MISSISSAUGA, Ont. -- As Canadian carriers continue to repair their balance sheets following the Great Recession, rate increases are inevitable. However, shippers can minimize any future rate increases if they’re willing to work more closely with their carrier partners to eliminate waste from the system, according to Mark Seymour, CEO of Kriska Transportation.
Seymour urged greater collaboration between shippers and carriers when speaking at the 2012 Surface Transportation Summit hosted by Motortruck Fleet Executive, Canadian Transportation & Logistics and Dan Goodwill & Associates. Seymour gave an example of a customer that recently asked for a rate decrease. When Seymour said he’d consider it if the shipper improved its payment terms, unloaded trailers more quickly and lowered its trailer detention requirements, the company wasn’t interested.
“Some people just don’t get it,” Seymour said. “We have no more to give in terms of rates. What we have to do is work together to get rid of waste, because there’s lots of waste still in the system but it’s going to take a collaborative effort to get rid of it.”
Seymour said Kriska’s rates took an 18% hit from 2008 through early 2010, and have not yet been fully restored.
“We got half of that back,” he said. “It’s been a combination of getting half back and reducing our costs that has allowed us to return to profitability. I don’t think we’ll ever get it all back; it’s not coming back anytime soon. But rates have to go up because there are too many influences that are outside of our control that will not allow us to stay where we are today.”
Seymour said most Canadian carriers are still licking their wounds, trying to repair their balance sheets, profit ratios and cash flow.
“We lost control of pricing,” Seymour admitted. “We allowed the tail to wag the dog.”
Heading into the downturn, Seymour said Kriska and many companies like it already thought they ran lean. When forced to look further just to survive, more waste was uncovered and removed. But the carrier itself can’t remove all inefficiencies from the system, he warned.
“We’re not going to get waste out of the system unless we work together,” he told more than 200 shipper and carrier executives at the summit. “Business tenders are no way to get waste out of the system. I think rates need to go up, but maybe they won’t need to go up as quickly if we can get waste out. There’s a tremendous amount of it stuck in the middle and we can’t get it out ourselves as carriers.”
Seymour also acknowledged many carriers - Kriska included - still have fences to mend following the downturn. He realized people within his organization were going to suffer when a bank manager put to him bluntly: “You make the tough decisions, or I’ll make them for you.”
“Employees got hurt,” Seymour admitted. “Long-term decisions were made that were in their best interests if they wanted to hang around our organization, but they felt like they got hurt; they felt like they got taken from. That’s natural, but when you have to make those decisions, people that trust and respect you will, over time, understand that it had to be done.”
Seymour said Kriska has offered rate increases to its drivers in each of the past two years as it has returned to profitability.
“I think we repaired some of the damage that was done,” he said.
Seymour also warned of the risks involved in acquiring other businesses. It can be a great way to diversify, but not necessarily to grow, he warned. Kriska has made five acquisitions in the past five years and is smaller now than it was five years ago.
“It’s a great way to build business, to create more sustainability and to diversify your income stream, but you have to be very cautious,” Seymour warned. “Good fits are hard to find. Often, it’s the culture that can drive a wedge between a good and bad acquisition. You certainly don’t want to make an acquisition that’s a cultural misfit.”
Seymour also urged carriers to run their company as though they’re looking to sell it, even if the sale of their business isn’t on their radar.
“If you run your business with discipline to drive profitability and sustainability, you’re always going to be in the position to sell, or at least to be profitable and seen in the eyes of lenders as being very disciplined,” Seymour advised.
As for challenges coming down the road, Seymour agreed with other presenters that a shortage of drivers will remain an issue. He also lamented a litany of impending regulations, which will be difficult to enforce. “I’m not against regulations, I just think there are too many to enforce and we have more coming,” he reasoned. “Sadly, without being able to enforce the regulations, there are too many carriers, too many trucks on the road trying to fly under the radar and we have an uneven playing field.”
Seymour left shippers in the room with this message: “When capacity tightens up and we’re left with the decision of who we’re going to work for, I think the Jack Welch concept will come into play (the former GE executive was known for firing the worst-performing 10% of his managers each year). At our place if we can’t service everybody, we’re going to service the ones who treat us best, pay us on time, treat our people the best and offer consistent volume and those relationships are built by sitting down and working together, not by wasting time on bids.”