Seems almost like yesterday that we were talking about the financial burden and waste that was built in to getting a transport license; the bureaucracy of the tariff and transport boards, and of course, government regulations.
In many cases during the pre-deregulation days, there were some fairly inefficient transport operations hiding behind regulated rates. When shippers began the move to new and significantly lower rates, many carriers went bankrupt, or were purchased. No more Maislin Transport, CP Express & Transport, CN Route Canada, Thibodeau-Finch Express, or Imperial Roadways. Heck, anyone who might have worked with any of these will have a hard time getting reference checks if they are job searching. (It might be a great opportunity to mention that you were once vice president of internal diagnostics for Brazeau Transport).
I can personally remember rail intermodal rates for a former employer dropping some 25% after deregulation. We also used to pay over $800 a truckload from Toronto to Montreal in the ‘eighties’. Those prices are barely heard of today. Shortly after deregulation, carriers set prices based more on having a lower rate and less on how that decision impacted their bottom line. (Buyers couldn’t care less, it seemed). The smarter transport providers looked at ways to reduce their costs in order to compete and survive.
Fifteen short years later, the other shoe has dropped, and the industry has moved to a new generation of issues. A whole new resources base has decided that there are other occupational paths that appear to be more desirable than driving truck. One can only speculate whether some trucking firms today are purchased simply for their driver pool.
Rates are rising. It looks like they will continue to rise into the foreseeable future. With these ever-rising transportation costs, the banging-on-the-table, beating-up-the-carrier approach to contract negotiations is something you may only be telling your grandchildren. It’s now time for the shippers and receivers to get more creative, more efficient and begin to work in partnership with their providers of transport services. Supply is behind demand, due to driver shortages, and a general rationalization of the number of players in the industry. Simple economics will tell you that those companies who provide the best return on the carrier’s dollar will be the most desirable. What can you do? Work with your transport providers to drive out costs.
The 2004 term of the year is “friendly freight”. Carriers want easy- to-handle, low-risk shipments that will provide higher returns on their investment of driver, truck and trailer.
Review waste in your transportation supply chain. That 2-hour load and unload might be a good starting point. Can you reduce it to 1 hour at each end – load and unload? If it is in excess of several hours can you work with a drop/switch trailer arrangement? Driving out one or two hours of costs in the loading and unloading of your products will not only reduce costs but attract more transport providers to your business.
Equipment in motion is what driving is all about. Adding these wait times to the hours of service can extend delivery times. If they run out of hours then that delivery could be another day!
Carriers have taken to advertising “friendly freight” to attract new drivers in their recruitment campaigns that tout: “no touch freight”; “shippers load and count”; “pin-to-pin movements”; and “low risk commodities”. Are you starting to get the picture?
If you are shipping in and/or out of the US then embrace the newer customs initiatives of CSA, PIP, FAST, and C-TPAT where applicable. They will in time cut costs by reducing border delays. Understand FDA and BTA requirements and the proper classification and notification needed for these goods if yours qualify.
Fees for border delays and border clearance have already crept in to the accessorial language of today’s transport providers. Paying for these fees will not make them go away, so as partners we all need to work at driving these controllable cost aspects out of the border delay equation.
Other Cost Elements
Other ways of reducing your provider’s costs could be to pay your invoices in 30 days or less. How about looking at 7, 14 or 21 day terms or payment by Electronic Funds Transfer?
Do you have the ability to ship and receive on hours outside the traditional day time, peak traffic hours? Think about making your firm’s hours of service more “friendly” to the carrier, reducing the time that they sit in traffic.
Can you introduce better packaging to reduce damage, and better product conveyance such as unitization versus hand bombing of freight.
Do you still have 300 carriers calling on your 3 shipping doors? Maybe it’s time to look at reducing this number and learning to partner with fewer providers who you can help understand your collective distribution environments.
Doing nothing could leave your freight at the dock, while your competitors are moving their more “friendly freight” by aligning themselves and working together with good service providers. In time you simply may not have any choice.
Jack Bradley is president of MSM & Associates Consulting Inc. His column appears monthly in Canadian Transportation & Logistics and on ctl.ca. He can be reached at www.consultmsm.com