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  Chuck Snow’s speech to H2O highway conference
The trucking industry has done a lot of growing up in the past 31 years. Health and safety regulations have made a huge difference in how carriers operate their businesses. Today, it’s much safer to haul goods over the road, and in most cases, it actually costs less to ship cargo over the road now than it did in 1974. This really doesn’t make much sense when you consider the following:
Trucking is a $47.8 billion industry in Canada, and with recent increased fuel surcharges, it’s gone to well over $50 billion a year. It is one of the largest employers in Canada, with over a third of a million people employed across the country – not just as drivers, but also as mechanics, dock workers, dispatchers, accountants and sales people. What do you think the gender balance is for truck drivers? You guessed it – it’s 97% male. As an industry, we have done an awful job attracting women into the profession. Old school mentalities have helped create the driver shortage that we are now facing, but more on that later. There are 671,000 trucks registered in Canada. That includes for hire and private carriers combined. (These are all huge numbers, but to keep it all in prospective, trucking is two and a half times as big as the rail industry – but only half as large as the oil and gas industry.) Thanks to a rail strike in the 1950s and the deregulation of the trucking industry in the 1980s, trucking companies have become the biggest movers of freight on land. Other important factors in the rise of trucking in the Canadian economy is the 1988 Canada/US free trade agreement, and NAFTA, signed in 1992 by Canada, the USA and Mexico. The resulting cross-border truck traffic has increased nearly 5% each year for the past 18 years. Nobody really knows exactly how much freight trucks actually haul, but estimates range from 278 to almost 500 million tonnes annually. Traffix plays a key role in Ontario’s trucking industry I started Traffix in 1979 as one of the first load brokerage firms in Canada. We marketed the services of gypsy leasers – those trucks and drivers that were not controlled by the over-regulated industry. Leasers didn’t have money invested in operating authorities, didn’t have to file tariffs, and weren’t tied to union contracts, so they were able to operate at a fraction of the cost of regulated carriers. They had their own customers who would hire them to haul cargo either to or from the US, but their trucks would often go empty one way due to a lack of marketing resources. Traffix was created to fill that gap. Instead of moving goods from point A to point B, we focused on the efficiency of transportation and looked at how to match available trucks and available loads. So we put a marketing team on the streets and never looked back. Safety and efficiency were on top of our list on how to make things work. We developed high transportation volumes and were pioneers in providing just in time service. Regulated carriers took five days to move a full load from New Jersey to Toronto – we did it in 12 hours. And when they took 10-14 days to move a load from Toronto to California, we did it in 56 hours. Through our efforts to combat industry over-regulation and the resulting inefficiency, we played a big role in the deregulation of the trucking industry. (We didn’t cause it, of course – we just pushed it six months to a year ahead of when it would have happened anyway because of the Canada/US free trade agreement.) As soon as deregulation hit Ontario, the licensed/regulated carriers with authorities or licenses on the books discovered overnight that their valuable licenses had become worthless. In some cases, they had been worth millions, and many businesses had borrowed money to buy them or used them as collateral for bank loans. Up to this point, Ontario was probably one of the last bastions of good freight rates on the continent. With free trade and deregulation, large American mega-carriers start to flood the Ontario transportation landscape. JB Hunt, Schneider, Werner, Poole, Swift, and the rest of them quickly arrived on the scene. And after licensed Canadian truckers had accused Traffix of predatory pricing, they were taken aback by these big American boys. These were companies with over five years of experience in a deregulated marketplace – and excellent marketing capabilities. They knew how to market their services with pizzazz, doing things like offering free trucking to the US border, and not turning on the meter until the truck was on the US side. Many licensed Canadian carriers declared bankruptcy. Their sales staff quite often took their customer lists and opened up their own load brokerage houses. The former gypsy or leaser industry was legitimized and became the new licensed Canadian carriers. They were better equipped to operate in the deregulated environment since they were non-unionized and did not have expensive authorities to pay for. In many cases the new carriers depended on load brokers to fill their empty miles and fulfill their marketing requirements. In 1990, Load Link was introduced to the industry, revolutionizing North American trucking. It offered a computerized load board that matched empty trucks with loads posted from load brokers. Today, over 900 load brokers (400 based in Ontario) and 3500 trucking companies use Load Link, posting an average of 20,000 loads a day. Close to 70% of all LTL cargo moved between south central Ontario and the USA (and back) is moved through load brokers or non-asset-based entities. :: Back to top The growing role of technology in trucking Technology has played a huge role in today’s trucking industry. Load Link has created an excellent communication platform for truckers and brokers. But now the future lies in a new concept – e-gistics. A good example of e-gistics is Canada’s leading shipper to carrier digital marketplace Trans-Lucent Markets Accufreight Exchange. Freight exchanges such as Accufreight are starting to impact freight brokers – they provide shippers with the ability to reach hundreds of carriers directly, and carriers are, in turn, able to provide pricing directly to shippers without the standard 18-30% markup charged by the broker community for sourcing the same carriers. According to Edward M. Wolfe, President of the Motor Carriers Analysts Group and Managing Director of Equities Research for Bear Stearns, one of Wall Streets largest investment companies, “In 2004 the merger of the internet and logistics created a whole new field called e-Gistics, which is forecasted to reach $260 billion annually in the next 10 years in the US alone. Widespread internet use is greatly impacting the logistics industry and supply chain connectivity. There are developments on numerous fronts including web-based auctions and exchanges, Web shipping aggregators, online logistics management providers, vendors of international trade logistics and reverse or return logistics systems, business to consumer fulfillment and secure email. And the main denominator in all of this is trucking. All of this activity relies on the trucking companies being connected and focused on the future.” For the record, when Traffix saw the future of load brokerage becoming commonplace in 1988, we opened our own terminal and started building our own corporate fleet. Today we operate out of Milton, Ontario and concentrate on LTL cargo between Southern Ontario and a 1000 mile radius of the USA and back to Southern Ontario. We presently operate a fleet of 25 tractors and 60 air ride logistics trailers. Plus, we still operate a viable brokerage operation to cover the areas we don’t serve with our own equipment. The trucking industry’s issues – and challenges Take a minute and look around you. Look at all of the things in the room – chairs, walls, carpets, the clothes you have on. Take a look at the shoes, pants, shirts, and handbags of the people around you. Do you know how these things got here? TRUCKS. More than 50% of all goods get from origin to destination totally by truck. Most of the remainder is hauled by train or ship or aircraft – and they still require trucks at each end to complete their journey. But along with the size and the scope of this industry comes a load of problems, or to use a more diplomatic word – challenges. Challenge #1: High traffic volume First, there is the sheer volume of trucks on the road. On main highways, about 15 % of traffic is made up of trucks. This varies, of course, from region to region – it’s 21% in New Brunswick, 10 % in PEI and 5% in the Yukon. Translate these percentages into actual traffic, and the average kilometer of main highway in Canada sees about 1100 trucks per day in both directions. In Ontario, that average is 2300 trucks per day, though the 401 has volumes greater than 10,000 trucks per day in Southern Ontario and about 40,000 a day near Toronto! What does all this mean? That 40% of all truck activity occurs on about 2% of Canada’s roads – the main highways. Challenge #2: A growing driver shortage Another major issue is a critical shortage of experienced drivers; I’m afraid that this one is reaching the danger point. The shortage is being felt most in the cross border sector of the industry. The average age of a driver is getting close to 50, and there are very few people entering the industry compared to the number that are leaving. Because of insurance issues, the industry loses any opportunity to mentor 18 year olds graduating high school. By the time they can be insured – at 25 in most cases – they already have other careers and very few end up entering the truck driving profession. And it seems that our governments are not being particularly helpful. In their wisdom they have deemed truck driving as unskilled labour. With this job designation it is very difficult to hire trained truck drivers from other parts of the world such as Eastern Europe. I would love to see our Minister of Labour negotiate an 18-wheeler in downtown Toronto traffic at rush hour or make his way through a blinding snowstorm with a load of cattle somewhere on the trans-Canada near Kenora. Then tell me it’s unskilled labour. Challenge #3: A lack of affordable insurance The current insurance situation is a nightmare for truckers, especially those based in Ontario. Right now, there are only four insurance companies that will underwrite carriers hauling south of the border. Rates are no longer predicated just on loss history, types of cargo hauled or drivers’ records. They now audit carriers fuel tax reports and apply surcharges for areas in the USA known for courts awarding huge settlements to injured parties in truck crashes. Truckers serving California, Texas, North Carolina, New Jersey and New York can expect to pay higher insurance rates. Canadian truckers carry more insurance coverage than their American counterparts, in part because insurance companies have to pay out large settlements in US funds while collecting premiums in Canadian dollars. You have no idea of the uncertainty that truckers live through at renewal time. Since our insurance policies are the backbone of our business, many truckers are doing whatever is possible to keep insurance not only affordable but simply available! Raising deductibles, self insurance on collision and forming cooperatives or “captives” are becoming more common. The escalation of cargo theft creates even more problems with insurance. These days, the trucking industry is under siege by organized criminals who have created their own industry of stealing cargo. Cargo losses from theft total more than $2 billion dollars annually in Canada alone. :: Back to top Challenge #4: The high cost of fuel To start, we are paying $1.00 per liter at the pumps. Plus, recent changes to federal emission standards state that engines had to be designed to emit less pollution. To do this, they had to be completely re-engineered. The result? Hotter operating temperatures, bigger radiators, more frequent maintenance intervals, increased cost of trucks and lower fuel efficiency. By 2007 soot and nitrogen emitted by diesel engines will be reduced by 97% compared to 1987 models. However until we can find an appropriate alternative to idling trucks (have you been to a truck stop at night lately?) this exercise is a waste. Governments need to legislate the original equipment manufacturers to provide affordable built-in generators that can supply both hot and cool air in truck cabs. Until this happens, all of the emission standards that we have gained running a truck will be lost idling that same piece of equipment. Challenge #5: Increased waits at the border The average day sees 26 trucks crossing the border every minute. Very little has been done to accommodate the increase in truck traffic in the past 20 years. Drivers do their best to plan their time so that they can operate within their allotted hours of service. Delays at the border waste valuable driver time, truck usage and diesel fuel, and cause shipments to be late. Even with some of the systems designed to help streamline clearances (such as PAPS and PARS), sometimes the sheer volume of truck traffic brings everything to a grinding halt. There has been talk about expanding the Peace Bridge that joins Buffalo, NY to Fort Erie, Ontario, or rebuilding the Ambassador Bridge between Windsor to Detroit. These bridges are decades old. The truck route through Windsor from the 401 to the Ambassador Bridge is an embarrassment. Currently the process for crossing the border either northbound or southbound is very similar. Going into the USA, we use a process called PAPS. Coming north, we use PARS (Pre Arrival Release System). Here’s how it works: The trucker faxes the paperwork to the customer’s customs broker with a carrier bar code affixed to the paperwork. The custom broker presents the documents to Canadian or US Customs for clearance. If there is anything wrong with the documentation the driver will NOT be allowed to clear the shipment, and then he/or she must see the customs broker or the Customs office. Incorrect paperwork can cost the trucker hours of wasted time while the broker, the customs official, and sometimes the customer sort out the problem. Most US brokers are open 24/7. However, Canadian brokers are often not located at ports of entry and keep limited hours. Their lack of availability can result in the driver having to go “broker shopping” or looking for a willing customs broker to clear a shipment. If the driver is unable to clear the shipment, he must to move the shipment under bond to an inland sufferance terminal. It’s ironic, but the customer who insists on utilizing the service of one of these 9-5 custom brokers always seems to yell the loudest when their shipment is late because it is waiting to be cleared at a bond shed. Challenge #6: Other delays US law limits the number of hours drivers can be on duty. After 14 consecutive hours, they have to stop for 10. After 60 hours in 7 days or 70 hours in 8 days, they must stop for 34 hours. If they are delayed at the border, or while they are loading or unloading (even if they are waiting in their bunk, their time is logged as on-duty time) it severely cuts into their driving time. These delays are particularly hard on LTL carriers, who make a lot of stops. Truckload carriers are less affected by wasted time at shipping and receiving docks than LTL carriers. Smaller LTL carriers are only able to survive by having all their pickups and deliveries performed by their own drivers in the US. Even though the Canadian dollar is strong, the cost of hiring local US cartage agents – and high commissions to freight brokerage houses for filling up excess capacity on trailers – to perform local pickups and deliveries is prohibitive. As a result, carriers are often forced to take lower paying freight rather than have empty space on trailers. Challenge #7: A volatile marketplace Unfortunately, trucks have become commodities in today’s volatile transportation marketplace. I will give you some examples: In January, 2004 the Canadian dollar was weak, hovering at about 68 cents. Canadian manufacturers were having a field day exporting products all over the USA. Americans were lined up to buy whatever we could provide. Truckers hauling southbound could demand whatever they wanted to move shipments to the USA. It was so good that several load brokers gave up handling outbound freight because the market was too volatile. On the other hand, the weak Canadian dollar resulted in truckers scrambling for shipments northbound. An inbound load from anywhere would be gobbled up immediately. An outbound full load to California was going for $4200. An inbound shipment from California was going for $3200. Today an outbound load can be moved for as low as $3300, while a backhaul northbound will often fetch $4500. It is all supply and demand. The smart money is on shippers who have chosen NOT to increase shipping volumes at month’s end and who take advantage of capacities at the beginning and middle of the month. A good example of this dependence on supply and demand is the annual watermelon season nightmare. Every April, watermelon season begins. It starts in southern Florida around Homestead and by Labour Day it works its way all the way north to Delaware and southern New Jersey. The largest and longest harvests seem to be in Georgia and the Carolinas. Every year small trucking companies and freight brokers drop southbound rates by as much as 50% so that equipment can be re-positioned into the melon belt. This makes it a little harder for the rest of us. I am often asked if melons pay that much more than dry freight? The answer? It just depends on how many trucks are available in the south on any given day. Remember, trucks are commodities. Plus, hauling melons normally results in being paid in US funds – and they will make out the cheque to whatever name you want it made out to. This leaves the rest of the cargo down south, sitting on shipping docks waiting to be moved. This past summer was a bonanza for Canadian truckers looking for northbound cargo. :: Back to top Challenge #8: American drivers don’t want to come to Canada The driver shortage in the USA is much more severe than in Canada. And this is the first time in years that the American carriers have been reluctant to haul cargo into Canada. WHY? 1) There’s a good chance that the driver won’t be able to cross the border. He may have no documentation to come into Canada or he may have no border experience. 2) If they do come into Canada, they face the same border crossing issues that Canadians do every day, such as long lineups and delays in clearing customs if documentation is not up to par. 3) The safety enforcement in Canada, especially in Ontario, is much more stringent than in the US. Incidents in Ontario such as wheels flying off trucks have resulted in Ontario’s truck safety enforcement being the continent’s strictest. 4) The southbound load activity is totally unpredictable from Canada. In most cases, southbound shipments are priced far below the US market in price per mile. If a US dispatcher has a truck in Atlanta and there are two shipments available (one to Kansas City and the other to Brampton, Ontario) you can bet that driver is on his way to Kansas City! So where is the trucking industry headed? Despite the issues, trucks are here to stay. The days of manufacturers having railway sidings are not coming back. And I really can’t see using the Don, Humber and Credit River systems to move barges loaded with containers and trailers from the outlying suburbs of Toronto to Lake Ontario. Trucks will continue to move cargo. Fuel and trucks are not going to go down in price. Professional drivers are not going to suddenly appear in large numbers. As all of these issues continue to erode the profitability of the trucking industry, costs will continue to escalate, and will end up getting passed on to the transportation buyer and, in the end, the consumer. We all need to look at alternatives to how cargo is moved around the country and to and from the USA. It is foolish – and plain bad business – to think we can operate in the future in the same way we did a decade ago. We need to change how we plan inventories and how we all operate our businesses. Using waterways as alternative roads Trucking is my business. I know the issues, and I understand that in order to survive, I need to expand my vision of the future of transportation. The opportunity to move cargo through North America’s waterways is an idea that none of us can afford to overlook. Given the increasing population and the just-in-time demand for goods, there is enough room at the table for everyone to prosper in their sector of the marketplace. It makes good sense to take some of the load off the roads and onto the waterways – in the form of a kind of floating warehouse. While it will not solve all the issues, it will make a dent in offering an alternative. Moving goods via the water will reduce emissions, since ships use only 10-20% of the energy required by trucks. It will ease up on road traffic and border congestion. And it takes advantage of a transportation system that is full of potential. It is efficient, environmentally conscious and potentially very profitable. Knowing what I know about where trucking has come from and what I face each day, I am looking forward to an innovative future of working with new ways of providing transportation. I figure that it’s all about being open to new ideas and taking risks to make things better for all of us. As leaders, we have no choice but to take risks. And the ability to see alternatives and take chances – that’s what makes good leaders of all of us. :: Back to top |
