Fleet Executive May/June 2012 by Annex Business Media

Motortruck

Fleet Executive C A N A D A ’ S

B U S I N E S S

GREEN TRUCKING Your take on the proposed GHG emissions regs

MAY/JUNE 2012

M A G A Z I N E

F O R

THE BOTTOM LINE Profits: Where’s the app for that?

F L E E T

O W N E R S

PROFITABILITY Why the industry is ripe for consolidation

A Natural Fit? The potential for savings is considerable, but many obstacles remain to trucking adopting natural gas as its new fuel of choice

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May/June 2012

Volume 81, No. 3

contents

COVER STORY 26 A NATURAL FIT?

The potential for savings is considerable, but many obstacles remain to trucking adopting natural gas as its new fuel of choice.

30 WORTH THE INVESTMENT?

New study investigates whether fuel-efficient technologies are ultimately worth the up-front cost.

Features page 10

18 IN ACQUISITION MODE

Fuelled by cash, changing demographics and a post-recession appetite, the trucking industry is ripe for consolidation.

20 LEADING BY EXAMPLE

Next generation leaders share vision of trucking industry’s future at TCA.

22 GREEN TO GOLD

Ottawa unveils new plan to reduce heavy-truck GHG emissions – including industry stakeholders’ comments on the government’s plans – and Ontario close to completing draft of goods movement strategy.

Departments THE VIEW WITH LOU…6 While feeding the fears of drivers is easy, real leadership requires embracing change and guiding them through it.

page 12

COMPETITION WATCH…8 APPS updates fleet with 17 new Pete 386s; Manitoulin Global Forwarding acquires Beler International; Consolidated Fastfrate announces plans to move into 10,000 sq.-ft. cross-dock facility in Regina; Schneider National reduces cargo theft by 35%; and more.

THE BOTTOM LINE…10 It’s time to stop thinking “social media” and start thinking “social profitability,” says MSM Transportation’s Mike McCarron.

TAKING CARE OF BUSINESS…12 Mercantile’s Mark Borkowski discusses three common insurance pitfalls – and how to avoid them.

page 22

THE HUMAN EDGE…14 Carriers are already experiencing difficulties finding drivers and O/Os, according to a CTHRC study.

MAINTENANCE MATTERS…15 Efficient truck repairs depend on a smooth flow of information from purchase orders to invoices.

GEARED UP…32 Our revamped Equipment Watch section features a test drive of Kenworth’s new T680 and the latest in new products from Volvo.

DASHBOARD…36 TransCore’s Canadian Freight Index jumps 24% in March; CGFI rises 10% after 12th consecutive increase; US truck tonnage up 0.2% in March; and more.

INSIDE THE NUMBERS…38 Do environmental concerns affect carrier selection?

trucknews.com

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page 32 May/June 2012 ❙ FLEET EXECUTIVE 3

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WHAT’S ON TRUCKNEWS.COM Brought to you by the editors of Truck News, Truck West and Fleet Executive

BLOGS ATBS Canada CEO Ray Haight gives owner/operators a crash course on how to do business in tough times. Motivational speaker and photographer David Benjatschek offers stress-busting tips to help gauge what’s really important. Dan Goodwill and Associates president Dan Goodwill gives his thoughts on the current driver shortage.

You said it... “The issue is not a driver shortage but a compensation

gap issue. You have enough people with their A/Z license (I have mine), just not enough who, in turn, are willing to work for these sweatshop-style, per-mile plans that do not pay for other hours of activity that are totally work-related and benefit the carrier and shipper. No one likes to be exploited, it does not matter what industry they are in… What we are seeing instead is a conscious decision by carriers to pursue a churn and burn strategy with drivers. The evidence is there in the brutal compensation plans.” —J. BROUWER’s comments on Dan Goodwill’s blog, “Some thoughts on the driver shortage.”

Web TV:

Transportation Matters ROAD TODAY TRUCK SHOW 2012:

Highlights from the 4th annual Road Today Truck Show.

TIRE TALK:

There was plenty of tire news to go ’round at this year’s Truck World show. Here are some highlights.

TRUCKER RADIO SHOW:

Trucker Radio Show hosts Stan Campbell and Tim Denis dish on their syndicated radio show and their new partnership with sister publication, Truck News.

FULL STEAM AHEAD ON CONSOLIDATION:

Why experts believe the time is right for industry consolidation.

FOLLOW US ON TWITTER @TruckNewsMag @AdamLedlow @JameMenzies @LouSmyrlis @JuliaKuzeljevic @KathyPenner Fleet Executive editors are now on the Find us on Facebook facebook.com/trucknews 4 FLEET EXECUTIVE ❙ May/June 2012

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radio! For a list of stations and on-air times go to truckerradio.com.

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Motortruck

Fleet Executive

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

THE VIEW WITH LOU

Feeding the fears of drivers is easy; leadership requires embracing change and guiding them through it

or an association that takes pride in fighting for the rights of truckers, I find it hard to understand why the Owner-Operator Independent Drivers Association (OOIDA) remains vehemently opposed to electronic on-board recorders. As you know, US legislators are considering a provision that would require all longhaul trucks to be equipped with electronic on-board recorders (EOBRs) for real-time monitoring of drivers’ compliance with Hours-of-Service rules. This side of the border, the Canadian Trucking Alliance has been coordinating an effort among carriers and professional drivers to voice support for the mandatory implementation of EOBRs. Both the American Trucking Associations and the Canadian Trucking Alliance say their members, many of whom have gone ahead and started using EOBRs in their fleets ahead of any government mandate, have found that it improves compliance, safety and operating efficiency. But OOIDA refuses to be convinced and its attacks are becoming increasingly vitriolic. First is OOIDA’s cost argument. EOBRs are “exorbitantly expensive,” according to OOIDA, which claims EOBRs will cost between $1,000 and $1,500 to purchase – a pretty steep increase from the paper logbooks currently available at truck stops or from carriers for little or no charge. And based on that cost, OOIDA goes on to claim the costs will hurt owner/operators and small fleet owners. The Canadian Trucking Alliance counters that EOBRs can be purchased as a standalone device in the $300-$500 range (Hours-ofService recording only) or up to $700-$800 for units with additional options such as routing, dispatch, communication and fleet management capabilities. That’s a pretty wide range in pricing so obviously one side is manipulating numbers to strengthen their argument. Who should you believe? Well, having reported on this industry for more than 20 years, I can tell you one thing: Margins are so tight in this industry that carriers are pretty quick to complain about anything they consider a needless expense. So why have so many proven willing to invest in EOBRs before the devices are mandated? Could

MAY/JUNE 2012

VOL. 81 NO. 3

Lou Smyrlis, MCILT, Editor lou@transportationmedia.ca

it be they deemed them to be a worthwhile investment that could help them save money? The CTA reports that carriers which have voluntarily implemented EOBRs have reported as much as a 75% reduction in Hours-of-Service violations. With Hours-of-Service penalties costing up to $400 per violation, this alone would create a considerable business cost savings. Why would OOIDA deny its own members such an opportunity? Owner/operators and small fleets have been hammered worse than anyone during the recession and the slow recovery; they’re the ones who can least afford Hours-of-Service penalties. Furthermore, why do they want their members to continue to waste their time slaving over paper logs? The other reality is that in most cases it will be the trucking company, not the driver/independent operator, who will be buying the EOBRs. So why does OOIDA raise cost as an issue when the people actually footing up the bill don’t see it as one? OOIDA’s next argument is that EOBRs are actually a way for large companies to squeeze more productivity out of drivers and increase costs for the small trucking companies they compete with. It is true that Canada’s largest carriers do want to consolidate the industry, but if EOBRs are helping them squeeze more productivity out of their drivers as OOIDA accuses, why would they want to give up such a competitive advantage to their smaller competitors by making EOBRs mandatory for all? Could it be that the reverse of what OOIDA is claiming is actually closer to the truth? Could it be that the current antiquated system, where it’s all too easy to fudge the paper log or keep multiple logs, hurts drivers by allowing shady operators to compete on an uneven playing field? Would an electronic record that can’t be easily fudged not be a better way to ensure drivers are able to stay within what is considered legally acceptable driving hours? Why would OOIDA want to deny that to its members? Owner/operators tend to be wary of change. I recall many opposing satellite communications when that technology emerged 20 years ago; yet they wouldn’t want to be without it today. It’s easy for an association to simply feed the fears of its members. It takes leadership to embrace change and make the effort to guide its members through it. FE

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 Stephen Ferrie sferrie@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)

6 FLEET EXECUTIVE ❙ May/June 2012 Member/Canadian Business Press

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COMPETITION WATCH TRIMAC has announced its intention to purchase Ontario-based LIQUID CARGO LINES. Trimac plans to purchase all issued and outstanding shares in the company and take over its 13-acre property which will then be sold to a party related to Trimac and leased back to Liquid Cargo Lines. The closing is expected to occur in the third quarter of this year, Trimac announced. Liquid Cargo Lines has been in business since 1953, providing specialized bulk transport through Ontario, Quebec and the US with a focus on chemicals and asphalt. Its assets include its 13 acres of real estate, 50 trailers and 23 company-owned power units. Fifteen owner/operators also work for the company. APPS TRANSPORT GROUP has taken delivery of the first of 17 new Peterbilt 386s the company has ordered. The order represents about one-third of its entire fleet. Rob McDonald, president of Apps, told Fleet Executive the company was unhappy with how its EPA07 generation vehicles were performing and decided to start with a clean slate when transitioning to EPA2010 technology with selective catalytic reduction (SCR). The 386s, with 450-hp Paccar MX engines and automated transmissions, are a heavier-spec’ than others within the fleet and will be given to dedicated drivers handling heavier loads. Apps plans to keep the trucks for seven years – at which time they’ll have about 500,000-600,000 kilometres on them – and then determine whether to trade them in or continue running them, based on the condition they’re in. It has spec’d features such as automatic shutdown to reduce idling and keep the hours on the engine as low as possible. CHALLENGER MOTOR FREIGHT has embarked on an aggressive strategy to rejuvenate its fleet, and by year’s end will have replaced more than 400 tractors – or nearly a third of its entire fleet. By the end of the year, Challenger’s oldest highway tractor will be of a 2010 vintage, president Dan Einwechter told Fleet Executive during an interview in May at Challenger headquarters. This investment comes after the company replaced most of its trailer fleet with 600 Stoughton and 400 Wabash trailers, all configured for long combination vehicle (LCV) applications. The new trailer purchases were part of a “right-sizing” strategy, which saw the 1,000 new units brought in to replace 1,400 aging trailers, Einwechter explained. The new tractors – more than 200 of which have already arrived – will look a little different than those flying the Challenger colours in the past, with the company having decided on a more modern paint scheme. MANITOULIN GLOBAL FORWARDING has acquired Regina-based freight-forwarder BELER INTERNATIONAL. Established in 1994, Beler is the longest-standing freight-forwarding company in Saskatchewan, according to company officials. Exporting predominantly from the prairie provinces, it serves clients around the world in the agricultural machinery marketplace. CONSOLIDATED FASTFRATE (CFF) has announced plans to move into Regina’s Global Transportation Hub with a 10,000 sq.-ft. cross-dock facility. It will be co-located with CP Rail’s intermodal yard with construction set to begin this spring. The facility, on 10 acres of land, will be up and running by fall of 2013, the company announced. TRANFORCE, through its subsidiary I.E. Miller Services, has acquired certain assets of PEAK USA ENERGY SERVICES. Peak USA, a subsidiary of Nabors Industries, is an oilfield service company specializing in rig moving, custom heavy hauling, crane and rigging services, and oilfield transportation. The acquired business spans two operating districts located in Alice and Kilgore, Texas, providing work to a combined total of about 75 employees. The transaction is valued at more than $10 million and is expected to generate annual revenues of approximately $25 million for TransForce. SCHNEIDER NATIONAL says it reduced its cargo theft rates by 35% last year, it’s fifth straight year of decreased incidences even as cargo theft escalates across North America. FreightWatch’s International 2011 Annual Cargo Theft Report indicated cargo theft was actually up 8.3% last year. Schneider says it has bucked the trend, with the 35% decline marking the largest drop in its history. Schneider credits its success to a “multi-layered approach consisting of proactive communication with shippers, Schneider drivers and owner/operators, methodical procedures and top-notch technology.” Piloting new security products, satellite tracking on tractors, trailers and containers, 24/7 security monitoring, and high-security locks and seals on loads are some of the ways the company has reduced its cargo theft incidences, the company announced. BISON TRANSPORT has acquired a ‘turn-key’ trucking terminal in Langley, B.C., the company announced. The centrallylocated 20,310-sq. ft. facility is located on 6.15 acres in the northwest Langley industrial area and adjoins Port Kells and Surrey. The size and nature of the purchase will see Bison share the facility with another trucking operation for at least the first 12 months, with room for other potential tenancy arrangements ongoing, the company said. The acquisition includes a twostorey 12,000-sq.-ft. office building, five trailer service bays and a cross-dock bay. 8 FLEET EXECUTIVE ❙ May/June 2012

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BOTTOM LINE

PROFIT: Where’s the app for that? By Mike McCarron

he Canadian Trucking Alliance Blue Ribbon report on the driver shortage has been the rage of social media sites recently. To sum it up in less than 140 characters: the pay stinks and no one wants the job. It’s hard to get excited when you’re all over the continent for weeks on end and earning about the same as someone who flips burgers for a living. A better bottom line is the only way we’ll ever have the coin to attract the human capital we need. Most of us have been trying to figure out how to get new customers and add revenue using social media. Even the Tyrannosaurus truckers have come to grips with the fact that their beloved CB is being replaced by Twitter. However, my spidey-senses tell me it’s easy to be fooled into thinking that social media is only a marketing tool. And why not? “Media” means marketing and marketing means sales. But of course, sales and profits are two different things. If your company has assigned its social media efforts to the sharp, young up-and-comer in the sales department, then social media is costing you money. You won’t start getting an acceptable return until you stop thinking “social media” and start thinking “social profitability.” Here’s what to keep in mind:

1. Get social media into the C-suite Get social media out of sales now. It shouldn’t be a line item on your P&L. Social media has to be about profit, not marketing. That won’t happen until it’s a priority of the big dogs every Monday morning in the boardroom.

2. It’s a strategy, not a tactic Most companies (not just truckers) only use social media as a tactical sales tool. They haven’t integrated it into their business planning and systems. It needs to be viewed as a strategic tool that can improve your brand, profitability, and drive EBITDA in every single department. Think what you’ll save in cell phone bills by training your drivers on Skype and other messaging tools.

3. Don’t master the software By the time you figure out that sexy new app, there will be a better, cheaper one out there. There is nothing to be gained by becoming an expert on every shiny new technology. Focus on finding opportunities that exist in every nook and cranny of your terminal first, and then look for the technology to help you achieve the desired results. You get no competitive advantages by having an office full of Twitter gurus. 10 FLEET EXECUTIVE ❙ May/June 2012

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4. Blend the new and old Once the savings washcloth is thoroughly wrung out, the only way to make more money is to increase top-line sales. Social profitability can help you accomplish both – but only when you blend it with proven, old-school, relationshipbuilding sales systems. Not too many customers want to go for sushi and a ballgame with my iPad.

5. Measure the cost Social profitability is not cheap. In fact, a properly executed strategy is surprisingly expensive and hard to measure. Mining compelling data, monitoring the social spheres to see what’s being said about your company, and working the blog circuit is time consuming. Time is money, and time spent on social media needs to be accurately measured.

6. Social catastrophe @yourcompany Loose lips sink ships! Social profitability can turn into social catastrophe quickly. Imagine the damage that can be done to your company’s reputation by some wiener on the dock who’s unhappy with his 1% raise. Before Suzie starts hammering out tweets for your business, you need to make some critical decisions. Who “owns” social media at your company? What’s confidential and what is not? How do you monitor your customers and competitors? What’s your crisis plan when the line gets crossed? I have yet to hear of any company that truly understands how to use social media to increase its enterprise value. I do think our industry is behind the times and has yet to even begin to understand how it can help solve our biggest challenges. Unless you just got back from the moon, the fact that we have a serious driver shortage should be no surprise. Thinking social profitability and not social media alone will not put bums into our empty seats. But it should add some zeros to the bottom line and help us begin to pay our drivers what they truly deserve while attracting the new entrants we desperately need to survive. FE Mike McCarron is the managing partner at MSM Transportation (www.shipmsm.com) in Bolton, Ont., which specializes in moving products between Canada and the rest of the world. He can be reached at mmccarron@ shipmsm.com or @AceMcC on Twitter. trucknews.com

12-06-01 10:17 AM

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TAKING CARE OF BUSINESS

WATCH OUT FOR THESE INSURANCE PITFALLS The path to peace of mind starts with awareness. By Mark Borkowski

ife and health insurance promise peace of mind, but often leave doubts and unanswered questions. With the inner workings of insurance not well understood, where can you get unbiased advice? To find out, I asked an actuary, Promod Sharma. Sharma knows insurance, having designed products for a decade before spending five years helping advisors sell them across Canada. He now shares his insider insights through blogging and speaking to accountants, lawyers and the curious. Over the years, Sharma noticed three common problems with insurance that still have not been eliminated:

- Poor blueprints; - Shoddy construction; and - Lousy after-sales service.

Poor blueprints The right blueprint is essential at the outset, Sharma says. The design can easily be suboptimal because the expertise of advisors varies greatly. With insurance, you might get the wrong product, the wrong amount or both. There are many, many choices these days. For practical purposes, insurance products are often interchangeable when configured precisely. Accountants are in a similar situation. They work from the same tax rules, but their solutions vary with their skill, knowledge and courage.

Shoddy construction Chefs using the same ingredients create different dishes. Expertise counts. Even skilled advisors make mistakes. Since there is no mandatory review of their work, errors can sneak through. There are also advisors who look more skilled than they are or who are not up-to-date with the latest developments. An insurance policy is a complex, legal contract. What is written takes precedence over what was intended or assumed. Where can clients get an independent second opinion? “You are at a disadvantage unless you know how products are designed and how advisors sell them. Sometimes there’s more veneer than substance. What looks great today might fail to last,” Sharma says.

Lousy after-sales service Since selling life and health insurance is considered difficult, insurers pay most of the compensation when the sale is made. As a result, there’s little money paid in future years. That means there’s little incentive to provide after-sales service. 12 FLEET EXECUTIVE ❙ May/June 2012

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When advisors make future visits, they are more likely to sell something new than service what’s already in place. That’s unfortunate. Insurance appreciates in value since the likelihood of payout increases every year. There’s a practical problem, too. Products are complex and new versions are constantly introduced. Advisors have difficulty remembering how the old products worked. Selling products from different insurers heightens the confusion. Advisors who keep good records can re-familiarize themselves with what they sold, but that takes time away from selling more products. “These days, every field is complex. The solution is specialization to find the ideal strategy and tailor it for the perfect fit,” Sharma says, “Yet, many advisors are generalists who sell insurance, investments and even employee benefits. That’s like the proverbial Jack of all trades.”

Who loses? Advisors are not required to put the interests of their clients first. They can start selling with minimal training, so buyers should beware. Prudent clients should consult a trusted advisor – often their accountant or human resources director – before making important financial decisions. Deciphering insurance strategies can be a particular challenge since the sales tools used to sell insurance are designed to focus on the positives. It can be difficult to figure out what’s been left out, to ask the right questions and to figure out what the answers mean. “How do you ask questions about (something) you do not know you are missing? That is very tough,” Sharma says. Accountants and human resource departments face a tough dilemma. Rejecting insurance strategies is easy, but their clients then lose out on valuable protection and tax benefits. Recommending insurance strategies is even more dangerous. If problems arise, will clients blame the wellmeaning accountant or human resources director they trusted, or the salesperson? The path to peace of mind starts with awareness of the pitfalls. A confidential, independent insurance review lights the safe route. FE Mark Borkowski is president of Mercantile Mergers & Acquisitions Corporation. Mercantile specializes in the sale of midmarket companies. Mark can be contacted at www.mercantilemergersacquisitions.com. trucknews.com

12-06-01 10:18 AM

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THE HUMAN EDGE

Carriers already experiencing difficulties finding drivers and O/Os, CTHRC study shows

bout six in 10 Canadian fleets are experiencing difficulties filling vacancies for Class 1 (A/Z) drivers, while more than half are having trouble finding owner/operators, according to research released by the Canadian Trucking Human Resources Council. The research also shows that 48% of fleets surveyed are having trouble filling vacant jobs for Class 3 (D) drivers. The CTHRC’s Beyond the Wheel 2 research initiative surveyed 1,112 industry representatives in late 2011, and it updates ongoing research into the demand for workers in nine key industry occupations.

Age of Class 1 (A/Z) drivers in Canada

30 and under 55 years and over

22%

13%

31 to 44 years

30% 45 to 54 years

36%

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Other findings include: ▲ The demand for employees is on the rise: Almost 45% of surveyed fleets expect their labour needs to increase over the next five years and 26% expect the demand to stay the same. Another 21% did not know what to expect. ▲ The industry’s workforce is aging: Thirty per cent of industry employees are 45 to 54 years old and 17% are 55 or older. Those 45 years and older account for 58% of Class 1 (A/Z) company drivers, 49% of owner/operators and 44% of truck/transport mechanics. ▲ Women continue to be underrepresented in the industry: A mere 3% of company truck drivers and 4% of owner/operators are women. However, women account for 25% of freight claims/safety and loss prevention specialists; 19% of dispatchers; and 11% of foremen, supervisors and managers. All of Beyond the Wheel’s data and projections are combined with other economic indicators, and are available free of charge through the demand data tool on CTHRC’s Labour Information Highway at www.cthrc.com. “With this updated forecasting data, every Canadian fleet will have access to the latest information needed to support everything from business plans to recruiting strategies,” says Angela Splinter, CTHRC’s executive director. “With geographic-specific data, they will be able to compare their individual experiences against regional benchmarks, and identify issues that can only be addressed by CTHRC’s extensive suite of tools and resources.” The latest research addresses the demand for employees in occupations including truck drivers; owner/operators; shunt drivers; cargo workers; dispatchers; freight claims/safety and loss prevention specialists; foremen, supervisors and managers; and allied trades such as truck and transport mechanics, transport trailer technicians, and parts technicians. FE trucknews.com

12-06-01 10:19 AM

MAINTENANCE MATTERS

Go with the flow Efficient truck repairs depend on a smooth flow of information from purchase orders to invoices By John G. Smith

rucks may be powered by diesel, but the repair procedures are powered by information. That becomes clear when Gary Cummings describes the process at FleetNet America, which manages 75,000 service events a year. An average truck repair involves 9.4 conversations by phone, e-mail or another communication method, the company president and CEO said during the annual meeting of the Technology and Maintenance Council. Most discussions take 2.4 minutes. Simple multiplication can translate that into the hours and days which are added to the time spent on the repairs themselves. Consider the steps for a shop looking to secure a single purchase order. There’s the initial conversation with the customer, the time to understand requirements for the repair, determining the final charges, delivering the invoice, and securing payment. The repair order itself involves detecting a problem, assessing the problem, directing the truck trucknews.com

MAINT.MATTERMay12.indd 15

to a shop, authorizing the diagnostics, authorizing the repair, orchestrating the repair, and summarizing the invoice. Many of the steps overlap. The first two steps in the process for a purchase order can easily match five of the steps in the repair order, Cummings noted. “We still need that data interaction, and in some cases I would argue we even need more conversations.” But there are opportunities to streamline the procedures.

Step 1: Assess the problem Cellular technology and remote diagnostics could be better used to create a repair order as soon as a truck arrives at a shop, said Bruce Love, president of DP Solutions, which develops an array of hardware and software for heavyduty dealerships. “Before [a technician] turns a wrench on the unit, he’s got an opportunity to reduce his downtime.” But Brian Mulshine, Navistar director – field service, warns there are some limitations. “Does the fault code always tell

you what part to change on the engine?” he asked the crowd of maintenance managers at this seminar. The fault code could identify a problem, but it can also be a red herring created by a power spike during charging. “You can do remote diagnostics...but we’ve also got to be careful that you have the right information at your fingertips.” Another source of valuable information can come in the form of Internet access in a service bay, giving mechanics instant access to everything from fault codes to parts catalogues and wiring diagrams, Love said. Those who order parts from that location will also be less likely to waste 10 minutes an hour talking to the guy at the parts counter.

Step 2: Direct to the shop Fleets have traditionally chosen specific repair facilities based on rates, proximity and reputation, said Mike Delaney, president and CEO of Wheel Time Network. But the right data can lead to more informed choices, particularly when shops have access to information May/June 2012 ❙ FLEET EXECUTIVE 15

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MAINTENANCE MATTERS

about unique needs. “There’s no decision that can be faster or better than the one you make in advance,” he said. The right information is not limited to the truck alone. A shop should be able to tap into specific fleet requirements, such as the need to authorize repairs over $1,000, preferred oils, or pre-defined procedures, said Dick Hyatt, president and CEO of Decisiv, which provides “cloud-based” service management platforms to 150 fleets. It is the type of information that can avoid a number of conflicts. Still, as much as information like this can improve the flow of communication, fleets need to commit to the process. “The investments are for naught if the customer does not want to use technology,” Mulshine said.

Step 3: Authorize diagnostics According to Delaney, the most important

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step in a smooth repair process will involve the diagnostic work. In most cases, this task should be completed in a mere two hours, he said. And if done correctly, it will create a firm estimate and a firm time for the repair to be completed. The real conflicts emerge when the invoice doesn’t match the original discussions about these diagnostics. “If it’s all done verbally, you’re going to get in trouble,” Mulshine added.

Step 4: Authorize the repair Love it or hate it, the telephone still plays a big role in the repair process – even in the days when data can be swapped in real time. “The worst of all is when you connect and get to hear two minutes of promotions about why they care about customer service,” Hyatt said. Delaney stresses the limitations of a phone call by asking whether kids

answer a text or voicemail more quickly. Text messages are simply more efficient, he said. “It may not be good grammar, but it’s a helluva way to communicate quickly.” One of his customers will now approve repairs in five or 10 minutes using a text message, while the process traditionally took one or two days when trying to reach people by phone. “The phone is the enemy,” he stressed. “Fully documented and timestamped communications mean faster and better [repairs].” Maybe he’s being too hasty. Voice Over IP (VOIP) systems give shops the chance to track who was on a call and how long a conversation lasted, Love said. Voicemails can even be attached to electronic repair orders along with text messages and e-mail. That way, all the related details can be tracked, and include the time stamps that let a shop see how long the fleet took to provide a purchase order.

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MAINTENANCE MATTERS

Step 5: Orchestrate the repair Let’s not lose sight of the real task at hand. “The most important step in the process is to fix the truck,” Love stressed. The challenge is that Standard Repair Times (SRTs) are not always standard. “This is a very dynamic environment. It’s a manufacturing environment. Bolts are going to break,” he said of work in a modern shop. An initial diagnosis might be wrong, a technician might be ill, or the facility can be overloaded on a particular day. Better software makes it possible to build a standardized workflow based on a shop’s actual experience. The best systems even offer more “visibility” into the related transactions, Mulshine said. Someone in the shop may note that a part needs to be ordered, but the fleet may be able to respond that it already has a spare part

in stock. “That’s where we can hit home runs,” he said.

Step 6: Summarize the invoice One of the biggest steps to avoiding problems with an invoice will involve the better sharing of information. Love foresees a day in the near future when Web-based computer platforms will eliminate the need to re-key in the same information over and over again. But fleets, manufacturers, technology providers and service providers often use different standards and platforms. “This is where I feel sorry for a fleet,” Mulshine said. “We’ve got to prevent creating more Web sites.” “We are asking too much work,” he said, stressing that there needs to be a better sharing of information. “That’s where we’ve got to focus.” Hyatt suggests that cloud-based computing models make it possible to link

a long list of data. A simple unit number could connect to information about the truck, warranties, parts, and fleet profiles. “History is captured and maintained,” he added. Then the information can be used to measure, track and analyze every step in the process. Much of that could be accessed through a QR code printed on a truck’s door. The good news is that the capability exists, Hyatt stressed. “Data can be shared and it can be exchanged and it can be exchanged effectively.” FE John G. Smith is an award-winning writer based in Ajax, Ont., and has been covering the trucking industry for more than 15 years. He is the former editorial director of Motortruck’s sister publication Truck News, and now president of WordSmith Media Inc.

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PROFITABILITY

IN ACQUISITION MODE Fuelled by cash, changing demographics and a post-recession appetite, the trucking industry is ripe for consolidation By Julia Kuzeljevich

n a for-hire carrier industry struggling under the weight of more than 12,000 carriers competing for $34 billion in annual revenues, and dealing with an average operating ratio of about six cents on the dollar even in good years, transportation CEOs have made it clear they would like to consolidate the industry. Medium-sized and smaller carriers, meanwhile, say they want to either grow or sell. Prospective buyers and sellers now find themselves in an improving economic climate, and facing demographic shifts. Does this mean we are about to enter a mergers and acquisitions spree? Experts Doug Nix, vice-chairman of Corporate Finance Associates, and Doug Davis, independent director with ProTrans Ventures, offered their insights at the recent Driving for Profit seminar series, sponsored by our sister publication Truck News, Dalton Timmins Insurance, and Daimler Truck Financial and organized by NAL Insurance. The session, moderated by Transportation Media editorial director Lou Smyrlis, went into considerable detail about current trends and how carriers can best respond. We will be including coverage over the next couple of issues. Before Nix and Davis explained why they felt the next couple of years looked ripe for industry consolidation, they were asked to outline why the recession years, which were also initially considered ripe for consolidation activity, did not deliver. “We saw great uncertainty during the last recession. Businesses were struggling for survival. People just hunkered down and conserved cash, just trying to get through the recession. The idea of taking on someone else’s debt and

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problems just wasn’t part of anyone’s plans,” said Nix. “The desire (for consolidation) was there, but the recession created such a devaluation of companies. Anyone who didn’t have to sell was best to wait. I think the lending community was really patient, much more than they’ve been at other times. They must have thought that trucking is a core business, it’s not going away. They were spending time elsewhere, giving the transportation industry a little more rope.” When asked for specific signs that mergers and acquisitions are expected to grow over the next few years, Nix noted that demographics play a major role, with the older contingent of the baby boomer generation contemplating retirement prospects or at least lifestyle changes. “Time moves on, and if a guy was 52 three years ago he’s 55 now and timeframes have been compressed,” he said. “You have a lot of people in this demographic range who have an ‘exit timetable,’” agreed Davis. “What we’re seeing is that there are more buyers than sellers. But there are people who are coming out of the doldrums, who are saying, ‘I’m not going to be at this forever.’ I think a number of people are moving to that point. “While you might not be able to say what the average company looks like, the average sellers are probably baby boomers thinking about exiting. In many cases, they have had a great deal of success; some have been tarnished by the recent recession. I’ve had a few conversations where they’ve said they wanted their business to get back to a certain level, but the last time they were at that level, they were working 60-hour plus weeks with their cell phones going off constantly. Now they may have gotten comfortable trucknews.com

12-06-04 8:03 AM

PROFITABILITY and may lack the energy and interest to put the dog days back in again,” Davis added. There’s also a tonne of cash in the marketplace today that needs to be invested. “If I was just looking at financial statements, I wouldn’t know there was a downturn in the economy. I don’t think it will be a feeding frenzy like it was in 2006-2007, but it will be astronomical compared to the last few years. We’re getting a number of inquiries on doing proactive acquisition work,” said Nix. The financial sector in Canada also appears to be taking a more optimistic approach. “The moving parts are starting to fall into place. Lenders see that they can back some of these industries, especially in Canada,” he said. The investment banking sector, meanwhile, will remain conservative in its approach, said Davis, “but their outlook the next few years is a lot rosier. They may be both more cautious and aggressive in terms of putting their deals together,” he said. “One of the malaises of Canadian trucking companies is that a number of people who are in the business are bargainfocused as opposed to buying a better business and paying the premium for it, but buying a stronger business in the longer term,” said Nix. For those who intend on being buyers or sellers over the

next few years, now is the time to determine what you need to fix in your own business. “Clean your offices, wash your fleet once in a while. Get your books and records in order, and get personal stuff out of the corporation. To the extent you can cut down on this stuff, it makes it easier for buyers to see what the business is,” said Nix. “The one thing about mergers is that it’s rare to have a merger of two equals. Very early on somebody’s on first base. Safety is a key business risk. Generally poor safety means poor culture,” he added. In the case of family-run businesses, noted Nix, many of these are forced onto the next generation, who may not want to run them. “We see a lot of deadbeat kids too,” he said, who may be against a sale that threatens an easy lifestyle. “If you are going to do a generational transfer, I implore you to get third-party financing where the kids have to pay you at the time of transfer,” he said. It’s an emotional issue, and all stakeholders, whether or not they own shares in the company, will feel they need to be part of any transaction in some fashion, said Davis. “Do all acquisitions line up to original expectations? No, but that means they just didn’t hit all the objectives. This means we live in a turbulent, competitive world. If you’ve bought a bargain, you probably have a higher risk versus if you did a proactive search,” said Nix. FE

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PROFITABILITY

LEADING BY EXAMPLE Next generation leaders share vision of trucking industry’s future at TCA By Lou Smyrlis

nvest in detailed and regular evaluation of business processes. Show the courage to reject customer demands that are not beneficial to your company’s health. Terminate unproductive practices. In short, that’s what the executives representing trucking’s next generation of leadership believe they must do in the years ahead to boost their company fortunes and reenergize the industry. The Truckload Carriers Association, at its recent annual conference in Florida, brought together five rising stars in truckload transport to discuss their visions of the future, with the colourful Jim Hebe, senior vice-president of North American sales operations for Navistar, acting as moderator. The panellists included a Canadian, Rob Penner, executive vice-president and chief operating officer (COO) of Bison Transport; as well as Michael Gerdin, president, CEO and chairman of Heartland Express; Steve Gordon, COO of Gordon Trucking; Aaron Tennant, president and CEO of Tennant Truck Lines; and Paul Will, vice-chairman, president and COO of Celadon Trucking Services. Although all expressed optimism for the opportunities that lie ahead, they stressed the need for increased discipline and analysis of all business functions. Will, who saw opportunities for growth for his company in both Mexico and Canada, pointed out the need for trucking companies to routinely evaluate where their business is heading rather than just “running miles to run miles.” “It’s a simple yet complex task,” he said. Gerdin, whose father Russell had grown Heartland Express into the model for a well-run transportation company with an operating ratio that was the envy of many, also spoke about the need to be constantly evaluating the performance of all aspects of the business and not be carried away by the latest industry trend. 20 FLEET EXECUTIVE ❙ May/June 2012

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“You have to do what is right for your company. Don’t just do it because it’s an industry trend,” he advised, stressing the need for discipline on freight hauled. Gerdin said that load count, deadhead, and loads on lanes are three reports he checks daily to ensure Heartland is headed in the right direction. He is also keen to ensure he is not doing business with the wrong customers. “Be really particular about who is getting into your freight basket. If you don’t watch it, it will start to deteriorate on you pretty quickly,” he warned. “There are customers who will tie you up on the load end and the back end and then you are only running 350 miles as a result. That’s when you are not using your equipment properly. That’s when you are running into trouble…Those who are disciplined will continue to grow. ” That was a comment that found common cause with Gordon who warned that carriers that don’t manage their customer relationships will end up being managed by their customers. Bison’s Penner pointed out that all the data available through today’s various information technology tools – dwell time at the shipper’s yard, for example – is allowing carriers to measure productivity in much more objective fashion and to have more intelligent conversations with customers. Penner said Bison doesn’t simply go to its customers with a price increase, but rather shows them where they may be adding costs to Bison’s operations and then works with them to either remove those costs or asks to be paid for them. Tennant, whose company serves the niche market of heavy machinery hauls, said it would be impossible for his company to be disciplined on such things as load balance and density since it must deal with the difficult task of providing national coverage while running irregular routes. So, instead, he focuses on pricing that supports its true operational costs. trucknews.com

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PROFITABILITY

“I don’t say no (to customers). I believe in pricing the contract so I don’t have to say no,” he said. There is growing frustration with shippers who are pushing payment terms to 45 days and beyond. Gordon said those are practices brought to North America by multinationals that may be used to dealing on such terms in other places in the world. But all the panellists agreed that it’s in the hands of individual carriers to fight back. “That’s up to each and every one of us. We don’t do business with anyone who wants 60-day pay terms. We just say no to them. If interest rates start going back up, that becomes real important,” Gerdin said. Celadon’s Will pointed out that with capacity tightening up, carriers are in a better position to push back on shipper demands for longer payment terms.

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“Shippers will try to push you to do it, but you have to hold your ground. Eventually, they will back off,” he said. Speaking of capacity, most of the panellists agreed they are either not adding to their capacity or are growing conservatively. What most are doing is replacing the oldest vehicles in their fleet and moving back to shorter replacement cycles or, as was the case with Bison, trying to establish “the true life cycle” of these trucks. Gerdin said he is sticking to same formula his father employed when he started Heartland Express with just 16 trucks back in 1978. His father was very focused with his money and never went into debt by purchasing a lot of trucks in response to anticipation of industry demand. “He was more focused on making money with the trucks he had. One of

our successes was in keeping it simple. We are going to continue with that,” Gerdin said. He added that he doesn’t believe in buying trucks on cycles, opting instead to keep close tabs on what’s going on with his own fleet and the used truck market and not being afraid to make a deal when he sees a problem coming. Penner pointed out that even when the money is available to get into new iron, finding the right people to place behind the wheel and to service the trucks is so difficult it limits the ability to grow a fleet. “Anyone can go out and buy trucks and trailers, but the ability to place quality drivers and service people behind those trucks is the limiting factor,” he said, adding he sees Bison more likely to grow by bringing more carriers under their umbrella. FE

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12-06-01 10:22 AM

GREEN to GOLD

Ottawa unveils new plan to reduce heavyduty truck GHG emissions By Lou Smyrlis

anada’s Environment Minister, Peter Kent announced proposed regulations to reduce greenhouse gas emissions from new on-road heavy-duty vehicles last month. Kent said the new regulations can be met by using existing technologies for fuel efficiency, aerodynamics and idlereduction. The proposed regulations are also designed to be in alignment with those of the US. “Canada and the United States have a deeply integrated automotive industry and there are significant environmental and economic benefits to aligning our emission standards for new on-road heavy-duty vehicles,” said Kent. “Today’s announcement means that, by the year 2020, greenhouse gas emissions from Canada’s heavy-duty vehicles will be reduced by three million tonnes per year. This is equivalent to removing 650,000 personal vehicles from the road.” Canada previously worked closely with the US to establish common North American standards for greenhouse gas emissions regulations for lightduty vehicles for the 2011-2016 model years, and is working towards proposed regulations for model years 2017 and beyond. The response from the Canadian Trucking Alliance was favourable.

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CTA president David Bradley said the announcement is consistent with the direction the industry is already headed in. “It would be advisable that the regulations allow for some flexibility to take into account differences in the Canadian truck market versus the situation in the US, but the industry supports this initiative,” Bradley said. “The way you reduce GHGs is through improved fuel efficiency and with diesel prices continuing to increase year by year, motor carriers are motivated to burn less. In fact, at no time in our industry’s history have our companies environmental goals been so aligned with society’s desire to reduce GHGs.” Under the proposed regulations, heavy truck tractor and engine OEMs will be encouraged to meet average GHG emission targets as a percentage of their total fleet sales over the 201418 period. Compliance measures in the US will include a system of bankable and tradable credits and possibly penalties. The regulations will not deal with existing tractors. Nor will they cover existing or new trailers, although the US Environmental Protection Agency has indicated it could regulate GHG emissions caused by trailer drag in 2018. It is hoped that by model year 2018, GHG emissions from new heavy trucks

will be 20% less than 2010 models. “That would be a good thing,” said Bradley. “But time will tell whether the market will respond.” He said CTA has been encouraging the Canadian government to accompany the regulation with a labelling system identifying “GHG compliant tractors” and accelerated capital cost allowance to speed up the penetration of those trucks into the marketplace. “The regulation is flexible in that it does not prescribe what has to be done to reach the GHG reduction targets as was the case with the smog emissions mandate,” he said. “That is not a bad thing since the trucking industry is not homogenous in terms of the type of equipment used to transport various commodities, the terrain, etc., but it does not provide the truck buyer with an Energy Star type labelling system identifying the most fuel efficient product.” Reducing emissions from the transportation sector is integral to Ottawa’s overall climate change strategy for Canada. The strategy aims to reduce greenhouse gas emissions by 17% from 2005 levels by 2020. Transportation is responsible for 24% of Canada’s GHG emissions. The proposed regulations, which are subject to a 60-day public consultation period, were published in the Canada Gazette. FE trucknews.com

12-06-01 11:28 AM

GREEN to GOLD

We can do more

Industry stakeholders bend government’s ear on plans for GHG emissions regs. By Lou Smyrlis

ttawa has encouraged industry feedback on its proposed legislation mirroring the US mandate to reduce heavyduty truck GHG emissions and government officials got an earful at a conference hosted by the University of Manitoba Transport Institute. Canada’s proposed regulations are designed to reduce emissions from the whole range of on-road heavy-duty vehicles and engines, including large pick-up trucks, short/long-haul tractors, cement and garbage trucks, buses, and more, for the 2014 model year and beyond. As a result of implementing the proposed standards, Ottawa anticipates that greenhouse gas emissions from 2018 heavy-duty vehicles will be reduced by up to 23% from those sold in 2010. By the year 2020, GHG emissions from Canada’s heavy-duty vehicles will be reduced by three million tonnes per year. This is equivalent to removing 650,000 personal vehicles from the road, according to Ottawa. Both the Canadian and US regulations do not include the trailer in their legislation, however. Industry stakeholders attending the Heavy Duty Vehicle GHG Emissions and Fuel Efficiency in Canada Conference took issue with that. “Without the trailer the rules are actually meaningless,” said Dr. Siddiq Khan, a senior researcher at the American Council for an EnergyEfficient Economy in Washington, D.C. Louis-Philippe Gagne, the lead engineer working on the development of regulations to limit GHG emissions from new on-road heavy-duty vehicles with Environment Canada, explained there were two reasons for keeping trailers out of the legislation this time around. One was the decision to align Canada’s legislation with that of the US and the Americans decided not to address trailers. trucknews.com

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“That said, the US is going to look at trailers in the next round.” Gagne added. The second reason he gave was that the Canadian trailer industry is very complex with hundreds of manufacturers. “We have to see this as a first step and it’s a step in the right direction. Vehicles made here are sold in the US and vice versa. It’s important not to have standards that would impede CanadaUS trade,” Gagne said. Jairo Viafara, research associate with the Transport Institute and organizer of the conference, wasn’t completely buying into that argument. He pointed out that although Canada’s trailer market does indeed include many small operators, with the largest number of trailers coming from a small group of manufacturers. Claude Robert heads up Groupe Robert, one of the most environmentally progressive fleets in Canada. He wasn’t buying into all the logic behind the government’s plans either. “The world is a little larger than Canada and the US. Other countries are using different environmental technologies and have been doing it for years,” he said pointing to much greater fuel efficiency gains realized on European trucks. “Why should we try to reinvent the wheel? Why not standardize with the world? What are we trying to prove? That we are second-, third- or fourth-best?” The new standards are quite modest because they are focused on using existing technologies, acknowledged Stéphane Couroux, acting chief of Greenhouse Gas Regulatory Development and Marine Analysis Section Transportation Division for Environment Canada. But he also pointed out that European truck technology while better in terms of reducing GHG emissions

is not as stringent as North American standards on nitrous oxides. He also emphasized the cost of a “made in Canada” approach. “If we were to go ahead of the US, that means truck manufacturers would have to certify their vehicles for Canada and the US. That would be very expensive,” Couroux said. Mark Nantais, president of the Canadian Vehicle Manufacturers Association, also stressed the need for harmonization of regulations between the two countries in his presentation. He argued that the Canadian market is not large enough to warrant a uniquely Canadian approach without great cost to manufacturers, which would get passed on to purchasers. “North American based vehicle manufacturers are global companies. Harmonization of vehicle legislation is very important to them. A patchwork of regulations is not only too complex, but, more importantly, it will delay implementation of new technologies,” he said. Robert, however, pointed out that Canada should be just as concerned about harmonizing legislation among the provinces as it is between Canada and the US. Differences in provincial legislation on items such as wide-base single tires and LCVs remain a thorn in the side of trucking companies wanting to use environmentally sustainable practices on a national level, he said. Gagne acknowledged that was a valid point, but said he believes the provinces are supportive of Ottawa’s plans on GHG legislation. Canada’s proposed GHG regulations for heavy-duty trucks have been published in the Canada Gazette, and are subject to a 60-day public consultation period. That period ends June 13 and Environment Canada is encouraging submissions from all stakeholders. FE May/June 2012 ❙ FLEET EXECUTIVE 23

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GREEN to GOLD

LET’S GET MOVING Ontario close to completing draft of goods movement strategy. By Lou Smyrlis

anada may be one of the most successful trading nations in the world, but all the freight traversing our roadways –combined with the failure over the past 20 years to properly invest in maintaining our infrastructure – is creating congestion that threatens the efficiency of our transportation system. Prior to the recession, a study examining the costs of urban traffic congestion for Canada’s nine largest urban areas estimated that approximately one half billion litres of fuel is wasted annually because of congestion. This amounts to 1.4 megatonnes of needless GHG emissions every year. Focusing how to move freight more effectively would address both the need to reduce GHG emissions and drive efficiencies into our transportation network. With that in mind, Ontario expects to have a draft of its Ontario Goods Movement Strategy ready in June and hopes to release its final strategy and action plan by the fall, a high ranking official within the Ministry of Transportation told logistics professionals attending the Supply Chain Canada conference. Meetings with stakeholders to discuss the draft strategy are expected to take place over the summer, confirmed James Perttula, manager of the Goods Movement Office within the Transportation Policy Branch at the Ministry of Transportation. The proposed strategy for how Canada’s most heavily populated and congested province can best move goods through its transportation infrastructure will take a “system approach that recognizes that shippers need an efficient, agile and flexible multimodal transportation system,” Perttula said. “Regardless of how fast the economy is going to grow, we know it will grow and that Ontario’s population will grow

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and that is going to have an impact. If congestion is an issue now, it will be even more of an issue in 20 years,” Perttula said in making the case for the need of a concrete goods movement plan. The Ontario government had been working since 2007 with the Quebec government to develop a Continental Gateway Strategy. MTO undertook extensive research and consultation to provide a picture of the state of the multimodal transportation system and current system challenges; identify key freight generating nodes and infrastructure, regulatory and policy matters that need to be addressed. However, those talks have “stalled” and Ontario’s transportation ministry recently got the green light to move ahead on its own, Perttula acknowledged. Although Ontario’s plan will be complementary to the work done on the Continental Gateway Strategy and will build on many things the province is already doing, Perttula said it will help sharpen MTO’s focus on good movements. In addition to making Ontario’s transportation system more efficient, Perttula said the strategy will address how to: ▲ Ensure a competitive and streamlined regulatory environment; ▲ Build partnerships to strengthen transportation planning; ▲ Integrate sustainability practices into transportation; and ▲ Promote the strengths of the system. Perttula said recognition of shippers’ interests underlies how MTO will approach goods movement, and how shippers think on a multimodal platform. “Shippers think about efficiency. They rely on efficient operations in each mode and strong connections between the modes,” Perttula said, adding MTO is not looking to wade into the thorny issue of modal shifting.

“There is often talk of shifting freight from one mode to another (due to concerns about energy use and emissions). We need all the modes. We want to work to ensure the greatest efficiency of all the modes and that the connections between the modes are as strong as they can be,” he argued. The stakeholder wish list boils down to three basic demands, according to Perttula: Strong Infrastructure: Access to efficient multimodal supply chains is a deciding factor with respect to where a firm decides to locate and the province’s aging infrastructure will require continued investment. That is a topic regularly raised by the transport minister, despite the belt-tightening the province is embarking on, Perttula said. “Even in this time of financial restraint, we want to make strategic investments in infrastructure,” he said. Competitive Regulations: Intermodal connections and time-sensitive shipments are particularly vulnerable to congestion and regulatory delays. Perttula said there is need to educate the municipalities on how freight moves best to ensure municipal bylaws don’t have a negative impact on freight flows. The province also needs to play an advocacy role in dealing with US or other provincial jurisdictions considering legislation the MTO feels could be detrimental to transportation efficiency. Firm Plan for the Future: Competing jurisdictions are increasing their focus on goods movement planning and state-wide/multi-state freight plans are increasingly common in the US. “Other jurisdictions have already done this and we now need to step up. We need a firm plan for the future,” Perttula said. Ontario’s multimodal transportation system moves more than $1.3 trillion in goods per year. It carries 49% of Canada’s total international trade (across all modes) and almost 70% of road trade with the US. FE trucknews.com

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A Natural Fit? The potential for savings is considerable, but many obstacles remain to trucking adopting natural gas as its new fuel of choice By Lou Smyrlis

26 FLEET EXECUTIVE â?&#x2122; May/June 2012

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12-06-01 11:29 AM

COVER STORY: NATURAL GAS

Photo courtesy of: Westport Innovations Inc.

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he up-front installation costs are considerable and the fuelling network is still negligible, but despite these considerable obstacles, fleet owners can consider natural gas as a viable fuel for their operations, according to a new report published by the Conference Board of Canada. In fact, the Conference Board estimates that converting fleets to natural gas could generate savings of approximately $150,000 per truck over a 10-year period. This savings is nearly twice the cost of installing a natural gas engine – estimated at $80,000 per vehicle, according to the Conference Board, an independent, not-for-profit, applied research organization. “Our models indicate that while the capital costs are high, the savings from lower fuel costs make natural gas an economically viable fuel for the trucking sector,” said Vijay Gill, co-author of Cheap Enough? Making the Switch From Diesel Fuel to Natural Gas. “Trucking firms could reap significant net benefits in operating costs while also reducing their environmental impact.” The report considers the potential for natural gas as an alternative to diesel for heavy-duty trucks in particular. When looking at the financial impact, it takes into consideration the expected operating cost savings over the life cycle of the vehicle, the additional up-front capital costs, and the impact of fuel taxes and capital cost allowances. These impacts are also considered in the context of the greenhouse gas (GHG) reduction potential of the fuel. For-hire trucking, with its more than 12,000 carriers competing for $34 billion in annual revenues, is particularly sensitive to the energy price shocks currently experienced with diesel. Thin margins are, in part, a function of the low degree of capitalization in the industry. Operating costs, rather than capital costs, make up the largest slice of the total cost pie for motor carriers. And this, in turn, makes for a far more volatile cost structure and a lower operating margin than what is required in other capital-intensive industries. Rapidly rising fuel prices can quickly erase margins in the trucking industry. Trucking consumed more than five billion litres of diesel fuel in 2008. At a unit price of $1.20 per litre, this would amount to about 20% of industry revenues, the report points out. May/June 2012 ❙ FLEET EXECUTIVE 27

12-06-01 11:29 AM

COVER STORY: NATURAL GAS

ROAD READY: Kenworth’s T800 liquefied natural gas truck has been in full production since 2009, and boasts a 20% reduction in greenhouse gas emissions, according to the company.

“To further put the fuel costs in perspective, a 30-cent increase in the price of diesel fuel, without a corresponding rise in freight charges, would wipe out the operating margin. This demonstrates the importance of minimizing fuel consumption and mitigating the impact of fuel price increases through the use of fuel surcharges or hedging instruments,” Gill states in his report. Both natural gas and oil prices can be volatile, but historically, on an energy-equivalency basis, natural gas has traded at a significant discount relative to crude oil. Today, that discount is trending toward historical highs: crude oil now costs more than four times the price of natural gas per unit of energy. The same holds true when comparing wholesale diesel and natural gas prices. This gap leaves plenty of room to cover the additional costs of compressing or liquefying gas for transportation uses, according to Gill. “Large shale gas discoveries in North America, and to a lesser extent, Canada, will likely serve as a price buffer against new sources of demand for natural gas. Over the past several years, significant investments in shale gas production capacity have generated enough incremental supply to hold natural gas prices well below historical peaks,” Gill forecasts. Gill is careful to point out that shifting toward natural gas will not directly help carriers reduce their exposure to volatile fuel prices. Natural gas prices can be volatile, he stresses, and exhibit a larger degree of seasonality. However, carriers with mixed fleets could benefit from the fact that gas and oil prices have not always moved together and, at times, have moved in the opposite direction. “If these trends persist, a mixed fleet could act as a natural hedge against price volatility. In addition, long-term price contracts are more readily available for natural gas than they 28 FLEET EXECUTIVE ❙ May/June 2012

CoverStoryMay2012.indd 28

are for diesel. Taking advantage of long-term contracts can add certainty to the cost savings over the life cycle of the vehicle,” he says. Natural gas currently holds a further fiscal advantage over diesel as a transportation fuel because it is exempt from federal and provincial excise taxes. The report readily concedes that diesel as a crude oilbased fuel has a significant energy density advantage over natural gas. Its density allows a significant amount of energy to be contained within a relatively small space, requiring smaller fuel tanks and saving weight. Natural gas, on the other hand, suffers from a lack of energy density and must be compressed or liquefied in order to be viable as a transportation fuel. Compressed natural gas (CNG) typically takes about 1/300th of the volume of natural gas at standard atmospheric pressure. Liquefied natural gas (LNG) manages to reduce this to approximately 1/600th of the volume. Even at this volume, LNG is approximately 40% less energy-dense than diesel (22 megajoules per litre vs. 38 MJ/L). As a result, natural gas vehicles have a shorter range or require a larger fuel tank, which reduces the truck’s carrying capacity and, thus, its ability to generate revenue in comparison to diesel. The process of compressing or liquefying gas also comes at a price, in terms of both capital and energy. There are environmental advantages to natural gas, however. Being a fossil fuel, natural gas emits GHGs and so contributes to climate change, but it does so at a lower intensity than crude oil-based fuels. Life cycle GHG emissions are generally lower than emissions from diesel by up to 25%. It can be considered a transition fuel in terms of climate change mitigation – “cleaner” than oil and more commercially viable and available in the short term than zero-carbon alternatives. “GHG emissions would be expected to fall by more than 50 tonnes per truck per year, assuming no additional demand is generated as a result of the lower operating costs,” the report estimates. There is also the potential of eventually moving to renewable natural gas (RNG), or biogas, to further reduce GHG emissions while maintaining the use of current technology. Biogas is methane-based and made from renewable sources, such as landfills, sewage waste, and agricultural waste. After being upgraded to biomethane by removing CO2 and other impurities (such as hydrogen sulphide), it can be injected into the existing natural gas pipeline infrastructure, obviating the need for a dedicated transportation and delivery system to end users. The main benefit of biomethane as a replacement for natural gas is the reduced carbon footprint. The fuel itself is carbon neutral, as any associated carbon would have been emitted regardless. Despite the price and environmental advantages, adoption of natural gas faces several hurdles. The lack of access to capital, particularly for small and medium-sized carriers, adds a barrier to investment even if the economics over the trucknews.com

12-06-01 11:29 AM

COVER STORY: NATURAL GAS

life cycle of the vehicles are favourable. Gill states that higher capital cost allowance rates would help to encourage investment in the given technology, as they would allow firms to recover their investment sooner. The Canadian Trucking Alliance (CTA) recently appeared before a Commons Standing Committee on Transport to appeal to the feds for support in rolling out safety-related and environmentally-friendly transport alternatives. The Committee seemed especially interested in the industry’s adoption of natural gas-powered trucks, but was told more must be done to stimulate investment. “Proven technology exists today, right now, that can make our industry even safer, that can level the competitive playing field and make the air we breathe cleaner,” David Bradley, who heads CTA, said in his testimony. “The industry is moving in this direction, but the goal should be to accelerate the penetration of this equipment into the marketplace. Trucking is an under-capitalized industry in Canada. We can either wait 20 years to maximize the safety and environmental impact that is possible, or we can partner with government to re-equip our fleets over the next five years, through a combination of regulatory and fiscal measures such as accelerated capital cost allowances, repayable grants and regulation.” Even more important is the value of the fuel excise tax exemption for natural gas. Nearly half of the estimated savings from natural gas vehicles are in the form of fuel tax savings, as natural gas is currently exempt from the equivalent of a road diesel excise tax. Uncertainty over whether natural gas could lose its tax exemption compounds the disincentive created by the high capital cost of converting to natural gas engines. “If and when the rate of adoption increases, there will be pressure on governments to introduce new excise taxes due to slowing growth in diesel fuel tax revenues,” Gill points out. “Clarity on the part of the federal and provincial governments about their intentions would reduce this uncertainty. A specified period of exemption could provide additional incentive for carriers and infrastructure providers to make the necessary investments. One option would be to guarantee the exemption for a period of time, but also mandate a small percentage of biomethane production for grid injection, with the additional costs passed through to natural gas consumers.” Another issue is the absence of refuelling stations. In order to address this concern, Gill suggests that trucking companies explore the potential for “co-opetition.” While continuing to compete for customers, carriers could cooperate with natural gas suppliers in the development of a refuelling network and liquefaction facilities. “While carriers willing to convert their fleets to natural gas face significant capital costs and continuing risks related to relative fuel prices, availability of fuelling infrastructure, and tax policy, they could reap significant net benefits in operating costs while also reducing their environmental impact,” the report concludes. FE trucknews.com

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OBSTACLES

& LIMITATIONS

Some of the key obstacles to widespread take-up of natural gas-fuelled heavy-duty trucks include: Upfront capital cost. Diesel heavy-duty trucks cost approximately $120,000. Natural gas trucks add a significant price premium ($80,000 to $100,000).

Access to capital. Even if the life cycle savings (due to reduced fuel costs) exceed the upfront capital costs, trucking carriers in general may have greater difficulty accessing the capital required.

Lack of infrastructure. In order for there to be widespread take-up, a dense and competitive refuelling infrastructure will have to be developed. Liquefaction also adds to the costs and reduces the life cycle energy balance.

Vehicle range. CNG in particular is not well suited for long-haul trucking activity. LNG suffers less of a penalty because of its higher energy density (relative to CNG). A LNG truck with two 450-litre tanks has an operating range of approximately 1,200 kilometres. Larger tanks can overcome the vehicle range issue to some extent, but only at the expense of weight. Reduced payload. A LNG truck is typically 400 to 500 kilograms heavier than an equivalent diesel truck, due to the weight of the LNG tanks. This reduces the amount of freight that can be carried. At 10 cents of revenue per TKM and a 1,000-km length-of-haul, this translates to $40 to $50 of lost revenue per trip.

Other factors. Due to the lack of widespread use of natural gas trucks, their long-term track record in terms of performance, reliability, and resale value relative to diesel trucks is less certain. However, due to the cleaner burning nature of the fuel, there is at least the potential for reduced maintenance costs. At the same time, there is also the potential for increased costs related to inspection, certification, and employee training. Source: The Conference Board of Canada, 2012

May/June 2012 ❙ FLEET EXECUTIVE 29

12-06-04 8:01 AM

COVER STORY: NRC REPORT

WORTH THE INVESTMENT? New study investigates whether fuel-efficient technologies are ultimately worth the up-front cost By Lou Smyrlis

s the cost saving potential of fuel-efficient technologies worth the up-front investment? Answering that critical question, based on real-world trials, is at the heart of a new study just released by Natural Resources Canada, entitled “Results from the Road.” Commercial highway freight has the fastest growing energy demand of any economic sector in Canada. It’s responsible for nearly 10% of the country’s greenhouse gas emissions. Rising fuel costs are also placing downward pressure on profit margins as an increasing number of shippers push back on the magnitude of fuel surcharges and demand to know what carriers are doing to reduce their fuel consumption. So carriers need to improve on the fuel performance of their vehicles not only for the sake of the environment, but also for their bottom lines. The challenge, as the “Results from the Road” study points out in its opening paragraph, is that achieving cost-saving initiatives requires upfront investment in new technology. And given that their goal is to save money, transport companies need reassurance that any investment they make is likely to deliver a positive return. Towards that goal, Natural Resources Canada, back in September 2009, launched the SmartWay Certified Technology Fund (SCTF) to prove out the cost-saving potential of fuel-efficient technologies by helping freight companies purchase, install and test fuel-efficient tires and aerodynamic skirts in a variety of real-world driving conditions. The goal was to learn about the performance of energy-efficient devices and equipment in a variety of real-world operating conditions on as many vehicles as possible. Twelve companies qualified for up to $100,000 in funding and entered into contribution agreements which required them to collect and report fuel-usage data when using their new fuel-efficient technologies. Research like this was available from the US, but as Louis Brzozowski, senior manager of ecoENERGY Efficiency for Vehicles with Natural Resources Canada, explains, it’s important to have Canadian-based data. “We have a significant trucking industry in Canada with considerable east to west traffic. Road surfaces, climate, and

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the reality of the operations can all be different from the typical US experience. We wanted to get the word on these technologies from the Canadian trucking industry to find out what really worked, to find out if perceived misconceptions were actually valid,” Brzozowski said. After a full year of pre-trial baseline fuel usage gathering, followed by six months of trials – including both summer and winter driving conditions – Natural Resources Canada is releasing the findings through the “Results from the Road” report. Brzozowski says the results are clear: The more often companies use these fuel-efficient technologies, the more fuel they save. “The most important takeaway is that these technologies can work and do work for Canadian fleets. They are good for the environment and the bottom line,” he says. Key findings from the research project include: ▲ a 5% average reduction in fuel consumption; ▲ and an eight-month/110,000 kms payback period. Let’s examine the results in greater detail. After installation, fuel usage data was collected over two periods to satisfy the need to include both summer and winter driving conditions. Data was collected from August to October 2010 and again from December 2010 to February 2011. (To supplement the fuel-usage data, participants were also required to administer

COMBINED SUMMER/WINTER TRIAL RESULTS Quintile (SCTF trailer use) 0-20% 20-40% 40-60% 60-80% 80-100% All trucks (0-100%)

Number of Trucks 319 280 24 37 103 763

Average Fuel Consumption -1.5% -2.9% -0.3% -2.8% -5.1% -2.6%

trucknews.com

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COVER STORY: NRC REPORT surveys among drivers, maintenance staff and fleet managers directly involved in the project.) For the three-month summer/fall period from August to October 2010, usable data were collected from 371 tractors across the 12 qualifying companies. In the three-month winter period from December 2010 to February 2011, usable data were collected from 392 tractors. According to the pre-trial baseline data, over the course of six months, these tractors drove more than 37 million kilometres while using nearly 15 million litres of fuel. That works out to an average fuel consumption of 39.7 L/100 km. During the six trial months in which the tractors were equipped with aerodynamic skirts and low rolling resistance tires, the same amount of fuel was used, but the total distance driven climbed to nearly 39 million kilometres, making the average fuel consumption 38.9 L/100 km.

PARTICIPATING CARRIERS Seafood Express (PEI) • Armour Transportation Systems (NB) C.A.T. (QC) • Mont-Cal Logistics (QC) Challenger Motor Freight (ON) • SLH Transport (ON) Big Freight Systems (MB) • Turk Enterprises (MB) Bakerstreet Produce Company (SK) Siemens Transportation Group (SK) Edson Freight Lines (AB) • Phantom Freightlines (AB) “While this amounts to a 2% reduction in average fuel consumption during the trial period, it is not perfectly reflective of the fuel-saving potential of the SmartWay-certified technologies,” the report explains. “On average, the tractors pulled SCTFequipped trailers only 33% of the time – meaning that for twothirds of their trips, they were not experiencing the benefits that come from using the tires and skirts.” The report stresses that the more often a tractor pulls a trailer equipped with fuel-saving technologies, the more closely the full potential of the equipment is achieved. For a more precise analysis of the data, the tractors were grouped into five “quintiles” according to how much time they spent pulling trailers equipped with fuel-saving technology. The study then focused on the 80-100% quintile – that is, the group of tractors that pulled SCTF-equipped trailers at all times. And that’s when the true potential of the fuel-efficient technologies shone through. It was found that for both the summer/fall and winter trial periods, the high-usage group experienced a 5% reduction in average fuel consumption rates compared to the pre-trial baseline period. (The low-usage groups saw only a 2% reduction in fuel consumption – clear proof that greater fuel savings can be experienced by using SmartWay-certified technologies more often.) “Considering that the average commercial transport truck gets approximately 40 L/100 km (based on SCTF pre-trial baseline data), this 5% reduction in fuel consumption could save transportation companies two litres of fuel for every 100 kilometres travelled,” the report states. trucknews.com

CoverStoryMay2012.indd 31

The data were also analyzed to determine how many tractors recorded a noticeable improvement in their fuel efficiency. Of those in the 80-100% usage quintile, 71% reduced their fuel consumption. Of those that pulled SCTF-equipped trailers less than 80% of the time, only 51% noted fuel savings. The report calculates payback on the initial investment to within eight months or 110,000 kilometres. “As the price of fuel increases, this payback period will become even shorter,” it notes. This is how the payback was worked out: To be SmartWaycertified, a trailer must include both an aerodynamic skirt and a set of fuel-efficient tires. It costs approximately $2,300 to purchase and install the skirts and $10,800 to purchase 18 tires – for a total cost of $13,100. However, the report points out that tires need to be regarded as a “sunk cost” – something transportation companies must buy, regardless of type – and so the net equipment costs need only to consider the difference in cost between fuel-efficient and regular tires. Of the initial calculation, $10,260 (18 regular tires at $570 per tire) is a sunk cost, bringing the actual price of SmartWay upgrades to just $2,840. The average truck has a fuel economy of approximately 39 L/100 km and drives about 180,000 kilometres per year. Assuming a diesel fuel cost of $1.30 per litre, the average annual fuel cost is $91,260. The study established that using SmartWay-certified technologies can cut fuel usage by 5%, bringing fuel consumption down to 37 L/100 km. At that rate, the annual fuel cost when using SmartWay-certified technology is $86,580 – amounting to an expected annual fuel savings of $4,680. So the initial investment of $2,840 will be repaid in 0.6 years (just over seven months). It should be noted that if all tires were installed immediately (in other words, all at once, regardless of the condition of the existing tires), the total equipment costs would increase by $540 to $3,380. This increases the payback period to about eight-and-a-half months, “still making tire replacement an affordable and sensible choice,” according to the report. “We hope this study encourages voluntary investment by the Canadian trucking industry in energy efficiency – both driver training and technologies – that will allow companies to lower their energy consumption, simultaneously decreasing their operating expenses and improving their environmental performance. Immediate to medium-term competitiveness is also supported by encouraging Canadian on-road fleets to implement new fuel-saving processes,” Brzozowski says. FE

Learn more:

To learn more about SmartWay-verified technologies – or how to adopt these energy-efficient technologies in your company’s fleet – contact Natural Resources Canada’s FleetSmart program online at www.fleetsmart.nrcan.gc.ca or by telephone at 613-960-7427. To learn more about the US SmartWay program, visit www.epa.gov/smartway.

May/June 2012 ❙ FLEET EXECUTIVE 31

12-06-01 11:29 AM

With the T680, Kenworth gets it ‘just right’ New highway tractor complements Kenworth’s existing line By James Menzies

ike Goldilocks in the story of the three bears, fleet owners and drivers may have found the Kenworth T660 cab a little too narrow for their liking and the full-sized T700 just a little too wide. Now they have a new option in the Kenworth T680 that may well fit their requirements “just right.” The all-new T680, unveiled at the Mid-America Trucking Show in March, fills a void in Kenworth’s highway tractor line between the narrow cab T660 and the ultra-wide T700. The new tractor, with its 83-inch wide cab, is a good fit for linehaul fleets and drivers that want all the amenities found in the T700 in a package that’s less cumbersome to manoeuvre a occupies a little less space between the lines. While in Louisville for the Mid-America Trucking Show, I was fortunate to be among the very first to take Kenworth’s newly introduced T680 for a drive. The odometer read 208 miles, precisely the distance from the Chillicothe, Ohio assembly plant where it was constructed. The T680 is Kenworth’s “most aerodynamic truck ever,” with engineers somehow improving airflow by 10% over the T660, which Kenworth considers to be the incumbent best32 FLEET EXECUTIVE ❙ May/June 2012

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in-class model by which to compare. A 10% improvement in aerodynamics translates to a 5% fuel savings, which will surely get the attention of fleet owners. You have to take a close, hard look to see how and where Kenworth improved on the already slippery T660, while expanding the cab width to 83 inches (2.1 metres). Company officials attribute its aerodynamic improvements to things like: an optimized bumper and hood, full-height side extenders, close-out fairings between the cab/sleeper and fairings, chassis fairings extenders and flush-mounted lighting. The cab is constructed of stamped aluminum and the 76inch sleeper is integrated into the body. The T680 I drove featured that same 76-inch sleeper, but it’s also available in a day cab configuration. The new truck comes standard with the 12.9-litre Paccar MX engine, but a Cummins ISX15 is optional and was the engine under the hood of the truck I drove. Interestingly, the T680 I drove was equipped with an Eaton UltraShift Plus transmission labelled “Paccar by Eaton.” I’m told the transmission is, for now, exactly the same as Eaton versions I’ve driven before. But over time Paccar will work with Eaton to tune it specifically to the requirements of trucknews.com

12-06-01 10:24 AM

the Paccar MX engine to fully optimize performance. I should point out, the truck I was driving was a prototype, which could explain the curious combination of a Paccar-labelled transmission paired with a Cummins engine. It begs the question though, will we one day see a Cummins-branded UltraShift? At any rate, the UltraShift Plus is a fine transmission and I’m always pleased to see one when I climb into the cab, because it allows me to focus on what the truck itself has to offer rather than the location of the rpm needle. In the case of the T680, there was much to enjoy. The fit and finish of the interior was pure luxury, both to the eyes and to the touch. Kenworth has located the five-inch driver performance centre display on the primary gauge cluster behind the steering wheel, yet clearly visible through the wheel. This is a logical place for it, as it makes it easy to read the display without diverting your eyes from the road ahead. In fact, you can glance at any messages without turning your head whatsoever. The truck came equipped with Kenworth’s NavPlus “infotainment” system, which can be used for navigation, satellite radio control or as a digital display of secondary gauges. NavPlus is an intuitive system that can be enjoyed with little driver input. Behind me, the sleeper cab offered amenities that long-haul drivers will appreciate during their off-duty periods, and is easy to enter through a 24-inch, unencumbered entranceway, assuming there’s no shifter in the path. The T680 comes with a rugged, foldout work desk that is as heavy-duty as any you’ll find in a sleeper cab. You can spec’ an optional rotating passenger seat that, when coupled with the desk, provides an office-like workstation that sure beats working from bed. Unused space has been cleverly converted to useful storage, which officials say results in 65% more storage capacity than the current best-in-class offering. That improvement seems almost too substantial to believe, but a closer inspection reveals no wasted space and plenty of options for stowing clothes and gear. Back up front, the windshield is 50% larger than competitive models, Kenworth claims. I noticed the visibility from the driver’s seat was excellent. Some of the additional glass comes from above; I noticed it was easy to read traffic lights without bending down to peer out from underneath a sun visor or the roof lining. The windshield also seems to let in an extraordinary amount of ambient light. I had plenty of opportunities to look at signal lights on my drive. I took an unplanned detour through some tight city streets amidst busy afternoon traffic after prematurely exiting the Interstate. That’s all right, though, I can attest to the truck’s manoeuvrability in tight quarters; I didn’t jump a curb or cause any damage to Louisville’s infrastructure – not to mention the truck. And, of course, this was with a full-sized sleeper cab and pulling a 53-ft trailer. When it comes to drivability, I find many of today’s trucks trucknews.com

GearedUpMay12.indd 33

have a seemingly loose steering system that takes some getting used to. They’re simply not as responsive as the passenger vehicles I’m used to driving on a daily basis. The same can’t be said of the T680 and this was the most resonating impression the new truck left upon me. The steering was incredibly responsive and I was comfortable with its handling almost immediately. In fact, the acclimatization period that typically occurs when setting out in an unfamiliar truck was practically nonexistent. Everything about the Kenworth T680 was slick, from its exterior design to the attention to detail afforded its interior. Little things like backlit gauges that notify you when a function is active to a seat that’s ultra-comfortable and automatically adjusts to the driver’s weight, make this truck a pleasure to operate in every possible way. I would say I have the body composition of your typical trucker, so it should come as no surprise that I found the driver environment to be comfortable, since most trucks are designed for guys like me. But Kenworth also said the cab was designed to suit everyone from a woman in the fifth percentile to a 95th percentile man. The other thing I noticed during my drive was the quietness of the interior. These days, it’s difficult to write about any new truck model without commenting upon the lack of interior noise; all truck OEMs have made great strides in this area. Still, even with that in mind, the T680 seemed exceptionally quiet. All these little things add up to a driving experience that’s less fatiguing over the course of a day. With a promised 5% fuel economy improvement over the Kenworth T660, operators could save as much as $4,000 per year, the company claims. Kenworth announced Kansas-based TransAm Trucking placed a staggering order for some 1,000 T680s. Not a bad way to launch a new model, Kenworth. I expect the new truck will enjoy strong acceptance from image-conscious fleets, including private fleets and those who want a new tool in their arsenal with which to attract and retain drivers. The T700 is a perfect truck, the T660 excels in regional applications. Now Kenworth has rounded out its line with the ideal truck for solo long-haul drivers. Having finished my drive, I climbed from the truck and noticed one more interesting characteristic when I closed the door. The door closed so easily and soundlessly that I assumed the passenger door was open, which it was not. Upon unveiling the truck for the first time the day before, Preston Feight, Kenworth’s chief engineer waxed poetic about the door, like only an engineer can: “This is an incredibly capable door. Just the sound of it is beautiful.” Certainly, the door provides a car-like closing experience, thanks to a pressure relief valve that equalizes interior and exterior pressure. The door is also triple-sealed against the elements and road noise, which surely contributed to the quiet ride I alluded to. It’s an excellent door, to be sure, but it’s also a symbol of sorts, of the attention to detail and quality that went into the design of the T680. FE May/June 2012 ❙ FLEET EXECUTIVE 33

12-06-01 10:24 AM

Volvo Trucks unveils ‘Blue Power’ natural gas strategy for North America

By Lou Smyrlis

olvo Trucks has announced it will launch its own 13-litre liquefied natural gas (LNG) engine for the North American market in 2014, claiming “significant” fuel efficiency gains compared with current natural gas products. Combined with the company’s previously announced offering of compressed natural gas (CNG)-powered Volvo VNM and VNL model daycabs, the new diesel ignition engine provides Volvo with a range of natural gas-powered transportation solutions. Volvo is also testing another fuel that can be produced from natural gas, DME (dimethyl ether), which Volvo executives believe has the potential to become an attractive alternative for the North American market. “Our focused strategy is not to put all our eggs into one basket. In the future, there will be regional differences and we don’t know which way alternative fuels will go. We want to keep our options open,” said Olof Persson, president of AB Volvo and CEO of the Volvo Group. Through high pressure diesel ignition technology – using trace amounts of diesel to ignite the natural gas – Volvo’s LNG engine will deliver a 30% fuel efficiency improvement compared with spark-ignition (SI) engines, making it a viable alternative for demanding long-haul applications, explained Ron Huibers, president of Volvo Trucks North American sales and marketing. The Volvo 13-litre LNG engine will also reduce greenhouse gas emissions by about 20% compared with current diesel products. Huibers also says the engine will accomplish these savings 34 FLEET EXECUTIVE ❙ May/June 2012

GearedUpMay12.indd 34

without sacrificing power, torque or fuel efficiency, all of which are critical attributes for on-highway operations. The company’s proprietary Volvo I-Shift automated mechanical transmission also will be available for customers to specify. The company also recently announced that it is operating natural gas-powered VNL demonstrator trucks. The larger, more robust VNL model features a 12-litre Cummins-Westport ISX12 G gas engine. Factory production of the natural gas-powered VNL daycab will begin in conjunction with commercial availability of the 12-litre gas engine in early 2013. The Volvo Group has conducted hundreds of thousands of miles of customer field-testing of trucks equipped with DME. The results – from 10 vehicles operating in a variety of applications in Europe – indicate DME holds much promise as a heavy-truck fuel, and could become a viable alternative in North America to CNG or LNG when it comes to performance, environmental impact, safety and distribution, Persson and Huibers said. DME most closely mirrors the performance qualities and energy efficiency of diesel while significantly reducing GHG emissions. It is a compression ignition fuel, which, like diesel, requires no separate ignition mechanism. Unlike LNG, it does not require cryogenic temperatures; it is handled like propane, with tank pressures of 75 psi (vs. 3,000 psi for CNG), and it is non-toxic. DME burns with a blue flame and requires no diesel particulate filter. DME packages densely enough to allow long range transports or to allow room for vocational truck equipment on the frame. FE trucknews.com

12-06-01 10:24 AM

Volvo unveils Remote Diagnostics to keep trucks connected, out of shop By Lou Smyrlis

elematics will continue to evolve until no truck is ever offline, according to Ron Huibers, president of North American sales and marketing for Volvo Trucks. And judging by Volvo’s recent product launch, the future may well be here. Volvo Trucks, during a special media conference held in Miami in conjunction with the Volvo Ocean Race May 18, announced the launch of its Remote Diagnostics aftermarket service for North America. The service is designed to provide “a seamless, dynamically connected system of vehicle management tools to help maximize vehicle uptime.” Remote Diagnostics will be standard on all Volvo-powered VN model highway trucks. Huibers said Volvo was the first North American truck manufacturer to deliver a telematics solution, offering fleet management tools in 2002. Today, Volvo’s Remote Diagnostics provides proactive diagnostic and repair planning assistance with detailed analysis of critical diagnostic trouble codes. The remote communication platform facilitates live dealer and customer communication through Volvo Action Service, Volvo’s 24/7 support team. Proactive diagnostics streamline service procedures with confirmation of parts on-hand before a truck arrives at a service location, increasing uptime. Remote Diagnostics also provides service case communication and documentation among Volvo Action Service, dealers and customers through ASIST, Volvo’s Webbased service management tool, which comes free of charge for two years with the purchase of all new Volvo trucks. “Remote Diagnostics maximizes vehicle uptime by reaching far beyond proactive diagnostics to deliver total connectivity among the vehicle, Volvo and the decisionmakers responsible for maintenance,” said Stephen Roy,

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Volvo Trucks’ senior vice-president of aftermarket and soft products. “As part of our integrated business solution, Volvo Trucks Support Services, and bundled under Connected Vehicle services, Remote Diagnostics leverages Volvo’s support network and service management tools to rapidly address service issues before they occur.” For nearly a year, Volvo field-tested Remote Diagnostics with motor carriers in the US and Canada, drawing on the feedback from 15 customers operating more than 1,300 Volvo VNs with the service. Volvo officials said the test trials found that by using Remote Diagnostics, downtime could be reduced by about one day per event. Challenger Motor Freight was one of the Canadian participants in the test trials and Bryan Burningham, director of maintenance at Challenger, was on-hand at the launch to talk about his experience with the system. “The Remote Diagnostics service has really helped with vehicle uptime,” Burningham concurred. “It’s much easier to manage events with the service communication tool because it provides a very good data trail so we know what we’re working on, what we’ve done and when we expect it will be done…Communication has really sped up and internally we are able to have more intelligent discussions.” Ron Huibers said Remote Diagnostics raises the bar to a whole new level in terms of what a truck maker can deliver to help keep customers on the road moving freight. He believes it will help “leap frog” Volvo over competitors. “If we can help keep trucks on the road, everybody wins,” Huibers said. Remote Diagnostics is the first service being offered under the new Connected Vehicle Services category of the Volvo Trucks Support Services bundled aftermarket offering. Previously launched categories include: Service Management. Beginning Jan. 1, Volvo Trucks began offering ASIST at no charge with all new truck purchases. ASIST lets customers receive electronic estimates, approve repairs, and issue a purchase order, regardless of the vehicle’s location. The online tool allows the customer to monitor vehicle status online, communicate directly with the dealer and maintain an electronic “file cabinet” of service activities. Consolidating all maintenance events and communication in one Web-based tool also eliminates invoice and repair surprises, according to Volvo. Parts Purchasing. Volvo customers can order parts online through their local dealer. The online portal provides 24/7 access to parts availability and pricing from the local Volvo dealer. Customers can also receive nationwide credit access at all Volvo Trucks dealer locations in the US and Canada through a charge card program. Fleet Services. Volvo Trucks Support Services offers 24/7 roadside assistance through Volvo Action Services and full contract maintenance services and a variety of leasing and rental program options. FE May/June 2012 ❙ FLEET EXECUTIVE 35

12-06-01 10:24 AM

DASHBOARD

TransCore Canadian Spot Market Freight Index 2007-2012

2007 2008 2009 2010 2011 2012

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

JAN

173

214

140

171

222

220

-1%

FEB

174

217

117

182

248

222

-10%

MAR

228

264

131

249

337

276

-18% 24%

APR

212

296

142

261

300

MAY

280

316

164

283

307

JUN

288

307

185

294

315

JUL

219

264

156

238

245

AUG

235

219

160

240

270

SEP

206

203

180

234

263

OCT

238

186

168

211

251

NOV

227

143

157

215

252

DEC

214

139

168

225

217

TransCore Canadian Spot Market Freight Index 2007-2012

TransCore’s Canadian Freight Index jumps 24% in March TransCore’s spot market Canadian freight index saw a sizeable gain in March with volumes up 24% month-over-month, while the first two months of the year recorded only 1% gains. However, year-over-year volumes were down 18% from the unusual record-setting levels reached in March last year. While postings by TransCore’s Canadian-based Loadlink customers were down 11% from Q1 last year, consolidated postings from both US and Canadian-based subscribers’ actually increased 3% year-over-year for the first quarter. This increase was primarily attributed to an increase in cross-border postings from US-based companies, which were 63% higher than Q1 2011. In March, cross-border postings accounted for 69% of activity by Loadlink’s Canadian customers. IntraCanada postings made up 29% of the total volumes. Import postings constituted 57% of all cross-border postings while export postings accounted for 43%. Top regions for import loads into Canada were: Ontario (54%), Western (22%), Quebec (21%), and Atlantic (3%). Top regions for import equipment into Canada were: Ontario (52%), Western (23%), Quebec (22%), and Atlantic (3%). Top regions for loads within Canada were: Western (51%), Ontario (24%), Quebec (19%), and Atlantic (6%). Total equipment postings in March increased 5% from the previous month, while year-over-year capacity was up 9% from March 2011. For the first time in 2012, the monthly 36 FLEET EXECUTIVE ❙ May/June 2012

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equipment-to-loads ratio dipped. Capacity has tightened up compared to the first two months of the year; however, equipment availability remains much more abundant than the tight capacity crunch of March 2011. 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, lessthan-truckload (LTL) shipments and trucks are posted to the Loadlink network annually. The first six columns include monthly index values for years 2007 through 2012. The seventh column indicates the percentage change from 2011 to 2012. 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.

CGFI rises 10% after 12th consecutive increase Results published by the Canadian General Freight Index (CGFI) indicate that the cost of ground transportation for Canadian shippers increased 0.8% in February when compared with January results. After the 12th consecutive monthly increase, the CGFI is now 10% above the March 2011 result. The Base Rate Index, which excludes the impact of accessorial charges assessed by carriers, increased slightly in January, and is now 0.5% over the January result. Since March 2011, base rates reported by the CGFI have risen 4.4%. Average fuel surcharges assessed by carriers have increased from 18.79% of base rates in March 2011 to 20.42% in February 2012. “The CGFI has now hit a 10% increase milestone year-over-year,” said Doug Payne, president and COO of Nulogx. “Yearly base rate increases appear to be sticking, while remaining increases are being spread across fuel and accessorial charges.”

Canadian rail freight shows another healthy monthly gain Canadian rail freight traffic from both domestic and international operations rose 13.1% from February 2011 to 25.4 million tonnes in February 2012. On the domestic front, the industry’s core transportation systems, non-intermodal and intermodal, saw their combined freight loadings rise 11.7% to 22.3 million tonnes over the same 12-month period. Non-intermodal cargo loadings, which are typically carried in bulk or loaded in box cars, advanced 12.0% to 20.0 million tonnes. The gain was the trucknews.com

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GreentoGol result of increased traffic in more than two-thirds of the commodity classifications carried by the railways. The commodity groups with the largest increases in tonnage were coal, wheat and colza seeds (canola). Intermodal freight loadings of containers and trailers loaded onto flat cars grew 8.6% to 2.2 million tonnes. The increase occurred solely on the strength of containerized cargo shipments as trailers loaded onto flat cars declined. At an international level, traffic received from the US experienced a 24.5% gain to reach 3.1 million tonnes. The increase was driven by both non-intermodal and intermodal traffic. Geographically, 61.0% of the freight traffic originating in Canada was in the Western Division of Canada, with the remainder loaded in the Eastern Division. For statistical purposes, the Eastern and Western Divisions are separated by an imaginary line running from Thunder Bay to Armstrong, Ont. Freight loaded at Thunder Bay is included in the Western Division while loadings at Armstrong are reported in the Eastern Division.

US truck tonnage up 0.2% in March US truck tonnage rose 0.2% in March after increasing 0.5% in February, according to the latest report from the American Trucking Associations. “March tonnage, and the first quarter overall, was reflective of an economy that is growing, but growing moderately,” said ATA chief economist Bob Costello. “The pace of freight definitely slowed from the torrid pace in late 2011. “Most economic indicators still look good, which will continue to support tonnage going forward,” he said. Costello also noted that the industry should not expect the rate of growth seen over the last couple of years, when

tonnage grew 5.8% in both 2010 and 2011. “Expect tonnage overall this year to be up at a more moderate rate, perhaps less than 3%, which is more inline with normal growth.”

RBC PMI shows encouraging results in April The RBC Canadian Manufacturing Purchasing Managers Index for April has good news for those worried the economic recovery may once again be slowing. Canadian manufacturing business conditions in April improved to the greatest extent in 2012 so far, according to the Index, a monthly survey, which offers a comprehensive and early indicator of trends in the Canadian manufacturing sector. The headline RBC PMI – a composite indicator designed to provide a singlefigure snapshot of the health of the manufacturing sector – signalled a solid improvement in Canadian manufacturing business conditions in April. At 53.3, up from 52.4 in March, the PMI was the highest in four months, but nonetheless remained below the average for the series. The RBC PMI found that both output and new orders increased in April, with firms generally citing greater client demand. Notably, new export orders grew solidly and at the fastest pace for a year. Canadian manufacturers hired additional staff in April; however, job creation was the slowest in three months. The rate of input price inflation was the strongest since last August. “Favourable manufacturing conditions have been a prevailing force in Canada so far this year thanks, in part, to strong output and new export order growth in particular which accelerated in April at the fastest pace in a year,” said Craig Wright, senior vice-president and chief economist at RBC. “As the economy south of the border strengthens, we expect the Canadian manufacturing sector will continue to reap the

benefits of increasing US demand for key Canadian exports such as autos, tonnes in carbon offsets and currently he’d machinery and lumber.” get The about $240.” Index is conducted in association That Markit, might not aseemglobal like a lotfinancial of cash with back considering the work and investment information services company, and the involved, but,Management if nothing else,Association it could giveofa Purchasing company bragging rights and maybe a marCanada (PMAC). keting tool. On the other hand, financial “Encouraging signs camethefrom the or marketing bottom line may not the latest RBC PMI report, with bothbenew most important aspect of the program, orders and output increasing solidly to in some. The value of fuel saved outweighs the April. Manufacturers reported a pick value the credits andorders, it alwayswith will, greater Arcand up inofnew export told the Sun, but the social value of contribdemand from the US particularly uting to a cleaner environment is priceless. highlighted,” said Cheryl Paradowski, As for what a trucking company to president and CEO of PMAC. has “The do to comply, Stedeford says COAC proincrease in output contributed to vides the input expertise and does all thethe work. higher purchases and first “We basically come in and do all inaccumulation of input inventoriesthe since stallation,” he says. “We do an awareness August 2011, which added to suppliers’ session, put ourAlthough modems in (the trucks), deliverywedelays. the RBC PMI we capture all the data and we send reports signalled the strongest improvement in to the company to let so them whereit business conditions far know in 2012, they to focus, which need a still need remained below theoperators series average little bit of help in a certain area.” in April.” FE Equipment is installed by COAC to ac-

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curately measure f Stedeford says hardware, though. gram,” he says. “S with all of the oper es they can make th the amount of fue COAC’s Web tion of their equ non-hydraulic lifti excavator, is $4,0 the setup itself. T change for a veh COAC can help t “We actually says. “We come in gether, we sugge should put into th when to do it, we very much a win-w Truckers who f bon offsets attracti to surrender their themselves out of “If someone do carbon offsets wo you have to be in says. “So while t emissions) they ca it’s gone through agreed-upon me haven’t, they shou their customers t duced (their emiss It may end up too long, anyway, Trade concept be something Steded pen (short of a ch ment, perhaps). It’s basically a c where the pollute rewarded for being cooperative alread bers across the pro

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motortruck

May/June 2012 ❙ FLEET EXECUTIVE 37

12-06-01 10:24 AM

Knowledge of transportation air pollutant emissions and effects

INSIDE THE NUMBERS Environmental performance measurement

Little Knowledge

50.8%

Company has environmental management plan – 57.0%

Company reports on environmental performance – 39.8%

Environmental performance includes transportation – 32.9% air pollutant and GHG emissions

4.0%

3.2%

0.8%

Very Little Knowledge

25.8%

20.6%

Very Knowledgeable

Extremely Knowledgeable

Knowledgeable

Very Little Knowledge

23.8%

Extremely Knowledgeable

0.8%

Environmental considerations in carrier selection Knowledgeable

Consider environmental factors that reduce GHG emissions – 39.2%

20.8%

Consider environmental factors that reduce air pollutant emissions – 37.8%

Little Knowledge

49.6%

Knowledge of transportation GHG emissions and effects

Aware if carrier uses hybrids or alternative fuels – 27.0%

Consider age of the engines of carrier’s fleet – 64.9%

DO ENVIRONMENTAL CONCERNS AFFECT CARRIER SELECTION? Canadian companies are starting to include environmental considerations in their carrier selection process. The latest Shippers’ Pulse Survey, conducted by the Canadian Industrial Transportation Association in partnership with Transportation Media, documents the level of awareness of environmental issues among shippers and the degree to which such considerations shape their carrier selection. Almost six in 10 shippers now have an environmental management plan and a third of them include transportation emissions in that plan, the survey found. Close to 40%

consider GHG and air pollutant emissions during their carrier selection. However, the vast majority acknowledge their knowledge of both GHG emissions and air pollutant emissions and their effects is negligible. This presents an opportunity for carriers willing to help shippers understand the issues and best practices involved with sustainable transportation practices. The full Shippers’ Pulse report, which includes other quality assessment metrics, as well as projections on shipper volumes, pricing, priorities and more, is available on the Web site of our sister publication www.ctl.ca for just $49.99. On the top navigation bar, click on reports and select Pulse Survey Report from the drop-down menu.

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