MOTORTRUCK NOV/DEC 2011 by Annex Business Media

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Fleet Executive C A N A D A ’ S

B U S I N E S S

M A G A Z I N E

NOVEMBER/DECEMBER 2011

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Mixed signals Don’t let current uncertainty divert you from future opportunity. Get expert analysis on the road ahead with our Decisions 2012 Special Report

PLUS Shippers and carriers debate the industry’s most pressing issues in our 6th Annual Roundtable

contents November/December 2011

Volume 80, No. 6

DECISIONS 2012 Page 25

COVER STORY

Decisions 2012 � � � � � � � � 25 Mixed economic signals are making planning for the coming year very challenging. Many of the economic fundamentals are sound, but you wouldn’t know it from the daily stream of bad news emerging from the stock market. Knowing when to seize the green light towards new opportunities and when to put on the brakes will be key to success in this volatile economy. Prepare yourself with our annual Decisions Report�

ECONOMIC OUTLOOK

Recessionary fears, while tempting, don’t take into account economy’s positive indicators, economists say.

DEPARTMENTS THE VIEW WITH LOU . . . . . . . . . . . . . . . . . . . . . . . . . 6 The driver shortage, and what to do about it, is once again rising to the forefront of fleet executive concerns. But dealing with it effectively will take creativity, not repetition of past practices. COMPETITION WATCH . . . . . . . . . . . . . . . . . . . . . . . . 8 Clarke Road Transport acquires assets of refrigerated trucker Select Transport; Erb Group receives Gold Award from the Waterloo Region’s Healthy Workplace Program; TransForce acquires all shares of I.E. Miller Services, Quik X Transportation; Entrec Transportation Services picks up pair of Alberta trucking firms; and more.

LEGISLATIVE ROUND-UP

Truckload Carrier Association’s Chris Burruss and Canadian Trucking Alliance’s David Bradley offer the latest updates on key legislative changes at the Driving for Profit seminar series.

THE BOTTOM LINE . . . . . . . . . . . . . . . . . . . . . . . . . 10 MSM Transportation’s Mike McCarron explores the power of social media and its implications for the trucking industry. TAKING CARE OF BUSINESS . . . . . . . . . . . . . . . . . . 12 While not purely science, sales still requires artful execution – and the right process can help bolster numbers and capture lost opportunities.

FEATURES

SEALING CIRCUITS

The dos and don’ts of electrical sealing for the winter months ahead.

TRUCKS FOR CHANGE

A not-for-profit organization is looking to bridge the gap between carriers and charities in need of their services.

CARROT AND STICK

B.C. trucking firms stand to reap rewards through carbon offsetting programs, but is the cost of green equipment and potential loss of control worth it?

MY HR SPACE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 More and more organizations are using psychometric testing to peek at their employee’s grey matter and get a better idea of how they operate. HRPA’s Duff McCutcheon talks to several organizations on how they use testing in hiring, development and job spec’ing. EQUIPMENT WATCH . . . . . . . . . . . . . . . . . . . . . . . . 36 Daimler optimistic about future growth in truck sales; DTNA rebrands powertrain portfolio with Detroit Diesel becoming Detroit; and International showcases upgraded ProStar+, TranStar. DASHBOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 TransCore’s Canadian Freight Index starts fourth quarter up 19%; freight cost increases stall in September: CGFI; and Canadian Manufacturing Purchasing Managers’ Index shows slower (but still solid) growth in November. INSIDE THE NUMBERS . . . . . . . . . . . . . . . . . . . . . . 38 How many Canadian private fleets have a bonus incentive plan in place? Plus: which transportation mode will have the highest pricing power in 2012? NOVEMBER/DECEMBER 2011

what’s on trucknews.com? Blogs • MSM Transportation’s Mike McCarron dishes on magic buttons, little closes and other keys to a deal in his first blog for trucknews.com. • Need help dealing with your boss? Professional business speaker and trainer David Benjatschek offers a three-step plan in his latest blog. • Dan Goodwill of Dan Goodwill and Associates offers his economic forecast for 2012. • Contributing editor James Menzies invites readers to weigh in on the question: should Canadian carriers be allowed to recruit drivers from overseas?

Web TV: Transportation Matters • MARKET MANIA:

What’s the impact on transportation planning and company valuations?

• IT’S A MATTER OF TIME:

The latest on proposed changes to US trucking Hours-of-Service.

• GET SOCIAL:

How supply chain managers are leveraging the Internet in their day-to-day job functions.

• WASTE NOT: A Canadian firm uses waste heat energy recovery to power an APU.

You Said It . . . “The immigrant drivers from overseas will make great citizens. This is a country that has great freedoms and opportunities. A skilled driver from another continent can buy a house here, raise a family and get ahead in a country that, for the most part, is welcoming to immigrants, and accepting of diversity and cultural differences…Why can't we develop a homegrown driving culture? There's only mild interest in doing so, in my opinion, and no concerted strategy. I'm not holding my breath.”

We now TWEET! Follow us on Twitter Twitter.com/AdamLedlow Twitter.com/JamesMenzies

– Harry Rudolfs responding to James Menzies’ blog:

Should Canadian carriers be allowed to recruit drivers from overseas?

Twitter.com/LouSmyrlis

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Motortruck

Fleet Executive

The View with Lou cut yourself loose from the past We need creativity to deal with the driver shortage, not repetition of past practices

he driver shortage, and what to do about it, is once again rising to the forefront of fleet executive concerns. The American Transportation Research Institute’s latest release of its Critical Issues in the Trucking Industry report shows that fleet executives rank the driver shortage as their third most pressing concern. That’s up from the numLou Smyrlis, ber five slot from the previous year. MCILT The shortage is not necessarily Editor tied to the resource challenges imlou@transportationmedia.ca posed on many industries during an economic upturn. Our current upturn is fairly slow compared to previous economic recoveries. Hiring challenges are being exacerbated by baby boomer requirements, lack of interest in the industry by the younger generations, and possibly the impact of CSA implementation. Can we do a better job of solving the driver shortage this time around? Listening over the past few months to carrier executives discuss how best to deal with the shortage, I’m not feeling confident the shortage is going to be solved. In his book, The 33 Strategies of War, best-selling author Robert Greene argues that what limits people and corporations in meeting new challenges is the inability to confront reality, to see things for what they really are. “As we grow older, we become more rooted in the past. Habit takes over…Repetition replaces productivity.” I fear the industry is marching in the same direction. For example, at the recent Ontario Trucking Association annual conference I was surprised to hear Steve Russell, chairman and CEO of Celadon Trucking Services, actually question if people preferred to collect unemployment insurance rather than return to work as drivers. Surely we can do better in addressing the driver shortage than blaming our woes on unemployment insurance. Same goes for ongoing industry hopes to address the driver shortage by recruiting qualified drivers from overseas. As James Menzies, executive editor from our sister publication Truck News, reported last month, many carriers insist they can’t find qualified Canadian drivers willing to accept the pay and lifestyle afforded by a career as a long-distance driver. Bringing experienced drivers from countries in

Europe and the Middle East would fill that need, according to proponents. That can only be part of the solution. In North America, it’s estimated we could need up to 400,000 drivers. How much of a dent can we expect immigration to make? A better approach is to finally address the competitiveness of driver pay and benefits relative to other professions. But it can’t stop there. Assuming it’s just an issue of more money may simply leave us with higher-paid drivers who still hop from job to job during the good times and continue to exit the industry in utter frustration during the bad times. First, we must get a closer read on how many drivers will be needed over the next few years. Then we must directly address why the industry is failing to attract new drivers. We need to do a much better job of both raising awareness about the industry among the potential driver pool and addressing the issues that reduce the industry’s attractiveness. I see a strong Canadian Trucking Human Resources Council playing a central role in both endeavours and hope the industry rallies around the CTHRC now that Ottawa is pulling back on its funding for the council. I also like ATRI’s suggestion that the industry develop programs that advance work/life balance, healthy lifestyles, and family relationships. As carrier respondents to the ATRI report pointed out, drivers, particularly those in over-the-road applications, could benefit from resources to maintain family connections, protect their health and reduce stress while on the road. The industry must also adopt more sophisticated recruitment practices. The most common hiring mistake is finding drivers who have the right skills but the wrong personality for the job on the hope that attitude can be changed by coaching, incentives, rewards, etc., according to the folks at Caliper Research. The firm conducts personality assessments and has done more than 3.5 million of them. Caliper has researched the personalities of local, regional and long-haul drivers and found some significant differences. Caliper believes that people are actually hard to change; their personalities are already hard set before they come in for the interview. In their own words, job techniques can be taught; drive and motivation can’t. It does make for new ways of thinking but as Greene argues, if you want to deal with new challenges, you must cut yourself loose from the past and open your eyes to the present. mt

is written and published for owners, managers and maintenance supervisors of those companies that operate, sell and service trucks, truck trailers and transit buses. NOVEMBER/DECEMBER 2011

VOL. 80 NO. 6

Editorial Director Lou Smyrlis (416) 510-6881 lou@TransportationMedia.ca Managing Editor Adam Ledlow (416) 510-6890 adam@TransportationMedia.ca Features Editor Julia Kuzeljevich (416) 510-6880 julia@TransportationMedia.ca Creative Director Mary Peligra mpeligra@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 Rob Wilkins (416) 510-5123 National Sales Manager Don Besler (416) 699-6966 Account Manager Brenda Grant (416) 494-3333 Production Manager Kim Collins (416) 510-6779 Circulation Manager Mary Garufi Video Production Manager Brad Ling Research Manager Laura Moffatt Vice President Publishing Alex Papanou President Bruce Creighton

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)

MOTORTRUCK Member/Canadian Business Press

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Production Artist:

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CompetitionWatch

CLARKE ROAD TRANSPORT has acquired the assets of refrigerated trucker SELECT TRANSPORT out of Windsor, N.S. Select specializes in the haulage of produce and other refrigerated freight. “This strategic acquisition expands our service offering into the area of refrigerated transport,” said Dean Cull, president of Clarke Road and COO of freight transportation with Clarke Inc. “It will allow us to better service our existing customers and build out our client base. Further, it will allow us to improve our efficiency by maximizing our equipment utilization. The Clarke team is extremely excited by the opportunity this acquisition provides.” ERB GROUP has received a Gold Award from the Waterloo Region’s Healthy Workplace Program. The program recognizes workplaces in the Waterloo region that demonstrate a “strong commitment to improving the health of their employees.” Companies are evaluated using a points system based on wellness activities and programs at the workplace, Erb announced. The company received a Silver Award last year under the same program. Erb earned the award in part because of its Highway to Health Wellness Program, which consists of presentations on health topics including cholesterol, physical activity and smoking. TRANSFORCE has reached an agreement to acquire all the shares of I.E. MILLER SERVICES, a provider of rig relocation services, including disassembly, transportation and reassembly of oil and gas drilling rigs. Founded in 1936, I.E. Miller is a subsidiary of Complete Production Services. It operates eight terminals in Texas, Louisiana, Oklahoma, Colorado, and North Dakota. With about 400 employees, I.E. Miller specializes in mostly high-end, high horsepower rig movements. It also services a base of leading oil and gas producers as well as drilling companies. The transaction will add annual revenues of approximately US$138 million. The transaction is expected to close in the fourth quarter. TRANSPRO FREIGHT has received a Platinum Plus safety award from Markel Insurance. The award was earned by placing within the safest 5% of 1,000 Canadian carriers evaluated by Markel. Silvy Wright, president and CEO, Markel Insurance Company of Canada said, “It is our distinct pleasure to recognize Transpro’s commitment to safety and continuous improvement...particularly, the commitment to road safety and the uninterrupted flow of goods in Canada.” STEVE’S LIVESTOCK TRANSPORT has announced an acquisition of FUNK’S LIVESTOCK TRANSPORT. Steve’s claims to be North America’s largest commercial livestock transporter, even before the acquisition. Funk will operate as part of Steve’s Livestock Transport out of its Blumenort, Man. facility, according to Portage Online. The two companies collectively move the majority of the hogs produced in Manitoba. TRANSFORCE has announced it has entered into an agreement to acquire all the shares of QUIK X TRANSPORTATION, including its US operations. Quik X has a network of 17 centres across Canada and the US, with more than 600 employees and agreements with 325 independent contractors. Founded in 1990, Quik X specializes in time-sensitive freight and is known for developing its own sophisticated proprietary software. It’s an asset-light carrier with annual revenues of about $200 million. The deal should close near the end of the year, TransForce announced. Heavy-hauler ENTREC TRANSPORTATION SERVICES has announced it is acquiring Alberta trucking firms TRAK EQUIPMENT HAULERS and JAY REID TRUCKING. Trak is based in Edmonton and specializes in the transportation of oversized and overweight equipment for the oil and gas and construction industries. The fleet operates in Alberta, B.C. and Saskatchewan and will be integrated into Entrec’s existing Spruce Grove division, the company announced. Jay Reid Trucking is based in Bonnyville, Alta., and is also a transporter of oversized and overweight equipment, operating in Alberta and Saskatchewan. Entrac said it will combine Jay Reid Trucking with its existing Bonnyville division. The two acquisitions add two pilot trucks, 12 specialized tractor units, more than 40 specialized trailers and other equipment to Entrec’s fleet.

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For daily COMPETITION WATCH news go to www.trucknews.com or subscribe to our bi-weekly e-newsletter. 8

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ADVERTISING FEATURE

CHARTING THE CHARTING THE COURSE COURSE TO TO PROFIT PROFIT I n today’s tough economy, transport companies are facing more challenges than ever. Factors like higher fuel prices, shrinking margins, and reduced shipping opportunities are forcing organizations to do even more with less. But in doing so, some organizations discover they don’t have the internal resources needed to properly assess, manage and achieve the new expected level of performance. Luckily, they can look to Shaw Tracking to provide these resources. Shaw Tracking’s Professional Services team can assist in the deployment of technology and help manage operations in order to take greater control over profits.

Professional Services Support The opportunity for increased control over profits comes from implementing new technology within an organization’s current operations. As with any new technology, it is common to question the most effective method of calculating its Return on Investment (ROI). The solution? Set up benchmarks prior to rolling out the technology against which the ROI can be measured. This is why Shaw Tracking’s Professional Services has made its mandate as follows: To provide organizations with a proven methodology and the tools to effectively measure the greatest potential for ROI. Shaw Tracking understands that the groundwork must be laid before putting all of an organization’s benefits and costs into any given profit-driven formula. After all, every formula is as unique as the business it’s coming from. Shaw Tracking’s Professional Services’ step-by-step method to calculating true, attainable ROI provides: ■ succinct and complete project definitions ■ the scope and boundaries of the project ■ the ‘soft benefits’ made tangible and quantifiable in monetary terms ■ a solid, water-proof line of argument and attainable ROI document ■ a sensitivity analysis of final results probability and the major risk factors that impact it

Automated Hours of Service Shaw Tracking offers fleet managers the tools they need to accurately monitor and assess their performance, efficiency, safety, compliance, driver and truck information, all in near real-time. The Hours of Service application uses the electronic on-board recorder (EOBR) embedded in the MCP100 hardware solution, and complies with Canadian and US regulations. This technology allows for improved dispatch decisions, increased productivit y and maximized miles per truck per day. As such, the Shaw Tracking Hours of Service application was designed as a proactive management tool, enabling fleets to optimize their dispatch assignments by providing accurate, near realtime driver availability information to the load planning process. As a web-based sof tware ser vice, the information is delivered to the dispatch system via a web interface. It can also be viewed online with a web browser. This automated record-keeping system helps reduce costs by eliminating the use of paper logs and

by mitigating the driver violations and fines associated with non-compliance. Additionally, the Hours of Service application runs on the OmniTRACS platform, which minimizes the need for up-front investment and driver training. Proven Results Over the past year, Shaw Tracking’s Professional Services has delivered proven results and greater profits to many new and existing customers. On average, the following results have been delivered: ■ an average savings of $929,955 annually per customer ■ an average savings of $6,461 per truck per year

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TheBottomLine

time to Google yourself

uch to the chagrin of the rest of the McCarron tribe, my foray into social media began about a year ago when I started dabbling in the world of Facebook and LinkedIn. I had loads of fun catching up with pals from all over the world and even picked up some deals by rekindling old business relationships. However, the real power of social media and its implications for the trucking industry didn’t hit me until this past spring. I was blown away as I watched ordinary people – armed only with the weapons of social media – change the world. They accomplished in months what billions of dollars in military might failed to do in years: wipe out three Middle East tyrannies and protest regimes in a dozen more. I don’t think Facebook and Twitter are fundamentally changing our business; we still move freight on trucks, and shippers still want good service and better prices. But it is revolutionizing how people talk – and hear – about our companies. How to manage this change is a multimillion-dollar question at a lot of businesses. Not many have a good answer. According to an Accenture study, only 8% of US companies “extensively” use social media even though 65% of marketing executives say social media is important to their companies’ future success. The survey of 200 respondents from large ($1 billionplus) companies, found that only 5% formally integrate social media with other customer and marketing initiatives. About 25% said they were only “slightly engaged” or “not engaged at all” with social media. Age of Transparency The days of companies controlling and even 10

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hoarding information are over. Now anyone can be Andy Rooney. If you mistreat a customer, he’ll take his complaint online where it will live forever. What will you do when it happens to you? In a MarketTools study of 330 marketing executives, 95% of respondents said satisfied customers are very important or extremely important to their company, yet only 8% regularly respond to customer complaints online. Maybe they don’t want to show their weaknesses or vulnerabilities. On the other hand, sharing a problem and how it was solved can build trust. And trust is still the key to a successful relationship, one of the few things Facebook hasn’t changed. If your five-day service was six days last month, you’d better tell people before they tell the world, and explain what you’re doing to get back on track. Social Media and Sales It isn’t enough for trucking companies to just be using social media. You need to figure out why you’re using it and how it can help you sell freight. A study by Gary Breininger and Associates found that supply chain professionals spend an average of 17 hours a week on the ’net. Not a huge surprise to me. What caught my attention is that 58% of respondents said the most important reason they use it is to source suppliers. They’re visiting your Web site, checking public records, and reading whatever else comes up with your name on it, including blog posts, Twitter feeds, and Facebook pages. Social media may not translate into a direct sale, but what customers read will influence their decision to call you up or

Mike McCarron is the managing partner at MSM Transportation (www.shipmsm.com) in Bolton, Ont., which specializes in moving products from Canada to and from the rest of the world. He can be reached at mmccarron@shipmsm.com. In coming issues, Mike will continue to identify and provide insights on sales management for truck fleets.

skip on down to the next search result. What Your Employees Say The best way to attract and retain good employees these days is to embrace these changes and make them an integral part of your corporate culture. You can’t fight it or ban it any more. In fact, you need to use the available tools to empower your employees as a source of ideas to garner innovative ideas and improve your bottom line. I would wager that your top sales producers are using LinkedIn to build your business. It also means they have a permanent online resume for all your competitors to see. As you plan for the year ahead, talk about how to monitor social media and which outlets are most important. Start with Facebook and Twitter and move on to Yelp, Yammer, Jive, or whatever platform is new as you’re reading this. Then go Google yourself and see what shows up. I bet your prospects and competitors already have, and in growing numbers. mt

Another notch in our growing Award Belt Trucknews.com’s WebTV show Transportation Matters has won a silver award in the Best Video or Multimedia Feature category at the third annual Canadian Online Publishing Awards. The awards recognize excellence in online editorial and innovation by Canadian magazine, newspaper, broadcast and Web site publishers. The silver-winning episode was “Big Beer Run,” which originally aired last winter and chronicled Challenger Motor Freight’s 10-day trek across the GTA hauling six massive beer tanks for Molson-Coors.

www.trucknews.com/videos/

Taking Care of Business

capturing lost opportunities in sales It’s not pure science, but requires artful execution

recently watched an interview with Tibor Shanto, a Toronto-based B2B sales expert, discussing whether sales is art or science. Shanto was making the case that while not purely science, sales most definitely needs to be rooted in science, in the form of a defined, vibrant, validated and adhered-to process. I caught up with Shanto, principal at Renbor Sales Solutions, to discuss how process can improve sales and enable sales people to capture opportunities they would have otherwise lost. Tibor told me that he was a proponent of a having a process, but was leery to call it a sales process. Over the years, there has been a lot of emphasis placed on having a sales process, but in reality, a sale has two parties (the buyer and the seller), so the seller needs to be aware of the buying or buyer’s process if they are to successfully execute their own sales process. Strictly focusing on the sales process without accommodating the buyers’ process leads to a number of issues, not the least of which is lost sales. This is a real challenge for many sales organizations and sales people. A key overlooked benefit of a good process is that it creates alignment; alignment with other internal groups and processes, but, much more importantly, alignment with the buyer. Without that alignment with the buyer, you are exposed in a number of ways. Picture two ships in the night: they see each other, but continue to sail their different ways. So how do you develop a process for selling that can be executed without having to be recreated for each buyer? According to Shanto, he developed a flexible process called EDGE. He told me to think of it as a platform on which you 12

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can build something specific to your market or environment. But as a platform it starts off with a focus on alignment, and then is tailored to specifics. The EDGE has two sides, each with four zones: Buyer – Explore. Define requirements. Game plan. Execute. Seller – Engage. Discovery. Gain commitment. Execute. Often, sellers will be out of sync with the buyer. For example, the buyer may still be exploring the need or desire to enter the market, and will have met with the seller, and the seller now believes they are engaged, and move to “Discovery” before the buyer is ready to start defining requirements. This happens because the seller has been involved much longer than the buyer; they identified the company and the internal players, did their research, went to LinkedIn, made the call, and got the appointment. They are ready to move on and the buyer is just getting started. Where it becomes more dangerous is when the seller gets ahead of a buyer still squarely in the “Define requirements” zone, and the seller is trying to close because he has moved to “Gain commitment.” This is where buyers get scared off, and opportunities are lost for no other reason than misalignment. (By the way, the same can happen when the seller falls behind the buyer, who then finds another seller in the same zone they’re currently in). I asked Shanto how the EDGE process deals with the differences in buyers, and the different styles of sales representatives. Shanto believes that the variance among

Mark Borkowski is president of Mercantile Mergers & Acquisitions Corporation. Mercantile specializes in the sale of mid-market companies. Mark can be contacted at www.mercantilemergersacquisitions.com.

organizations is in the sub-stages of each zone. For example, based on the nature of the product and market, one company may have two stages that fall under “Discovery,” where different product, bought by other users, may require three stages in the same zone. Even with similar companies, based on their position in the market and their outlook, there are instances where one may have more stages than the next, but those stages are still in the same zone. As for reps, that is an important consideration, because sales is not pure science: it requires individual creativity and skill. It is a science delivered artfully, and one shouldn’t limit that important element. The EDGE as a platform provides the grounding that allows sales people to be more creative and productive. Consider music: whether you want to look at Charlie Parker or Ian Anderson, they had to learn the basic notes or chord structure before they went on to improvise the way they did. Most great sales people I meet have that groundingin process that allows them to improvise that much better, both in terms of execution and results. mt

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MaintenanceMatters Matters

sealing circuits The dos and don’ts of electrical sealing for the winter months By Chuck Carman, curriculum developer, CARS

s the seasons change and we move into the winter months, the quality of electrical sealing becomes more vital. With the increase of moisture and the use of ice melting chemicals, a poorly sealed or repaired electrical connection can result in a failure – and misery – very quickly. If moisture or corrosion is found within a connector, the source of this intrusion must be found and repaired correctly to prevent it from reoccurring. Drying the connector’s body or applying an electrical contact cleaner will not resolve the issue. Corrosion will appear as a white or light green dust or “growth” within the connector body and on the terminals. There may or may not be any sign of liquid being present so the connector would appear to be perfectly dry. The corrosion, however, tells you that moisture has been present. Black smudge marks on the terminals are a sign of overheating or fretting (micro movement at

MOTORTRUCK

the terminals contact point). Virtually all exterior electrical connectors are now designed with weather seals. Each connector contains two primary seals, one seals the connector halves (Fig. 1) and the other seals the entry point of the wire to the connector (Fig. 2). Each seal is designed with a number of lips to deliver multiple layers of sealing protection. When performing any electrical repair or diagnosis, these seals should be carefully inspected for proper installation and damage. The seals can become damaged for a number of environmental or induced conditions. Improper connector mating and locking can cause a distortion of the connector half seal. Incorrect circuit testing, such as back probing, which is done by inserting a test probe through the back side of a connector either piercing the seal or slipping down the side of it, cause can nicking and distorting the sealing lips. However, it is normal to see some minor seal abrasions, these will not allow moisture to leak in. If the connector body is too close to a source of high heat, it can also cause the connector

and seal to warp, allowing gaps to form between the connector body and seal. Missing or incorrectly installed sealing plugs (used in the connector cavities that are not used) in module or bulkhead connectors are another common source of intrusion. Moisture can seep past the wire seals and penetrate the connector due to incorrect wiring harness positioning. Proper wire harness routing will allow the wires to enter the connector without bending keeping them close to right angles. If the harness position pulls the wire, the seal bore will

become deformed (Fig. 3) which can create a path that will allow water to migrate past the seal. One source of water intrusion that is much more difficult to isolate is when the water wicks through the wire itself. This wicking effect can move moisture along

MaintenanceMatters Matters

large distances and even against gravity. A small pumping effect is created inside the wire insulation due to thermal cycling. If this is suspected, a complete inspection of the related harness is needed. The harness will need to be inspected for any opening in the wire insulation, caused from abrasion, improper circuit testing (probing by piercing the insulation to make contact) and chemical deterioration. Previous circuit repairs are a great place to start inspecting especially if non-sealed repairs methods were used (unsealed butt connectors rather than

heat sealed ones). Also, other connectors that share common circuits should be inspected for contamination as well. Once the source of moisture has been determined and a terminal repair to a connector is needed, be sure to closely follow the electrical terminal repair procedures supplied by the manufacturers. Ensure that the correct wire gauge, terminal, seal and crimping tools are being used. Be careful not to deform the circuit seal as it is crimped to the wire insulation. Dielectric grease is suggested by many manufacturers. It works

great against fretting and can repel some amount of water. However, too much can cause a hydro-lock to occur within the connector and not allow the terminals to make full contact since they will be pushed back out by the grease. Electrical circuit diagnosis can be challenging enough. Perform careful repairs to prevent headaches for others or yourself down the road. mt For more information on truck technology, visit www.trucksondemand.ca.

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the human edge

let’s get personal More and more organizations are using psychometric testing to peek at their employee’s grey matter and get a better idea of how they operate. HRPA’s Duff McCutcheon talks to several organizations on how they use testing in hiring, development and job spec’ing By Duff McCutcheon

uilding understanding into how one “ticks” is key to leadership development at Versacold – a Canada-based global 3PL specializing in cold storage and distribution. The Vancouver-based company uses the Myers-Brigg Type Indicator (MBTI) – a psychometric questionnaire that measures psychological preferences in how people perceive the world and make decisions – to find out their managers’ strengths and weaknesses. “We find it really helps people understand how their personality and actions affects other people at work,” says Sam Smith, learning and development specialist at Versacold. They’ll often test entire teams to examine strengths and weaknesses of all members and get a better idea of how they can work best together. “The testing reveals a lot of things that people don’t realize about themselves. One thing we found was the communications between managers and their reports improved because managers were stepping back and examining a given situation with a better understanding of how their report would perceive the situation, before acting.” Job Design Lafarge North America uses psychometrics in its job design procedures, basing skilled 16

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trade roles on the company’s best and brightest. Whoever Lafarge hires for these positions must have similar attributes to the company’s known performers. Starting in 2008, the company began benchmarking key plant positions against its very best hourly staffers in eight plants across North America. Through the use of personality, integrity, science and skills testing, the company created ideal profiles against which all new millwrights, electricians and control room operators will be measured. Considering the safety-sensitive nature of Lafarge’s 24/7 cement operations and the fact that the average Lafarge tradesperson spends their entire careers with the firm – averaging 30 to 35 years – ensuring fit is crucial.

“We want to test if the person works well as a team member, if they accept new knowledge, have interest in acquiring new skills, if they have problem solving/critical thinking skills, is professional, has pride, respect for environment and safety, risk assessment, action-oriented, responsibility, accountability, integrity, leadership – all kinds of skills, competencies and core Lafarge values,” says Francois Boucher, area HR manager, Lakes and Seaway Lafarge Canada. The assessments involve tests from several vendors, including WorkKeys (www. act.org/workkeys) for science knowledge, Valpar testing (www.valparint.com) for essential skills, and 16PF personality testing (www.ipat.com). And for potential hires that are used to working around machines, even the act of testing reveals a lot. “It’s a full day of assessment and it’s exhausting,” says Boucher. “We’re taking tradespeople out of their comfort zones and observing them also provides a lot of information.” Hiring Custom publisher Naylor LLC uses the Harrison Assessment (www.harrisonassessments.com) – a job suitability index that looks at people’s preferences and tendencies – as part of its hiring process. “It’s an assessment that’s based on performance enjoyment theory – that you

excel at the things you like to do best,” says Chip Sharkey, Naylor’s vice-president of human resources. An individual’s assessment is compared against generic templates for job types – like sales manager, middle manager, specialist – that have been developed by Harrison. “But what we’re really looking at is the individual,” says Sharkey. “There’s no pass/fail. What we get are data to focus on in interviews. For example, if someone has a low organization or planning score, and the job demands those skills, we’ll focus in on that during interviews to explore past experience.” And while he says there’s no absolutes in the assessments and hiring, when a person’s profile points out glaring differences between personal preferences and job requirements, “there’s not likely going to be a fit.” It’s an approach shared by Rhys Spencer, a former HR manager at Wells Fargo Financial Canada who used predictive index testing for sales hires. “With all assessments, if it’s done right, you should be benchmarking against what a top performer looks like within your company, whatever the role, and not necessarily

trying to hire a perfect match, but not hiring an inverse match. You don’t want to hire an introvert for a sales job.” Spencer used a Canadian testing company called Predictive Success (www.predictivesuccess.com) – a predictive index system that asks potential hires to select what they think best describes them from a series of competencies. The software then provides a two-page report that details the needs and drives of the individual. “Ultimately, assessment testing is about validation,” says Spencer. “It’s a post-script. Here’s the job description, the job ad, and that’s the profile from which the interview questions are built on. The test is the validation against the process – is the person what we think they are from what we’ve discussed with them? “The risk of not doing it is hiring managers will hire someone just like themselves. And when you do that, there are five failures along the way.”

preted assessments, what’s often ignored by HR professionals is the prep work – especially a solid understanding of the role you’re hiring for, says Rick Lash, national practice leader, leadership talent, at the Hay Group. To get the most out of assessments, “you really need to understand the role’s key accountabilities: what are the critical few capabilities that differentiate average from superior performance in that role? Or, if organization’s strategy is changing, what implications does this change have on what the role has to deliver on?” Lash points to the example of a hospital that had a reputation for research excellence thanks to the top-notch scientists they hired to work in their labs. When the organization decided it needed to turn its research area into a revenue stream, it changed the scientists’ job requirements from not only research excellence, but also entrepreneurial skill. “All of which has implications on what you’re assessing for,” says Lash. mt

Strategic hiring While it’s all well and good to aid your quest for the perfect hire with some well-inter-

Duff McCutcheon is a communications specialist at the Human Resources Professional Association (www.hrpa.ca).

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Profitability

Trucks for Change New network bridging gap between charities, trucking companies By Adam Ledlow

a 28-year career at Ryder Logistics. “I was looking for something that would be meaningful – an opportunity to give back…What eventueventu ally struck me was that I was fairly well positioned with my experience and with the people that I knew in the inin dustry to try to do something with that and make a differdiffer ence by relying on my past career, and bringing it to the not-for-profit industry.” Pete Dalmazzi (right), founder of the Trucks For Change Network, and Adam Ledlow, managing editor of So how does it work? The Motortruck Fleet Executive, discuss the new charity-based initiative during a recent episode of Transportation Trucks For Change Network Matters. To view the “Trucks For Change” episode, visit our archives at trucknews.com/videos. consists of two groups: client charities and its members hile it would seem like common “Every month, trucking companies re- (trucking companies). The organization sense that goods donated to ceive dozens of requests from charities to collects requests for service from its client charities eventually find them- do things like pick up donations and dis- charities and organizes them using a newlyselves in the hands of those in need, many tribute them to where they are needed. launched technology called Movematrix, charitable donations are, in fact, routinely They also do a lot of great community social which allows charities and trucking comparejected and end up in a place most would events and fundraising events across the nies to review open capacity and charitable find unthinkable: the dump. country, so they need equipment,” he says. requests, respectively. “Offers will be made by our members to It’s a cruel reality brought on by a simple “It takes a lot of time for both parties, and lack of affordable transportation to bring the chances of the charities finding a truck- charity needs that they can accommodate, the goods where they’re needed. ing company who can help on any given and if accepted, the work simply gets done, The problem, it turns out, is that the day is fairly small. What we are trying to do the products get moved and the transaction whole process of requesting equipment is to bring some of the efficiencies to this is completed,” Dalmazzi says. TFCN charges its members an annual from trucking companies is inefficient, says process basically from the freight brokerage Pete Dalmazzi, president and founder of industry, which is a very efficient system membership fee to use the system, while the Trucks For Change Network (TFCN), in matching shippers’ needs with available charities incur a “modest cost” for using the service. In the future, Dalmazzi says a not-for-profit organization looking to capacity from the trucking industry.” bridge the gap between carriers and chariDalmazzi constructed the idea of the goal is to invite corporate sponsors ties in need of their services. Trucks For Change Network following from the transportation sector to become

MOTORTRUCK

Profitability

for charities and the transportation industry. involved in the project. For more information, visit www.trucksforchange.org. The benefits of using the Trucks For Change Network extend to both parties, says Dalmazzi. For charities, which typically have small staffs and no logistics departments, TFCN takes a lot of the grunt work out of transportation planning. “That whole act of having to solicit trucking companies, they do not know where to start and it is a lot of work. What this allows them is sort of a one-stop shop for approaching trucking companies…for donations.” The affiliation with TFCN also allows them to have better donor reach (the ability to solicit donations from a wider area) as well as keeping charitable goods away from the dump. “By giving them an affordable transportation option, we basically allow them to say ‘yes’ more often,” Dalmazzi says. For trucking companies, they’re able to make a contribution to their communities and do it in a costeffective way. “Forward-thinking companies…understand that in the future, stakeholders, investors, customers and employees are going to favour companies that give back and become involved in their communities and positive social initiatives,” Dalmazzi says. “I think there are going to be some important benefits for our members going forward by being involved in not only Trucks For www.truckingforwishes.com www.greentrucker.com Change, but similar initiatives.” helping dreams come true for children saving our environment, with life threatening illnesses one mile at a time Currently, the Network includes 15 members that are among the largest trucking companies and for-hire motor carriers in Ontario. “We have received the endorsement of the Ontario Trucking Association, so we are inviting all OTA members to join forces with us,” Dalmazzi says. www.drivingforproﬁt.com The group has been working with Habitat for expert information in an affordable fashion Humanity since the pilot project’s launch in late Next Seminar is April 27, 2011 2010, and, in addition to recent work with Food Banks Canada, TFCN has garnered interest from children’s Disability • Downtime • Buydown charities, community development charities, health research charities, and environmental and nature conservancy charities. “There has been great interest, and we look forward to bringing a lot of them aboard in the near future,” Dalmazzi says. NAL Downtime Lounges While in the near term TFCN is looking to build its HWY 401: Woodstock, TA Truck Stop, Exit 230 membership base, in the future, the group may venture into asset donations, rental services, and driver and proCornwall, Fifth Wheel Truck Stop, Exit 792 fessional volunteer services, to become a one-stop shop

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GreentoGold carrot and stick

Carriers can reap rewards from carbon offsetting, but will equipment costs, loss of control hinder progress?

new venture in B.C. claims to offer truckers a way to enhance their bottom lines, saving them money via reduced diesel fuel purchases while putting cash in their pockets by selling carbon offsets. That’s the carrot, anyway. The stick, as it were, is that the trucking company has to buy equipment that allows its fleet to be monitored and mentored and, if B.C. joins the Cap and Trade wave being made currently in some jurisdictions around the world, they could even lose the capacity to

By Jim Bray make their own decision in the matter. The ability to remove carbon is going to be a larger and larger requirement as we move forward, says George Stedeford, CEO of the Carbon Offset Aggregation Cooperative of B.C. (COAC), who likens his group to a kind of Wheat Board for carbon emissions, buying carbon offsets from companies and then selling them. According to the Pacific Carbon Trust, a carbon offset is one metric tonne of carbon dioxide (CO2) or equivalent that is reduced or removed from the atmosphere as a result

of emission-reducing (offset) activities. What that means to a trucking company, according to the Trust’s Web site, is that, “If it cuts its carbon emissions sufficiently, through a qualifying energy efficiency initiative, it can sell those emissions savings or offsets to us. We will, in turn, offer a portfolio of offsets to clients to counter their emissions.” You can’t just sell the offsets yourself, though. COAC basically acts as a middleman between the trucking company and the Pacific Carbon Trust, the latter of

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GreentoGold which is a B.C. Crown corporation founded to deliver made-in-B.C. greenhouse gas offsets to help clients reduce their carbon footprint and drive the growth of B.C.’s low-carbon economy. The two organizations recently signed a five-year agreement to cover all of B.C.’s carbon offsets. COAC CEO Stedeford describes it like this: “The truckers bring in their carbon credits, we put them in a silo and then we are able to sell them because, with a much larger volume, we can get a better price.” The reason trucking companies can’t earn carbon offsets on their own is that, in order to qualify to sell offsets to the COAC, a company has to sign on with its program. Stedeford says it’s because there needs to be

standard methods for calculating a company’s carbon emission reductions. “The big thing about our program from a carbon standpoint is, if you don’t have approved methodologies, then the carbon offsets you claim are voluntary and can’t be validated. “In other words, if you don’t sign up, then you’re basically on your own. And then the deck is stacked against you,” he says. Under the COAC’s program, however, there’s a specific method of calculating baseline information and of calculating actuals. Then you relate the two against each other to get the change in your litres per kilometre tonnes. And as long as you fulfill the requirements of the methodology, then those carbon offsets will be validated.

To take advantage of COAC’s program, you sign up, your drivers are taught how to drive in a manner prescribed by the COAC to help them reduce their diesel use and, via monitoring, your emissions are validated and audited. Then, when you say “I reduced carbon emissions by ‘X,’” you’re saying it with confidence that it’s a correct number, Stedeford says. How much money is involved? COAC board member MaryAnne Arcand, who’s also executive director of the Central Interior Loggers Association, was quoted in the Vancouver Sun as saying the offsets are valued at $12 to $13 per tonne. Or, as Stedeford puts it, “If (a company) consumes 70,000 litres of diesel a year and we can help him reduce it by 10%, then that will be about 22

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GreentoGold tonnes in carbon offsets and currently he’d get about $240.” That might not seem like a lot of cash back considering the work and investment involved, but, if nothing else, it could give a company bragging rights and maybe a marketing tool. On the other hand, the financial or marketing bottom line may not be the most important aspect of the program, to some. The value of fuel saved outweighs the value of the credits and it always will, Arcand told the Sun, but the social value of contributing to a cleaner environment is priceless. As for what a trucking company has to do to comply, Stedeford says COAC provides the expertise and does all the work. “We basically come in and do all the installation,” he says. “We do an awareness session, we put our modems in (the trucks), we capture all the data and we send reports to the company to let them know where they need to focus, which operators need a little bit of help in a certain area.” Equipment is installed by COAC to ac-

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curately measure fuel consumption. Stedeford says it isn’t really about the hardware, though. “Ours is a behavioural program,” he says. “So it’s just trying to work with all of the operators to be aware of changes they can make that will significantly reduce the amount of fuel that they’re burning.” COAC’s Web site says a normal installation of their equipment into a truck and non-hydraulic lifting equipment, such as an excavator, is $4,000, including the cost of the setup itself. That’s a healthy chunk of change for a vehicle, but Stedeford says COAC can help there, too. “We actually do the whole thing,” he says. “We come in, we put the program together, we suggest the equipment they should put into their units, we can schedule when to do it, we can even finance it, so it’s very much a win-win.” Truckers who find the idea of selling carbon offsets attractive but who may not want to surrender their independence may find themselves out of luck. “If someone does it all on their own, the carbon offsets won’t be available because you have to be in the program,” Stedeford says. “So while they might (reduce their emissions) they can’t sell their offsets unless it’s gone through some sort of auditing, an agreed-upon methodology. And if they haven’t, they shouldn’t be out there telling their customers that they’ve actually reduced (their emissions) by ‘X’ amount.” It may end up being a moot point before too long, anyway, if the so-called Cap and Trade concept becomes a reality in B.C., something Stededford says is going to happen (short of a change in provincial government, perhaps). It’s basically a carrot-and-stick approach, where the polluter pays while the seller is rewarded for being green. Stedeford says the cooperative already has a number of members across the province. Other ways to go green Different jurisdictions have or are pursuing ways to reduce emissions and fuel use that

don’t necessarily amount to marketing what basically appear to be merely mathematical calculations (carbon offsets), but which instead help trucking companies increase their efficiency in other ways, sometimes offering government rebates to help encourage companies to become more efficient. Alberta’s Trucks of Tomorrow program, for example, offers rebates to companies who improve fuel efficiency and reduce greenhouse gas emissions by embracing such equipment as cab heaters, auxiliary power units, and trailer skirts. Stedeford says the COAC’s system works better, however. The government has tried plans on their own to offer rebates and the like, but they don’t catch on very well because of the paperwork and trying to figure out what you’re supposed to do for it. Besides, he says, his group offers extremely aggressive pricing, so the cost for people to get the equipment and put it in will be better than if they do it themselves. Plus, they have trained installers so companies don’t have to figure out how to get it done and whether it’s done right. The biggest positive, Stedeford says, is that there’s money in the pocket of the trucking company. “If we can help a trucker reduce his fuel consumption by 10%,” he says, claiming that is a conservative estimate, “then for the amount of equipment we put in and our commission charge, the operator is putting money in the bank. “As for COAC’s commission, if you don’t reduce fuel COAC doesn’t get anything other than for the equipment,” he says. “We take (our commission) on the fuel saved, so we bear a lot of the risk there. Not only that but, because we have the administrative ability, we can help smaller companies who can’t afford all the administrative costs of setting up that whole infrastructure to follow the required methodology.” So is this program a money-making proposition for trucking companies faced with a tough, uncertain market, or is it a way to entice truckers into signing over their sovereignty for 30 pieces of silver? Or is it both? Only time will tell. mt

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Mixed economic signals are making planning for the coming year very challenging. Many of the economic fundamentals are sound but you wouldnâ&#x20AC;&#x2122;t know it from the daily stream of bad news emerging from the stock market. Knowing when to seize the green light towards new opportunities and where to put on the brakes will be key to success in this volatile economy. Prepare yourself with our annual Decisions Report.

DECISIONS2012 PLUS Shippers and carriers debate the industryâ&#x20AC;&#x2122;s most pressing issues in our 6th Annual Roundtable. sponsored by shaw tracking

DECISIONS 2012

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the

Panellists MODERATOR LOU SMYRLIS, editorial director, BIG Transportation Media

motortruck

JACK BRADLEY, director of purchasing and logistics, Armtec

DAN GOODWILL, president, Dan Goodwill and Associates

HEATHER FELBEL, vice-president, supply chain, Indigo Books and Music

DECISIONS 2012

Concentrate on the road ahead

Shippers and carriers debate the opportunities and challenges anticipated for the coming year

s American Trucking Associations president and CEO Bill Graves pointed out in his annual state of the industry address, motor carrier executives grappling with the current economic uncertainty need to be careful not to miss out on the opportunities that lie ahead. The shape and depth of these opportunities, along with the challenges that must be overcome, was a central focus of our annual shipper-carrier roundtable. As usual, our roundtable participants had a great deal to say, so once again we will share their insights with you over the course of the next two issues. In Part I of our Issues Roundtable, our panellists discuss the competitive pressures driving their industries, their strategic focus, and their perceptions on industry capacity. Watch also for video clips of their comments in special installments of our award-winning Web TV show Transportation Matters, available on www. trucknews.com and www.ctl.ca. BIG Transportation Media, through its ownership of both motor carrier and shipper publications, is in the unique position of being able to see issues from both sides of the transportation equation. We consider it our mandate to foster dialogue between buyers and providers of transportation services. Our annual Shipper-Carrier Issues Roundtable, which is published in both our carrier and shipper publications, is an important step towards that goal. It allows buyers and providers of transportation services across the country to gain a more wellrounded understanding of the issues at hand. This roundtable would not have been possible without the support, once again, of Shaw Tracking and I wish to thank this highly respected industry player for its continuing sponsorship of this event. I would also like to thank all the roundtable participants who took time out of their hectic schedules to make this roundtable a possibility. As with past participants, these individuals were specifically chosen because of the high-esteem with which they are held within the transportation industry and their insightful and honest contributions certainly showed why. This year the roundtable was held in front of a studio audience and we thank CITT for organizing the event and Maritime-Ontario for the use of its state-of-the-art facilties. Lou Smyrlis Editorial Director

DOUG HARRISON, president, Day and Ross General Freight

JONATHAN (J.J.) MAISLIN, president, Maisliner

DOUG MUNRO, president, Maritime-Ontario

BRIAN TAYLOR, president, Liberty Linehaul

november/december 2011

DECISIONS 2012

Shipper-Carrier Roundtable MT: We conduct research annually to gauge freight volumes for the coming year. What our research showed for 2012 was that the outlook for freight volume growth is muted at best – 42% of Canadian shippers expect freight volumes to remain flat with 2011. Jack, construction is a bellwether industry for the Canadian economy. What do your projections look like for next year?

MT: Dan, you are in a unique position in that you work with both shippers and carriers. From your discussions with both groups, what are you hearing as far as where freight volumes are going for 2012?

Goodwill: I think I am hearing a fairly common thread which is slow growth. Things are not what you hear in the media – you hear all about the debt crisis in Europe and see these crazy gyraBradley: Like everyone else, we are certainly optimistic that we tions in the stock market every day and it is easy to think that the will have some good volumes into 2012, but I think that cautious world is caving in and we are heading for disaster. That is just not optimism is out there. Obviously, everyone wants growth and we reflected in freight volumes. There is some growth that is slow, are hoping for that and are projecting a little bit of growth. We sell and there should be some cautious optimism. Our shipper clients into the commercial sector, the municipal and government sector, are still very focused on costs and managing them, as well as lookand the resource sector. Resources are not bad in some places, ing very carefully at value. For our carrier clients, 2007-2008 was where you can get some business going on the construction side a real education for a lot of them. We had not seen declines of 2025% in freight volumes in years, so a lot of comand drainage side and laying pipe down, but on panies really had to look inwardly; look at their the residential side there are little bits – we do business model and get back to Freight Managepatio stones and landscape architecture. It has ment 101 – the basics of running a trucking combeen steady, but not quite where you want it to pany. I am seeing that reflected on an ongoing be. If consumers have cash then they are holding basis in discussions with shippers. Carriers are beonto it a little bit for that rainy day. In the Toing very cautious on price, where they allocate ronto market, we have the Commonwealth their capacity and making sure that they get good Games coming, so what is that going to bring? return on their assets that they are employing for Those bids are coming up, so we are optimistic each shipper. The word that I see is discipline. I that we are going to land our fair share of bids am finding that the carriers are more disciplined when it comes to that type of business, but it is as we head into the end of 2011 and into 2012 cautious optimism. I would agree with your surthan I have ever seen before, and I think that is a vey that for as many people that think that there good thing. It is good for shippers, too, because might be a bit of a bump up, there are people that you want to deal with a trucking company that is think that there will be a bump down. responsible, well managed, and knows its costs. Those are the companies that you want to surMT: J.J., your company provides services across “I am really glad to hear round yourself with. North America and globally. What are your shippers saying they thoughts as far as freight volumes for next year? are going to be more MT: What are the competitive pressures driving demanding because that your industry, and is your strategic focus for 2012 Maislin: Our outlook has not changed that is where the good carriers changing as a result? much in the sense that we are in the second year really stand out.” of a three-year plan. As a company, we look at it Brian Taylor, president, Felbel: There are a few things. In the past, we as variable costs. We think defensively in the looked at how efficient we could make the opsense that if we have to shrink in a rough econoLiberty Linehaul eration, not only inside the operation itself, but my then we want to know that we are able to. with any partners. We would let relationships That being said, we do not use the economy as an excuse at all within the organization. We take a look at selling run for a longer period of time, and what I see happening now is more products or different types of products to our existing cus- that we are actually changing those relationships more frequenttomers, a more value-add approach to potential customers at the ly. We are now taking a look at what the return on that relationend of the day, purchases across the board, and pretty much doing ship is going to be, both with the service provider and the cost everything that we can to ensure that our company is continuing itself. The day of Indigo staying with the same provider for a long to grow and thrive in a rough economy. To the point that we are time has gone. It will constantly be looking at the value; not just about to set the next three-year plan, we are looking towards Asia, the value that the carrier can bring to us, but actually how chalIndia and places like that. There are still people out there making lenging that service provider can be for my organization and money and we are going to try to figure out how to do it and grow what they can bring to the table in terms of innovation and solutions that are beyond just a price increase. It is about the type of our business. 28

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DECISIONS 2012

Shipper-Carrier Roundtable skills that they employ within their organization that help us think differently about the work that we do. I think that is where we are really going to see the return. It is not just about the dollar, but it is about how we are going to create solutions together. Bradley: Equal to that, the people that we like to engage ourselves with are people that are innovative in terms of cost-reduction. People are not just coming to the table to say, “Here is our price and that is it.” We want to sit with people and go over our costs. We do job-site deliveries. Is there a better time in the day that might utilize the equipment better? We talk about what we can do collectively to reduce our cost exposure. There are some really smart people out there in the trucking industry that we have dealt with that have come to us with that. That was unheard of 10 years ago, and I am really impressed by the industry for bringing people through that are looking at that now. I have an interview process that I go through for new carriers and we ask them about what they do to reduce their fuel. If they are being innovative in that sense, then they should be able to support having some cost-sharing. Not all of it, but a sharing of it. I agree that what we need to do is have more innovators like that on both sides. I am open to it, and I am really glad to see the trucking industry developing people like that. That mindset is really refreshing. MT: Both our shippers are saying they are looking for solutions, new ideas and stronger partnerships and want to think differently. On the carrier side, I know a lot of you have had issues in terms of profitability over the last few years and you want to improve on that. Listening to the shipper panel, what do you think your strategy needs to be for 2012 and the years to come?

our industry, because we are a service industry), being well capitalized and able to invest in technology and to make the right investments to drive the future, and the right culture that allows people to be successful. A tough economy makes you that much stronger because you have to innovate and look at the value proposition, the value that you bring to the client and how you not only retain business, but grow business.

“It is not just about the dollar amount, but it is about how we are going to create solutions together.” Heather Felbel, vice-president, supply chain, Indigo Books and Music

“We have to get better at

Maislin: We really took a lot of time, stopped everyone in our company and did a SWOT analysis with everyone in the organization. In the progress of building a three-year plan, we looked at ourselves and decided what we were going to do and where we were going to go. We wanted to grow quite a bit. How do you grow as a transportation logistics provider? Service excellence. Within the core of our business, there are certain traits that you have to see: you have to pick it up on time, deliver it on time, bill it correctly, claims-free, transparency on the freight, and if there is a problem, get to the customer before they get to us. That is the approach that we took. A lot of carriers do not do it, is how we feel, and we felt that if we did it 99-100% of the time, then we would continue to grow. Then we took a look at our business model. We are truckers, 3PLs, freight forwarders; we operate facilities and warehouses. When I take a look at shippers, they probably deal with anywhere from three to 20 carriers. When a sales representative calls and wants to know about the delivery of a certain product, regardless of whether it’s air, ocean, truck or whatever, they will be able to go in to our system and filter that information. That is one of the things that we have done to be a bit more innovative and grow our business. Another thing that we have done is go into customers and ask them to let us handle their logistics; we take it over from A to Z. In Ontario, we just took over the entire logistics process for a furniture importer and distributor.

Harrison: Within Day and Ross, we are actually what we do and get almost in the midst of a five-year review of where we close to perfection. Shippers MT: What makes the dynamic between the shipper want to be and how we are going to get there; inand carrier increasingly interesting as Canada do not want problems.” novation plays a very key part in that. Innovation is evolves as a country and supply chain evolves is that Doug Munro, president, about having a culture that allows for innovation, outsourcing is becoming more and more of a trend. Is Maritime Ontario but also having the right talent in place to innovate this something that we saw during the recession beand drive change and value-added solutions back cause shippers were trying to reduce their supply to a client, and look at how we can impact their supply chain posi- chain staffs and outsourced more of those functions, or is this a longtively. In looking forward, great businesses are built on a few things: term trend where increasingly there is going to be an intermediary that customer focus, having great talent in the organization (especially in will be there between the carrier and the shipper? november/december 2011

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Shipper-Carrier Roundtable Goodwill: To me this trend is here to stay. There is no turning back. Heather said the key word: solutions. The reasons that 3PLs have progressed to where they are over the last 50 years and why they are going to continue to progress is that they provide a full solution. A lot of trucking companies look at it as moving assets from A to B, whereas a 3PL goes in there and tries to provide a solution. I see a number of carriers trying to get on the bandwagon – opening up a freight brokerage operation or throwing up a flag and saying, “We do international freight” – but it really comes down to what J.J. is trying to say: he is trying to go in there and provide a solution as well from a carrier perspective. To me, that is the key. The reason 3PLs have come in between a lot of carriers and shippers is that they can do the whole gambit. They can provide LTL, truckload and overseas, whereas a lot of carriers are too narrow in their scope. I do not see anything holding that trend back. What could be helpful is if more carriers became a little broader in their perspective and understand that it is more than just moving assets; it is providing solutions. MT: When we have a non-asset-based provider in the relationship, obviously it does affect the relationship between the shipper and carrier to some degree. What are your thoughts on that, Doug?

is concerned, truckload is almost right at balanced capacity and LTL is a little bit into excess capacity, but not quite as bad as it was the previous year. What are your thoughts on this issue? What will drive the capacity equation over the next few years?

Taylor: Obviously economic growth will be part of it. The other thing that is going to affect it is that there are a lot of small carriers that are going to have issues; there is going to be a lot of consolidation in the industry, and when that happens usually there is some downsizing of the carriers that are purchased. The carrier that purchased them tends to weed out the freight that is not worth hauling, and there is a lot of that going on out there, I think. When we talk about capacity and perfection, we find the same thing: we have always been a niche market. We do appointment LTLs, we do expedite team service, and we are into blanketwrapped and all kinds of specialty services. The other thing that comes into the equation now is secure capacity. We talk about security in the supply chain and high value products. There are 3PLs that are good at that, and there are some that tend to get so many people involved in the supply chain that there is not a lot of control in that supply chain anymore. No one really knows who is picking it up. I think in terms of good capacity, there is going to be a shortage of it. I think that there are carriers that have always been in this industry that are good, strong players that treat their employees properly, do training and invest in technology that are going to come to the forefront, and I am really glad to hear that shippers are saying that they are going to be more demanding and ask more ques“To ensure capacity, we tions, and they want carriers to come to them with believe in true partnerships. solutions because that is where the good carriers We really have to work with really stand out.

Munro: Many of our customers are 3PLs and we value that. The difficulty with customers like that is that they are more demanding than a typical shipper because of the wholesale nature of the relationship and to that extent, we have to get better at what we do and get almost close to perfection. What do customers want? They want good prices, tracking and tracing capabilities, and efficiency. We are trying to be like a courier where we can provide our carriers, and we work the kind information a courier would for a package hard to ensure that.” and do that for general freight. That is where we are Harrison: First of all, out of the 10,000 or so Jack Bradley, director going because whether or not it is a 3PL or a retail for-hire carriers serving the Canadian market, the type shipper that we are dealing with, people do of purchasing and logistics, majority have fewer than six vehicles. The market Armtec not want problems. Our food customers are under is very fragmented, and I think that we are going pressure from wholesalers and are getting complito see some consolidation. Quite frankly, if the ance penalties and fines. People do not have time for that. We are economy does not improve shortly, then we will see some banktrying to be as good as we can operationally so that we can take that ruptcies and some closures as well. Good carriers, just like good burden away from customers. It makes that relationship a little more business people in general, have never looked at the top line and difficult, but it forces us to become better as a carrier, and I think said, “I just care about the top line.” It is about the bottom line that is why a lot of the industry is improving. return. The only reason that you look for growth is to improve your position in the market and to continue to be able to be strong MT: Let’s move onto capacity. There is a lot of speculation in the and invest in your business, and that is through bottom line marketplace about where we stand in terms of capacity. Are we profit. I think that capacity will tighten. Used truck values have headed towards a shortage of capacity? Our latest research shows that certainly dropped. The new fuel technologies and the requireshippers are actually less concerned about capacity right now than they ments of more computer-based technology inside trucks means were at this point last year. They basically feel that, as far as trucking that very few people are buying used trucks. Major carriers like 30

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DECISIONS 2012

Shipper-Carrier Roundtable ourselves and others are really looking at how to invest in equipment. What is the right flowthrough of assets that you are going to go through? We continue to look at that and look at what assets we need to invest in as we get through the entire downturn. I do not think that is managing capacity to actually drive rate levels up; I think it is the prudent thing to do in your business so that you will withstand downturns and really be able to optimize where you were. When the market dropped 20% and freight volumes dropped 2025% , that was an incredible period of time that required a lot of proactive work. But if you think about it, if you have a number of assets and the entire market has dropped 25%, chances are that you are not going to be able to get out of those assets. So all of us are equally looking at it and saying, “When is the right time to move back into assets?”, because we do not want to be burdened with that going forward. I think that there is a real split between the high quality carriers that are looking to do all the right things and add value and have truly strong relationships with customers and invest in the right assets, and those others who I think will be quite challenged in the economy ahead.

need someone to drive them. That is a big part of it; a bigger part, maybe, than buying a truck, because you need someone to drive it. We have to understand some of the economics that are out there as well. The capacity that we see is really trying to work with partners through organic growth. What we have to offer as we grow is that carriers can grow with us and that is one way of assuring capacity.

“The reasons that 3PLs have progressed to where they are and why they are going to continue to progress is that they provide a full solution.” Dan Goodwill; president, Dan Goodwill and Associates

Felbel: I am finding that there are rules within the organization that are inherited. So I’m looking at them and asking, “Why are we doing this?” We are thinking differently. When we think about solutions with the partners that we have, how are we bringing those solutions forward so that all of us can win? MT: Dan, with the clients that you work with, are there any solutions in particular that you see as being really helpful in terms of managing capacity in a more intelligent manner?

Goodwill: There are a few things: if you are in staple products, delivering milk or bread, or even retail traffic that is very steady, your business is interesting because it is going through changes, MT: I want to bring our shipper panelists back into but other retail businesses maybe have a little bit the discussion. When you look at all the highs and more consistent traffic. You can look at a dedilows in capacity over the past decade, is there a better cated truck model where you can get favourable way for shippers and carriers to manage capacity in pricing, you can sign a long-term deal with a this country? Should we be sharing information better trucking company, and it is a win-win because than we are? they get a revenue stream and know what their bottom line is going to be, and the shipper has a Bradley: We are in 48 locations across Canada chance at negotiating a bit more favourably than and we need trucks. We are in a specialized marif it was just buying capacity on the market. What ket, so we need flatbeds and variants of them – Heather is suggesting – collaborating and sharing some of them are drop decks and some are things with a carrier, looking at the carrier as a multi-axle, depending on what our needs are. For partner and looking to them for ideas – that is us, in order to ensure capacity, we believe in true something that is overlooked. A lot of carriers are partnerships. We really have to work with our in there every day moving the shipper’s freight “How do you grow as a carriers, and we work hard to ensure that. They and sometimes they know that freight better than transportation logistics have to be profitable and we have to understand the shipper. You want to look at ideas from the provider? Through a little bit of their costing. We still have to lean folks you work with, and try to come up with service excellence.” pretty hard to make sure that we have our costs solutions that work for both sides. Be open-mindJonathan (J.J.) Maislin, right, but at the same time, if that person has to ed to change. If you are trying to reduce your president, Maisliner go through a change and we have to look for sometransportation costs, if you are just focused on the one new, the market is pretty thin. The other part transportation costs and you are not looking a the of the equation is the drivers. What drives the total supply chain then you have blinders on. I capacity is having someone to drive the power. We can link two to think that this capacity shortage thing – we have kind of softthree trailers together in some areas of the country, but we still Continued on page 35 november/december 2011

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Economic Outlook

Recessionary fears, while tempting, don’t take into account economy’s positive indicators By James Menzies

espite a steady stream of apocalyptic media reports on the economy, the US is actually experiencing a manufacturing renaissance, wages are holding steady and Canadians have hoarded away an unprecedented amount of cash. Those were some of the surprising revelations shared by Benjamin Tal, managing director and deputy chief economist with CIBC World Markets when addressing the Toronto Trucking Association recently. While Tal admitted there is still much uncertainty surrounding the North American and global economies, he suggested the economy today is nothing like it was in the months leading up to the ‘Great Recession’ of 2008. “It’s very tempting to compare the situation (today) to 2008; very tempting but wrong,” Tal said. “In 2008, we had a situation in which the financial market meltdown led to the recession. Today, we are talking about recessionary fears leading to difficulties in the market. It’s a big difference.” Tal doesn’t expect the North American economy to plunge back into recession, and he said when you look at the numbers, there are reasons for optimism. For one, US manufacturing has posted 25 consecutive months of growth thanks to consumers in emerging economies who are now hungry for quality, brand name American goods. “I’m talking about the Y Generation in China, 200 million young Chinese people who have never experienced poverty in their lives. Their propensity to consume is higher than the average American teenager and what they want is not junk; the junk they send to us. What they want is quality products and brand names,” Tal said. “For the first time, American and Canadian manufacturers can compete in this space because the competition is not on price, it’s based on quality and brand name and that’s why we see this renaissance of US exports.” Tal said American exports to emerging markets are increasing by 22% a year and stealing market share from Germany, which used to dominate the export market to emerging markets. “Years from now when the fog clears, we will see American and Canadian manufacturing sectors that are smaller, leaner but much more dynamic and more profitable...that’s the future,” Tal suggested. So if US manufacturing is on the rise, why is the country seemingly unable to improve its dismal unemployment rate? Tal said most of the expansion seen from US manufacturers has been driven by capital spending rather than job creation. He also said two-thirds of all jobs lost in the recession were from the construction and manufacturing sectors and those displaced

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workers don’t have the skill sets required to transition to office work where there remains a demand for workers. “I see a significant skill mismatch between what is needed and what is available,” he noted, adding “the bargaining power of the existing labour force in the US is surprisingly high.” Tal pointed to a ‘Real Hourly Wage Index’ that showed wages remained steady for those who kept their jobs, marking the first ever recession in which wages didn’t decrease. On the US housing front, Tal isn’t expecting to see a recovery for at least another year. He said there are 12.5 million US homes in a negative equity position and owners will continue to walk away from their mortgages. Having recently compared the US housing market today to where it stood 12 months ago, Tal said “nothing has changed.” The US consumer also has a role to play in an economic recovery, and for the most part they are sitting on their wallets, Tal said. “We used to joke about American consumers; when they’re happy they spend and when they’re depressed they spend even more,” Tal joked. “This American consumer is deleveraging like never before.” Tal said American consumers are saving more than they’re spending, which may prolong the economic recovery but will put the average consumer on steadier ground and better able to weather the next recession. However, thrifty consumers are throwing a monkey wrench into the plans of American bankers trying to kickstart their economy by tempting consumers with low-interest loans. And Tal explained while the Federal Reserve is making plenty of money available to banks to lend, banks are looking at the default rates and saying ‘no thanks.’ As a result, Federal Reserve balances are exceedingly high and there’s very little money changing hands, meaning the Obama Administration is unable to use monetary policy to drive consumer spending. Tal said further stimulus spending in the US may provide a temporary boost, but it’s not a long-term answer to the nation’s economic woes. A true recovery will have to be driven by the private sector, Tal suggested. Looking at Europe, an equally troubled part of the world, Tal said Greece will default on its debt but the repercussions of Italy going broke would be far more serious. Therefore, he expects Italy will be bailed out by the European Central Bank as it buys up Italian bonds to prevent it from defaulting. China’s growth is slowing as well, but it’s a controlled slowdown, Tal said. He said China is buckling down to control inflation. But while China has the ability to effectively manage its economy, Tal

DECISIONS 2012

Economic Outlook said there could be trouble on the horizon. The debt-to-GDP ratio in China is reportedly a reasonable 20%, however when you include the money local governments borrowed to fund infrastructure projects (China’s own stimulus spending), it’s a startling 75%. Some

provinces in China, Tal revealed, have a debt-to-GDP ratio that’s higher than Greece’s. While China can manipulate its own economy to provide a soft landing, even a soft landing will hurt the comContinued on page 35

Growth signals for trucking are present but so are risk factors By Lou Smyrlis

rucking will face softening demand in 2012 while costs may continue to rise but capacity should remain tight making continued improvement to revenue per mile possible, according to transportation industry experts. “Right now, freight demand is moving sideways, rather than falling off a cliff like it did in 2008. That indicates to me that we might just skirt by another recession,” says Bob Costello, chief economist and vicepresident of American Trucking Associations, adding that any growth in the current environment is a welcomed development. “This is remarkable. We have never seen anything like this. Freight is growing slowly, but we are still seeing revenue per mile growing,” he says. “There has been some growth in capacity but supply and demand remain close to equilibrium. Fleets did a good job of ‘rightsizing’ during the recession...This industry is significantly smaller than it was a few years ago.” The TL sector shed about 20% of its capacity, one quarter of it due to bankruptcies and the remaining three quarters due to fleet reductions by the surviving players, according to John Larkin, managing director of Stiffel Nicolaus. Larkin provided his insights at the recent Ontario Trucking Association annual conference. He also figures that LTL shed about 20% of its “effective capacity,” reducing its workforce rather than the number of terminal doors. And the largest player in the LTL sector, the financially beleaguered YRC, is down to about 11-12% market share, about half its former size. As a result of this tightening, Larkin said trucking rates are rising 4-5% in the US, before accounting for fuel surcharges. TL contract rates are up 8.5% on average with spot market rates up 2.4%. Contract rates in the reefer sector are up 5.9% with spot market rates up 2.6%. The flatbed market is strongest with contract rates up 11% and spot market rates up 2.4%. “Well managed, well capitalized, highly systemized companies such as Old Dominion are emerging as leaders,” Larkin said. A slow growing economy, however, is making for uneven and choppy progress across the industry. In general, Costello said, large fleets are seeing stronger volumes than smaller ones, likely because of their relationships to larger shippers. “No one is doing great, but it feels like larger companies and shippers are outperforming small business right now,” Costello said. Volumes for large TL carriers, for example, are up 11.2% from January 2009 while small TL carriers are still struggling with volumes 5.4% below January 2009. It’s a similar story when examining revenues. While revenue per mile for large TL fleets has grown 9.1% since January 2009, small TL fleets are only experiencing a 3.2% gain. While growth signals are present, the risk factors are equally clear. Cost pressures in particular pose a risk for motor carriers over the next year with the inflation rate for items such as fuel, equipment and driver wages exceeding the inflation rate for the broader economy,” Costello said. Take driver wages for example. It’s a sad commentary on the plight of the US motor carrier industry that drivers make no more today in real

terms (taking inflation into account) than they did in 1990. Driver turnover is running at 79% on average among US carriers and was at 138% at its height prior to the recession. “Even with unemployment over 9% many fleets are having a hard time finding drivers. For a group that is so sought after, these numbers (driver pay) will go up,” Costello said. Motor carriers face a similar situation with spending on new trucks. The average age of the US Class 8 truck fleet is approaching seven years. Yet research shows there is a financial penalty associated with hanging on to older trucks. While maintenance costs average out to about five cents per mile for trucks with under 550,000 miles on them, maintenance costs rise to about 15 cents per mile once that 550,000 mile threshold is reached. Costello anticipates solid truck sales due to the significant pent-up demand for new trucks to renew aging fleets. “We are going to have to be on a replacement cycle for quite some time,” Costello said. Cost will be challenge, however. The average sticker price for a Class 8 truck in 2006 was $95,000. Today, it is around $125,000 – a $30,000 increase that somehow has to be absorbed during a weak economy. “In this cycle, you can’t forget about the cost side of the equation,” Costello emphasized. A related challenge for carriers is the fact the trucks they are looking to trade in have more miles on them than they would have in the past and so command a lower price on the used truck market. “There is enough demand right now that even the smaller guys are able to stay in business but the smaller fleets are still having to downsize. They need to sell three of their used trucks to buy one new one,” Larkin pointed out. Diesel prices have been on a rollercoaster ride as the price of crude jumped to $115 per barrel in the spring due to strong demand from China before dropping back down to $75 per barrel as the global economy cooled. Crude oil pricing stands at about $86-$87 right now but there are a couple of developments that could place upward pressure on diesel pricing. In the northeastern US, there is a push towards ultra low sulphur for heating oil, which could result in capacity issues for diesel that drive up pricing. Also, the US federal government will at some point be once again setting up its heating oil reserve, which also could lead to a supply shortage issue for diesel and drive up price. A further challenge will be the growing use of third-party logistics providers, particularly by smaller shippers looking to consolidate their power in pursuit of better rates. One of the side effects on carriers from this development is a growing inability to subsidize their larger accounts by charging small shippers higher rates, according to Larkin. However, Larkin added that after three decades of deregulation the North American trucking market has become quite fragmented with plenty of opportunities for a carrier to differentiate itself on the basis of service quality. “Pricing is not the only competitive weapon,” he emphasized. mt

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Regulatory Outlook

TCA’s Chris Burruss and CTA’s David Bradley provide the latest updates on key legislative changes By James Menzies

he North American trucking industry is facing considerable change on the legislative front. Some of the proposals currently in the works, such as revised hours of service, threaten to have a severe impact on the industry. David Bradley and Chris Burruss, heads of the Canadian Trucking Alliance and Truckload Carriers Association respectively, were interviewed at length by Transportation Media editorial director Lou Smyrlis at the recent Driving for Profit seminar. The far-ranging conversation touched on many of the most pressing legislative issues facing the industry. Following are some highlights from the discussion: Hours-of-Service revisions A deadline of Oct. 28 came and went without the anticipated announcement from the US Federal Carrier Safety Administration regarding revisions to the US hours-of-service regulations. When asked where the industry was headed, Burruss said “Back to court, that’s where we’re going.” “No matter what the rules look like, it’s going back to court,” he continued. “If the industry is happy with it, the pseudo-safety advocates won’t be and if they’re happy with it, industry is not going to be happy with it and our board has told us to take any means necessary to defend the existing rules.” Burruss said the industry is expecting the new rules to reduce daily driving time and eliminate or change the reset provision. “From a cost standpoint, it would have an enormous impact,” he said. “We would like to see some more flexibility, but we don’t think that’s going to happen. These changes are going to be pretty tough to adapt to; you’re talking about a fundamental change to the supply chain.” When asked if Canada would move to adopt the revised US rules, Bradley said “There is no sense at this point at either the federal or provincial levels that there’s an appetite to follow the US in reopening the hours-of-service here.” EOBRs/ELDs Another hot button topic was the impending mandating of electronic on-board recorders (EOBRs), or as the TCA prefers, electronic logging devices (ELDs); a distinction that implies the association supports the use of the devices for hours-of-service monitoring only. A recent US Court of Appeals decision requiring the FMCSA to revise the wording of its proposed EOBR mandate for carriers with a history of HoS violations does not mean the issue is off the table, Bradley and Burruss agreed. “This is a reality, it’s going to happen, there is no way (FMCSA) 34

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is going to abandon it,” Burruss said of an EOBR mandate. While Burruss said a new rulemaking won’t likely be released prior to the US election, it is definitely coming. Bradley said Canada at one time showed an interest in taking the lead and implementing an EOBR mandate even before the US does, however that no longer seems to be the case. The focus in Canada should be on enforcement policies and ensuring consistency across the country, Bradley suggested. “I think there are some jurisdictions where you still get enforcement officers at the scales writing enforcement policies,” Bradley said. “I think in Canada we would be wise to spend the next year or so developing a Canadian approach to a North American rule.” Both the CTA and TCA have seen an increasing percentage of their member fleets transitioning to EOBRs or ELDs on their own. Burruss said many truckload fleets took advantage of the downturn to implement on-board recorders and Bradley indicated the CTA policy supporting an EOBR mandate is facing resistance from a surprising source. “Where I get opposition from CTA seeking an EOBR mandate is from carriers who already have them and see the economic benefits in terms of productivity and reducing the costs of handling paper,” Bradley said. “They’re saying ‘Why give that to everybody else? I’m getting a competitive advantage right now because I’m using EOBRs’.” Sizes & Weights Bradley said Ontario’s LCV program to date has been “a spectacular success” and he suggested it’s now time to “open up the program.” Allowing the more widespread use of LCVs (two 53-ft. trailers pulled by a single tractor) will make Ontario a more attractive destination for manufacturers, he added. Meanwhile, south of the border the TCA recently revised its position on sizes and weights to mirror that of the American Trucking Associations. Traditionally, TCA has opposed increasing truck weights, because the last time US weights were boosted to 80,000 lbs, rates did not keep pace, Burruss noted. However, the TCA now sides with the ATA in its belief that the industry must do more with what it has rather than adding more trucks to existing highways. With that in mind, TCA and ATA developed a joint policy supporting 88,000 lbs on five-axle combinations and 97,000 lbs on six-axle configurations. Despite the solidarity from industry, Burruss said it’ll be three to five years before US lawmakers approve any productivity increases. Continued on page 35

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Shipper-Carrier Roundtable peddled it a little bit on this panel – is coming, and I think we would be naïve to think that, even though we are fairly stable right now, we are not going to have an issue. That issue is coming. We have not talked much about driver shortages or about the fact that if you want more drivers you have to pay them, and if you want to pay them more than it is going to be reflected in the freight rates. That is the bad news of this whole thing. Somewhere you have got to pay for the higher costs. MT: Another thing adding volatility to truck transportation is that there is a lot of legislation that is percolating on the U.S. side and, to some degree, on the Canadian side. There is legislation that is on the table right now having to do with hours of service, onboard recorders, and how fuel efficient trucks need to be. Brian, is there any legislation in particular that is concerning you as a carrier? Taylor: I think the first three you mentioned –

anything that affects the driver pool, and hours of service certainly in the U.S. When you look at the north-south movement of freight, and that is primarily our business, they expect that for hours of service if they drop one hour from an 11-hour day to a 10-hour day that is obviously going to impact efficiency. They are thinking that CSA2010 could reduce the driver pool by 4%. With EOBRs I think it is going to be harder for carriers to effectively deliver on the time frames that mt shippers want them to stay within. “A tough economy makes you that much stronger because you have to innovate and look at the value proposition.” Doug Harrison, president, Day and Ross Transportation General Freight

Watch for excerpts from our Decisions 2012 Shipper-Carrier Roundtable on our award-winning WebTV show, Transportation Matters, at www.trucknews.com/videos.

Regulatory Outlook continued from page 34

Economic Outlook continued from page 33

Second bridge for Windsor-Detroit Asked about the seeming indifference Michigan lawmakers have shown towards building a government-funded bridge linking Windsor to Detroit, Bradley didn’t pull punches. “I’ve had the pleasure of spending a lot of time in the (Michigan) state capital trying to talk sense, and what I came up against is the fact I don’t have billions of dollars – that’s the reality of it,” Bradley said. “It’s no wonder to me that Michigan is virtually bankrupt, because its political system is morally bankrupt.” Burruss agreed the government-funded bridge was a “political casualty,” but Bradley still holds some hope that Michigan politicians will eventually get on-board. “I have to believe that eventually if you are right and the facts are on your side, that you will prevail,” he said. “And I believe even in Michigan, the politicians will eventually do the right thing. I do believe it will happen eventually because it has to happen, you can’t rely on 19th century infrastructure to support our economy in the mt 21st and 22nd centuries.”

modities markets, Tal said. Expect to see copper, oil and gold prices soften as China sorts out its own mess. Here at home, Tal said “life is good.” Canada is outperforming much of the world. However, while the economic data is encouraging, Tal said there are still concerns lying under the surface. For instance, 40% of Canadian economic growth over the past 20 years was generated through government spending. “You don’t need to be an economist to predict that the government will not be a major force of economic growth,” Tal warned. “In fact, it may be a negative force, so we have to replace it.” Private business spending accounts for only 12% of the Canadian economy with the consumer making up the remaining 50% or so. But Tal said Canadian consumers are also buckling down. In fact, Tal said Canadians are sitting on an unprecedented amount of cash, about $135 billion which is just sitting on the sidelines. “This is conservative money that’s not looking for adventure,” Tal said. Despite having unprecedented savings, Canadians still have a debt-to-income ratio that hovers around 149%. In the US, it was at about 150% when the housing collapse occurred. But Tal isn’t expecting a collapse on this side of the border. He said the two pre-conditions that could trigger a US-type housing collapse – skyrocketing interest rates and a sub-prime mortgage scenario – do not, or will not exist here. Less than 5% of Canadians fall into a risky category with a debt service ratio of more than 40% and an equity position of less than 20%; in the US a third of homeowners fell into this category. “My guess is the housing market in Canada over the next two to three years will stagnate,” Tal predicted. He also suggested the Bank of Canada will not repeat past mistakes and hike interest rates amid such economic uncertainty, as it did in the early ’90s, sparking mt a housing crisis. november/december 2011

EquipmentWatch Market leader Daimler optimistic about future growth in truck sales By Lou Smyrlis It may be that being a market share leader in North American Class 6-8 truck sales makes for a more optimistic outlook, but Andreas Renschler, head of Daimler Trucks is not buying into all the economic doom and gloom. Renschler said Daimler is not seeing any significant negative effects on its business, adding he is confident 2011 will prove to be a good year. As of August, three of Daimler's four core markets were showing significant growth compared with the previous year: Europe by 41% in the medium- and heavy-duty segments, the NAFTA region by 38%, and Brazil by 16%. Year-to-date, global sales of Daimler Trucks have climbed by 18% through August. Daimler Trucks North America in August achieved its best sales results since March 2007. Sales climbed by 52% and Canada did even better with 53%. Incoming orders were also running a full 114% higher than the same time last year. "Our production capacity is full until the first quarter of 2012," Renschler said. He cautioned that looking at these extreme growth rates, one needs to keep in mind that they are based on low levels from the previous year, so "it's absolutely okay if we'll see lower numbers in the time to come." But both Renschler and Martin Daum, president and CEO, Daimler Trucks North America, expected more growth for 2012 in Class 8 truck sales. Daum said that growth could be in the 30-40% range should the economy prove stronger than currently forecast or 15-20% under a more tepid economy. Renschler also liked what he saw when he looked further into the future. He sees global automotive markets growing by over 40 million units in sales until 2020. And there is great demand for truck replacements in the North American market. "The average age of truck fleets here has now reached the highest level in about 30 36

motortruck

years," he said. "In spite of any short-term fluctuations, in the medium- and long-term, our business is a growth business. As a global truck manufacturer, we'll profit from this growth – no matter where it occurs." The company is preparing to meet this increased demand by expanding its capacity in Santiago, Mexico with a US$45 million investment DTNA rebrands powertrain portfolio; Detroit Diesel becomes Detroit By James Menzies Daimler Trucks North America (DTNA) is dropping the Diesel from Detroit Diesel, as part of a new branding initiative designed to better reflect the diversity if its powertrain portfolio. The new Detroit brand was showcased for the first time at a press conference at the American Trucking Associations Management Conference and Exhibition. Company executives said the Detroit brand was created to encompass all powertrain-related components and is evidence of the OE’s intentions to respond more quickly and efficiently in “developing an optimized line of vertically integrated components.” Andreas Renschler, management member of the Daimler board, said “DTNA and Detroit Diesel have embraced Daimler Trucks’ strategy through implementation of uniform production standards and processes, and a modular strategy for engine development, engineering and manufacturing processes that draws upon Daimler’s global resources.” The new Detroit brand will be supported by more than 800 dealers and distributors across North America, the company noted. “The Detroit brand of powertrain components continues our commitment to innovation, which is the essence of DTNA,” said Martin Daum, president and CEO of DTNA. “Based on the existing Detroit Diesel brand, long synonymous with quality, reliability, fuel efficiency, power and performance, the new Detroit brand will be the platform for all current and future DTNA optimized vertically integrated powertrain components.”

International showcases upgraded ProStar+, TranStar By James Menzies Navistar showcased an International ProStar+ and TranStar at the American Trucking Associations’ convention, highlighting a variety of new driver-friendly options. “Rebounding freight volume, along with the effects of CSA 2010, have resulted in a growing driver shortage among Class 8 fleets,” said Jim Hebe, Navistar senior vice-president, North American sales operations. “Customers today are asking us more and more to provide products that will help fleets attract and retain qualified drivers. We believe these product features deliver on that need.” The ProStar+ on display had a new Diamond interior trim package, with diamond-stitched trim on the seats, door panels and throughout the sleeper cab. The new interior will be available for order in mid-2012, and in addition to being stylish, is also durable and easy to clean, Navistar officials said. Already available for order on the ProStar+ are: an in-dash GPS system featuring prognostics, fault code and tire pressure monitoring and a premium stereo; the MaxxPower battery-powered HVAC system that provides no-idle heating and cooling while guarding against battery depletion by automatically starting the engine to recharge the batteries when necessary; Bendix’s Wingman Advanced collision mitigation system, which combines adaptive cruise control with braking features; Bendix disc brakes; the Bendix AutoVue lane departure warning system; LED interior lighting designed to last 100 times longer and use 75% less energy than incandescent bulbs; and a Fontaine 12-inch Ultra NT fifth wheel that saves up to 50 lbs. The regional haul TranStar was displayed with a new Eagle interior trim package with air ride seats, a wood-grained dash, chrome accents and bezels and a ‘wing panel’ over the center console. Navistar officials said the new package offers a more premium and comfortable driving experience for regional haul truck drivers.

DashBoard TransCore’s Canadian Freight Index starts fourth quarter up 19%

TransCore’s Canadian Freight Index, which monitors freight movement on the spot market, saw a 19% increase year-over-year in October, although the month-over-month comparison dropped 5%. October recorded the highest same month freight volume since October 2005. While October levels were down from the previous month, volume exceeded nine of the 12 months of 2010 and was the seventh highest spot market freight volume this year. Equipment postings in October were down slightly – 2% behind September volume. Capacity was 8% below recorded levels for October 2010. The equipment-to-loads ratio remained largely unchanged. TransCore’s Canadian-based Loadlink freight matching database constitutes the largest Canadian network of carriers, owner/ operators, freight brokers and intermediaries and has been available to Canadian subscribers since its inception in 1990. More than 13 million full loads, less-than-truckload (LTL) shipments and trucks are posted to the Loadlink network annually. As a result of this high volume, TransCore’s Canadian Freight Index is representative of the ups and downs in spot market freight movement and provides a historical account of the domestic and cross-border spot market freight movement. The first five columns include monthly index values for years 2007 through 2011. The fourth column indicates the percentage change from 2010 to 2011. The last column indicates the percentage change from the previous month to the current month. For the purpose of establishing a baseline for the index, January 2002 (index value of 100) has been used.

TransCore Canadian Spot Market Freight Index 2007-2011

2007

2008

2009

2010

2011

% % Change Change Change Y-O-Y M-O-M

Jan

173

214

140

171

222

30%

-2%

Feb

174

217

117

182

248

36%

12%

Mar

228

264

131

249

337

35%

36%

Apr

212

296

142

261

300

15%

-11%

May

280

316

164

283

307

Jun

288

307

185

294

315

Jul

219

264

156

238

245

-22%

Aug

235

219

160

240

270

12%

10%

Sep

206

203

180

234

263

12%

-3%

Oct

238

186

168

211

251

19%

-5%

Nov

227

143

157

215

Dec

214

139

168

225

TransCore Canadian Spot Market Freight Index 2007-2011

Canadian Manufacturing Purchasing Managers’ Index shows slower but still solid growth in November

Both output and new orders rose at slower, albeit still solid, rates in November, according to the RBC Canadian Manufacturing Purchasing Results published by the Canadian General Freight Index (CGFI) Managers Index, which offers a comprehensive and early indicator of indicate that the cost of ground transportation for Canadian trends in the Canadian manufacturing sector. The headline RBC PMI – a composite indicator designed to provide shippers in September remained the same when compared with August results. However, the Base Rate Index, which excludes the a single-figure snapshot of the health of the manufacturing sector – impact of accessorial charges assessed by carriers decreased by 0.1% registered 53.3 in November, down from 53.7 in October, and indifor the same period. This was the first decrease in base rates cated the weakest improvement in Canadian manufacturing business conditions in four months. Index readings above 50.0 signal expansion since March. Offsetting the decrease in base rates were slight increases in from the previous month; readings below 50.0 indicate contraction. The RBC PMI found that Canadian manufacturing business condiboth average fuel surcharges assessed by carriers and other accessorial charges. During this period, the fuel surcharges assessed by tions improved further in November. New orders and output both carriers equated to 20.16% of base rates, up from 20.1% in August. increased solidly, with firms generally linking growth to greater client The combined effect of lower base rates and higher accessorial demand. Nevertheless, the rates of increase eased since October to charges resulted in no change in average transportation costs for five- and four-month lows respectively. New export orders also fell for the second month running. Meanwhile, the rate of input price Canadian shippers. “The slight decrease in base rates was predominantly driven by inflation slowed further from April’s peak to the weakest in the reduced costs in the transborder truckload sector,” said Doug 14-month survey history. “The latest RBC PMI numbers show that global uncertainty is Payne, president and COO of Nulogx. “Over the summer these movements were subject to significant cost increases and it is pos- weighing on the Canadian Manufacturing sector,” said Craig Wright, senior vice-president and chief economist, RBC. “Although the sible that these are easing somewhat.” The CGFI is sponsored by Nulogx, a transportation manage- Canadian numbers continue to point to an expansion in the sector ment solutions provider, and is used by shippers and carriers to compared to declines in other parts of the globe, the trend over the benchmark performance, develop business plans, and secure com- last couple of months has been one of slowing growth.” The monthly survey is conducted in association with Markit, a petitive agreements. It was developed with the assistance of Dr. Alan Saipe. The most recent results are available at the CGFI web- leading global financial information services company, and the MT Purchasing Management Association of Canada (PMAC). site: www.cgfi.ca.

Freight cost increases stall in September: CGFI

NOVEMBER/DECEMBER 2011

29%

29% Thatâ&#x20AC;&#x2122;s the percentage

InsidetheNumbers

of Canadian private fleets with a bonus incentive plan. This rises to 50% amongst Change in use of trucking 2012

large fleets.

Decrease 7%

EXPECTED RATE INCREASES 2012 Size of Increase

% of Respondents

Down 5%+

Down 2-5%

Down 0-2%

Flat

22%

Up 0-2%

26%

Up 2-5%

28%

Up 5%+

Not sure

15%

SURCHARGES Currency

% expect trucking to have highest pricing power 2012

31%

96% 6%

Detention Border Delay

Increase 34%

% RESPONDENTS PAYING

Fuel

Stay the same 52%

26% 15%

Border Security

21% CAPACITY CONCERN

4.69 0 excess capacity

5 balanced capacity

10 very tight capacity

WHICH MODE WILL HAVE THE HIGHEST PRICING POWER IN 2012?

Canadian purchasers of transportation services expect trucking to have the highest pricing power among all modes next year, our latest Transportation Buying Trends Survey reveals. Thirty-one percent of the Canadian shippers and third-party logistics providers answering our survey chose trucking as the mode with the highest pricing power. The next closest mode was courier with 14%. However, any price increases in trucking are not likely to be substantial, with 54% of survey respondents expecting an increase of less than 5%, exclusive of surcharges. The survey also showed that 34% of transportation buyers expect to increase their use of trucking services next year, but the largest proportion (52%) expect their use of the mode to remain flat with 2011. Shipper perceptions of capacity in the trucking sector is trending closer to balanced. The Transportation Buying Trends Survey is conducted annually in partnership with the Canadian Industrial Transportation Association and CITT. In 2012, we will be expanding our efforts to include carrier service performance research.

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