AIRFREIGHT How industry is coping and evolving in face of headwinds
JULY 2013
SUPPLY CHAIN Cargo Montreal launch creates ‘hub of expertise’ MARINE East Coast Gateways moving full-speed ahead Published Since 1898
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ZONE Europe is ramping up talks on transport funding and touting infrastructure as a mechanism for growth
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16. . . EASTERN PROMISES
Canada’s East Coast Gateways look both abroad and close to home, promoting the advantages of less congestion and infrastructure improvements.
VOLUME 116
ISSUE NO. 6
JULY 2013
COVER
20. . . TURBULENCE AHEAD
A sluggish global recovery, excess capacity and increasing security legislation are creating headwinds for airfreight carriers. Industry experts discuss how the industry is coping and evolving.
26. . . HUB OF EXPERTISE
The launch of Cargo Montreal has created a ‘hub of expertise’ for transportation in the Greater Montreal region. But can it help change the public’s negative perception of the sector?
Departments 4 THE VIEW WITH LOU Get the insights and contacts you need to manage your supply chain in a slow economy at this year’s Surface Transportation Summit. 6 IN THE NEWS Shippers and railways remain at loggerheads over new rail freight service legislation; Tim Harrington appointed to lead MOL Canada; and Cargo Montreal holds annual assembly announcing project plans for 2014. 25 INSIDE THE NUMBERS Is Western Canada’s infrastructure keeping pace with an economy growing faster than the national average? 28 DASHBOARD TransCore’s Canadian Freight Index rebounds in May; ATA economist surprised by May’s record truck tonnage; railway freight enjoys strong growth in May; and more. 30 THE BIGGER PICTURE State of Logistics Report highlights ‘new normal’ in freight transportation – and it ain’t pretty.
Europe is ramping up talks on transport funding and touting infrastructure as a mechanism for growth....10
Our Annual Shipper’s Choice Awards Survey rating the performance of carriers in all modes is now completed. Your response has made it a success. Look for the results in our September issue.
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the view with Lou Volume 116 Issue No. 6 July 2013
Don’t miss the 2013 Summit
EDITORIAL DIRECTOR
Lou Smyrlis (416) 510-6881 Lou@TransportationMedia.ca
Get the insights and contacts you need to manage your supply chain in a slow economy
W
e are coming through a slower than expected first half of the year with a great deal of uncertainty about what the next quarter will bring. Earlier this month, the Council of Supply Chain Management Professionals released its 24th annual State of Logistics Report in which author Rosalyn Wilson described the “new normal” as characterized by slow growth with GDP at 4% or less; higher unemployment than usual during economic recovery; slower job creation; increased productivity of the current workforce from investment in machinery/technology; and less reliable or predictable freight services. Economic experts looking beyond 2013 are calling 2010-2020 the “Low Growth Decade.” For supply chain managers, the main challenge of a Low Lou Smyrlis, Growth Decade will be twoMCILT fold: Walking the tightrope between meeting customer demands for service and government demands for compliance while staying true to company edicts on cost control; and securing capacity in less predictable freight markets with less reliable freight service providers as volumes rise, but capacity does not. Clearly, it’s a time that calls for the most innovative of supply chain strategies put into effect by the most informed of supply chain managers. We are hoping to be of some help in that regard with our next Surface Transportation Summit, which we put on in partnership with Dan Goodwill & Associates. The all-day event, scheduled for Oct. 16 at a new venue, The Mississauga Convention Centre, will bring together carrier, shipper and industry supplier executives to discuss the industry’s most pressing issues and share insights on how to solve them. We start off the Summit with an economic forecast provided by one of Canada’s leading economists and look at the implications for shippers and transportation providers as they prepare their 2014 business plans. Our most popular session from last year’s Summit, The View from the Top, is back, featuring CEO perspectives on major transportation trends. For this track, we assembled a blue chip group of transportation company executives from the LTL, truckload, rail and insurance industries, as well as arranged for insights 4 4
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MANAGING EDITOR
from a leading global management consultancy. We round out an information-packed morning with expert panels examining the growth potential of dedicated transportation and intermodal services. Many of North America’s leading shippers have outsourced their private fleet operations to dedicated fleet management companies. Our panel consists of a major shipper and the leader of Canada’s largest dedicated fleet management company. The two parties will outline the keys to a successful implementation and provide an overview of some of the best practices in private fleet management. Intermodal operations are enjoying similar growth. Still, for many companies, intermodal transportation remains a niche component of their operations with intermodal revenues representing about 3% of the total North American freight spend. Is this about to change and are you making the most effective use of this transportation option? Our panel of experts will dig into those questions. The afternoon will include several concurrent tracks, including insights on carrier scorecards and compliance management, and the current environment for mergers and acquisition strategies. We close out the day with one of the hottest topics in transportation today: An in-depth look – from both the shipper and carrier perspective – on running a successful Freight RFP. The market reality is that freight bids or RFPs have become increasingly popular as a mechanism to negotiate freight rates and service. Is this the best way to build trust and dependability? Does the process allow carriers to communicate their value propositions and to secure compensatory rates? What factors should you consider in making a thoughtful decision on your largest supply chain expenses? To answer these questions, we have assembled a panel of two large shippers and two leading carriers. All of the panellists have had extensive experience with freight bids and will share their insights on how to improve the freight procurement process. But that’s not all. The Summit is designed to be of practical use to both shippers and carriers alike and last year attracted more than 200 transportation and supply chain executives. So it’s sure to present delegates with the ideal business networking opportunity. To register, go to www.surfacetransportaCT&L tionsummit.com. www.ctl.ca
Adam Ledlow (416) 510-6890 Adam@TransportationMedia.ca FEATURES EDITOR
Julia Kuzeljevich (416) 510-6880 Julia@TransportationMedia.ca PUBLISHER
Nick Krukowski (416) 510-5108 nick@ctl.ca ART DIRECTOR
Mary Peligra mpeligra@bizinfogroup.ca CONTRIBUTING EDITORS
Carroll McCormick, Leo Ryan, James Menzies, John G. Smith, Ian Putzger, Ken Mark MARKET PRODUCTION MANAGER
Gary White (416) 510-6760 gwhite@bizinfogroup.ca
VIDEO PRODUCTION MANAGER
Brad Ling
RESEARCH MANAGER
Laura Moffatt
CIRCULATION MANAGER
Barbara Adelt (416) 442-5600 Ext. 3546 badelt@bizinfogroup.ca EXECUTIVE PUBLISHER
Tim Dimopoulos
VICE-PRESIDENT PUBLISHING
Alex Papanou PRESIDENT
Bruce Creighton HEAD OFFICE: 80ValleybrookDrive,Toronto,ONM3B2S9 CANADIAN TRANSPORTATION & LOGISTICSis writtenforCanadiantransportationandlogistics professionalswhomanageproductflowfrom manufacturertopoint-of-sale.Editorialisfocused onreporting,analysisandinterpretationofCanadian logisticstrendsandissues.Itispublishedby BIGMagazinesLP,adivisionofGlacier BIGHoldingsCompanyLtd. SUBSCRIPTIONS: Contactusat:mmarasigan@bizinfogroup.ca Tel:4164425600ext.3548.Fax:4165106875. Website:ctl.ca(clickonsubscriptionbutton) SUBSCRIPTION RATES: Canada:$64.95+applicabletaxes, peryear;$105.95+applicabletaxes,fortwoyears.U.S.A.: US$105.95peryear.Allotherforeign:US$105.95peryear. Singlecopies$8exceptfortheannualLogisticsBuyers’Guide (Aug)$59.95+applicabletaxes,(notincludingHST)plus$2.00 forpostage.USA:US$107.95,Foreign:US$107.95ISSN Lou Smyrlis, 1187-4295(print),ISSN1923-368X(Digital),(Can adian MCILT Transportation&Logistics.)IndexedbyCanadianBusiness PeriodicalsIndex.PrintedinCanada.Allrightsreserved.The contentsofthispublicationmaynotbereproducedeitherin partorinfullwithouttheconsentofthecopyrightowner. POSTMASTER: Pleaseforwardforms29Band67Bto: 80ValleybrookDrive,Toronto,Ontario,M3B2S9 SecondClassMailRegistrationNumber0721. PUBLICATIONS MAIL AGREEMENT 40069240 We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund (CPF) for our publishing activities.
MEMBER CANADIAN BUSINESS PRESS CANADIAN CIRCULATIONS AUDIT BOARD
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in thenews Shippers, railways at odds over new rail freight service legislation The new Fair Rail Freight Service Act is now law, requiring rail companies to offer a service agreement if the shipper requests one. In the event that rail companies and shippers cannot reach an agreement through commercial negotiations, shippers can use the new arbitration process created by this bill to establish the terms of service to which they are entitled. This new arbitration process will operate under the Canadian Transportation Agency. For each violation of an arbitrated service agreement, a penalty of up to $100,000 could be issued against the rail company by the Canadian Transportation Agency. The goal of the legislation is to encourage railways and shippers to work together, the Conservative government stated in a release, adding that “through enhanced col-
laboration, shippers and railways can increase the efficiency of the supply chain.” Yet both shippers and the railways still have their issues with the final legislation. Shipper groups remain skeptical about how effective the new law will be in actual practice. “Shippers acknowledge the government’s attention to the rail service problems over the past six years, and its objectives for Bill C-52, however, there are concerns about its effectiveness in practice,” said Bob Ballantyne, president of the Canadian Industrial Transportation Association. “As the bill breaks new ground, there is no jurisprudence and little relevant experience on which to draw.” The Coalition of Rail Shippers (CRS) had proposed six amendments designed to provide more clarity and increase the probability that the government’s stated objectives would be met. The government
did not adopt the clarifying amendments. Now that C-52 is law, the CITA and its member companies will be looking for quick implementation of the third commitment in the government’s announcement of March 18, 2011, specifically to “establish a Commodity Supply Chain Table, involving supply chain partners that ship commodities by rail, to address logistical concerns and develop performance metrics to improve competitiveness.” The railways, meanwhile, retain their distaste for the legislation. “It is unfortunate that the government has passed this legislation because it is not consistent with a sound public policy agenda that encourages increased productivity and innovation in Canada,” Claude Mongeau, president and CEO of CN said shortly after Bill C-52 became law. The federal government’s Rail Freight Service Review, launched in 2008, en-
Check it out! The Annual Survey of the Canadian Supply Chain Professional – Canada’s most comprehensive benchmark study of the supply chain professional ever conducted is now live! Your participation will ensure an accurate benchmark of salaries in the supply chain sector. To make your voice count, please visit our homepage at www.PurchasingB2B.ca and follow the link to the survey. Results of the survey will be featured in the October issues of PurchasingB2B, MM&D, and CT&L, and online.
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Thank you in advance for your contribution!
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couraged railways to embrace greater supply chain collaboration and to strengthen service levels and Mongeau said this was an important catalyst in CN’s decision to launch a series of collaboration agreements with customers and partners in all sectors of the business. “We believe the government should have recognized these significant successes and resolved to promote further progress within a commercial framework. Instead, the government adopted new rail regulation – regulation that could actually chill supply chain innovation that benefits both the rail industry and its customers,” he said. This new legislation follows the Government of Canada’s tabling of the Fair Rail Freight Service Act last December. It fulfills a key commitment, announced in 2011, as part of the Ottawa’s response to the Rail Freight Service Review’s Final Report.
MOL (America) Inc. and Montship jointly announced on May 21 that their liner agent agreement will expire on July 31. All other agent agreements between MOL’s non-liner divisions and Montship
will continue without interruption. MOL will maintain its four existing weekly liner services to and from Vancouver and its Asia/Halifax service which began on June 17. Further details regarding MOL
Tim Harrington appointed to lead MOL (Canada) Inc. MOL has named Tim Harrington to head the new MOL (Canada) Inc. liner organization. Effective Aug. 1, Mitsui O.S.K. Lines, Ltd. will begin operating in Canada as MOL (Canada) Inc. Harrington, who will hold the title of vice-president Canada, will be responsible for sales, customer service, and operational activities to serve the Canadian market. Harrington will be stationed in Toronto, and will report directly to Richard Craig, senior vice-president of operations of MOL (America) Inc. “We are very pleased to have Tim to lead our new Canadian organization,” said MOL (America) Inc. president and CEO Tsuyoshi Yoshida. “His credentials and leadership will be a strong asset MOL and we expect that customers will be extremely satisfied with Tim’s considerable industry knowledge and broad base of ability.” Harrington has more than 25 years of shipping industry experience in sales, marketing, pricing, and general management. He has held various management positions with increasing levels of responsibility with CAST, Sea-Land Service, Maersk Line, and, most recently, NYK Line. Harrington received his undergraduate degree from York University in Toronto. www.ctl.ca
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On October 16th 2013, please plan on joining Canada’s top Transportation Executives for a day of education & networking. Introducing the 2013 team of presenters... We have created an agenda that truly addresses the many challenges facing both Shipper and Carrier executives.
SUMMIT AGENDA
Angelo Sarracini
President, Bailey Metal Products Limited
Grace Tomaszun
Manager, N.A. Transportation McCormick & Company
Carlos M. Gomes Senior Economist, Scotiabank
Neil McKenna
V. P. Transportation, Canadian Tire Corporation
FREIGHT BIDS: Is there a better way for carriers and shippers to work together? CARRIER PERFORMANCE MANAGEMENT: Metrics that deliver results INTERMODAL TRANSPORTATION: Expanding beyond its niche
Keith Reardon
V. P. Intermodal Services, CN Rail
Mike Owens
Jeff Lindsay
V. P. Physical Logistics, Nestlé Canada Inc.
President and CEO, Canada Cartage
Doug Munro
Oryst Dydynsky
Anna Petrova
Senior Supply Chain Leader, Ferrero
THE VIEW FROM THE TOP: The CEO’s perspective on major transportation trends DEDICATED TRANSPORTATION: Outsourcing fleet management to a third party CROSS-BORDER FREIGHT TRANSPORTATION: Best practices TRANSPORTATION SALES: Can you adapt to the new normal?
Charles W. Clowdis, Jr. Managing Director, North American Markets, IHS Global Insight (USA), Inc.
President and Owner, Maritime-Ontario Freight Lines Limited
Tibor Shanto
Tom Coates
Ron Tepper
Principal, DAP International Trade Consulting
Executive Chairman & CEO, Consolidated Fastfrate
Jeff Pries
Michelle Arseneau
Douglas Nix
Mike McCarron
MERGERS & ACQUISITIONS IN TRANSPORTATION: How big are the opportunities? LOOKING AHEAD: Economic forecasts for 2014 Principal, Renbor Sales Solutions
VP and COO, Lakeside Logistics
Sr. V. P. Sales & Marketing, Bison Transport
Registration: 7:30 am Presentations: 8:20 am sharp
Managing Partner, GX Transportation Solutions
MISSISSAUGA CONVENTION CENTRE 75 Derry Road West, Mississauga, ON 2013 SUMMIT SPONSORS
Barry O’Neill
Executive Vice President, Hub Group
Jacquie Meyers
President, Meyers Transportation Services
Wes Armour
President & CEO, Armour Transportation Systems
Vice Chairman, Corporate Finance Associates (CFA) Chairman of CFA’s Transportation and Logistics Industry Practice Group
Consolidation Consultant, Wheels Group
For more information and to register, please visit www.SurfaceTransportationSummit.com
PRODUCED BY MOTORTRUCK FLEET EXECUTIVE, CANADIAN TRANSPORTATION & LOGISTICS & DAN GOODWILL & ASSOCIATES
Trans Summit 2013 CTL.indd 1
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Cargo Montreal announces project plans for 2014 Cargo Montreal, the logistics and transportation cluster of the Greater Montreal area, unveiled its first 2012-2013 progress report during its Annual Assembly held in Montreal June 19, and attended by industry leaders from the greater Montreal area. Cargo Montreal’s management team has officially been in operation since last December, and reported on the progress of the various chapters in the organization and also on the studies launched by the logistics and transportation sector partners in the Montreal region. Cargo Montreal also elected its board of directors for 2013-2014. Sylvie Vachon,
president and CEO of the Montreal Port Authority, was reelected for a second mandate as the board chair, and Madeleine Paquin, president and CEO of Logistec Corporation, as vice-chair. “We’ve covered a lot of ground since our launch. We’ve been working non-stop to ensure Montreal is known as the hub of North American transport. And the economy of Greater Montreal will definitely benefit from this,” said Mathieu Charbonneau, managing director of Cargo Montreal. In March, Cargo Montreal launched three project streams that will reflect and represent important issues for the economic development of Greater Montreal. These project streams will look at perspectives and opportunities in the sector’s development, at establishing methods of communication and dissemination of information and at improving access and the flow of truck trans-
portation in the Greater Montreal area. Several aspects of the various projects are already underway, namely a study on the transportation industry’s profile in Greater Montreal, a pilot project that will measure the fluidity and efficiency of transportation moves and also a project that aims to gather information on how goods move in the Greater Montreal area. A first round of data from the projects is expected in the fall of 2013. Attendees also heard about three new projects beginning in 2014 that will see the adoption and integration of best practices and innovative technology towards sustainable development. A third project will examine human resources and labour issues and aims to provide timely solutions to address these. For more information on Cargo Montreal, see page 26.
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in the
ZONE Europe ramps up talks on transport funding; touts infrastructure as mechanism for growth By Julia Kuzeljevich
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Transport ministers from across the globe discussed the challenges of infrastucture and funding during a roundtable discussion at the International Transport Forum in Germany.
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unding transport emerged as the major theme of the 2013 International Transport Forum, hosted annually by the Organization for Economic Cooperation and Development (OECD) in Leipzig, Germany. Transportation Media was invited to attend as a media participant this May among some 1,000 delegates, including NGOs, CEOs and Transport Ministers from 60 states. The focus was on potential financial solutions for investing in infrastructure, borders and transportation technology. For logistics professionals who are doing business with and within Europe, the OECD has warned that long-term economic weakness in Europe “could evolve into stagnation with negative implications for the global economy.”
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In its half-yearly update, the OECD slashed its forecast for the 17 European Union countries that use the Euro, saying it will shrink by 0.6% this year, after a 0.5% drop in 2012. But the silver lining is that the economic situation is leading to calls, evidenced at the Summit, for more innovation and cooperation in the continent’s fiercely competitive environment. Canada’s federal government is now undergoing final rounds of talks to conclude the Comprehensive Economic and Trade Agreement (CETA), which had stalled, at press time, on European resistance to increased Canadian access to beef markets there. Europe and the US may also begin free trade talks soon, giving Canada the impetus to ct&l july 2013
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get in ahead of the game. “We have to see well-chosen “The parties are committed to expansion of transport as helpful resisting protectionist pressures in to enhancing the life of people, challenging economic times, and and as necessary transactions of are seeking to achieve an ambicommerce and tourism. My point tious outcome across all negotiatis not confined to Europe, but aping areas. The Government of plies specifically in the case of Canada has made the CETA neausterity,” said Sen. gotiations a priority in its interna“Funding transport is not only tional trade agenda and negotiaabout new investments, but about tors continue to move the maintenance. New challenges negotiations forward as quickly as The appetite for risky investment in transport has decreased must be addressed on green transpossible,” the federal government in Europe as the continent’s economy improves slowly. port, but budgets are tight. The stated recently regarding the stairony is that there is a lot of liquidtus of the negotiations. ity in the markets,” said Jose VieAs an integrated block, the European Union (EU), composed gas, Secretary General of the International Transport Forum. of more than 27 member states, represents Canada’s second largBut the appetite for risk is significantly down in Europe, said est trading partner in goods and services. In 2010, Canadian goods David Fass, CEO of Macquarie Group in Europe, the Middle East and services exports to the EU totalled $49.1 billion, and imports and Africa (EMEA). from the EU amounted to $55.2 billion. The banking market is slowly coming back, and there is more With budgets tight, discussion of funding at the ITF centred not equity going into public-private model projects, but there is also less only on finding innovative sources, but also on transport’s general debt being incurred and lower returns for investors in these markets. role, as a driver of economies versus a simple mechanism for the “The best short-term policies seem to be what we always considflow of goods. ered long-term policies. But we don’t want to go into them because In his keynote address at the summit, Amartya Sen, professor of they don’t yield growth tomorrow. But these will be the ones that Economics and Policy at Harvard University, spoke about the rele- create the confidence and underpin the growth. We have a crisis of vance of transport and the role it could play as a stimulus tool in a trust in all the institutions we’ve built over the years. We believe time of austerity measures. that going structural is the way to restore this confidence,” said An-
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gel Gurría, Secretary General of the OECD, during the ITF summit opening plenary speech. “Countries need to rebuild their transport networks. In the main port regions of Northern Europe, ports often represent about 10% of the employment base,” he added. “Worldwide, only very few countries could say they have an overfunding of transport infrastructure. In Germany, the infrastructure is considered very good in the international context, but our problem is the budget; it’s a continuous struggle,” said Peter Ramsauer, Germany’s Federal Minister of Transport, Building and Urban Development. Germany’s current infrastructure budget is just over 10 billion Euros, but Ramsauer said an additional four billion are needed. Some 20 years after the fall of the Berlin Wall, he said there has been some neglect of the infrastructure in the west of the country as the east was being rebuilt. “We are trying to make a shift from east to west in regard to road, rail and waterways. We think the best thing to do in Germany would be to introduce more tolls. There’s a user charge already in place now for trucks weighing 12 tonnes and over,” Ramsauer noted. Germany faces general elections in September, and Ramsauer said that regardless of who is negotiating any future policies, “we have to find structural solutions for funding transport.” During the conference, ministers released a Declaration on the Funding of Transport, which demonstrates “a clear willingness to make transport a growth strategy,” they said. “There is a willingness politically to address the dilemma, possibly including the need to introduce unpopular measures,” said Viegas. The Declaration acknowledges that “a reliable, intermodally integrated transport system is essential to economic prosperity and equitable access to goods and services; that the system needs to be financially sustainable, safe and secure and meet high standards of environmental protection.” Most importantly, the declaration emphasized the need to align funding for transport infrastructure and services with transport’s fundamental role in the econowww.ctl.ca
my and society. For example, funding policies would consider fiscal constraints to stable funding arrangements that facilitate implementation of long-term policies promoting sustainable transport.
The policies would need to be more consistent between funding practices and strategic directions for change in the sector, and decision processes would need to ensure funds are deployed to their most efficient use.
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The aim of the International Transport or containers; from a customs office of deForum is not to approve uniform models of parture in one country to a customs office public consultations, said Viegas, but for of destination in another country; without Ministers to share what they have learned requiring extensive and time-consuming border checks at intermediate borders. and take it home. Canada’s Honourable Denis Lebel, “We also know that there will not be a Minister of Transport, Infrastructure and single magic bullet solution. Governments Communities, participated in several panel realize they have to put their relationship Canada’s Minister of Transport Denis Lebel sessions at the summit, explaining Canawith the private sector on more stable discusses the country’s approach to using da’s approach to using public-private partfooting without shifting the risk entirely to public-private partnerships (P3s) to finance nerships (P3s) to finance a number of mathe other side. Mutual trust must become infrastructure projects. jor federal bridge projects. part of the permanent transport lexicon,” “Our goal is to facilitate. We want to he said. take as many regulations away as we can, While sustainable infrastructure projects will be key to growth potential, in the supply chain, “the prob- to do the right thing to support the economy. But we have to be lem for achieving seamless road transport is not the lack of infra- very careful to manage this money very well because it’s public structure, but rather inappropriate border procedures, which can money. We have to invest with strategic choices,” said Lebel. He noted there was a lot of discussion at the summit about account for up to 57% of lost transport time in some regions of the world,” said Umberto de Pretto, International Road Transport “readily available funds,” but he said that many governments are in fact in crisis, and that Canada itself faced cuts to several of its fedUnion Secretary General Elect. Temel Kotil, then CEO of Turkish Airlines, echoed this thought eral government departments. Lebel also attended the Ministerial Session on attracting private during an open ministerial forum at the summit, when transport professionals had the opportunity to address governments about in- finance and ensuring predictable funding, and a Ministers’ Roundable (closed to the press) on attracting new sources of private fidustry needs and opportunities. Kotil told the forum that regulation issues within the European nance to transport infrastructure. Rosario Macario, Assistant Professor of Transportation at the airline industry, as related to routing restrictions, for example, create additional costs through fuel spending. He called on European Instituto Superior Técnico, the engineering arm of Lisbon’s Techofficials to “make the air more straight” by finalizing more “single nical University, said that public-private partnerships have demonstrated the ability to harness additional financial resources and skies” agreements with their trade partners. “The world is normalizing more in terms of travel, culture and operational efficiencies. “However, they are often ignored in the public books. The delivbusiness, and airports should be operating 24 hours a day, said Kotil. (In 2010, Canada finalized a Comprehensive Air Transport ery model should be governed by ‘maximum value for the money.’” The problem with P3s in Europe is that there is a “bias in planAgreement with the European Union allowing Canadian air companies access to the 27 member states while European air carriers ning and forecasting hindering the quality of decision at the project selection stage. There are biases towards developing new projects are able to increase their presence in Canada.) Harmonizing certain air regulations in the European Union instead of making a more efficient and flexible use of the existing would come with challenges; there are some 27 air traffic control ones, and this leads to maintaining existing infrastructure in poor systems at work, among them some military operations. condition,” she said. De Pretto stressed that using the “low lying fruits,” like existing There is also a “lack of robust instruments for decision makinfrastructure, and prioritizing transport operators’ use of the roads ing, such as national infrastructure accounts (balance sheets),” at certain times, “gives them a real business incentive.” said Macario. In a discussion on cross-border funding, De Pretto criticized EuShe advocated use of a public sector comparator tool for the asropean transport tax schemes saying, “Fuel taxes were initially made sessment of models to determine the proper service provider for a and collected for infrastructure, but that money goes elsewhere. So public sector project. It consists of an estimate of the cost that the now they’re saying let’s collect again so we can finance rail, for ex- government would pay were it to deliver a service by itself. ample. I’m just noting that Europe is the only place in the world Canada is one of the few countries worldwide to employ this where we have more taxation on transport and therefore produc- type of modelling. Lebel noted that under the new Building Canada tion goes elsewhere. The net effect is a high level of unemploy- Fund, projects with capital costs of more than $100 million will be ment,” he said. assessed to determine if better value for money can be achieved CT&L Solutions are simple and already exist, he said. Implementing through a P3 model. key UN multilateral trade and road transport facilitation instruments – in particular the TIR and Harmonization Conventions – Features editor Julia Kuzeljevich has been writing about transwould effectively streamline Customs procedures and eliminate portation issues for more than a decade. Her meticulously rebarriers that hinder international trade, he said. searched articles have garnered several transportation and The TIR Convention establishes an international customs tranCanadian Business Press writing awards. sit system with maximum facility to move goods in sealed vehicles 14
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GUTEN TAG TO ALL OUR PARTNERS IN BERLIN High-efficiency intermodal platform. Strategically located on the shortest route between Europe and North America’s industrial heartland. Offering access to 40 million consumers within one trucking day, and another 70 million within two rail days. No wonder the Port of Montreal is connecting with partners across the globe. port-montreal.com | +1 514 283-7011
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Eastern Promises
Canada’s East Coast Gateways look both abroad and close to home, promoting the advantages of less congestion and infrastructure improvements
By Julia Kuzeljevich
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anada’s eastern gateways are in full expansion- and promotionmode, domestically and abroad, benefitting from a climate of cooperation and collaboration amongst stakeholders. Their aim is to draw clientele and investment from further afield while strengthening traditional relationships. “A lot of times when you are doing sector-focused trade missions, you are selling Canada first, then you are selling your region. I also think from a Gateway perspective, gateways, ports and airports in Canada maybe don’t have the congestions that some of the larger-scale cities down the US coasts would have. So we could talk about the natural advantages we have here; if we could market and keep doing the things we’re doing, in a way that promotes ourselves without criticizing everyone else,” said Nancy Phillips, director of business development at www.ctl.ca
marine shipping
the Greater Halifax Partnership, and executive director of the bridges. The upgrading and enhancing of the bridge air gap system Halifax Gateway Council. will enable the port to identify exactly the ship clearance. The Council offers transportation stakeholders in the Halifax Another key priority for the Halifax Gateway this year is the region a forum to work together to improve the efficiency and marketing of the $100 billion in mega projects that are underway competitiveness of the Gateway. or going to be getting underway in Atlantic Canada. “There are two main priorities for this year. One is the building “These projects offer tremendous supply chain/logistics out of the Halifax Logistics Park, which is part of the Burnside opportunities for our region,” said Phillips. Logistics Park,” said Phillips. The city of Halifax has maintained a long history of investing in “We have worked with the municipality to have land set aside its infrastructure, and, indeed, infrastructure is one of the main that we can market to the transportation industry and to compa- priorities this year at the Port of Halifax, which has some $20 nies that would add value in terms of increasing cargo volumes. The million per year invested and some substantial projects underway, second priority is to increase air one at the container terminal, access for both cargo and air and one at the Richmond passengers. At the end of 2012, terminal – a $73 million project “We’re focusing on exports and on the Stanfield airport just comkey to reinforcing breakbulk, pleted its main runway extencargo and project cargo, said our domestic markets. It’s definitely sion to 10,500 feet. We would Michele Peveril, senior manager love to see more airlift out of of strategic relations with the awareness raising, working with this region for air cargo. BeHalifax Port Authority. cause we don’t have enough “One hundred million dolexporters, making sure any projects airlift, a lot of it gets trucked to lars has been cost-shared bethe US,” she said. tween the port and the federal within Canada and North America Raising awareness of the government, which is usually gateway is an ongoing priority. solely funded through the Port know our capabilities, and our In March, noted Phillips, the Authority from revenue for Gateway welcomed a third inoperations. The Port is also priglobal connections...We have set bound mission of individuals oritizing its ongoing business and companies in the transpordevelopment, awareness, and about to diversify on a few fronts tation industry. direct dealings with customers. “We brought in companies It was interesting to see that in and this has served us well through that were focused on the cold 2012, our percentage of cargo chain, on marine and airports. originating in or destined for recessionary periods.” The inbound mission was foAsia was 48% [of total cargo]. cused on Asia with nine indiWe currently have cargo conviduals from Vietnam welnections to 150 countries. We – Michele Peveril, comed, but we did have other have traditional trade lanes in senior manager of strategic relations countries represented,” said Northern Europe, but we’ve with the Halifax Port Authority Phillips. also broadened this to include Plans for 2013 include emerging markets in Asia,” marketing the Gateway as a she added. one-stop shop at events such as The Port of Halifax and CN the recent Supply Chain Canada conference. Rail have reinforced their business development efforts in Asia, “We’ll be researching specific cargo commodities that would appointing commercial representatives in the region who will help be good fit for building the cargo park, and continuing with our to market the Port of Halifax as a gateway to North America using ongoing marketing and communications through social media. CN’s rail network. We’re also in the early stages of building a Gateway IT focus,” “We’re also focusing on exports and on our domestic markets. said Phillips. It’s definitely awareness raising, working with exporters, making In April, the Government of Canada announced funding sure any projects within Canada and North America know our towards two Intelligent Transportation Systems (ITS), an capabilities, and our global connections. We have a number of integrated port logistics system and an air gap system at the Port different types of cargo we can handle: oversize projects, breakbulk, of Halifax, with the federal government contributing up to bulk, and multiple terminals to serve a wide variety of commodities. $330,000 under the Strategic Highway Infrastructure Program, We have set about to diversify on a few fronts and this has served and the Port of Halifax providing $330,000 towards the us well through recessionary periods,” said Peveril. completion of these projects. In December, Nova Cold Consolidated, a Dartmouth, N.S.With larger ships accessing the port, there is a need to based cold storage firm, announced an expansion and modernization continuously monitor vessel clearances under each of the harbour plan for its plant in anticipation of expanding export markets, with www.ctl.ca
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marine shipping
Quinn said there will be a doubling of the current one million tonnes of potash exported through the port. The port has started a service with MSC on a bi-weekly (and eventually weekly) basis, and changes in truck and rail infrastructure are also underway, along with a new access road being built off Route 1 near the Saint John Harbour Bridge to accommodate over-sized loads using the Port of Saint John, allowing eastbound over-sized loads smooth access directly to and from the port. “We’re making sure we are well positioned to move things around the port, and to create great linkages with our short lines. We’re looking for total flexibility for rail within the port itself. Because of increased container traffic, our partners running our container terminal have invested in new equipment, another $600,000 to help efficiency in container movements. We’re setting the foundation for the significant renewal of the west side of the port to build on diversity in terms of what we handle. We’re very cautious that the infrastructure we have in our port system in Eastern Canada be utilized in an innovative way,” said Quinn. In December, Port Saint John representatives joined regional Atlantic Gateway ports and other economic development partners at Breakbulk South America in Sao Paulo, Brazil as part of the Port’s focus on developing trade in South America. “This port will continue to build its relationships on that northsouth laneway and build on the wonderful opportunities present in the southern marketway and how they may be able to get their products into the Canadian marketplace, through different channels for moving goods as an option to some of the traditional gateways,” said Quinn. Another major Eastern Gateways player, the Montreal Port Authority (MPA) has inked a new six-year collective agreement with the Maritime Employers Association and the Longshoremen’s Union, concluded this February, which sets working conditions at the Port until the end of 2018. “The agreement sends a very positive message of stability to port clients around the world, and it allows us to continue our work on various development projects related to our activities,” said Sylvie Vachon, president and CEO of the Montreal Port Authority. The Port of Montreal now has representation in Asia, a first for the Port, following a recent Asia trade mission which also included officials from the Port of Halifax and CN. The trade mission to Asia is the third step in the Port of Montreal’s efforts to be much more visible on an international scale, and follows the appointment of representatives in the US and in Europe for three and two years, respectively, said MPA.
The Port of Saint John is looking to become a bigger player in container shipping.
assistance from the Government of Canada and the Province of Nova Scotia. The Atlantic Canada Opportunities Agency loaned Nova Cold Storage $410,000 under its Business Development Program to establish a modern cold chain logistical centre in the Atlantic Gateway Halifax Logistics Park. The Province of Nova Scotia is also investing $540,000 in the project, through the Productivity Investment Program. Barry Smith, president of Nova Cold Storage, said the expansion “will provide exporters with increased capacity for their products at a time when the landscape of food exporting in Atlantic Canada and nationally is rapidly changing. Today, there is a greater emphasis on quality, traceability and food security and our clients require more support in preparing their products for export.” Saint John: An option to low water ports Saint John Port Authority, with its natural niche on the north side of the port, is looking to play a bigger role on the container side. “We are trying to position the port to be seen as an option to congested ports and to ports with lower water levels,” said CEO Jim Quinn. He sees the Atlantic Gateway strategy as offering the potential for an integrated logistics solution, and positioning Canada in terms of its strengths in the global marketplace. “We started a strategy here in the port that dovetailed into the Atlantic Gateway’s strategy, to reintroduce the historical markets Saint John was involved with for decades, on the North-South trade lanes,” said Quinn. “In Saint John, we move some 28-29 million tonnes on average every year in petroleum products on the export side. It’s a huge reach in terms of economic stimulus, and has a big impact on revenue generation, jobs, and the economy,” he said. With Potash Corp’s expansion of its facility in Sussex, N.B., 18
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MPA forms an integrated part of the Logistics and Transportation Metropolitan Cluster of Montreal, “Cargo Montreal”, which was launched in December, and which is seeking to bring together the companies and other stakeholders in the logistics and freight transportation sector and to make Greater Montreal “a multimodal platform recognized and sought after for its contribution to its business partners’ competitiveness, and to the economic development of both the region and the province of Quebec.” Cargo Montreal is currently preparing a logistics profile with the goal of establishing a detailed portrait of the transportation and logistics community in Greater Montreal and to provide a means of measuring supply chain performance in the region. The Government of Canada has also recently issued RFPs for laboratory services and geotechnical studies in relation to the construction of the new bridge for the St. Lawrence to replace the Champlain Bridge, one of the busiest in Canada, with $20 billion worth of international trade crossing it every year, and a crucial corridor for the regional economy and for Canada as a whole. The contract award was set to be announced in late June. The province of Quebec could also benefit from a new $100 million, 89-acre intermodal rail terminal in Salaberry-de-Valleyfield. CSX Transportation is heading the project, which is designed to connect the region with its 34,000-km rail network in the US.
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Michael J. Ward, CSX president and CEO, said the project is expected to create more than 300 permanent jobs when completed in 2015. “We believe this new terminal will provide immediate and long-term benefits to Quebec and to Salaberry-de-Valleyfield. The terminal will provide an anchor for the development of new business, helping boost the economy and create jobs while helping the environment and reducing congestion on the highways,” said Ward. Located in the Perron Industrial Park, the terminal will be close to the newly-completed Autoroute 30. As part of the project, the province of Quebec and Salaberry-de-Valleyfield will make improvements to the road network in the immediate vicinity of the terminal. The Quebec Ministry of Transportation will also support the project through a $6 million grant for the reduction of greenhouse emissions. The terminal is expected to handle up to 100,000 containers per year, using rubber-tire gantry cranes to transfer containers between trains and trucks. CSX said it will also relocate a portion of its main line in residential areas of Salaberry-de-Valleyfield to a location south of Autoroute CT&L 530 alongside the new terminal in the industrial park.
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air freight
From left: Jeffrey Cullen, Jim Ramsay, and Lise-Marie Turpin
turbulence ahead A sluggish global recovery, excess capacity and increasing security legislation are creating headwinds for airfreight carriers. At the recent Supply Chain Canada conference, Lise-Marie Turpin, vice-president of Air Canada Cargo; Jim Ramsay, vice-president of international freight forwarding, UPS Canada; and Jeffrey Cullen, president and CEO North America, Bellville Rodair International, discussed how the industry is coping and evolving. By Lou Smyrlis
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CT&L: The Canadian economy appears to be slowing. From what you are seeing from your own customer activity in the domestic and global markets, does this appear to be a minor hiccup or does it reflect more serious damage to the Canadian economy and global trade? Turpin: We are noticing a slowing in the economy in general. A lot of indicators are a bit worrisome. But we are very dependent on what happens south of the border and in the US there appears to be some slow but steady growth occurring. The housing market has improved. The automotive industry is selling cars. So there is good news that should help in the longer term, but there is always a gap between what happens in the US and what happens in Canada. I think we will get through this eventually, but all indications – when I speak to customers from around the world in different industries – are that things will be flat with hopefully a bit of an improvement towards the end of the year and in 2014. Ramsay: Certainly, it is hard to predict and get a good feel for
where everything is going, but I always keep in mind the resiliency of the Canadian entrepreneur and the ability of Canadian companies to adapt. Some of the surveys we’ve conducted show that in 2013, three out of five business leaders expect their business to be higher than the previous year. That’s a good signal. The other aspect to consider is what is going on in the emerging markets and how is Canada positioning itself to shift a little bit away from its reliance on the US. There are predictions that by 2025, trade with the US will be declining, but the decline will be offset by trade with nations such as China, Brazil and India. There is a lot of fluctuation. The Canadian economy is going through some dramatic changes and it’s a great opportunity for people to be looking at their supply chain to take advantage of things going on outside Canada.
Cullen: I would like to share my perspectives on two market verticals we are in: retail and automotive. On the retail side, we are seeing a slowdown in the fashion sector in Canada. The numbers are flat. We are seeing increasing competition with US chains, such as Target, entering the Canadian market. I think that’s going to give shoppers more of an opportunity to value shop, which aligns with price shopping. The challenge for retailers will be maintaining margins, which trickles down through the whole supply chain. Price pressure on the retail side of things is going to place price pressure throughout. In the luxury retail sector, volumes are flat or slightly lower than in 2012. The expectation is that we are going to see that continue through the rest of 2013, but we are seeing expansion into the sector despite that. Nordstrom is coming to Canada, which is going to put pressure on the Harry Rosens and Holt Renfrews of the world, and The Bay as it morphs itself into the upper end of things. We are seeing Harry Rosen and Holt Renfrew respond to the pressure by opening new retail outlets and looking at new branding. The other big thing we are seeing in the luxury market is the slowing of the market in Asia, which is significant for global trade. When I say slowing in Asia, they are just not getting the percentage
growth we have been expecting and need to drive success for luxury retailers. That is a worrying factor because most of the luxury world has placed such a focus on Asia evolving into a more sophisticated consumer market. On the automotive side right now, Canada is on fire. It can barely keep up with demand. The fear that I have, and share with a number of people, is that this is going to be short-lived because we aren’t seeing the investment being made here in Canada in manufacturing by the automotive companies. They are investing in Mexico and the US. One of the biggest challenges we have is how to go about developing a manufacturing base here in Canada again and it has to be a 20-year horizon. The challenge for the logistics sector is that we don’t have a six-month view, never mind a 20-year vision, so how do we engage with the automotive sector in a way that is not just reactionary? CT&L: What do you see as the major issues affecting air transport
right now and what is their impact on decision making within your companies?
Ramsay: One of the trends I see right now around the world is a
situation where the available capacity on aircraft is exceeding the potential demand to fill that space. That is creating a lot of challenges for the entire industry in how they use their assets. Within UPS, we have the option of using our own aircraft or buying space on commercial aircraft, which is a bit of a shift for us. That works well for providers with aircraft for more than one purpose. The pure freight provider who used to do stuff at very low cost is going to struggle in this environment. The provider who is moving passengers or packages will do well. For us, this is driving some different decisions in how we use assets within UPS and how we make sure our customers are well taken care of. A longer term issue I have been paying a lot of attention to is overall costs and I don’t necessarily mean airfreight costs. I’m thinking about manufacturing and production costs – the cost of commodities, labour and transportation. One of the trends we’re seeing is the tipping point where wages in China and other places in Asia become comparable to places closer to us, such as Mexico. All of a sudden you have some parity going on. That means commodity costs and how you get those commodity costs into manufacturing and the movement of goods become far more important for decisions of where you are going to grow. The longer term trend is to see more growth for places such as Mexico as a key manufacturing location. I’m not saying that China and Asia will go away, but I think you will see some shifts. For us as an organization that means we have to think differently about how we position ourselves and have our own infrastructure and tools for getting across the border on the ground versus air.
Turpin: From an airfreight perspective, we are in the situation we
are in because of high fuel costs. What happens when you have high fuel costs is that the cost of operating all-cargo aircraft becomes more and more challenging. And you also have the rise of other modes of transportation, such as ocean, which has become more sophisticated in what it can offer customers. This, coupled with Continued on page 24
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Exciting Times for Air Canada Cargo
N
ew routes and recent innovations have made for exciting times at Air Canada Cargo. With Air Canada’s new leisure carrier rouge taking off and fleet expansion, the carrier is in growth mode. Combined with milestones like the launch of e-air waybill, forwarders and shippers have more options to choose from when choosing Air Canada Cargo: more options for shipping freight to Europe and Asia, and the ability to reap the numerous benefits of sending airway bills electronically. New for Europe: Istanbul, Edinburgh, Venice In June, Air Canada introduced Istanbul as a new destination, an exciting opportunity for Air Canada Cargo to offer direct service between its Toronto hub and Istanbul, and also to flow traffic to points beyond on the thrice weekly flight. The July launch of Air Canada rouge provides more opportunities for growth. Freight capacity on the leisure carrier is managed by Air Canada Cargo, and freight bookings on all Air Canada rouge routes are made as they would be on any other Air Canada flight. Air Canada is transferring two Boeing 767s and two Airbus A319s to rouge routes as it adds Boeing 777 aircraft to its fleet. The B767s will operate on the Air Canada rouge flights to Edinburgh, Venice and Athens, while the A319s will operate on Caribbean destinations. Four more 777s will be added by the end of 2013, and one more at the start of 2014. The new 777 aircraft will be deployed on the Montreal – Paris and Toronto – Munich routes in the short term.
“777s are great planes for cargo, so their addition is more than welcome,” says Vice President – Cargo, Lise-Marie Turpin. “We’re in growth mode right now, and that is very exciting.” More Frequencies to and from Asia Air Canada Cargo now serves Asia with the most flights and frequencies to and from Canada, thanks in part to the addition of a new route between Toronto and
Seoul this June. Seoul is now served with 7 flights per week from Toronto or Vancouver. Daily service between Calgary and Tokyo began May 1, complementing existing service from Vancouver and Toronto, for a total of 21 direct non-stop flights to Japan per week. Beijing benefits from increased frequency with a total of 11 flights per week from Vancouver using B767 aircraft and 10 flights per week from Toronto serviced by B777 aircraft. e-AWB Launched Always committed to innovation, Air Canada Cargo has launched e-AWB across its Canadian network and at its US hubs this spring, with global expansion in the works. e- air waybill greatly simplifies the air freight supply chain process. It eliminates manual tasks, reduces costs and improves customer service by speeding up cargo processing.
Air Canada Cargo was among the first carriers - and is so far the only Canadian air carrier - to sign international IATA Multilateral e-AWB Agreement this spring. The agreement provides a single standard agreement that airlines and freight forwarders can sign once without having to sign numerous bilateral agreements. IATA manages the contract on behalf of all carriers and forwarders that have signed it. For businesses shipping within Canada, Air Canada Cargo created the Domestic e-AWB Agreement, which forwarders and shippers sign only once to enable e-AWB shipments throughout Canada with Air Canada Cargo. Keeping in mind that not all businesses have the in-house technology to support EDI messages, Air Canada Cargo collaborated with Cargo Portal Services to offer e-AWB functionality. This functionality allows forwarders and shippers to enter their air waybill information on the portal, and the information is then sent electronically to the carrier. “Any business, regardless of its size, can fully benefit from the advantages of using e-AWB,” says Manager, e-Business Processes Karen Jones. “The CPS function is easy to use and a great time-saver. Our customers will reap the benefits of e-AWB as it renders air freight processes much more effective.” Stay On Top Air Canada Cargo sends regular commercial updates and operational news by email. Sign up today at www.aircanadacargo.com to stay connected.
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air freight
softening in demand and overcapacity, does give pause to what will be the distribution models of the future. Another issue is that, while it won’t happen overnight, the salaries that a manufacturer has to pay a Chinese worker in 2020 may not be that far off what he has to pay a US worker. So we may start seeing either more of manufacturing happening regionally versus across continents. And what does stay away may move by ocean more effectively than in the past. These things really change the way goods are going to flow and affect decisions on capacity, especially for the all-cargo carriers. This is something we will have to watch and adapt to. It does put a lot of pressure on yield and forces us to look at costs – where are we going to fly, how are we going to fly, what do we need to do to our costs to ensure air cargo remains an attractive solution? Regulatory compliance is also a big issue for our industry and it is just growing and will continue to get bigger and heavier and more cumbersome. As an industry, we really need to have a voice and push for standardization and the exchange of electronic information so we do risk assessments differently. But we need the globe to adhere to the same process and that is a big challenge because you are dealing with so many different governments, so many different regulatory bodies. It’s very taxing for the industry because compliance is very costly. We want to comply, but we need to find the easiest and smoothest way to comply without impeding the flow of trade.
Cullen: On the non-asset side of things, we are certainly seeing the supply chain shifting. We are watching things move from what had traditionally been airfreight into ocean freight. That customer still exists for me; they’ve just shifted from a higher margin business to a slightly lower margin business. Customers are allowing for longer tolerances in travel time and carrying greater inventories. Capacity and demand in airfreight are misaligned at the moment, which creates volatility in pricing and drives margins down. There continues to be a rapidly changing security environment, which has created even greater complexity than we had years ago; 9/11 changed the world forever and will continue to change the world forever. Global movement of cargo by air has become a very complex and very security-driven mode of transport and costs are starting to go up and so is the potential for longer transit times as we move to things such as 100% screening for cargo. People may start putting freight on the road or on the ocean to get around some of the complexity and cost that has crept into our world because of CT&L security and compliance.
For more on this topic, watch ‘NO SOFT LANDING’ on ctl.ca/videos.
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de the numbers
AD THE TURE
TRUCK WEST jUly 2013
National Highway System in Western Canada (kilometres)
inside the numbers
Core routes
Feeder routes
Northern / remote routes
Total
982
742
368
2,092
Saskatchewan
2,432
—
238
2,671
Alberta
3,994
216
197
4,406
British Columbia
5,855
447
724
7,026
27,601
4,492
5,917
38,010
Manitoba
ada’s eConomy
Canada
aster than the
rage. Can its
Length of Public Road Network in Western Canada (two-lane equivalent thousand km)
ure keep paCe?
Manitoba
Border % r40 Trucks million yeS ts)
Bridge, Ont.
86.6
8.3%
2.57
2 Sarnia-Blue Water Bridge, Ont.
61.7
164.6
226.3
21.7%
British Columbia
48.2
22.9
71.1
6.8%
415.6
626.7
1,043.30
100%
6
Medium- & Heavy-Duty Truck Statistics – Western Canada Medium-Duty Vehicles (thousands)
dge, Ont.
1
Manitoba
uglas, B.C.
4
Saskatchewan Alberta
n Bridge, Ont.
0
British Columbia
e.
0
an.
6
Ont.
3
a.
1
Sask.
9
Saskatche
1 Windsor-Ambassador Bridge, Ont.
British Colu
Ca
1.56
3 Fort Erie-Peace Bridge, Ont.
1.21
Man
4 Pacific Highway/Douglas, B.C.
0.74
ridge, Ont.
Canada
I
Heavy-Duty Vehicles (thousands)
Medium-Duty Vehicle km (millions)
11.2
17.3
160
1,529
38.9
30.9
529
1,224
131.4
87.4
2,617
5,421
96.3
16.7
1,891
585
438
317.2
8,294
Saskatche
5 Niagara Falls-Queeston Bridge, Ont.
Heavy-Duty Vehicle km (millions)
0.70
British Colu
Ca
0.60
I
7 Emerson, Man.
0.36
8 Lansdowne, Ont.
0.33 9 Coutts, Alta.
0.31
t’s an unfortunate reality in country, almost 60% of the nation’s governments are struggling to keep up Canada that unless roads and public road network (two-lane equiveven with maintaining the status quo. 10 bridges are completely crumalents) and 43% of the national highEven in Manitoba, where the governNorth Portal, Sask. bling, it has proven difficult to way system, as shown above from data ment has committed $4 billion over 10 IS infrastructure WESTERN CANADA’S INFRASTRUCTURE KEEPING PACE WITH make spending gleaned from Transport Canada’s anyears to infrastructure, it may not be a priority. When the businessGROWING nual Transportation in Canada report. THE enough to address the damage caused AN ECONOMY FASTER THAN NATIONAL AVERAGE? outlook is strong but future Yet Western Canada also tends to have by years of neglect. As the Manitoba congestion lost productivity in summers, the supplyTrucking chain. Association’s Yet, until recently, the unfortunate reality in Canada was that unless roads economic Road expansion is dependentequals on harsher winters and hotter Bob Dolyniuk efficient transportation, this is a reality which wreak havoc on roads and it points out,difficult Manitobato hasmuster somewhere were degraded to the point where it made headlines, it was the political will to makepginfrastructure spending a 22 tw july v3.indd 23 that is particularly hard to swallow. Adallows heavier weights in many rebetween 3,000 and 4,000 bridges with priority. For a trading heavily on efficient transportation, this isof athose reality that is particularly difficult to swallow. Addressing dressing gaps in infrastructure spend- nation spects. There are reliant also northern comhundreds if not thousands ing is particularly important in West- spending munities which are requiring increasbridges reaching the end of their life the economy has been much stronger than the rest gaps in infrastructure is particularly important in Western Canada where ern Canada where the economy has ing investments in infrastructure as span. Yet some of them haven’t been the country infrastructure that can keepinpace. Is it?and the lonbeen muchof stronger than the restand of theso requires they look an to seize the opportunities inspected over a decade country and soWestern requires an Canada infrastruc- accounts presentedfor by mining andthe energy exger you allow something deterioratealmost 60% of the nation’s public road network 48% of heavy-duty vehicles in thetocountry, ture that can measure up. Is it? ploration and development as well as the more it costs to repair it or you may (two-lane equivalents) and 43% of the national highway system, as shown Western Canada accounts for 48% to address population growth. get to the point where you haveabove to tear from Transport Canada data. Yet Western Canada of the heavy-duty the In many cases summers however, provincial down and start allon overroads again. – and allows heavier weights. There are also northern also hasvehicles harsherin winters and hotter – whichitwreak havoc
ROAD TO PROSPERITY
0.19
communities clamoring for increased infrastructure investments to keep pace with the demands of increased mining and development opportunities and increased population growth. In many cases however, provincial governments are struggling to keep up even with maintaining the status quo. Even in Manitoba, where the government has committed $4 billion over 10 years to infrastructure, it may not be enough to address the damage caused by years of neglect. As the Manitoba Trucking Association’s Bob Dolyniuk points out, Manitoba has somewhere between 3,000 and 4,000 bridges with hundreds if not thousands of those bridges reaching the end of their life span. Yet some of them haven’t been inspected in over a decade and the longer you allow something to deteriorate, the more it costs to repair it – or you may get to the point where you have to tear it down and start all over again. 13-06-13 2:46 PM
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Alb
6 Lacolle, Que.
21,417
Ca
Alb
67.3
Alberta
British Colu
Man
10 Largest Border % Crossings for40 Trucks (volume in million yeS movements)
19.3
21.9%
Alb
infrastruCture keep paCe?
Share of Total
228.2
Saskatche
national average. Can its
Total
198.7
Man
is groWing faster than the
Unpaved
29.5
Canada
Western Canada’s eConomy
Paved
Saskatchewan
7
ROAD TO THE FUTURE
ct&l july 2013
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t’s an unfortunate Canada that unless r bridges are complete bling, it has proven d make infrastructure a priority. When the outlook is strong b economic expansion is depe efficient transportation, this i that is particularly hard to swa dressing gaps in infrastructur ing is particularly important ern Canada where the econ been much stronger than the r country and so requires an in ture that can measure up. Is it Western Canada accounts of the heavy-duty vehicle
supply chain
Cargo Montreal creates
‘hub of expertise’ By Julia Kuzeljevich
W
ith the launch of Montreal’s Logistic and Transportation Metropolitan Cluster, which goes by the name “Cargo Montreal,” the city is looking to provide a common voice and vision among stakeholders and address the sometimes negative perception of transportation. Cargo Montreal, launched at the tail end of 2012, is part of the city of Greater Montreal’s economic development strategy, and its mission is to “bring together the companies and other stakeholders in the logistic and freight transportation sector to enable planning and coordination of the sector’s development.” Executive director Mathieu Charbonneau says Cargo Montreal has targeted several items of priority for 2013. These include taking advantage of opportunities for development that industry leaders have identified; promoting the role, position and contribution of the logistics sector to the city’s economy; improving access and transport flow for trucks in the Greater Montreal area; identifying key practices and technology and promoting their implementation; pro26
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moting harmonization and regulatory simplification; and spreading awareness of human resource issues and their potential solutions. Cargo Montreal’s activities are financially supported by the Ministère des Finances et de l’Économie (Quebec’s Ministry of Finance and the Economy), the Ministère du Conseil exécutif (the Department of the Executive Council), and the Communauté métropolitaine de Montréal (CMM, Montreal Metropolitan Community) and all of its members. Charbonneau noted that there is no specific calculation of the value of the supply chain as it pertains to Montreal. “We would like to do a study that would look at performance indicators and that would compare Montreal’s supply chain with others,” he said. There’s a negative connotation to the transportation industry, even within the government, added Charbonneau, and among the goals of Cargo Montreal is to change this image, to demonstrate what the transportation and logistics sector brings to the economy, and what its relationship is to suswww.ctl.ca
supply chain
tainable development. “We want to show the positive aspects,” he said. “We want to get the message out that Montreal is a hub,” he said. Greater Montreal enjoys a strategic position in North America: it is located within one-and-a-half hours by plane from other major economic centres such as Boston, New York and Toronto and is less than one hour by car from the Canada-US border. Greater Montreal is known as a highperforming intermodal platform thanks to its transportation infrastructure network, which enables it to efficiently serve local, national and international markets, according to Cargo Montreal. The involvement of academic institutions in the Cluster, specifically, the Interuniversity Research Centre on Enterprise Networks Logistics and Transportation (CIRRELT), and ESG, the School of Management at the University of Quebec in Montreal, will enable access to relevant research opportunities. Cargo Montreal also has a close relationship with the Port of Montreal, the “heart” of the cargo system in the city, said Charbonneau. “We are really lucky to have the support of Sylvie Vachon, the president and CEO of the Port of Montreal, as a chair on Cargo Montreal,” he said. “This cluster is a true reflection of the collaboration among all partners in the transportation and logistics industry,” said Vachon. “We all share common concerns. By combining our efforts, we will come up with the most creative and effective means to strengthen the competiveness of the Greater Montreal region in this area.” While each transport mode is still somewhat in its own silo, there has been considerable improvement in getting stakeholders’ collaboration, said Charbonneau. The concept of a cluster, too, is taking on more and more prominence, and it’s something that “fits the bill” in bringing stakeholders together, as it’s a neutral setting, he said. Next year, the cluster will also focus on innovation as one of its target pathways. Looking ahead 10 years, Cargo Montreal’s vision is to make Greater Montreal a multimodal platform that is recognized and sought after for its operational and environmental performance, for its contribution to its business partners’ competitiveness, and to the economic development of both the region and the province of Quebec. www.ctl.ca
The board of directors, which was appointed in November, brings together several senior industry leaders in the logistic and cargo handling sector. The Cargo Montreal name was inspired by the elements that identify the brand, including “intermodality, connectivity, cooperation and accessibility. CargoM for Montreal, but also for mobility,
movement and merchandise.” Charbonneau previously worked for the Association Quebecoise du transport et des routes (AQTR), Quebec’s road transportation association, where he was technical director, executive director of Transform, the AQTR’s training centre, assistant executive director and interim CT&L executive director.
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ct&l july 2013
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dash board
TransCore’s Canadian Freight Index rebounds in May
TransCore Link Logistics’ Canadian Freight Index volumes rebounded by 10% in May from the previous month following weak results in April. May load volumes, however, were 16% below results from a year ago. May’s load volumes for cross-border postings averaged 71% of total volumes. Cross-border loads destined for provinces within Canada were down 16% year-over-year compared to May 2012. Interestingly, cross-border loads originating in Canada destined to the US revealed no change compared to the same period last year. Ontario accounted for 57% of the loads into Canada, with Quebec accounting for 22%, Western Canada 19% and Atlantic Canada 3%. Intra-Canada load volumes that represented 24% of the total volumes for May were down 10% year-over-year. Western Canada accounted for 37% of the postings by region, with Ontario accounting for 32%, Quebec 23% and Atlantic Canada 8%. The equipment postings for May were virtually unchanged from April. Month-over-month levels increased slightly by 2%, and postings came in at 3% above last year’s level for the same period. The equipment-to-load ratio increased for May to 2.18 from 2.35 in the previous month. TransCore’s Loadlink freight matching database constitutes the largest Canadian network of carriers, owner/operators, freight brokers and intermediaries. More than 13 million full loads, LTL shipments and trucks are posted to the Loadlink network annually. As a result of this high volume, TransCore believes the Index is representative of the ups and downs in spot market freight movement. The first six columns include monthly index values for years 2008 through 2013. The seventh column indicates the percentage change from 2012 to 2013. The last column indicates the percentage change from the previous month to the current month. For the purpose of establishing a baseline for the index, January 2002 (index value of 100) has been used.
Freight costs decline 2.4%, according to CGFI
The total cost of ground transportation for Canadian shippers decreased by 2.4% in April when compared with March results, according to the latest figures from the Canadian General Freight Index (CGFI). The Base Rate Index, which excludes the impact of accessorial charges assessed by carriers, decreased by 2.1% when compared to March. Average fuel surcharges assessed by carriers have seen a de28
ct&l july 2013
TransCore Canadian Spot Market Freight Index 2008-2013 2008
2009
2010
2011
2012
2013
% % Change Change Y-O-Y M-O-M
Jan
214
140
171
222
220
228
4%
25%
Feb
217
117
182
248
222
198
-11%
-13%
Mar
264
131
249
337
276
245
-11%
24%
Apr
296
142
261
300
266
229
-14%
-7%
May
316
164
283
307
301
252
-16%
10%
Jun
307
185
294
315
295
Jul
264
156
238
245
233
Aug
219
160
240
270
235
Sep
203
180
234
263
200
Oct
186
168
211
251
215
Nov
143
157
215
252
215
Dec
139
168
225
217
182
TransCore Canadian Spot Market Freight Index 2008-2013
crease from 22.43% of base rates in March to 21.43% in April. “Cross border LTL continued on an upward swing, however, all other segments declined,” said Doug Payne, president and COO of Nulogx. “Total costs are 1.2% higher than a year ago.” The CGFI is sponsored by Nulogx, a transportation management solutions provider, and is used by shippers and carriers to benchmark performance, develop business plans, and secure competitive agreements. It was developed with the assistance of Dr. Alan Saipe. The most recent results are available at the CGFI Web site: www.cgfi.ca.
ATA economist surprised by May’s record truck tonnage
US for-hire truck tonnage jumped 2.3%, reaching the highest level on record, according to the latest figures from the American Trucking Associations. May’s gains came on the heels of a 0.2% decline in April. May’s seasonally-adjusted tonnage is the highest reading since December 2011. Compared to May 2012, tonnage was up 6.7%, representing the largest y-o-y gain since December 2011. Year-to-date, the tonnage index is up 4.5% compared to the same time period last year. “After bouncing around in a fairly tight band during the previous three months, tonnage skyrocketed in May,” ATA chief economist Bob Costello said. He said some of the increase is attributable to factory output rising in May for the first time since February (+0.2%) and retail sales performing stronger than expected in May (+0.6%). Costello added: “The 6.8% surge in new housing starts during May obviously pushed tonnage up as home construction generates a significant amount of truck tonnage. “While we heard good reports regarding freight levels during May, I have to admit, I am a little surprised at the large gain in tonnage,” Costello said. He added that tonnage continues to outpace the number of loads hauled as heavy freight (ie., housing construction materials and sand and water for hydraulic fracturing) is outperforming box trailer (ie., dry van) freight. www.ctl.ca
RBC Canadian Manufacturing PMI™ Canadian manufacturing conditions improve considerably in May 58.0
HIGH: 56.9 57.0 56.0 55.0 54.0 53.0 52.0 51.0 50.0 49.0
LOW: 49.3
48.0 Oct
2010
Jan
Apr
Jul
Oct
2011
Jan
Apr
2012
Jul
Oct
Jan
Apr
2013
50 = no change from previous month Source: RBC, Markit The intellectual property rights to the RBC Canadian Manufacturing PMI provided herein is owned by Markit Economics Limited. Any unauthorised use, including but not limited to copying, distributing, transmitting or otherwise of any data appearing is not permitted without Markit’s prior consent. Markit shall not have any liability, duty or obligation for or relating to the content of information (“data”) contained herein, any errors, inaccuracies, omissions or delays in the data, or for any actions taken in reliance thereon. In no event shall Markit be liable for any special, incidental, or consequential damages, arising out of the use of the data. Purchasing Managers’ Index™ and PMI™ are trade marks of Markit Economics Limited, RBC use the above marks under licence.
Railway freight enjoys strong growth in April
The Canadian railway industry saw double-digit growth in commodity loadings in April, as freight traffic carried rose 11.0% from the same month in 2012 to 30.2 million tonnes, Statistics Canada reports. The growth was spurred by a strong increase in domestic nonintermodal loadings which helped offset a decline in shipments received from the US. Within Canada, combined loadings of non-intermodal freight (i.e., cargo moved via box cars or loaded in bulk) and intermodal freight (i.e., cargo moved via containers and trailers on flat cars) rose 13.0% to 26.9 million tonnes. Non-intermodal freight loadings reached 24.4 million tonnes in April, a 14.2% increase. The gain was mostly the result of robust growth in four commodities – iron ores and concentrates (up 791,000 tonnes), coal (up 790,000 tonnes), fuel oils and crude petroleum (up 595,000 tonnes) and potash (up 365,000 tonnes). These commodities accounted for more than twice the gain of the remaining 37 commodities that rose during the month. Intermodal freight loadings increased 2.4% to 2.5 million tonnes. Both containerized cargo shipments and trailers loaded onto flat cars contributed to the gain. From a geographic perspective, both the Western and Eastern railway divisions in Canada saw increased loadings in April. The Western Division, which accounted for 59.4% of the domestic freight loadings, rose 11.5% from the same month in 2012 to 16.0 million tonnes. The Eastern Division accounted for the remainder of the loadings and increased 15.3% to 10.9 million tonnes. For statistical purposes, cargo loadings from Thunder Bay, Ont., to the Pacific Coast are classified to the Western Division while loadings from Armstrong, Ont., to the Atlantic Coast are classified to the Eastern Division. Rail freight traffic received from the US decreased 3.2% to 3.3 million tonnes. The drop was brought on by a decline in non-intermodal loadings.
Purchasing Managers Index shows indications of awakening Canadian economy
Operating conditions in Canada’s manufacturing sector improved at the strongest pace in 11 months in May, partly reflecting a sharp acceleration in the rate of new order growth, according to the RBC www.ctl.ca
Canadian Manufacturing Purchasing Managers’ Index. The headline RBC PMI – a composite indicator designed to provide a single-figure snapshot of the health of the manufacturing sector – rose to an 11-month high in May. At 53.2, up sharply from 50.1 in April to a level broadly in line with the series average, the headline PMI index was above the 50.0 no-change mark that separates growth from contraction and consistent with a solid improvement in Canadian manufacturing operating conditions. The RBC PMI found that manufacturing output increased for the first time in three months during May. The solid rise in production levels was supported by a much faster expansion of new orders, which also contributed towards the first increase in backlogs of work for eight months and encouraged firms to hire additional staff. On the price front, input costs rose modestly in May, with the rate of inflation little-changed from April’s nine-month low. “The RBC PMI rose with spectacular fashion in May, signalling the strongest manufacturing expansion in 11 months,” said Cheryl Paradowski, president and CEO of the Purchasing Management Association of Canada. “The headline RBC PMI index improved significantly over previously disappointing readings in 2013, reflecting the first increase in output levels in three months and an accelerated rate of new order growth.” The headline RBC PMI reflects changes in output, new orders, employment, inventories, prices and supplier delivery times. The volume of new work received by Canadian manufacturers rose for the second month running in May. Firms generally reported greater client demand and new contract wins, as well a further increase in new export order volumes. Overall, the rate of total new order growth accelerated sharply since April to an 11-month high. The solid rise in incoming new work contributed to an increase in production during May. Notably, this was the first rise in output in three months, with the rate of growth faster than the series average. Concurrently, both the levels of work-in-hand and stocks of finished goods at manufacturing companies increased in the latest survey period. Although the rate of accumulation was modest, it was the first increase in backlogs of work for eight months. The monthly survey is conducted in association with Markit, a global financial information services company, and PMAC. ct&l july 2013
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the bigger picture
it ain’t pretty State of Logistics Report highlights ‘new normal’ in freight transportation
T Dan Goodwill, president of Dan Goodwill and Associates has more than 20 years of experience in the logistics and transportation industries in both Canada and the US. He has held executive level positions in the industry, including president of Yellow Transportation’s Canada division, president of Clarke Logistics, general manager of the Railfast division of TNT, and vice-president of sales and marketing at TNT Overland Express. Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. He can be reached at dan@dantranscon.com.
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he Council of Supply Chain Management Professionals recently released its 24th annual State of Logistics Report. Last year, business logistics costs were once again 8.5% of US Gross Domestic Product (GDP), the same level they hit in 2011, the new report says. That means freight logistics was growing at about the same rate as the GDP. Inventory carrying costs and transportation costs rose “quite modestly” in 2012, said the report’s author Rosalyn Wilson. Year-over-year, inventory carrying costs (interest, taxes/obsolescence/depreciation/insurance, and warehousing) increased 4% year-over-year as inventory levels climbed to a new peak. Meanwhile, transportation costs were up 3% year-over-year, predominantly from an increase of 2.9% in overall truck transportation costs. This “new normal” is characterized by slow growth (GDP growth of 2.5% to 4.0%), higher unemployment, slower job creation (which will primarily be filled by part-time workers due to higher healthcare costs), increased productivity of the current workforce from investment in machinery/technology (and not human capital), and a less reliable or predictable freight service (as volumes rise, but capacity does not increase fast enough to meet demand). Wilson noted that slow growth and lacklustre job creation has caused the global economy to wallow in mixed levels of recovery. “This month will mark the fourth year of recovery after the Great Recession, and you’re probably thinking that there has not been much to celebrate,” said Wilson. “Is it time to ask, ‘Is this the new normal?’” For logisticians, the “new normal” means less predictable and less reliable freight services as volumes rise but capacity does not. In areas such as ocean transport, Wilson said, this can mean slower transit times. “I do believe the economy and logistics sector will slowly regain sustainable momentum, but that we’ll still experience unevenness in growth rates.” For cutting-edge logistics managers, however,
the current environment also means great opportunities to secure increasingly tight capacity in an era of shrewd rate bargaining. This is partly because the trucking industry, in particular, is facing a lid on capacity because of higher qualifications for drivers, while top carriers are becoming increasingly selective in their choice of customers and in the allocation of their assets. “Truck capacity is still walking a fine line – few shortages, but industry-high utilization rates,” Wilson explained. Truckload capacity continues to remain stagnant (with the majority of new equipment orders for replacement or dedicated fleets and the copious amount of truckload capacity sapping regulations coming down the pipeline) and the assumption that freight demand will continue to modestly increase (as the economy continues to muddle along at low single-digit GDP growth in combination with population growth), a less predictable and less reliable freight market is developing (as described in the “new normal”). “Qualified truck drivers have become a valuable commodity in very short supply.” Wilson predicts that this shortage will exacerbate as the economy improves even further. She’s predicting the current driver shortage of 30,000 will hit 115,000 by 2016. In the ocean and airfreight sectors, meanwhile, overcapacity is the issue. Railroads, meanwhile, have more than 20% of their freight cars in storage, she said. The 24th annual State of Logistics Report postulates that the lack of sustained growth, weak job creation, inconsistent freight volumes and rates have translated into a new normal for both the economy and logistics. While the State of Logistics Report sheds light on what happened in 2012, the “State of the Economy” track at our upcoming 2013 Surface Transportation Summit will take a peek at what to expect in 2014. Go to www.surfacetransportationsummit.com to find more information about CT&L the one-day event and to register. www.ctl.ca
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