Mississauga, ON — Shippers want more capacity and truckers want to give it to them. But new trucks don’t come from the factory with a driver installed, so both shippers and carriers are having to work together to make do with what they have.
The Surface Transportation Summit’s annual shipper-carrier roundtable was a cordial affair, with both shippers and carriers acknowledging the need to collaborate.
“Cost reduction is always an ongoing opportunity for everyone,” said Charles Daharry, transportation manager, Lowe’s Canada. “We can’t do that alone. We work very closely with our carrier partners to look at how to optimize the supply chain and find opportunities to increase efficiencies together.”
Carriers represented on the panel admitted they’re having to be selective as to which customers they award their limited capacity to.
“Demand is growing too fast from one day to another, and we had to keep capacity for our core clients,” said Tracey Raimondo, vice-president, sales and logistics for Normandin Transit.
Jim Peeples, president, Challenger Group of Companies, agreed.
“All participants in the supply chain need to work together to improve efficiencies. In the case of the customers I deal with, I’ll provide all the capacity they need if they include me in their business processes,” he said. Too often, he added, inefficiencies in the supply chain simply get kicked down the road instead of being resolved.
Fleets aren’t adding new capacity because, while it’s easy to buy more equipment, it’s proving difficult to find qualified drivers.
“The spend on recruitment and retention is higher than it’s ever been, and the retention piece is going to be a really big aspect going forward,” said Doug Sutherland, vice-president, Sutco Transportation Specialists. He said his company is avoiding the temptation to bring on new business and is focusing on serving its existing customers.
“You have a strong spot market, don’t go chase that,” he advised. “Stay with the customers that have been with you a long time and build that relationship.”
Raimondo agreed: “We are definitely aiming to give capacity to our core clients, but at the same time it’s going to be very hard for us to increase capacity right now. There is a shortage of labor in every aspect of our business now.”
These comments are the culmination of several years of warnings from carriers during this annual roundtable discussion. Carriers on the panel repeatedly implored shippers to work with them to eliminate inefficiencies and to understand that carriers’ operating costs are continuously rising while rates are not keeping pace. There’d be a day of reckoning, they warned, and that day has clearly arrived.
Martin Pede, manager of zinc sales and service with Hudson Bay Mining, acknowledged shippers have a role to play and must work more closely with their carriers.
“The RFP (Request for Proposal) has become more fluid and it needs to be more collaborative to ensure shippers’ needs are going to be met,” he said. “Shippers need to provide consistent volumes and information and can’t just draw a line in the sand. The RFP model is probably never going to go away…but the relationship aspect with carriers – especially truck carriers – has to become more ingrained in how the shippers approach the truck carrier market in this environment.”
Even when all the obvious inefficiencies have been eliminated from the system, there is still a need for rate increases, according to Raimondo.
“I’m sure we all agree that in the last decade, truckload rates have been too low and increases were long overdue,” she said. “We just have to find a way to be fair to both sides.”
Sutherland said he feels the strengthening economy brought “equilibrium” to pricing.
“Now that we’ve gotten to this level it’s understanding the increases year-over-year and having that honest conversation with your shippers,” he said. “When we sit down and talk about capital costs and exchange rates, they understand it because there is transparency there. When you just say ‘This is what the new rate is,’ that’s not going to go over as well.”
He also urged carriers not to “overshoot” in a booming economy, taking advantage of their customers.
Daharry admitted shippers don’t like discussing rate increases, “however it is a reality.”
He added: “I don’t believe the rate increase discussion should be a shock. You should be meeting with your carrier partners on a regular basis. There should be regular, ongoing discussions collaborating together and understanding what the carriers’ needs are.”