerous. Our investment has been huge. Our entire North American operation has spent millions. You get a balance with our company that I think is unique. We still maintain the personal contact. Our greatest strength is our uniformed driver. Also we have customer service people right there at our terminals. Shippers get to know them and talk to them personally. From there we jump to people who prefer to communicate with us electronically. We are capable of doing EDI with anybody. We are also capable of handling communication through the Internet. If someone wants to go on our Web site they can find out where their shipment is at any one moment and when it will be delivered. They can look at a freight bill, the bill of lading, they can also go in and organize files so that every morning they can have a report to themselves of everything they’ve shipped and its status, etc. If they want to tell us where to pick up freight they can do that over the Internet as well. It’s very state-of-the-art. And we are trying to improve every day the friendliness of our system, to make it easier for our customers to use.
CT&L: Reimer offers services for Mexico. How much growth do you anticipate for that market in the near term? Robison: The market is growing and our numbers are growing tremendously although the base was not large. We are seeing a lot more freight moving into Mexico from Canada. We have ambassadors at the border so we are able to walk every shipment through for our customers so they don’t have to worry about doing that. Because we do that so well for them, people find it very easy to do business with us. And Mexico is looking to improve the red tape. It’s not going to be done quickl
y but you will see improvements in that border.
CT&L: This summer you put Reimer employees through the Engagement through Education in the Fundamentals of the Business) Summit. Can you tell me more about what that entailed and the end result for users of your services? Robison: We are spending a lot of money in this area. The executives in our companies for the last five years have been trained in this area and now we are introducing programs to all our employees in the U.S. and Canada. It’s a way of taking advantage of something we think we have not done well as an industry and that is moving the ability to make decisions from the top end to the point where it actually touches the customer. We are developing leaders out of our drivers so that they can make decisions that we would have normally made at higher levels. Once he has been trained and understands the costs he is able to do a lot more than in the past and we can get things done much quicker. And customers are happier because they don’t have to wait for answers. As we train everybody to be better it has really made a big improvement. We are finding the attitude of our employees have vastly improved.
CT&L: Transport Minister David Collenette has been making headlines all year with his suggestions that in order to reduce congestion and greenhouse gas emissions, Canada needs to rethink its current transportation strategy. Part of that involves shifting some freight from road to rail in his view. In your view, as a country are we making the most efficient use of our modal options? Robison: I think he views things rather simplistically. He says take the freight off the road and put it on the rails. When you understand our business, you realize it just doesn’t happen that easily. We are a service business and we get paid for how well we pick up and deliver freight and how quickly we do that. People pay us because they want things quicker. The rails don’t provide that kind of service. If they did, they would have that freight. Is there a place for intermodal? Obviously there is. We use it ourselves. When you start shipping long haul there is an advantage to putting it on the rail, not only from an environmental standpoint but from a cost standpoint. But the speed of service is not there. If somebody wants their goods from Toronto to Vancouver in three days, the rails could never do that. If however they want five- or six-day service, then they would pay something a little less and move it by rail. You also can’t move freight on rail over short distances, say Toronto to Woodstock. You wouldn’t get the freight there on time.
CT&L: What is your view on the Kyoto Accord and the impact it could have on Canadian trucking? Robison: One of the things people don’t understand about the trucking industry is that we have done a tremendous amount of work in the environmental area with our trucks over the years. How efficient our engines have become over the last 10 years is phenomenal. Are we done? No. Are we going to get better and do we believe in helping with the environment? Definitely. But there is a cost and there is also a way to do it properly. We don’t think Kyoto is the answer but we think it certainly points in the right direction. We just don’t think we should be moving as fast. With the numbers that we are talking about I think we are going to end up putting costs on not only the country but also on the carriers, that might become disastrous. We would love to sit down and put a plan together to make sure we do it wisely and that at the end of the day we do all the things that people want us to achieve, but we do it in a way that leaves the industry healthy.
CT&L: Looking ahead, are there any other issues with the potential to keep you awake at night? Robison: I don’t know of a CEO that doesn’t lose sleep at night. I worry about anything that affects the trucking industry and our business. I have 1,500 employees and their families that I have to worry about. The decisions that we make as a company will have an impact on them. At the end of the day you have to ask yourself, are we doing the things that will make us successful so that our employees will also be successful? The worst thing that can happen is what happened to Consolidated Freightways. I think about those 16,000 people and their familiesthat’s sad.
CT&L: Looking five years into the future, how would you like to see your company positioned? Robison: The president of our parent company made a comment that I would like to embrace: that all employees need to be anxiously engaged in the success of our company and each other. What it boils down to is that all of us are looking to make our company successful and each other successful. When you do that, I have learned a long time ago, that it will cause your company to grow. If you are doing the right things within your own company it makes customers want to do business with you. You don’t do that by putting on a faade. It has to be built from within. What do I want for the next five years? I want a happy group of employees that are making a good wage, their families are successful and we are all doing what we are supposed to be doing and making customers love us.