Motortruck
Fleet Executive
C A N A D A ’ S
B U S I N E S S
NOVEMBER/DECEMBER 2012
M A G A Z I N E
F O R
F L E E T
O W N E R S
WHAT’S YOUR BEST MOVE? Make the most out of the year ahead with our Decisions 2013 report
RATE NEGOTIATIONS: Looking beyond the annual tug-of-war
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November/December 2012
Volume 81, No. 6
contents
COVER STORY 27 What’s your best move on capacity, rates, and service?
Learn from the insights of leading shippers and carriers with our annual Decisions 2013 report.
Features 19 FROM THE HEART Six of the industry’s most experienced and celebrated driving professionals speak candidly about life on the road – what keeps them going, what could drive them out and how fleet managers can improve the industry.
27
Departments 6 THE VIEW WITH LOU In the turbulent years ahead, trucking companies will need to know what they’re good at, focus on it, measure it and prove they’re the best at it, says editorial director Lou Smyrlis.
8 MAILBAG Do comments about buying cheap offshore tires really malign owner/ operators? Plus: a reader makes a case for better collaboration between shippers and drivers.
9 COMPETITION WATCH Anderson Trucking Service makes Albertan acquisition; Meyers buys New York-based 3PL; Bison set to deploy group of natural-gas powered tractors; and more.
10 THE BOTTOM LINE
19
Mike McCarron reflects on his recent sale of MSM Transportation and offers signs that the time may be right to sell your business.
12 TAKING CARE OF BUSINESS Canada’s new anti-spam legislation: what’s it all about and how can it affect your business?
36 GEARED UP Walmart Canada has unveiled a first-of-its-kind supercube trailer to greatly expand capacity. So why don’t truckers like it?
38 INSIDE THE NUMBERS A look at freight shippers’ capacity concerns, expected rate increases, surcharges and more from the Transportation Buying Trends Survey.
36
Special Inside: 13
Shippers and carriers came together to discuss pertinent industry issues at our first-ever Surface Transportation Summit in October. In this issue, our line-up of blue chip speakers debates the value of RFPs and ponders the challenges of the coming months.
trucknews.com
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November/December 2012 ❙ FLEET EXECUTIVE 3
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WHAT’S ON TRUCKNEWS.COM Brought to you by the editors of Truck News, Truck West and Fleet Executive
BLOGS
New TruckNews. com blogger and HR expert Carolina Billings discusses how to identify your company’s competitive advantage.
Editorial director Lou Smyrlis ponders whether equipment can fuel the trucking industry’s next consolidation phase.
Transportation industry veteran Kevin Snobel offers a list of safe driving tips for seven winter weather conditions.
You said it... “When the speed limiter law was enacted, the economic downturn was also enacted, so more trucks were sitting in Ritchie’s auction lot than driving up and down the road. The decrease in truck-related fatalities might also be related to this fact. I believe most drivers (particularly owner/operators) found that reducing average overall speed increases overall net income due to fuel savings. Using the safety angle to justify this legislation was political as it played on the public fear of big trucks. I have also noted that other forms of ‘unlimited’ transportation have continued their carnage unencumbered by the political guidance deemed so necessary to the trucking industry.” – RICK GREGOIRE’S COMMENTS ON LOU SMYRLIS’S BLOG, “NO LIMIT TO SPEED LIMITER CRAZINESS.”
Web TV:
Transportation Matters WORLD’S LARGEST TRUCK CONVOY 2012: Highlights from this year’s event in Paris, Ont. THE CAPACITY QUESTION: When will it lead to higher trucking rates? BIG MAN, LITTLE TRUCKS: Profiling model truck maker Dave Gordanier. STORMS AHEAD: Shipper-carrier panel weighs in on volumes for 2013.
FOLLOW US ON TWITTER @TruckNewsMag @AdamLedlow @JameMenzies @LouSmyrlis @JuliaKuzeljevic @KathyPenner Fleet Executive editors are now on the Find us on Facebook facebook.com/trucknews 4 FLEET EXECUTIVE ❙ November/December 2012
Whats On Sep 2012.indd 4
radio! For a list of stations and on-air times go to truckerradio.com.
trucknews.com
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Motortruck
Fleet Executive
is written and published for owners, managers and maintenance supervisors of those companies that operate, sell and service trucks, truck trailers and transit buses.
THE VIEW WITH LOU
NOVEMBER/DECEMBER 2012
VOL. 81 NO. 6
The Way Forward
EDITORIAL DIRECTOR
Know what you’re good at, focus in on it, measure it and be able to prove you are the best at it. Don’t worry about the locusts.
Lou Smyrlis (416) 510-6881 lou@TransportationMedia.ca MANAGING EDITOR
Adam Ledlow (416) 510-6890 adam@TransportationMedia.ca FEATURES EDITOR
L
istening to the executives on the panel discussing the state of the trucking industry at this year’s Ontario Trucking Association convention, it’s hard to feel much love for the road ahead. The panellists – Rob Penner, executive vicepresident and COO of Bison Transport; Jeff Bryan, president of Jeff Bryan Transport; Scott Tilley, president of The Tandet Group; Gord Smith, president of Manitoulin Transport; and Ron Tepper, CEO of Fastfrate – all expressed frustration with how long it may take to grow their business. For Smith, the best-case scenario was that things were likely to “go sideways for a few years.” For Bryan, we are already at the top (it must be a pretty low hill if that’s the case, I’m thinking) and things are going to stay flat. He’s already telling his people to stop looking for rainbows and learn how to make the best out of the situation. Unfortunately, this slow-growth, nothing-tobe-excited-about scenario of the future squared with the economic outlook that Emanuella Enenajor, economist with CIBC World Markets, provided the delegates attending OTA’s annual convention. Enenajor said the North American economy enjoyed seven “bountiful” years prior to the economic collapse and is now enduring a period of seven lean years. Almost sounds biblical. Should we expect a plague of locusts too? Our own market research, conducted across Canada, shows that 53% of shippers expect to boost their shipment volumes in 2013 above 2012 levels. That’s marginally better than the number who said likewise last year (50%), but down from those who expected volume growth for 2011 (60%). Perhaps more of a concern is the current state of the shipper mindset. Research we conducted earlier this year in partnership with the Canadian Industrial Transportation Association shows shipper priorities will make it difficult for carriers to push through the rate gains they’ve envisioned.
Shippers remain in a cost-cutting frame of mind with maximizing profitability and reducing costs cited as their top two priorities. Growth and increasing customer satisfaction trail considerably behind in their list of priorities. Requests for proposals (RFPs), maligned by many motor carriers, seem to be something the industry will have to get accustomed to as a result. As Lance Norman, vice-president of APPS Transport Group, acknowledged while participating in another OTA panel discussion on how the sales game has changed: It’s an RFP world and RFPs will likely be the primary method of sales going forward. Another trend is increased emphasis on technology, with just about every customer demanding some IT, electronic or EDI component to the transaction. And, of course, the carrier is expected to absorb the cost. Another trend is that distance to decisionmakers – both geographically and figuratively – is widening. It’s becoming harder to get in front of the ultimate decision-makers and the net result is less subjectivity in carrier qualification and the selection process, and more objectivity in that process. And nothing is perceived as more objective than rates. The growing use of 3PLs and 4PLs by shippers to manage their transportation purchasing is also adding a middleman to a financial transaction that already had little room for manoeuvring. What it all adds up to is that although motor carriers won’t starve in 2013 like they did during the recession, they will have to fight tooth and nail for every scrap of new business, for every chance to increase rates to more profitable levels. And that will mean concentrating on service levels. It’s easy to say you’re the best carrier in the country, Norman pointed out, but keep in mind that any shipper has heard the same from every carrier it has talked to on any given day. Can you prove that? In Norman’s words: Know what you’re good at, focus in on it, measure it and be able to prove you are the best at it. FE Lou Smyrlis, MCILT, Editor • lou@transportationmedia.ca
Julia Kuzeljevich (416) 510-6880 julia@TransportationMedia.ca
CREATIVE DIRECTOR
Roy Gaiot rgaiot@bizinfogroup.ca ADVERTISING CREATIVE DIRECTORS
Carolyn Brimer Beverley Richards
CONTRIBUTING EDITORS
Ken Mark James Menzies Ian Putzger John G. Smith Carroll McCormick Harry Rudolfs PUBLISHER
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Head Office 80 Valleybrook Drive Toronto, ON M3B 2S9 Motortruck Fleet Executive is published by BIG Magazines LP, a division of Glacier BIG Holdings Company Ltd., a leading Canadian information company with interests in daily and community newspapers and businessto-business information services. The contents of this publication may not be reproduced or transmitted in any form, either in part or full, including photocopying and recording, without the written consent of the copyright owner. Nor may any part of this publication be stored in a retrieval system of any nature without prior written consent. Motortruck Fleet Executive is indexed by Micromedia Limited. PUBLICATIONS MAIL AGREEMENT 40069240 Return Undeliverable Canadian Addresses to: Circulation Dept. – Motortruck Magazine, Suite 800 – 12 Concorde Place, Toronto, ON M3C 4J2 USPS 016-317. US office of publication, 2424 Niagara Falls Blvd., Niagara Falls, NY. 14304-0357. Periodical Postage Paid at Niagara Falls NY USA. Postmaster send address corrections to: Motortruck, PO Box 1118, Niagara Falls NY 14304. Member Canadian Business Press. Subscription Inquiries – (416) 442–5600. We acknowledge the financial support of the Government of Canada through the Canada Periodical Fund (CPF) for our publishing activities. ISSN Number 0027-2108 (print) ISSN Number 1923-3507 (digital)
6 FLEET EXECUTIVE ❙ November/December 2012 Member/Canadian Business Press
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MAIL BAG Do comments about buying cheap offshore tires really malign owner/operators? In my recent blog “Tread carefully: Tire selection deserves your respect,” I argued tires have to be “the most complicated ‘basic’ products you will find on a commercial truck.” I added that “drivers quick to blame their tires for an accident or owner/ operators keen to purchase cheap offshore tires to save a buck because ‘all tires are the same’ would be wise to visit a tire plant or two.” And that’s what I had done over the past few months, first spending time at Bridgestone Commercial Solutions’ flagship tire plant in Warren, Tenn. this summer and most recently at Michelin’s US3 plant in Spartanburg, S.C. Having spent hours at such plants and seeing firsthand the way they operate, I can tell you the sophistication and technology that goes into building a truck tire today – from the chemical compounds used and the design of the grooves or beads, to the mechanics of the curing process and detail that goes into the testing and quality control procedures – is truly a marvel to behold. And well worth considering when it comes to a purchasing decision between the established brands and bargainbasement-priced brands from Korea, China or India. At least one reader, however, took exception to my comment about O/Os looking to “save a buck or two.” See his comment below as well as my response. – Lou Smyrlis, editorial director I read with humour your comment “O/Os keen to save a buck or two” by buying offshore tires. This shows your drastic and ignorant understanding of O/Os in Canada. I would submit, Mr. Smyrlis, that most O/Os spend more time and consideration on their tire purchases than most fleets and maintenance advisers. Perhaps it would actually be the fleets that are trying to save a buck or two buying offshore crap. Yet again, O/Os being maligned. This time by our own industry media. Shame on you for an ignorant comment like that. – Brad McIlroy, O/O, Erb Group of Companies
The growing use of offshore tires in Canada from places such as Korea, China and India, often sold at much lower prices than established brands, is an issue we have been tracking through our research division on an annual basis since 2006. My comment was based on the findings of that research. What the research shows is that the use of such offshore tires has grown considerably among both fleets and owner/operators. Back in 2006, only 10% of O/Os and 19% of fleets responding to our annual Tire Buying Trends Survey told us they had used such tires in their operations. Within five years, that number had climbed to 45% of owner/operators and 47% of fleets. The comment is correct that fleets have been more willing to experiment with using 8 FLEET EXECUTIVE ❙ November/December 2012
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50% 40
USE OF OFFSHORE TIRES by O/Os by Fleets
30 20 10 0
2006
2007
2008
2009
2010
2011
2012
these offshore tires, but owner/operator use has grown substantially, nevertheless. It’s also interesting to note that 2012 represents the first year since the start of the survey that use of offshore tires has fallen off considerably from the previous year. As a further aside, we undertake a great deal of market research every year – everything from tire and equipment buying habits to freight volume, capacity and pricing trends to driver satisfaction levels. That is because we want to be sure that our comments are based on research rather than conjecture.
Collaboration must go further than shippers and carriers In his recent blog “Shipper-Carrier Collaboration,” Dan Goodwill said that remarks from the recent Surface Transportation Summit indicate there are underdeveloped areas where shippers and carriers, working together, can identify ways to improve efficiencies and reduce waste. Carrier executives very much appreciate shippers who treat them as business partners and who share information in an open and trusting manner. In these challenging times, when high equipment and fuel costs and rising driver wages are driving up freight rates, shippers should engage their carriers in meaningful discussions and look for opportunities to share information on best practices and cost efficiencies. One reader, however, believed collaboration should extend beyond the shipper and carrier. I agree that more collaboration with shippers is needed but also the drivers picking up loads deserve better information from the dispatchers and the shippers to make them feel more part of the vital chain. Right now, drivers are facing a lot of changes with Hours-of-Service and delays at border crossings, often for no real reason. This delays loads and adds to the cost of everything. Better treatment from some shippers would be greatly appreciated. Instead of being treated like an animal, we should be treated like professionals and a “thank you” goes a long way. – Tony Godsoe
To read and comment on our industry blogs, visit blogtn.trucknews.com. trucknews.com
12-12-05 8:13 AM
COMPETITION WATCH
St. Cloud, Minn.-based ANDERSON TRUCKING SERVICE (ATS) moved into the Alberta trucking market in October with the acquisition of WAYLON TRANSPORT. ATS said it eyed Waylon Transport as a good fit because of its proximity to roadways, rail yards and the Edmonton International Airport. Waylon Transport has established itself as an international and domestic transport provider while also serving the needs of Alberta’s oilfield. It runs 22 trucks and 40 trailers as well as a freight brokerage business. MEYERS TRANSPORTATION SERVICES has acquired Cheektowaga, N.Y.-based MEYERS DISTRIBUTION INTERNATIONAL (MDI). MDI is an 80,000-sq.-ft. warehousing and distribution facility, located within minutes of the border and the Buffalo International Airport. Officials say MDI will offer customized and flexible third-party services, and is able to service more than half of Canada and the US in one day’s transit time. The facility will specialize in consolidation/deconsolidation, order fulfillment, and inventory management, the company said. BISON TRANSPORT has announced it will deploy 15 natural gas-powered tractors in Alberta. The company inked a five-year deal with Shell Canada to fuel the trucks at Shell stations in Calgary, Edmonton and Red Deer. Bison is the first fleet to sign on with Shell, as it rolls out the first of its chain of LNG fuelling stations in Alberta. The LNG fuelling stations, to be built at Shell Flying J truck stops in the three Alberta cities, are expected to open in early 2013. “We are very pleased to be working with Shell on this leading edge initiative that stands to transform the commercial freight and fuel industries in North America,” says Trevor Fridfinnson, Bison’s vice-president, western operations. “Proving that this alternative fuel source can be economically and practically viable is our objective, aligning perfectly with our company values.” For its part, Shell is building a natural gas liquefaction plant at its Jumping Pound facility west of Calgary. The trucks will be from Peterbilt, with the 15-litre Westport HD engine. The first of these trucks will be delivered in November with the entire fleet of 15 to be deployed by January, Bison announced. CARAVAN LOGISTICS, in partnership with Risdale Transport, has opened a new terminal in Winnipeg. The new location, which joins Caravan’s Oakville, Ont. head office and Vaudreuil-Dorion, Que. location, boasts 450-sq.-ft. of office space and 15 trailer spaces available in the yard. The new terminal is located at 68 Bergen Cutoff Road in Winnipeg. “We are excited to announce the opening of our Winnipeg office as it represents an amazing opportunity to develop a local footprint in the growing markets of Western Canada,” said Caravan Logistics president John Iwaniura. “Caravan Logistics is always looking for drivers and managers that share a customer-focused mentality. We look forward to continuing to deliver our quality services to our customers and expanding Caravan Logistics’ service presence across Canada.” MULLEN GROUP has entered into a Memorandum of Understanding with two northern business partners to provide oilfield services, and transportation and logistics services in the Sahtu Settlement Area of the Northwest Territories. Its partners include HCI Holdings and Red Dog Mtn. Contracting. The companies have agreed to jointly develop oil and gas fields in the region over the next number of years. The MOU has resulted in the formation of Canol Oilfield Services, which will operate as a standalone company, with Mullen being a 45% stakeholder, the companies announced. BISON TRANSPORT has received an award as Outstanding Large Business from the Manitoba Chamber of Commerce. The award was presented as part of the Chamber’s Business Awards gala, held Oct. 18. Bison was selected from a group of finalists that included Cargill and HyLife. Rob Penner, executive vice-president and COO of Bison accepted the award. FE trucknews.com
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November/December 2012 ❙ FLEET EXECUTIVE 9
12-12-05 8:14 AM
BOTTOM LINE
FOR
RAISING THE SALE
When is the ‘right time’ to sell your business? By Mike McCarron
I
t didn’t hit me until my bride and I were going through customs in France, excited about our much-needed European getaway. After scrutinizing my passport, the agent raised his head and asked what I did for a living. I embarrassingly looked around and whispered, “I’m unemployed.” Yes, in October, my partners and I sold the freightbrokerage/trucking hybrid we started 22 years ago in Toronto with a phone and a fax machine. I was no longer in sales management, no longer had a paycheque. I was standing in front of a smug French customs agent trying to explain my occupation (or lack thereof). Freight brokering and trucking have been in my blood since I was hired out of university 30 years ago by a large American common carrier looking for a footprint in the Canadian market. It didn’t take long for me to hook up with other ambitious “kids” thinking we could do cross-border LTL better on our own. The years to follow were an unbelievable rollercoaster ride with twists and turns and a cast of characters that could fill a library of comic books. We built a successful business, and it was lots of fun. As news of the sale spread, truckloads of industry people began reaching out either to congratulate me or to wish me good riddance. Everyone asked the same two questions: why did you sell, and what are you going to do next? Being asked why I sold the business did not surprise me. What did surprise me was how many from the 50-plus crowd agreed with my reasons for selling at this time. As you get older, you reflect on your career and why you made the decisions you did. I don’t know where you’re at in your business, but here’s why it felt like the right time to sell mine:
The Fun Factor Let’s call a spade a spade: work wasn’t as much fun as it used to be. The 24/7 chime of the BlackBerry, the lack of loyalty, and the pressure on the bottom line can wear you down. As I gaze into my crystal ball, I see this as the new normal. My chats since selling the business made me realize I wasn’t the only trucker having problems falling back to sleep after the 4 a.m. trip to the bathroom.
Demographics The transportation industry is graying and there will be a glut of companies for sale. I read a study where 30% of motor carriers 10 FLEET EXECUTIVE ❙ November/December 2012
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earning less than $25 million annually said they were interested in selling within the next 18 months. With Economics 101 slanted in favour of the purchasers, I worried that multipliers in the future will be reduced even further. It might be harder to get out and even harder to get the price we deserved for more than two decades of blood, sweat, and tears.
Robust M&A Activity Transportation merger and acquisition activity was strong in the first quarter of 2012, even when you extract five major deals valued at a $1 billion or more. Investors have hoards of cash sitting in banks collecting 1% interest and just looking for a home. Despite concerns about the global economy and fears of a double-dip recession, transportation and logistics are expected to grow in the next 15 to 20 years. We wanted to take advantage of this current “mini” perfect storm because no one can predict the next economic tsunami or when everyone else will want to get out.
A Need to Learn After being self-employed for more than two decades, I felt like I had stopped learning. Our management team built such a finely-tuned sales and marketing system that I had almost worked myself out of a job. Even mundane tasks were a challenge, as there was always someone in earshot willing to help the boss-man in the corner office. I stopped going in on weekends because neither the security guard nor I had the Masters degree required to work the $100,000 photocopier. So that answers Question No. 1. Regarding what’s next, I don’t know, and that’s exciting. I’m too young to wake up every morning with nothing to do. I’ve learned over the years that for a personality like mine, free time is not your friend. On the other hand, I have lots of friends in the business – and many want advice about selling their company. Unemployment is overrated! FE
Mike McCarron is a former partner at MSM Transportation in Bolton, Ont. He still has transportation in his blood, although his heart isn’t pumping as fast as it did earlier this year. Follow Mike on Twitter at @AceMcC. trucknews.com
12-12-05 7:42 AM
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TAKING CARE OF BUSINESS
CANADA’S NEW ANTI-SPAM LEGISLATION: What it’s all about and how it can affect your business By Mark Borkowski
I
recently spoke with Ralph Kroman, a business lawyer with WeirFoulds LLP, about Canada’s new antispam legislation. He helps his clients deal with intellectual property and technology matters such as the acquisition of information technology, and the licensing and protection of copyright, trademarks and confidential information. Q: Let’s start with the basics. What is Canada’s new “AntiSpam” law? Kroman: Canada passed the Fighting Internet and Wireless Spam Act, unofficially referred to as the “Anti-Spam Act,” in December of 2010. It has not yet entered into force, but once it does, likely sometime in 2013, it will regulate certain activities to deter damaging and deceptive forms of spam and will ultimately promote the efficiency of our economy by prohibiting electronic threats to commerce. How will this new law impact Canadians and how they run their businesses? Kroman: This Act will have a significant impact on Canadians and their businesses, specifically regarding how they handle electronic means of conducting commercial activities. For instance, the main application of the Act relates to electronic messages sent to encourage participation in a commercial activity, including the purchase of goods or services by the recipient. These are referred to as “commercial electronic messages” and include messages sent through email, social networking sites and text messages. Individuals and businesses are prohibited from sending these messages without the consent of the recipient, identification of the sender and corresponding contact information, and inclusion of an unsubscribe mechanism. Even if you send a single electronic message targeted to one individual person, it may be subject to the Act. So, businesses will definitely want to review this law now in order to prepare for compliance. In addition to sending commercial electronic messages without consent, what other activities are prohibited by the Act? Kroman: Some of the other prohibitions involve the installation of computer programs without express consent; the alteration of transmission data resulting in electronic messages being delivered to a different destination without express consent; the use of false or misleading representations online in product or service promotions; and the collection of personal information and electronic addresses through computer programs without permission. The full list of prohibitions can be found at fightspam.gc.ca.
12 FLEET EXECUTIVE ❙ November/December 2012
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It seems like the key factor where most of these prohibitions are concerned is consent. Can you elaborate a bit further on this requirement? Kroman: There are two types of consent to consider: express and implied. Express consent occurs when the recipient has outwardly agreed to the receipt of the messages. Implied consent occurs when there is an existing business relationship between the sender and recipient. Implied consent usually expires two years after the most recent business transaction between the sender and recipient. Once the Act comes into force, we are given a transitional period where the consent of a person who has an existing business relationship is implied only until they either retract consent, or until three years after the day the Act came into force, whichever is earlier. What happens if someone, whether an individual or a business, is caught violating the Anti-Spam Act? Kroman: With respect to violations involving the absence of consent, there is a reverse onus obligation where, if investigated, you must be able to prove that you obtained consent, express or implied. There are serious implications and penalties for violating the Act. Individuals can be fined up to $1 million per violation, while entities, such as corporations, can be fined up to $10 million per violation. How can Canadians and businesses protect themselves from these implications? Kroman: Compliance is the key to protection, and awareness and preparation are needed for compliance. Review the regulations, understand them, and take the necessary steps to ensure you comply. Look at your electronic communications and determine which ones would be classified as commercial electronic messages and be caught by the Act. Then, review your database of contacts and determine where consent is required for future communications. You will also want to establish procedures for obtaining express consent, for maintaining lists of recipients who fall under implied consent, and for removing recipients when implied consent expires. Finally, make sure all communications comply with the Act and include all requisite information and the unsubscribe mechanism. FE For more information on the Anti-Spam Act, contact Ralph Kroman at 416-947-5026 or rkroman@weirfoulds.com.
Mark Borkowski is president of Mercantile Mergers & Acquisitions Corporation. Mercantile is a mid market M&A brokerage firm. Contact www.mercantilemergersacquisitions.com. trucknews.com
12-12-04 12:12 PM
Surface TranSporTaTion 2012
S
ummit
Surface TranSporTaTion
hippers and carriers work better when they work together. That’s what we have believed since bringing together our array of carrier and shipper publications, Web sites and newsletters more than a decade ago to create the most comprehensive information source on commercial transportation. And it’s what drove us to bring shippers and carriers together for our first annual Surface Transportation Summit this Oct. 17 in Mississauga, Ont., in partnership with Dan Goodwill & Associates. Transportation and logistics practices are becoming increasingly complex and an effective supply chain is becoming recognized as a competitive differentiator. At the same time, there are lingering questions about capacity, pricing and service standards. By bringing shippers and carriers
2012
together in an educational setting, we were looking to foster productive dialogue and networking. We were rewarded with a blue-chip lineup of speakers, more than 200 delegates and a very insightful exchange of ideas. But this conversation is too important to allow it to end there. So with this issue we are providing a comprehensive report on the major themes from the conference. Look also for our Inside the Numbers and HookedUp e-newsletters for more information as well as future episodes of our award-winning WebTV show, TMTV. And don’t forget to book Oct. 16, 2013 into your calendar for our next Surface Transportation Summit.
ummit
Surface TranSporTaTion 2012
Lou Smyrlis, editorial director, Transportation Media
ummit
Dan Goodwill, president, Dan Goodwill & Associates
2012 SUMMIT SPONSORS CITT is Canada’s foremost designation granting association in the supply chain and logistics sector. CITT offers professional development for anyone who buys, sells or manages the flow of goods and product – or is impacted by transportation logistics. CITT’s professional development offerings include: • Professional certification • Hot-topic, industry-related webinars and a top-rated annual educational conference • Face-to-face and online networking opportunities • Specialized logistics and business management courses
Zurich Insurance Group (Zurich) is a leading multi-line insurance provider with a global network of subsidiaries and offices in Europe, North America, Latin America, Asia-Pacific and the Middle East as well as other markets. For more information about the products and services it offers and people Zurich employs around the world, go to www. Zurichcanada.com. In Canada, Zurich is a leading commercial property-casualty insurance provider serving the global, large corporate, middle and specialties markets.
Surface TranSporTaTion 2012
An expert-level technical and business education and a professional designation from CITT are all affordable, accessible, and have the best ROI in the business. Visit our website at www.citt.ca for more information. trucknews.com
Summit MTR2.indd 13
ummit
SUPPORTING PARTNER
November/December 2012 ❙ FLEET EXECUTIVE 13
12-12-04 8:52 AM
Surface TranSporTaTion 2012
ummit
CONSTRUCTIVE OR COUNTERPRODUCTIVE?
Surface TranSporTaTion 2012
ummit
Shippers and carriers debate value of RFPs
BySurface James Menzies TranSporTaTion
A
ummit 2012 re Request for Proposals (RFPs) a constructive, mu-
tually beneficial process for both shippers and carriers, or are they, as one motor carrier executive deemed them, “Really friggin’ pathetic”? That was the most contentious issue of the day during the Surface TranSporTaTion 2012 Surface Transportation Summit, which brought together ummit 2012 more than 200 carrier and shipper executives. The event, sponsored by Motortruck Fleet Executive, Canadian Transportation & Logistics and Dan Goodwill & Associates, included a spirited debate on whether an RFP builds, or damages, shipper-carrier relationships. Mark Seymour, CEO of Kriska Transportation, got the discussion rolling when, while lamenting the tremendous amount of waste in the system, called for better collaboration between shippers and carriers and declared “business tenders are no way to get waste out of the system.” Brian Springer, vice-president, transportation with Loblaw Companies, when speaking later the same morning as part of the Managing a Win-Win Shipper-Carrier Rate Negotiation panel, defended the process. “I tend to disagree,” Springer said of carrier notions that RFPs are counterproductive. “Formal RFPs, when done in the right way – not a formal RFP where I’ll just grab the lowest cost and run with it, that doesn’t do anyone any good, you’re just back in the same place six months down the road – give you an opportunity to share all your lanes both ways with the carrier community and then really capitalize in balancing those lanes with carrier freight. So, I think there are some good opportunities there.” Dan Einwechter, CEO of Challenger Motor Freight, was part of the same panel discussion. He countered: “For every good RFP we see, I’d tell you I see two bad ones, where they’re empowering the wrong people to put data together; it’s a dumbing down of information, it’s not correct information and at our place, RFP at times means ‘Really friggin’ pathetic,’ because of the lack of data and because of inconsistency.” Too often, said Einwechter, shippers are hiring outside agencies to put together RFPs without a comprehensive understanding of transportation and logistics. “What happens is that the incumbent carrier pays the price, and, at times, our shipper, the client, who you may have a strong relationship with, pays the price because at the time when they least need or deserve turmoil, they have it intentionally inflicted upon themselves,” Einwechter said. He said Challenger recently saw an RFP that listed $45 as the target rate for loads going from Southern Ontario to Toledo, Ohio. 14 FLEET EXECUTIVE ❙ November/December 2012
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“I told my guys, ‘Throw it away, don’t even look at it. There’s no accurate data in there, don’t waste your time,’” Einwechter recalled. Wes Armour, CEO of Armour Transportation agreed that RFPs often impose an unnecessary burden on carriers. He said his company has received RFPs from customers that generate $30,000-$35,000 per year in revenue. “Any money we make on them, we spend trying to fill out the RFP,” Armour said. “The questions are ridiculous, there’s no room for flexibility, such as ‘Can we give you an intermodal rate or short-sea shipping?’ – there’s none of that in there. It’s ‘What is your rate?’ and that’s what they’re after.” For carriers that have established strong relationships with their customers, there could be opportunities to sidestep the RFP process. Michael Tan, divisional vice-president, supply chain and transportation with Hudson’s Bay Company, admitted he has forgone the process with sophisticated carriers such as Armour. “When we sat down with Armour, it was initially predicated on an RFP,” Tan said. “My team and I quickly decided to throw the formalities of the RFP out the window, and instead ended up with very candid dialogues with Wes and his team. I don’t take the same approach with each negotiation, but in this case it worked out very well.” Einwechter said RFPs generally fail to reflect the added value that large, sophisticated fleets can bring to the table, such as quick access to data, monthly route analysis, a customer’s trends and patterns, etc. “That stuff doesn’t get picked up in an RFP, so when it comes to decision time, our contact who would like to deal with us is pressured from somebody else to go with the cheaper rate and they don’t realize what they’re going to be losing, so we have to keep selling that value proposition to our customers,” Einwechter said. Springer admitted that, oftentimes, the incumbent carrier is at a disadvantage through the RFP process because it may be familiar with some of the inefficiencies in the system and will build that into the rate, while a competitor that’s bidding on the freight for the first time will not. Springer advised carriers to identify these extra costs in the RFP and not to bury them in the rate. He also admitted shippers need to be aware of these nuances when making decisions. “The RFP process is an opportunity for carriers and shippers to get connected, not just grab the lowest cost and run,” Springer said. “It really comes back to understanding what’s in an incumbent’s cost and what’s in the new carrier’s cost.” FE trucknews.com
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THE HUMAN EDGE become their best people. The fact is, we–need to understand executives said their top three concerns involved finding and GREATER COLLABORATION riers – Kriska included still have fences to that what makes usmend successful in a role is the same that retaining the right people. following the downturn. Hething realized makes us challenged moving to another role.” “I think a lot of companies have a talent management people within his organization were going NEEDED BETWEEN CARRIERS, All of us have atofilter, and sometimes, the right put person for approach, but I’m not so sure that it’s always tied in with the suffer when a bank manager to him the right job doesn’t interview well. goals of the organization,” said Lobraico. bluntly: “You make the tough decisions, or SHIPPERS: KRISKA’S SEYMOUR “Wouldn’t it benefit yourthem organization When it comes to succession planning, for example, the I’ll make for you.” to have a tool that Seymour also acknowledged many car-
leading companies By James Menzies of the world are already looking at the
next potential candidates in the pipeline for CEO. Assessments are a way to uncover s Canadian carriers continue competencies to repair their that balmay indicateance potential for successful performance in a new sheets following the Great Recession, rate position or increases one involving greater responsibility. They can are are inevitable. However, shippers useful not only for succession planning, but also for training minimize any future rate increases if they’re and engagement. willing to work more closely with their carrier partners to Lobraico said from there the are usually levels of at eliminate waste system,three according to decision Mark Seywork when a company is hiring. The first two levels involve mour, CEO of Kriska Transportation. theSeymour visible stuff, such as appearance, knowledge, education, urged greater collaboration between shippers and manners. and carriers when speaking at the 2012 Surface Transportathe level threeby stuff – such as Fleet attitudes and motivation – tionIt’s Summit hosted Motortruck Executive, Canadian that can lead to problems and sometimes terminations. Transportation & Logistics and Dan Goodwill & Associates. “People who are engaged sell morethat and have fewer Seymour gave an example of a customer recently asked accidents,” said Lobraico. for a rate decrease. When Seymour said he’d consider it if how improved can a company bestterms, leverage behavioural the So shipper its payment unloaded trailers assessments? more quickly and lowered its trailer detention requirements, a role wasn’t where interested. the skills and knowledge sets are the the “In company same, such as in nursing, is get it fair say a nurse is “We a nurse is “Some people just don’t it,”toSeymour said. have a nurse? No, behaviour affects the role from ward to ward. no more to give in terms of rates. What we have to do is work Assessment allows to understand who islots theofleader, together to get rid ofyou waste, because there’s waste and still there are different leader styles (i.e. collaborative, more in the system, but it’s going to take a collaborative or effort to aggressive),” get rid of it.” he said. Working conditions alsorates impact on performance. Seymour said Kriska’s took an 18% hit Optimizing from 2008 employee engagement is about understanding the employee through early 2010, and have not yet been fullyifrestored. fits“We the culture But “It’s an employee who is the got halfofofyour that workplace. back,” he said. been a combination wrong fit for your organization is not always at fault. of getting half back and reducing our costs that has allowed us “We often have a ‘sinkI don’t or swim’ attitude managers, to return to profitability. think we’ll with ever our get it all back; as with our drivers. One of the things you’ll find in organizations it’s not coming back anytime soon. But rates have to go up bewith multiple that whatthat drives the culture the cause there arelocations too many is influences are outside of ourisconbehaviour of the leadership at that particular location. If you’re trol that will not allow us to stay where we are today.” sitting in an office talking with somebody why they don’t Seymour said most Canadian carriersabout are still licking their fit the organization, whose responsibility is that? So toolsratios like wounds, trying to repair their balance sheets, profit assessment put the spotlight on your managers. Ultimately, if and cash flow. we“We havelost people problems, we have a management problem. control of pricing,” Seymour admitted. “We alEither A, know how to hire, or B, they don’t know lowed thethey tail don’t to wag the dog.” how to develop the employee. can’t besaid all things all Heading into the downturn,You Seymour Kriskatoand people; your organization has a personality, and there are many companies like it already thought they ran lean. When going to people thatjust don’t fit,” said more Lobraico. forced tobe look further to survive, waste was uncovIt’s important to understand that “We lead people, ered and removed. But the carrier itself can’t remove all we inmanage process. Assessment allows us to identify the efficiencies from the system, he warned. strengths those who tothe manage process “We’reof not going to are get better waste able out of system unlessand we lead people,” said Lobraico. work together,” he told more than 200 shipper and carrier In his years of experience in the trucking Lobraico executives at the summit. “Business tendersindustry, are no way to get also observed that automatically promoting people a waste out of the system. I think rates need to go up,tobut higher role sometimes didn’t have the best results. maybe they won’t need to go up as quickly if we can get “Weout. hadThere’s a history of taking our best people, promoting waste a tremendous amount of it stuck in the them to failure, and then they would go to the competitor and middle and we can’t get it out ourselves as carriers.”
A
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will tell you what that“Employees person will be on the job? Anytime gotlike hurt,” Seymour admityou’re hiring someone or promoting someone, you have ted. “Long-term decisions were made that to decide, you puttingif them in a place where they our can were in theirare best interests they wanted to hang around succeed?” said Lobraico. organization, but they felt like they got hurt; they felt like they 35-40% job when success, got Anywhere taken from.from That’s natural,of but youafter haveall, to comes make from motivating behaviour and drive. those decisions, people that trust and respect you will, over someone isthat coming driving job, they probably time,“Ifunderstand it hadin tofor be adone.” can drive. We do our due diligence, but what towe Seymour said Kriska has offered rate increases its really drivhaven’t determined is, will they do the job, and do fit ers in each of the past two years as it has returned to they profitour organization? Is it motivating to them? That determines ability. “I think we repaired some of the damage that wasif they will it and if they will perform.” done,” he do said. “A lot of when you’re casual in your Seymour alsotime, warned of the risks more involved in acquiring organization, when there are shortcuts, there are other businesses. It can be a great way to diversify, butmany not reasons why perfect fits leave.” necessarily to the grow, he warned. Kriska has made five acquiTheinPredictive Index allows companies to manage the sitions the past five years and is smaller now than it was gaps that exist between the job model or the behavioural five years ago. demands of the job, thebusiness, individual or thesustainnatural “It’s a great way to and build to model, create more behavioural strengths of a person. ability and to diversify your income stream, but you have to “Wecautious,” have had people tell warned. us the tool is great takes to us be very Seymour “Good fitsbut areit hard longer to make a hire. But the retention is great. If you want find. Often, it’s the culture that can drive a wedge between to a makeand a significant impact You in your business, you want hire good bad acquisition. certainly don’t want to to make slow,” said Lobraico. an acquisition that’s a cultural misfit.” As the also trucking faces morecompany competition from Seymour urgedindustry carriers to run their as though other sectors for fewer and fewer available and qualified they’re looking to sell it, even if the sale of their business isn’t on potential their radar. employees, a tool that enables companies to better fit“If theyou person to the mould with becomes all thetomore run your business discipline driveessential. profitabil“What you’ll find is, in the new environment we’re going ity and sustainability, you’re always going to be in the position to come into, it is our good people that are going to leave. to sell, or at least to be profitable and seen in the eyes of lendFE It’sasnot going to be your poor Seymour performers,” said Lobraico. FE ers being very disciplined,” advised.
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Surface TranSporTaTion 2012
ummit
POST-MORTEM OF A RECESSION: Surface TranSporTaTion WHAT HAS ummit CHANGED? By James Menzies 2012
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any shippers and carriers have emerged from the Great Recession leaner and more efficient than Surfaceever before, but the economic catastrophe has TranSporTaTion left a permanent mark on the transport industry. ummit 2012 Carrier and shipper executives who came together at the 2012 Surface Transportation Summit agreed the difficult economic times of 2008-2010 forced them to make some tough decisions and to dig deep for improved efficiencies. Michael Tan, divisional vice-president of supply chain and Surface TranSporTaTion transportation with Hudson’s Bay Company, said his company ummit 2012procurement called upon consultants, enhanced its negotiation skills, tightened up details in certain contract terms and re-examined the modes it was employing. “It forced us to explore ways to maximize sales as well, to segment our business and departments within our business and revamp the transportation strategy for each,” Tan said. “Moving fashion for The Bay was different than moving home products.” Also speaking of the shipper experience was Brian Springer, vice-president of transportation with Loblaw Companies. “It forced us to focus on our transport costs in a more in-
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depth way,” he said. “We were a decentralized business. The downside to that is you have regional cost centres that are accountable to their own P&Ls, so you don’t look at the greater good. One of the things we had to do is become more centralized in our business. We had to look internally in terms of how we were structured, in terms of our own fleet versus 3PLs, did we have the right balance? Even within our own fleet, did we have the right gear and were we spec’ed right? Did we have the right labour models in place? Do we really collaborate with 3PLs and carriers as well as we should?” During these soul-searching exercises, Springer said it also became clear Loblaw wasn’t as organized as it should be. It used different technology platforms to track inbound and outbound freight, which “really never portrayed a real accurate profile of what our network looked like, so we never gave carriers the full picture,” Springer acknowledged. “One thing we had to do was completely revamp our technology platform, so now we have one platform across the system and that helps us explain to a carrier what we need from them.” As a result, Springer said Loblaw can now provide its carri-
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er partners with six-month, six-week, six-day and 24-hour forecasts, rather than catching them by surprise the night before the shipments need to be delivered. On the carrier side, Wes Armour, CEO of Armour Transport, said he had the foresight to pay off the company’s debt before the recession kicked in, which put the company in an enviable position once the economy tanked. “One of the advantages of owning my own company was I was able to put the profits back into the company,” Armour said. “We had no debt, our equipment and buildings were paid for. I made the decision it was better to invest my money into my own company that I had control over rather than the stock markets.” This allowed Armour to retain most of its driving force as well as its support staff and executives and to offer small pay increases throughout the recession. Still, the company had to look for cost reductions wherever possible and Armour said: “This has made us a better carrier. We thought we had all our costs under control, but what we found when we started looking is there were better ways to do things.” Armour retained most of its customers through the downturn, but was affected by paper mill closures and the fact its customers were shipping smaller loads. “We certainly saw less volumes during this period of time,” Armour said. “It wasn’t less customers, all it really meant was shipments were much smaller. Instead of having a 1,000-lb
shipment every week from a customer, we ended up with a 600-lb shipment. We still had the same number of stops, the same amount of traffic, except the truck was generating a lot less revenue because the shipment was smaller. That is coming back slowly, but it took us a while to figure out why we weren’t getting the same revenue.” The permanent closure of most paper mills in Eastern Canada will force fleets serving the region to re-evaluate their routes, Armour said. “Some of these mills shipped 550 metric tonnes a day to the US, Ontario and Quebec,” he said. “It creates a huge imbalance coming eastbound versus westbound and southbound that hasn’t been able to fix itself and never will. That was a huge volume for our industry for years (which allowed us) to reposition trucks back in and move LTL back in the opposite direction.” For Challenger Motor Freight, the key to surviving was to diversify into new markets. Dan Einwechter, Challenger’s CEO, said his company focused on new opportunities such as heavyhaul and the emerging wind energy market. This was crucial, since cross-border freight dried up and fleets that traditionally ran north-south turned their attention to running east-west, where Challenger had traditionally been focused. “It was interesting to watch carriers race to the bottom on rates at times with no rationale,” Einwechter recalled. “When
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there’s less volume, you’d think rates Surface should go up so you have more profit on TranSporTaTion each load to cover off your expenses, but ummit 2012 it just goes the other way. Rates that were $800 became $650 became $600.” tonnes in carbon offsets and slowly currently he’d Even with the industry recoverget about $240.” Surface ing, Armour said certain changes are likeTranSporTaTion not One seemsuch like observation a lot of cashis lyThat here might for good. ummit 2012 back considering the work and that many shippers trimmed investment staff during involved, but, if nothing it could give on a the downturn and areelse, now counting company bragging rights and maybe a martheir carriers to fill that void. keting tool. Onseems the other hand, thethis, financial “Nobody to mention but in orour marketing bottom line may not be hapthe experience, what seems to have Surface most important aspect of the program, to TranSporTaTion pened with our customers – and I assume ummit some. The value of fuel saved outweighs the 2012 this – is that they have lost a lot of people value of thethe credits and it always will, through recession because in Arcand order to told the Sun, but the social value of stay competitive, they had to letcontribpeople uting a cleaner environment is priceless. go,” toArmour said. “Now, what our cusAs for(traditionally) what a trucking company has to tomers did, we as carriers doare tolooking comply,after Stedeford says COAC pronow. That has changed vides the expertise and does all the work. the whole focus. When they are looking basically come in and all the how infor“We value, I’m not sure theydorealize stallation,” he says. “We do an awareness much a carrier does now. The customer session, put our in (the doesn’twehave the modems horsepower to trucks), do a lot we capture all the data and we send of these things they used to do. Inreports fact, in tomany the company let them where cases it’stohard to get know a phone call they need to focus, which operators a back when we have an issue that need is problittle bit of help in a certain area.” ably their issue.” FE Equipment is installed by COAC to ac-
TALENT SHORTAGE WILL CONSTRAIN INDUSTRY CAPACITY: DAY & ROSS COO
GreentoGold
MERCANTILE MERGERS & ACQUISITIONS Mercantile Mergers & Acquisitions Corporation are a mid-market M&A brokerage firm. The company specializes in the purchase and sale of mid-market companies, including the Transportation industry. In addition, the company advises on business valuations, mezzanine, and equity financing, management buyouts, restructuring of debt, family business re-capitalization and workouts. Contact (in confidence): Mark Borkowski, President at: (416) 368-8466 ext. 232 or mark@mercantilema.com Mercantile Mergers & Acquisitions Corporation
don’t necessarily amount to marketing what curately measure fuel consumption. Stedeford says it isn’t really about the basically appear to be merely mathematical hardware, though. “Ours is a behavioural pro- calculations (carbon offsets), but which ingram,” he says. “So it’s just trying to work stead help trucking companies increase their with all of the operators to be aware of chang- efficiency in other ways, sometimes offering esBy theyJames can make that will significantly reduce government rebates to help encourage comMenzies panies to become more efficient. the amount of fuel that they’re burning.” Alberta’s Trucks of Tomorrow program, COAC’s Web site says a normal installafor example,growth offers rebates companies truckwho tion of their equipment into a truck and here will be many factors limiting capacity in thetoCanadian improve fuel efficiency and reduce greennon-hydraulic lifting equipment, such as an ing industry, but chief among them will be a lack of qualified drivers. house gas emissions by of embracing such equipexcavator, is $4,000, including the cost of Doug That was the message from Harrison, COO Day & Ross Group, ment as cab heaters, auxiliary power units, the setup itself. That’s a healthy chunk of when speaking to a full house at the 2012 Surface Transportation Summit, and trailer skirts. Stedeford says the COAC’s change for a vehicle, but Stedeford says hosted by Motortruck Fleet Executive, Canadian Transportation & Logistics and Dan however. COAC can help there, too. Shippers on-handsystem Goodwill & Associates. heardworks that better, trucking capacity is likely to The government has triedregulations, plans on their “We actually do the whole thing,” he remain tight, due to the rising cost of new equipment, forthcoming inown to offer rebates and the but trucks they says. “We come in, we put the program tocreased consolidation and a reluctance among the carrier communitylike, to add don’t catch on very wellof because of the pagether, we suggest the equipment they in an uncertain freight environment. But Harrison added: “One the greatest capperwork and trying to figure out what you’re should put into their units, we can schedule acity issues we have going forward is talent.” supposed do for it. Besides, says, his whenCiting to do it, we can even it, so it’s Chamber numbers fromfinance the Canadian of to Commerce and the he Conference group offers extremely aggressive pricing, so very much a win-win.” Board of Canada, Harrison said the Canadian transport industry is short 27,000 the cost for people to get the equipment and Truckers who find the idea of selling carpeople today, with that expected to grow to 74,000 people by 2015. putI can it inbuy will fuel, be better they do it bon offsets but who mayorder not want “I canattractive order trailers, I can power, but I than can’tifmanufacture themselves. Plus, they have trained installers topeople,” surrenderHarrison their independence may find said. “To me, the greatest constraint going forward will be the so companies don’t have to figure out how themselves out of luck. people side of the equation, not the equipment side or the fuel side.” it done andemployer” whether it’sindone right. “IfDay someone does it all on their own, the & Ross is looking to position itselfto asget a “preferred hopes of atThe biggest positive, Stedeford says, is carbon offsets won’t be available because tracting more drivers and support staff to its operations. money in thesaid. pocket you have to be inthat the program,” “It’s people deliver theStedeford value that that you there’s provide,” Harrison “Forofusthe gotrucking company. “If we can help trucker says. “So while they might (reduce their ing forward, we’ll be spending more time on our culture, focusing ona how we reduce his plans fuel consumption by 10%,” he emissions) they can’t sell their unless bring people in and how offsets we look at succession to ensure we’re a place it’s gone through people want tosome join.”sort of auditing, an says, claiming that is a conservative estimate, “then for the amount of equipment we put agreed-upon methodology. And if they Harrison also said the company will be developing relationships with post-secin and our commission charge, the operator haven’t, they shouldn’t be out there telling ondary schools and First Nations groups to raise awareness of the career opportunputting money in the bank. their that actually re- isthe itiescustomers available at thethey’ve company and within industry. “As for COAC’s if you duced (their emissions) by ‘X’ amount.” Even if drivers were readily available, Harrison said Day &commission, Ross would be caudon’t reduce fuel COAC doesn’t get anyIt may end up being a moot point before tious about adding capacity in the current environment. thingclosely other than the equipment,” says.to too long, anyway, if thewe’re so-called Cap and very “As an industry, all watching forfor when is the righthe time “We take (our commission) on the Trade concept becomes a reality in B.C., invest in capacity?” Harrison said. “We certainly have to invest in renewal,fuel but saved, so pragmatic we bear a lotview of the there.as Not something Stededford saystois invest going toinhapwhen is the right time capacity? The is risk caution we pen (short of a change in provincial govern- only that but, because we have the adminismove forward.” trative wesupply can help smaller compament,He perhaps). also warned shippers in attendance thatability, simple and demand will nies who can’t afford all the administrative It’s basically a carrot-and-stick approach, put upward pressure on trucking rates. So, too, will infrastructure deficiencies, where the polluter pays while the seller is costs of setting up that whole infrastructure he added. to followwill the need required methodology.” rewarded forpart, beingHarrison green. Stedeford the industry For its said thesays trucking to continue to innovate, So is this program a money-making cooperative already has a number of memwhether it be through the adoption of alternative fuels such as natural gas, propor the osition for monitoring trucking companies faced with a bers across the province. deployment of technologies such as for the remote of equipment. tough, uncertain market,and or isevolution it a way and to “I think the summary is, this is certainly a period of change entice truckers into signing over their soverOther ways to go green like most industries, leading providers will be required to focus on cost managefor 30 pieces silver? Or is customer it both? Different jurisdictions have or are pursuing ment, people and innovation, along with eignty understanding andofanticipating Only time will tell. ways to reduce emissions and fuel use that mt needs,” Harrison concluded. FE
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DRIVER SATISFACTION
FROM THE HEART SIX OF THE INDUSTRY’S MOST EXPERIENCED AND CELEBRATED DRIVING PROFESSIONALS SPEAK CANDIDLY ABOUT LIFE ON THE ROAD - WHAT KEEPS THEM GOING, WHAT COULD DRIVE THEM OUT AND HOW FLEET MANAGERS CAN IMPROVE THE INDUSTRY
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WHAT DRIVES DRIVERS?
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t’s one of the most critical issues a fleet owner or manager has to understand. Effective recruitment and retention will be just as important to future growth strategies for the nation’s carriers as finding new customers, pushing through higher rates and investing in new technology. There will be many factors limiting capacity growth in the Canadian trucking industry, but chief among them will be a lack of qualified drivers. That was the message delivered by Day & Ross Group’s Doug Harrison when speaking to our 2012 Surface Transportation Summit. In his words: “I can order trailers, I can order power, I can buy fuel, but I can’t manufacture people.” Citing numbers from the Canadian Chamber of Commerce and the Conference Board of Canada, Harrison said the Canadian transport industry is short 27,000 people today, with that expected to grow to 74,000 people by 2015. How do you build a winning strategy when it comes to driver recruitment and retention? How do you position your company as a “preferred employer” among the almost 13,000 forhire and similar number of private carriers crowding the Canadian trucking marketplace and all drawing from the same shrinking labour pool? We believe it starts with understanding what drives drivers in the first place. And that has been the main reason behind our annual National Driver Satisfaction Survey. Our research division, Transportation Media Research, spent the previous six years surveying company drivers and owner/
operators across the country – through e-mail, at industry shows and through focus groups – to get to the heart of critical questions such as which parts of their job drivers most strongly feel their employers should recognize and reward; which areas they want to receive more training; and the relative importance they attach to having a say in a range of management decisions. Our research also looked at how satisfied drivers are in their jobs, how often they change jobs and, when doing so, what would make them choose one company over another. Every year we have shared the results of this research with you in this magazine and at the many industry events at which I have been invited to speak. This year, for a change of pace, we elected to take a different path with the survey. We chose instead to take a focus-group style approach, conducting in-depth interviews with six of the industry’s most experienced drivers and owner/operators. In the following pages, these outstanding individuals speak from the heart with contributing editor Harry Rudolfs, a driver himself, about what it takes to make a long-term career out of trucking, the things that boost their job satisfaction and things that would make them consider leaving the industry. They also speak candidly about how to improve the industry and attract new people. Research of the scope and breadth we have conducted over the past seven years is a considerable undertaking and would not have been possible without the help and support of our founding sponsor, Michelin North America (Canada) Inc. It speaks to their commitment to this industry that they have chosen to support such research. Lou Smyrlis EDITORIAL DIRECTOR
FROM THE FOUNDING SPONSOR
MICHELIN NORTH AMERICA (CANADA) INC. Michelin North America (Canada) Inc. is Canada’s largest manufacturing employer in the tire industry. In all, over 3,700 people work in its three Nova Scotia manufacturing plants and at its headoffice in Laval, Quebec. Michelin was founded in Canada in 1941, and last year the company celebrated 40 years of manufacturing operations in eastern Canada. Michelin produces tires for both individual and commercial customers nationwide. As a testament to Michelin reliability, the public transit vehicles in several major Canadian cities, including Montreal, Quebec City, Regina, Winnipeg and Vancouver, are equipped with Michelin tires. From coast to coast, on two wheels or four, Michelin is without a doubt a better way forward. Michelin is pleased to have the opportunity and proud to be the Founding Sponsor of Transportation Media’s 2012 Driver Satisfaction research. The North American economy runs on trucks and understanding the driver’s view is a key to making sure trucking is safe, effective and efficient for everyone. Driven by a constant will to innovate, we are proud to help provide a longterm response to issues pertaining to mobility. 20 FLEET EXECUTIVE ❙ November/December 2012
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DRIVER SATISFACTION
manage a driver’s every move, whereas, as drivers, we have no control over road conditions, accidents or road closures, yet they want accurate ETAs. I realize that customers want to know where their freight is, but why does it have to make my job more difficult? It seems like they’re making a simple thing more complicated. We used to do just fine delivering loads from point A to point B using a pen, paper, and pay phone. Are there things that would make you consider leaving the industry?
[ HOWARD BROUWER ] Owner/operator with Schneider National, 2010 Truck News Owner/Operator of the Year Home: Welland, Ont. Experience: 20 years Typical run: Southern Ontario or Quebec to mid-US and return
If the economy continues to get worse, I would then consider hanging up the keys. I’m not going to buy another truck. So as long as my truck is running, I’ll keep at it for a couple more years. Of course, a serious illness would also change everything. If my wife or myself developed a health problem, we’d retire immediately. What’s your advice for attracting new drivers?
Honesty in recruiting is important. Don’t sugar-coat the job. Guys spend $6,000-8,000 on a driving school and have no idea what to expect. Recruiters will sing a nice song to get them on board, but the reality of life on the road can be different from what they expect. That way they’ll get applicants who want to do the job and less turnover.
What’s key to making a long-term career out of driving?
Like other owner/operators, I take great pride in my profession and my business. I want my business to be successful and I have a passion for this work. And I’m stubborn, I guess. It’s been a struggle the last couple of years. But I had a goal to make a million miles accident-free as a company driver, and a million miles as an owner/operator, and I’m just 100,000 short of that goal on my Western Star. I’m 55 now and planning to retire in a couple of years. How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
With the economy the way it is, it has been difficult the last few years. The loads aren’t very balanced, lots of freight going south and not enough coming back. It’s frustrating when you’re an owner/operator to have to sit and wait for a load coming back. I also have some issues with the communications technology we are now using. The other day I was driving through Chicago, and the satellite squawked something at me. I thought the voice said that my load was “deleted,” when it actually said was “updated.” I’m starting to think that all this new technology is actually getting in the way of truck driving. In my opinion, we have shippers, receivers and office personnel trying to microtrucknews.com
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I’m starting to think that all this new technology is actually getting in the way of truck driving. And your advice for improving the industry?
I think it’s important for management to listen to drivers. They are the eyes and ears for the company. For instance, a girl at one company told me that they had loads that didn’t get to Canada last week and I immediately told my people about the situation, and I asked for a follow up. And get rid of Just-in-Time delivery. The customer is promised a tight delivery window and this leaves no time for the driver to stop and eat properly and take breaks when they are needed. I’m noticing a trend towards third-party warehousing which will relieve the pressure of Just-in-Time freight. November/December 2012 ❙ FLEET EXECUTIVE 21
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subjected to a meddling of one sort or another. Basically, truck drivers take too much crap and are reluctant to stand up for themselves. Our situation isn’t going to get any better until we find a common voice. Are there things that would make you consider leaving the industry?
[ MARK LEE ] Company driver for Paul Brandt Trucking, Truck News columnist Home: Steinbach, Man. Experience: 29 years Typical run: Western Canada and lower 48 States
A big lottery win would do it. But seriously, I would get out tomorrow if i could get something that fulfilled me as much as trucking does, but I’ve never found anything like it. I’ve survived the bumps of many economic cycles, so a bad economy isn’t going to chase me out. As far as health issues go, I’m trying to avoid them by managing my own life as best I can. I can’t see changing what I’m doing unless I was struck with some major health or family issue, but for now I’m able to keep things balanced.
What’s key to making a long-term career out of driving?
What’s your advice for attracting new drivers?
I do enjoy it. I like to think that the job can always be done better, so I’m always striving to be more efficient. Truck driving is something I always wanted to do. It must be some kind of small boy thing. I’ve had other types of jobs in this industry, but I really don’t belong in an office. To be successful at this business, you’ve got to have a sense of independence and calmness. You’ve got to be confident enough to confront the challenges as they arise. A good driver has challenges instead of problems. If you’re always having problems and can’t overcome them, you really don’t belong out here.
Trucking companies have to realize we’re in the 21st century now, and they’re still using practices from the 1960s. Kids aren’t interested in coming into a job that requires them to sleep on the shoulder of the road every night, with its unsociable hours and lack of facilities. Transport companies need to go to more regional runs and switches, and seek out partnerships with other carriers. Part of the answer might be hiring drivers from overseas, but the programs have to be managed properly. Loblaws just opened a huge distribution centre in Regina, Sask., and there just isn’t the population base in this area to supply enough drivers. I follow some ex-pat blogs and I understand the company has hired some drivers from the UK. Apparently, they are working out quite well.
In what other industry does a company go out and buy someone a $140K machine and then just throw them the keys? How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
In many ways, I’m very satisfied because I’m happy with my career. But in other ways this profession is getting worse because it’s so highly regulated – overregulated, I would say. While we’re trying to do our job, it seems we’re constantly 22 FLEET EXECUTIVE ❙ November/December 2012
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And your advice for improving the industry?
Training pure and simple. In what other industry does a company go out and buy someone a $140K machine and then just throw them the keys? Some companies go around the block with the driver and that’s all the training they ever receive. And by training I mean real hands-on training sessions, not just sending the senior driver along with the new hire and have him sleeping in the bunk. Driver training isn’t about having a free team you can push around for a few weeks. Driving schools don’t teach anyone how to drive. They teach you how to pass the driving test. You learn how to drive by doing the job with a mentor, if it’s done correctly. It’s a proven fact that individual drivers have the most impact on fuel economy. It costs companies more not to train a driver. If some of these carriers want to stay in business, they need to readjust their attitude towards driver lifestyles and training. trucknews.com
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DRIVER SATISFACTION
Are there things that would make you consider leaving the industry?
I have been with FedEx Ground for 19 years and I have no intention of leaving the industry. I have ridden the ups and downs for many years – including the recession – and have positioned myself to sustain the instability of the industry. So far I have survived and intend to keep on doing so. What’s your advice for attracting new drivers?
[ MARTY GARDNER ] Owns 7 trucks on with FedEx Ground, 2008 Truck News Owner/Operator of the Year Home: Windsor, Ont. Experience: 30 years Typical run: Open board covering extra runs
What’s key to making a long-term career out of driving?
I enjoy the open road and the autonomy this job provides. It comes with a certain amount of freedom and independence, which I try to give to my drivers. As an employer, myself, I want to foster an atmosphere of mutual respect and trust in our workplace. Any company is only as good as its employees and I truly believe this. How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
From my drivers’ point of view, I would say their level of satisfaction is high and has been so all along. I think the key is scheduled linehauls. This allows my drivers to work hard and still have a family life. They can schedule their personal events around work, and they know where they will be at any given time. But maintenance costs are another matter, and they have risen dramatically with the introduction of new technologies. In the old mechanical days, I could basically fix any truck on the side of the road with a “MacGyver” repair, but I could not do that today – the electronics will shut down a truck with no hope of any quick fix. I would need to call an IT technician to plug in only to tell me that the truck needs to be towed in for repairs which is another huge expense. trucknews.com
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Truck driving does not appear to be very popular with the younger generation. Part of the problem with attracting new drivers is that young people can’t get any exposure to the industry. Due to insurance reasons, it is frowned upon to have passengers in the truck with you. When I started in this industry, I could drive around the yard or ride along with other drivers and learn the ropes along the way. You can no longer do this. You can offer someone a good job, a steady run and good benefits, but you cannot make them appreciate what they do. I’ve placed ads to find drivers and I’ve also hired drivers out of driving school (FedEx has a few schools that it finds acceptable) – both with mixed results. Some are just steering wheel holders while others have the appreciation and pride in what they do.
Part of the problem with attracting new drivers is that young people can’t get any exposure to the industry. And your advice for improving the industry?
Some things could be made better. For instance, not all truck stops have DEF fuelling tanks, so my drivers have to lug jugs of DEF around with them and keep it inside the cab in the wintertime because it freezes. But some things have gotten better – the new scales at Windsor and the one opening near London. You can get in and out quickly and more efficiently and there’s lots of room for inspections. But I can tell you what really rankles me as a small business owner is Workers Compensation (WSIB in Ontario). The premiums are outrageous. WSIB is necessary, but unfairly expensive. I frequently talk with other owner/operators like myself who have employees and they have the same negative experience with the WSIB. Workers Comp badly needs to be reformed in this province. It’s hurting small business owners. November/December 2012 ❙ FLEET EXECUTIVE 23
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From an equipment standpoint, things have improved so much. We’ve gone from springs to air ride suspensions, and even tilt steering is a big thing. In the old days, everything was bolted down. It didn’t matter whether you were a small or big man, you had to adjust to the truck. Driver comfort wasn’t considered important. Are there things that would make you consider leaving the industry?
[ ROBERT ST. VINCENT ] Owner/operator with Bison Transport, 2011 Truck News Owner/Operator of the Year Home: St. Malo, Man. Experience: 30 years Typical run: Open board running mostly southern Manitoba to mid-west US and return
What’s key to making a long-term career out of driving?
In my case, it’s in the blood. In the 1950s, my dad had a small transfer company in southern Manitoba. I come from a farming background and my dad always did some truck driving when he wasn’t busy farming. Every chance I could get, I was beside him and helping him. Truck driving is really a way of life and requires a commitment. Someone once said, “Find a job you love, and you’ll never have to work another day in your life.” You’ve got to want to do it and enjoy doing it. If you’re just in it only for the pay, then when things go wrong, you’ll really get discouraged.
I don’t think this generation has the same work ethic that my generation had. They’re not even interested in being independent. How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
At this point in my career, I’m quite satisfied. Trucking has been good to me, and I’ve been very successful at this. I’m happy with my equipment and I have a very good relationship with my carrier. 24 FLEET EXECUTIVE ❙ November/December 2012
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I wouldn’t consider leaving. Basically, I’ve dedicated my working life to being a truck driver and made my way up to owner/operator. I even built my own shop where I do all my own wrench work. So I’ve got too much invested to give up. I’m 50 years old, and I’ve never even considered retiring. What’s your advice for attracting new drivers?
My carrier bends over backward to accommodate drivers, getting them home when they have appointments or family issues. Things like that are important to drivers. But I don’t think this generation has the same work ethic that my generation had. They’re not even interested in being independent. When I was 16, I couldn’t wait to get out of the house and be on my own. Today, many of the kids live at home half their lives. When I started out, you had to prove yourself. You drove the oldest piece of equipment and worked your way up. Nowadays, these guys are handed new trucks with all the amenities of a mini-hotel room and they’re still not happy. One idea might be to change how drivers are paid and pay them by the hour. Start with a base rate and add a premium for different activities like border crossing or hauling dangerous goods. With EOBRs, it should be possible to tell if a driver is goofing off or not. And your advice for improving the industry?
Educating the public about trucks and their needs and capabilities should be a priority in every province. Four-wheelers don’t understand trucks and need to understand to leave a buffer zone around heavy vehicles. Secondly, improving the roads would be of great benefit to the industry. Some roads in Northern Ontario, for instance, are fifty years out of date and unsafe, in my opinion. This compares unfavourably to the United States where they’ve been rebuilding the Interstate system the last 15 years or so and they’re in much better shape. Lastly, investment in the industrial infrastructure around Winnipeg will pay off big time in the near future. This area is poised for growth; we’re already seeing large distribution centres going up around the west end of the city. Winnipeg’s location in the middle of the country makes it a thriving transportation hub, both for rail and road freight. trucknews.com
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DRIVER SATISFACTION
me to either leave the industry or search for a non-driving position within the industry. I see many of my peers struggling with issues of health and wellness as a result of years of lethargy fuelled by a lifestyle that embraces fast food and tobacco. I continue to try to be creative in finding ways to balance all of these factors in my life. It’s not easy. What’s your advice for attracting new drivers?
[ ALAN GOODHALL ] Company driver for J&R Hall Transport, Truck News columnist Home: London, Ont. Experience: 15 years Typical run: Weekly LTL loads to Winnipeg with US reloads
What’s key to making a long-term career out of driving?
To be concise: it’s the money, the freedom, and a sense of adventure that keeps me coming back. But I think the key to making a long-term career out of this work is first to recognize it as a lifestyle as well as a career. This needs to be understood by your family also. You’re doomed to a life filled with unneeded stress if you can’t get your head around the fact that you live the job 24 hours a day as an OTR driver. How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
The trucking lifestyle is a catch-22 for me. I love what I do, but often feel I’m getting too much of a good thing and balance it with the amount of time I get to spend with my family. That can suck you into a downward emotional spiral. Time, the lack of it, and how we use it is the common thread running through all the major issues faced by drivers today. In terms of wages, I don’t think there is much doubt that most of us are working longer for the same money we earned 10 years ago. The cost of living and inflation has eaten into our once-well-above-average income and limits us to the amount of downtime we can take to recharge and re-energize ourselves. Are there things that would make you consider leaving the industry?
As I age (I’m into my early fifties now), the amount of time I must spend on the job is the major factor that would cause trucknews.com
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That’s the million-dollar question, isn’t it? Well, if we want to attract professionals, we need to treat folks like professionals. That starts with an apprenticeship program that addresses all aspects of a driver’s responsibility in detail. Until an investment is made across the industry to develop mentors and professional trainers along with a system that allows individuals to obtain professional accreditation for the different skill sets, I don’t think we will get a handle on the driver shortage in the long term. Short term, I don’t know what the answer is. Major players in the industry seem to think that importing drivers is the short-term solution, but that may create more problems than it will resolve in the long term.
Time, the lack of it, and how we use it is the common thread running through all the major issues faced by drivers today. And your advice for improving the industry?
If we’re going to improve the industry, I think we have to first get out of the negative mindset we tend to fall into surrounding the major issues of the day. Exponential technological growth is a huge issue across our whole society and drivers need to recognize this for its potential benefits. Think of Hours-of-Service. Going back to paper logs is not going to resolve anything in my opinion. We should be developing ways of embracing technology to resolve HoS issues and promote positive change that is of real benefit. I guess what I’m saying is that we (drivers) need to stop looking backwards. That’s no easy task when most of us are in that 50+ demographic and we’re finding the rapid changes all around us very taxing. November/December 2012 ❙ FLEET EXECUTIVE 25
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DRIVER SATISFACTION
usual to see a truck driver being discourteous to other drivers, but that’s not the case today. There used to be more mentoring. When I was starting out, there would always be someone who would help you, who would tell you what’s going on. There’s still some of that in the industry, but much less. Are there things that would make you consider leaving the industry?
[ HARRY RUDOLFS ] Company linehaul driver with Purolator Courier Home: Toronto, Ont. Experience: 35 years Typical run: Montreal-Toronto runs and open board work
What’s key to making a long-term career out of driving?
It has never lost its novelty for me. I’m also lucky enough to have hauled a lot of different things in my career – cars, steel, lumber, dangerous goods – and this gives me a varied background from which to draw on. The key to making trucking a long-term career is you have to be able to challenge yourself every day. You have to want to do it; it’s no use giving someone a job and then having to crack a whip over to keep them motivated.
Some carriers still don’t have any kind of fuel-saving program in effect and they are wasting countless litres of fuel. There has to be a performance incentive of some type or drivers will keep idling forever. How satisfied are you at this point in your career? What is causing you to be more or less satisfied than in the past?
I’m very satisfied with the equipment. Everything is better in that regard. We don’t get the flats like we used to, and we don’t get as many breakdowns. Driver comfort is also head and shoulders above what it used to be. What’s not satisfying is the attitude of the public, and that of other drivers. When I first started driving, it would be un26 FLEET EXECUTIVE ❙ November/December 2012
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I can’t see ever giving up my licence. I would only give it up if I was forced to do so. There are opportunities for older drivers. I’m not planning on retiring. I’m planning to still drive a truck after the age of 65. Why should I give up something I love to do? What’s your advice for attracting new drivers?
My advice would be multi-pronged. First of all, when it comes to new drivers, we have to get them at a younger age. I would really like to see a little bit (about the profession) in the school curriculum. Somehow you’ve got to get it in youngsters’ heads that they might like to drive truck one day. Secondly, with manufacturing jobs drying up, there’s a new segment of the work force that might consider this trade. Some of these people might become good truck drivers, but they don’t know it yet. There must be a way of targeting these workers looking for a second career and introducing them to the profession. Lastly, many carriers are looking overseas to attract new drivers, and I think this is a good thing. These candidates are usually pre-screened drivers so you know you’re getting good potential employees. Many already have good English or French skills and make excellent workers and citizens. And your advice for improving the industry?
Some carriers still don’t have any kind of fuel-saving program in effect and they are wasting countless litres of fuel. But these programs have to be done right. There has to be a performance incentive of some type or these guys will keep idling forever. One of my pet peeves is signage. Some distribution centres and shippers are hard to access, and the lack of good signage makes it that much more difficult. Much time is wasted by having to drive around the block looking for an address, not to mention increased potential for a fender bender while doing so. Good signage can save fuel, time and reduce accidents. On a macro level, with Walmart introducing its 60-ft. trailer, we’re quickly reaching the maximum length one driver can safely haul and that our highway infrastructure can handle. If we’re really going to go the route of extra length trailers, LCVs or triples, we should really be thinking about separating the truck lanes. FE The preceding interviews were conducted by Harry Rudolfs, a frequent contributor to Fleet Executive and Truck News, and blogger for TruckNews.com. Rudolfs has more than 30 years experience in the trucking industry, hauling cars, steel, lumber, chemicals, auto parts and general freight as well as B-trains.
trucknews.com
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DECISIONS 2013
What’s your best move on capacity, rates and service? Learn from the insights of leading carriers and shippers.
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12-12-05 9:19 AM
DAN EINWECHTER CEO, Challenger Group of Companies
WESLEY ARMOUR President, Armour Transport
BRIAN SPRINGER
The Panellists
WESLEY ARMOUR
DAN EINWECHTER
DECISIONS 2013
BRIAN SPRINGER Vice-president, transp ortation, eastern Canada, Loblaw Companies
FROM THE SPONSOR
Shaw Tracking is a leader in GPS tracking technology and fleet management solutions for the Canadian Transportation Industry. Shaw Tracking is committed to bringing the latest technology to its customers that are customer-focused with tangible ROI benefits. Their tracking solutions not only generate data, but also enable users to transform the data into action plans to help improve fleet visibility, fuel management practices, operational efficiencies and driver retention and performance. Shaw Tracking is dedicated to providing those in the Transportation and Logistics industry with value-added insight and support to help run their organization as efficiently and effectively as possible. With more than 750 customers and over 50,000 units on the road, Shaw Tracking has proven results. But “Proven Results” is not just a marketing tagline. Shaw Tracking has demonstrated 28 FLEET EXECUTIVE ❙ November/December 2012
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time and time again that their customer-focused approach, along with their dedicated support team, strives to work hand in hand with their customers to unearth ways that they can help improve how they service and add value to their customers. Coupled with over 22 years experience and dedicated support to the Transportation and Logistics Industry, Shaw Tracking is committed to working with their customers to perform at unprecedented levels. Shaw Tracking continues to act as founding sponsor of the “Shipper-Carrier Issues Roundtable” for the seventh consecutive year. Shaw Tracking is pleased to continue to support the important insight and dialogue brought forward by prominent industry stakeholders. To learn more about Shaw Tracking, visit www.shawtracking.ca. trucknews.com
12-12-05 9:19 AM
{ COVER STORY }
NEGOTIATIONS:
sident, transp ortaw Companies
MICHAEL TAN
BRIAN SPRINGER
IS THERE A BETTER WAY FORWARD?
MICHAEL TAN Vice-president, supply chain and transportation, Hudson’s Bay Company
S
hipper-carrier freight rate negotiations are a tug-of-war at the best of times. But in the face of a deep recession followed by a slow recovery, they have too often turned nasty. Shippers are pressed to keep the lid on rate increases as long as they remain uncertain about future demand. Carriers, meanwhile, need to rescue their profit margins from the carnage of the recession. Are we doomed to be stuck in acrimony until the economy regains its normal strength? Or is there a better way forward, even now? To find out, I spoke to leading motor carrier and shipping executives during a panel session specifically dedicated to rate negotiations at our recent Surface Transportation Summit, a one-day event presented in partnership with Dan Goodwill & Associates. The shipper-carrier rate panel discussion, sponsored by Shaw Tracking, brought together: Dan Einwechter, CEO of Challenger Group of Companies; Wesley Armour, president of Armour Transport; Brian Springer, vice-president of transportation, eastern Canada, with Loblaw Companies; and Michael Tan, vice-president of supply chain and transportation with Hudson’s Bay Company.
>>
I believe their comments on how to build an environment of trust and collaboration that allows both sides to achieve these business objectives show the better way forward. Lou Smyrlis, EDITORIAL DIRECTOR trucknews.com
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November/December 20122 ❙ FLEET EXECUTIVE 29
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RATE NEGOTIATIONS
DECISIONS 2013
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FE: Just a few years ago, we went through one of the most severe economic downturns since the Great Depression and for the last couple of years, we have been working our way through a slow recovery. What impact did the Great Recession have on your company’s supply chain strategy and how it procures freight transportation services? Tan: My general philosophy is that a relationship where one party is struggling to make money and hating the partnership is really not a healthy and sustainable partnership. Beating down vendors for a couple of points really has no good long-term impact. That being said, we certainly were pressured to cut our costs. One of the first things we did was apply more sophisticated procurement expertise to our transportation services. We hired procurement consultants, but we also beefed up our analytics and negotiation skills and tightened up the details of our contract terms and conditions. It also forced us to re-examine the transportation modes that we were deploying while ensuring we had the proper people in place and processes and systems to support our operation. From an overall supply chain perspective, and having taken on the supply chain group, I had the luxury of going beyond transportation. It also forced us to find ways to maximize sales, to really segment our businesses and the departments within our businesses and, in turn, to completely revamp our transportation strategy to support each. Moving fashion for The Bay was entirely different, as we quickly learned, from moving home products for Zellers and Home Outfitters.
Educating customers has taken longer than many of us would have thought, but the issues of our industry are becoming more challenging and we have to continue to deliver that message. Dan Einwechter
Springer: Similarly, the Great Recession forced us to focus on our transport costs in a lot more indepth way. One of the things that was really prevalent in our business is that we were very decentralized. One of the downfalls of that is that you have regional cost
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centres, accountable to their own P&Ls and they really don’t look at the greater good. One of the things we had to do was become a lot more centralized in our business. We also had to look internally at how we were structured in terms of our own fleet and 3PL – did we have the right balance? Even within our own fleet, did we have the spec’ right? Did we have the right labour models in play? Did we collaborate with the 3PL players we deal with as well as we should? Are we a little too internally focused? One of the things that we realized was that our technology wasn’t there. From an outbound perspective, we planned from manually to spreadsheet and some degree of systems, but even within that, where we did use systems, our outbound freight and our inbound freight weren’t integrated. So we would never portray a real accurate profile of what our network looked like. We always put carriers in a bit of a struggle because we never gave them the full picture. So one of the things we had to do was completely revamp our technology platform. We are now one integrated system, both inbound and outbound. That helps us explain to carriers where we need to be and what we need from them. I disagree with comments that there is no room for formal RFPs. I think there is. Formal RFPs done in the right way; not RFPs where you just grab the lowest cost and run with that. That doesn’t do anyone any good. Six months down the road, you’re back to where you started. But a formal RFP provides the opportunity to share all your lanes, both ways, with the carrier community and then really capitalize on balancing those lanes with the carrier freight also. I think there are good opportunities there. FE: Wes and Dan, what impact did the Great Recession have on your company and the freight transportation services it offers to shippers and how it prices them?
Armour: Certainly, we saw less volumes during this period of time. It wasn’t fewer customers; it was smaller shipments. Instead of having a 1,000lb. shipment every week for a customer, you ended up with a 600-lb. shipment. So when the truck went out, it still had the same number of stops, except the truck was generating a lot less revenue because the shipments were smaller. That is coming back slowly. trucknews.com
12-12-05 9:19 AM
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{ COVER STORY }
What our customers used to look after, we end up looking after. That has really changed the whole focus. Wesley Armour
trucknews.com
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The other thing in our area that really hurt our industry was the closing of paper mills. Most of our paper mills are closed now. Some of these mills were shipping 550 metric tonnes a day to the US, Ontario and Quebec and their loss created a huge imbalance and that situation really hasn’t been fixed and never will because these mills are closed for good. These were huge volumes for our industry for years and years and helped reposition our trucks. We certainly went through fierce competition. We didn’t see much in rate decreases. We were able to hold our rates, but went two or three years with no increases. It’s hard to say, ‘How did that make you better?’ but that has made us a better carrier. We thought we had all our costs under control, but what we found when we started looking was that there were better ways to do things. We started working on that and became very active on it in 2011 and 2012. We also went out to look for more long-term partnerships. Losing the paper mills, we obviously had to replace that with other traffic. We’ve been able to do that, but it’s a different type of traffic than the trailer loads the paper mills created. We were fortunate going into this recession. One of the advantages of owning my own company is that I was able to put the profits back into the company, so we had very little debt. In fact, we didn’t have any. Our equipment and buildings were paid for. I made the decision that I was better off investing my money in my own company that I had control over rather than into the stock market or other places that someone else looked after. That philosophy has been with me for years. So we were in a strong position going into the recession and we continued to upgrade our trucks and give our people small increases. Now that we are coming out of the recession, we are really in good shape because our equipment is upgraded, and our people are staying with us. That’s a lesson that many carriers have to learn. It’s tough to get through tough times if you are not in a similar position.
Einwechter: I would mirror a lot of Wes’ comments. It was dramatic in Central Canada, it was dramatic in Eastern Canada, it was dramatic in the US. Almost every carrier was looking around in wonder. So how do you deal with that reality? Well, you have to be engaged with your employees and fill them in about what is going on in your own company, in the market around them. They are wondering, ‘Is it just us or is it everywhere?’ We made a serious commitment, in spite of the economy, to continue to upgrade our equipment. We went into some different markets on our heavy haul and wind energy side. We expanded in some areas, changed some areas on the van market side. We faced some additional competition on the van side because the transborder market was dramatically affected because of the volume of business and the dollar. A lot of carriers that weren’t on the east-west business that we’ve been involved in since 1994 decided to go into that marketplace. So there was a lot of turmoil, a lot of change, challenge and opportunity. It was interesting to watch carriers race to the bottom on rates at times. There was no rationale. When there is less volume, you would think rates should go up so you can get a little more profit on each load to cover off your expenses, but it went the other way. So rates that were $850 became $700, and $650. To Brian’s comment that there is a place for RFPs, there is. But for every good RFP that we see, I would tell you I see two bad ones, where they’ve empowered the wrong people to put the data together. It’s a dummying down of the information, it’s not correct information. At our place, RFP, at times, means ‘Really Friggin’ Pathetic’ because of the lack of data and inconsistency. When you hire these outside agencies, they are full of young, intelligent, skilled people, but reality eludes them. It’s a hell of a learning curve, but the incumbent carrier pays the price and, at times, the shipper pays the price because when they least need turmoil, they have it inflicted upon themselves. So for RFPs, as long as you don’t just use the lowest cost provider like some companies do; if you look at the data in an informed fashion, then that’s okay. But God forbid if the CFO or some executive who doesn’t have an understanding of transportation is looking over the shipper’s shoulder, and all they know is to take the lowest price. We saw an RFP show up from a customer
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Understanding from the carriers what are the things that are preventing them from hitting service milestones – that’s the real value of the scorecard. It highlights issues on both sides. Brian Springer
and their target rate for loads to Toledo, Ohio, southbound was $45 and their northbound was $45. I just told my guys, throw it away, don’t waste your time.
FE: That was an insightful look at how we got to this point. Next, I want to focus on where we go from here in terms of rates. I want to start with our shipper panellists. What are the competitive pressures that are affecting your decisions today when it comes to transportation rates?
Springer: We are in a very competitive retail environment. There are lots of good, strong players in the market. For us, it’s about pushing initiatives that reduce costs. We are in a very fresh environment; it’s important to our business, so speed to market is key. We are to the point where we are looking for carriers that have more diversity, where they are not just carriers. What other added value can they offer in terms of consolidation centres, etc. Shippers have a responsibility to make sure they provide the carrier with the right information. If you don’t, the carriers can’t make the right decisions in terms of business costing and, inevitably, you end up down the road at loggerheads. It’s really about understanding the strengths of the carriers, understanding our complete network. There really isn’t a whole lot of magic to this. If I have freight into Quebec and into Atlantic Canada and loads that come out of the US and the carrier has freight from the Atlantic into the US, I can fill that third lane. You sit down and talk about these things and those are the synergies that you find. But you only find those synergies through a truly collaborative process. FE: Is it your policy to treat all carriers the same from a freight rate standpoint or is each carrier treated differently, depending on what they have to offer?
32 FLEET EXECUTIVE ❙ November/December 2012
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Tan: Every carrier has its own strengths and constraints, so it’s necessary to treat each carrier differently. How differently depends on a lot of factors, such as regional presence or their existing customer base, their own strengths and weaknesses, their asset base and driver structure and in relation to our own demand. I think that while I would apply the same strategy towards two carriers within the same mode, I wouldn’t necessarily apply the same strategy across my entire network.
FE: Does it make sense from both a flexibility and cost-control standpoint to include in your stable of transportation providers both carriers who provide best-in-class service and get paid for that, and carriers who simply provide low-cost service and are paid accordingly, in the same way you may have differently-priced products for different income segments of your markets? Springer: I think you always need a mix of carriers in your stable. I don’t prescribe to the lowcost carrier option. We prescribe to the best cost carrier and that includes cost and service. We look at things such as is the carrier running the right equipment? In several of our scenarios, we are asking carriers to pull our billboards down the highway, so it’s extremely important that it’s not just the low-cost solution. But that doesn’t mean that smaller carriers with good costs can’t be the right solution. It comes down to having the right mix and the right synergy and right lane and niche. If the smaller carrier can execute on cost and they can execute on service, why wouldn’t we want to have them in our stable? By the same token, we have large carriers in our stable who provide cost and proper service as well. The expectations between those two carriers really is the differentiator at the end of the day. Whether you are a small carrier or a big carrier, we are going to hold you to a standard of cost and service. But larger carriers bring something extra to the table: the ability to flex when our volume flexes. In Ontario, we do just north of 6,000 outbound loads per week and you can multiply that by 1.5-fold for the inbound. If we have a fivetruck carrier in the mix, am I really going to expect them to flex with our volume, relatively quickly? Obviously not. They don’t have the resources to do that, they don’t have the asset base to do that. But I look at large carriers in a different trucknews.com
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light because there is some leverage against that volume. It’s not just about the low-cost carrier. Cost comes hand-in-hand with service. FE: If rate negotiations with each carrier are handled differently, what criteria are used to determine how a particular carrier should be treated? For example, are some of your longstanding core carriers treated differently from the carriers that receive less volume from your company? Tan: I certainly apply a set of criteria in evaluating our carriers. Reputation in the marketplace is extremely important for me. What is the bargaining power of the carrier’s customers? I look at whether they have a disciplined approach towards performance and service control and cost control. If I were to put a longstanding core carrier that we are very satisfied with next to one just off the street, the contrast should be fairly evident. And my approach with each would be fairly different. When HBC and Armour Transport sat down to discuss a potential partnership, for example, while it was initially predicated on an RFP, my team and I decided to throw the formalities of the RPF out the window and, instead, we ended up with fairly candid dialogues with Wes and his team. I don’t necessarily take the same approach towards every negotiation, but in this case, it worked out very well.
A relationship where one party is struggling to make money and hating the partnership is really not a healthy and sustainable partnership. Michael Tan trucknews.com
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FE: I would like to take it back to our carrier representatives. Are these comments representative of what you heard from your clients during the past few years? Is the value of the service provided by best-inclass motor carriers understood, appreciated and paid for by the shippers you do business with? Einwechter: Yes and no. I have shippers who are well informed, like the two here today. And then I have others who, during the height of the recession, had a very differ-
ent attitude. They opened up their contracts, feeling they owed it to themselves to double-check the rates due to market conditions, but now they are the same ones who are complaining because we want to open up a contract because the market is going in our favour. It was interesting to see. But I also have customers who understand what is looming, understand the dynamics, the history and they’ve had great dialogue with us and I like that. The rates may not go down, but the costs may go down because we will be collaborating. Educating customers has taken longer than many of us would have thought. Our customers have a mandate to keep their costs low, just like we do. They have to barter and negotiate, but the issues of our industry are becoming more challenging and we have to continue to deliver that message while we continue to provide good service. If we don’t deliver good service and still try to deliver that message, all our efforts are gone. Armour: I think there is no one answer to that. There are certainly shippers who look beyond just the price at the value you have to offer and those are the ones I enjoy dealing with because I think we can hold our own in that environment. There are customers now who are giving you $30,000-$35,000 a year and they create an RFP. Any money we make on the business we spend trying to fill out the RFP. And often there is no room for flexibility, such as moving some loads by intermodal; all they want is the rate. Carriers are focused on long-term stability. That’s what good carriers are looking at. Whether you have 1,000 trucks or are running a fleet of 10 trucks, when all of a sudden growth isn’t top line, you have to think of how to show a profit for what you’re doing. Also, going back to the impact of the recession, nobody seems to mention this, but I can tell you that my experience is that what seems to have happened with our customers is that they lost a lot of people during the recession. In order to stay competitive, they had to let people go. And now, what our customers used to look after, we end up looking after. That has really changed the whole focus. When they’re looking for value, I don’t know if they all realize just how much a carrier does now. In a lot of cases, the customer just doesn’t have the horsepower to do a lot of these things they used to do. In fact, in a lot of cases, it’s hard to even get a phone call
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back from them when you have an issue. We are running into more and more of this and every time we do, we have to add more staff or change our IT systems in order to comply with the customer’s needs. FE: We’ve heard that shippers use different criteria to evaluate carriers and that carriers are looking to treat different shippers differently, based on the relationship they have with them. When you are going into rate negotiations this coming year, what are the key criteria that will guide you as to how you will treat a particular customer? Einwechter: Profitability of the account, obviously. The amount of effort that needs to go into it – things such as trailer detention, do they pay for it? There are easy relationships and there are tough ones. The ones that are easy and give you the same amount of return or better, we will gravitate to those. The ones that fit our lanes, the ones that appreciate our value such as all the information we provide, all the backroom support, our customs capabilities, the monthly analysis of their trends and patterns. We have customers asking us for reports they can’t get from their own staff and we can turn that around in 10-15 minutes and that stuff doesn’t get picked up on an RFP. Volume is vanity; profit is virtue. We have to focus on the bottom line not the top line.
video stream To view our video coverage of this year’s Decisions panel, visit www.trucknews.com/videos.
34 FLEET EXECUTIVE ❙ November/December 2012
FE: Back to the shippers as we continue to explore how you value service. Do both of you use scorecards and what are the main points you look at on those scorecards? Springer: One of the things we make sure we are doing is to have a standardized process. We do have scorecards in place. They are, for the most part, service-oriented, looking at key things such as percentage of loads turned down, ability to flex, on-time arrival, CVOR in good standing, etc. At the end of the
day, the KPIs that any shipper uses are going to be somewhat consistent. There are KPIs that shippers need to run their business properly. For me, I become more engaged in terms of understanding from the carriers what are the things that are preventing them from hitting those service milestones – that’s the real value of the scorecard. It highlights issues on both sides. For example, if you are picking up the phone one day to tell the carrier you have 102 loads and the next day that you have 92 loads and then you struggle to understand why the carrier isn’t always executing to the levels that we need. Well, quite often, it’s because we put the carrier in a predicament. Understanding those issues, so that you can give the carrier a sixmonth, six-week, six-day and 24-hour forecast, means you no longer blindside the carrier. Now that we understand those core issues and we’ve put steps in place to mitigate them, the expectation is different. We’ve shared information and the expectation is that much higher. FE: Michael, what’s part of your scorecard and when carriers are being evaluated, how much input do they get on that evaluation? Tan: Our scorecards include a mixture of on-time performance metrics, lead time metrics, volume and cost metrics, and an issues log with, basically, root causes applied to every exception. Kudos to the carrier that comes to me with the kind of reporting I need to manage my own lead times and costs and sales objectives. I haven’t come across one that exactly meets my reporting needs, but I’ve come fairly close and inevitably carrier engagement in scorecard development is certainly necessary. At the end of the day, what sets apart a great carrier from a good one is what is proactively done to address the results of the metrics before a scorecard is even presented to me. Today, I’m working with a carrier on reporting that tracks and measures every stage of my logistics model between Toronto and Alberta with the intent of addressing every single exception with the accountable party, whether it be with the distribution centre, the carrier or consignee. If we are able to successfully administer this program it would drive 66% of my lead time out in serving the Alberta marketplace from Toronto without really impacting my regular costs and while maintaining near-perfect service performance levels. FE trucknews.com
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Cube AND CONTROVERSY Walmart Canada has unveiled a first-ofits-kind supercube trailer to greatly expand capacity. So why don’t truckers like it? By Julia Kuzeljevich, Carolyn Gruske and James Menzies
O
n November 6, Walmart Canada took the wraps off a radical new tractortrailer design it says increases cubic capacity by roughly 30%. The “supercube” trailer was designed and built in Ontario, in partnership with Innovative Trailer Design. The trailer itself is 60.5 feet long, 7.5 feet. longer than the industry standard. A lowered floor and 126-inch interior increases trailer capacity by 28%, offering 5,100 cu.-ft. of storage, and a drome box mounted to the back of the cab adds another 521 cu.-ft. of carrying capacity. The trailer is pulled by a Freightliner cabover. The tractor-trailer doesn’t exceed existing length or weight restrictions. Andy Ellis, senior vice-president of supply chain and logistics for Walmart Canada, introduced the design to stakeholders at the 2012 Transportation Sustainability Conference. “The conference provided us with a chance to showcase the supercube trailer not only with supply chain and transportation professionals, but also with other retailers,” Ellis said. “We’ve always said that sustainability is not a competitive advantage. We’ll share the knowledge and technology put into this truck with anyone who’s interested, just as we’ve shared the knowledge gained from our sustainable fresh food distribution centre in Balzac, Alta.”
36 FLEET EXECUTIVE ❙ November/December 2012
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Walmart’s supercube trailer was built under a special permit through a pilot program at the Ministry of Transportation in Ontario. The MTO is granting permits for four trailers, and two tractor units, and Ellis said the first of those vehicles was set to begin making deliveries as early as Nov. 12. Shipments of low-density cargo could benefit from the improved productivity, Ellis pointed out. While Walmart is more than happy to share the design with other shippers and carriers, the trucking industry hasn’t exactly greeted the new configuration with enthusiasm. The Ontario Trucking Association (OTA) held a carrier meeting prior to its annual convention Nov. 8 to discuss the new configuration. Numerous concerns were discussed about the manner in which the new trailer was brought to market and the oversight – or lack thereof – that could occur going forward. In a statement, the OTA board of directors declared: “The proposal to allow the longer trailers is not something the trucking industry has been advocating for or promoting. Therefore, the proposal does not enjoy the support of the trucking industry that previous changes to Ontario’s allowable truck configurations did. (The move, for example, to 53-ft. trailers or the controlled use of LCVs).” OTA also objected to the shipper, in this case Walmart, being granted a permit to operate the trailers when, in reality, they’d be pulled by third-party carriers. “Our members are very uncomfortable with this proposal as it currently stands,” said OTA president David Bradley. “The trucknews.com
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ed and sealed lightweight all-aluminum flat floor with antiproposed issuance of special permits to a shipper is a major slip surface minimizes trailer weight while providing a safe game-changer for the industry; it completely turns the whole and low-maintenance surface. Flush-mounted LED lights in approach to monitoring and managing truck safety on its head. This must be changed.” the ceiling with a timer switch at the trailer entrance provide Asked to explain the issuance of a permit to Walmart excellent visibility for loading and unloading freight. Canada for equipment that would ultimately be operated The drome box can contain four skids and rolls to the rear of by a third-party, for-hire carrier, and fall under said carrithe truck frame so it can be loaded by forklift. The trailer itself er’s CVOR, MTO spokesman Bob Nichols said it simply weighs 14,590 lbs, about 3% more than a conventional trailer. FE didn’t happen that way. He said the supercube pilot will follow the tradition of past pilot projects, especially when it comes to who is responsible for the trucks and trailers. “There is no change as to how these permits are being handled,” Nichols told sister publication MM&D. “The permits for this limited pilot will be issued to Walmart’s carrier and not to Walmart.” However, a Memorandum of Understanding between the Ontario Registrar of Motor Vehicles and Walmart Canada, obtained by Transportation Media, seems to imply otherwise. It reads: “The Registrar of Motor Vehicles, by authority of Section 110.1 of the Highway Traffic Act, agrees to issue Special Permits authorizing Walmart to operate extended semi-trailers on Ontario roads and highways.” The end of the document reiterates: “This MoU will remain in force as long as And is Proud to Sponsor Walmart holds Special Permits.” Nichols told MM&D that the trucks and trailers won’t be allowed on Ontario roads until the details of the pilot have been finalized. Not to be lost in all this is the fact the supercube is a very compelling alternative for transporting lightweight product. Benny Di Franco, president of ITD, www.drivingforprofi t.com www.truckingforwishes.com said his company enjoyed working on expert information in an helping dreams come true for children the project. affordable fashion with life threatening illnesses “When they came to us, we said it’s a no-brainer. It’s fully doable and a great idea. We haven’t changed anything within the laws. We’ve just allowed more caDisability • Downtime • Buydown pacity in the trailer without getting any longer,” Di Franco said. Among the more interesting innovations: the trailer comes with a scissor lift capable of handling 15,000 lbs, so a forklift can be used to stock the front section NAL Downtime Lounges of the trailer. A bogie airbag lift system HWY 401: Woodstock, TA Truck Stop, Exit 230 raises the height of the trailer to meet the Cornwall, Fifth Wheel Truck Stop, Exit 792 standard loading dock height of four feet. Inside the trailer interior, a fully weld-
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INSIDE THE NUMBERS
TL FREIGHT SHIPPERS Not sure 9%
Increase 30%
Stay the same 52%
23%
very tight 10 capacity
Decrease 9%
balanced 5 capacity
23%
23% 14% 9%
1%
3%
4%
DOWN DOWN DOWN
5%+ 2-5% 0-2%
5.09
% EXPECT THIS MODE TO HAVE HIGHEST PRICING POWER 2013
EXPECTED RATE INCREASES 2013
CAPACITY CONCERN
% of Respondents
CHANGE IN USE OF MODE 2013
FLAT
UP
UP
UP
0-2% 2-5% 5%+
NOT SURE
Size of Increase
SURCHARGES % RESPONDENTS PAYING
26%
Fuel Currency Detention Border Delay Border Security
excess capacity 0
97% 6% 31% 13% 16%
LTL FREIGHT SHIPPERS 30
CHANGE IN USE OF MODE 2013
Not sure 6%
Decrease 8%
28%
5
10%
0 2%
2%
8%
5%
5%+ 2-5% 0-2%
FLAT
UP
UP
UP
0-2% 2-5% 5%+
NOT SURE
4.23
Size of Increase
30
SURCHARGES % RESPONDENTS PAYING
25
Fuel Currency Detention 15 Border Delay 10 Border Security
20
excess capacity 0
23%
10
DOWN DOWN DOWN
balanced 5 capacity
24%
22%
15
Increase 39%
% EXPECT THIS MODE TO HAVE HIGHEST PRICING POWER 2013
EXPECTED RATE INCREASES 2013
20
very tight 10 capacity % of Respondents
Stay the same 48%
25
CAPACITY CONCERN
96% 8% 23% 6% 15%
5 0
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