MISSISSAUGA, Ont. — Delta Nu Alpha Transportation Network, a non-profit Mississauga, Ont.-based association, held a seminar March 27 and called the night a “perspective from the next generation.” Set up as a panel discussion with four young industry professionals (both carriers and freight brokers, all under the age of 40 were represented) its aim was to provide a deeper look into where the freight brokerage industry is heading and what was shaping the trucking industry today.
Mike McCarron, a 30-year industry veteran who sold the company he founded, MSM Transportation, to Wheels Group last fall, moderated the discussion.
On the panel was: Joel MacKay, president of Mactrans Logistics, a non-asset based 3PL; Shawn Roch, vice-president of sales and marketing at G. Roch Consultant; Eric Carusi general manager of T.P.T Systems; and Elias Demangos, president and CEO of Fortigo Freight Services.
On under-capacity and the driver shortage
The tight capacity in the Canadian trucking industry was a topic all panelists wanted to discuss. As entrepreneurs who are looking to grow their businesses, all were eager to talk about the impact of tight capacity and a labour crunch.
“Customers are asking for more than A-to-B,” Demangos said. “Filling the office seats is becoming more challenging. So not only do you have the driver shortage, but you can’t fill the seats in the office. You’re now thinking twice about growth: Is the margin there for me? Is it worth the headache? Most times it is, but you’ve really got to study a bit more.”
Carusi agreed with Demangos on the challenges of the driver shortage and offered suggestions on ways companies can attract more drivers, something he points out is necessary.
“We need to understand who our targets are,” he said. “As a carrier, we’d look at wanting to bring on more drivers. A lot of companies have the capital to invest in trucks but you need to attract those drivers. Whatever drivers are looking for – as much as the pay raise is important, ergonomics and being home (at a certain time) is really important. Those intangibles are crucial.”
On consolidation and mergers
Consolidation was a hot topic of the night, which was to be assumed given the young panel of experts who are well aware of the image of the industry from the outside.
Carusi summed the panelists’ views best when he said: “I think consolidation is really important. A lot of, for lack of a better term, bottom-feeder carriers kind of bring down the image of the industry. Their quality isn’t as prioritized and ultimately they’ll do the same job for a little less. It makes it tough for us in the industry to be well-rounded and create an image that people don’t look negatively on.”
When asked what to consider if buying or merging with another company, the panelists agreed that timing is everything.
“If it doesn’t affect your current business slowly integrate the merger, that’s fine,” said Roch. “But if you have to change your whole game, then it’s not worth it.”
Carusi added that mergers are a great way to grow your business. “But at the same time, don’t lose touch with your existing customers,” he said. “Because they rely on you to solve their current issues.”
The panelists also predicted that American companies would soon be expanding business into the Canadian market.
“I definitely think there’s going to be more Americans coming to Canada to acquire brokers,” said MacKay. “There’s only so much business these guys can get in the US, they have to expand. They need to keep buying to grow.”
Demangos agreed saying simply, “More Americans will definitely come up.”
On the hybrid and specialty broker trend
McCarron kicked off the topic of hybrid and specialty brokers by reading out a statistic about LTL freight, where from 2007 to 2012 the amount of freight under blanket pricing programs by brokers grew from $575 million to $2.5 billion. However, the overall size of the LTL market during the same period decreased by $3 billion.
“What it’s saying is that freight brokers are taking a lot of business off carriers,” said McCarron. “So why are brokers buying trucks?”
Demangos said customer pressure could be a factor, adding customers want to deal with asset-based brokers.
Carusi agreed saying, “Nowadays an educated shipper will most likely just end the conversation right away if you’re not asset-based.”
“I think you have to go where the business is,” added MacKay. “If the customer asks for a specific thing and it makes money, do it. I started selling freight brokerage in 1999-2000 and it was a bad word back then. I’m seeing now customers are coming to us and saying they want to use a freight broker. They want to use a 3PL – and I’ve never heard that. It blows me away.”
Roch said that brokers shouldn’t buy trucks. “Do what you’re good at,” he said. “You don’t ask a carpenter to fix your car.”
Demangos added that speciality brokers could potentially be the future of the industry. “Seeing a broker that’s 3PL that specializes in something, you can tell that they’re serious,” he said. “They’ve done their homework.”
MacKay went on to say that specializing has many benefits when able to satisfy customer needs, when they have nowhere else to go.
“As pure freight brokers, a lot of us built our businesses on taking the freight that common carriers didn’t want,” he said. “And a lot of that would be inside deliveries, like bulky freight and hot tubs – things that don’t fit in well in LTL networks so we’ve had to develop these networks. You build on what you’re good at and we get more customers and more referrals. They tell us what their problems are and we give them a solution.”
On the threat of technology
Like many industries, things are changing because of the advance of technology, and the trucking industry is no exception.
“If you don’t have scale and technology,” said McCarron, “you won’t survive.”
The panelists, however, didn’t seem fazed.
“The only software or piece of technology that will put us out of business are those Star Trek teleporters,” joked MacKay. “When they start moving stuff, then we’re in trouble.”
Roch added that people are hesitant to use new technology to ship their goods and went on to say that most would prefer a verbal confirmation at the end of a transaction – something eBay or uShip simply can’t provide.
“People are scared,” he said. “They want to deal with a human. They don’t want to just have technology to put it on the truck and ship it out for them.”
Carusi said the new software is not sustainable and won’t ever match service provided by professionals. “There are too many moving parts. Especially with regulations increasing – they have a core business they need to take care of and that’s not something they’ll be able to focus on. They’ll fall apart.”
On the future of the industry
“The need for a lot more home deliveries, residential deliveries,” said MacKay, when asked what will drive the future of the industry. “In the past the common carriers have typically stayed away from those, they don’t want to go to homes. But I do think there’s going to be a need for these providers to offer a full service for e-commerce. It’s not just going to be B2B business anymore it’s B2C and I think as an industry we need to change.”
Demangos agreed with MacKay that home deliveries would be a focus in the near future and added that he believes there will a change when it comes to long-haul driving because of the driver shortage that has taken a hold of the industry.
“I think you’re going to see a lot more rail and final mile deliveries,” he said. “It’s more a 9 to 5 if you will – as much as a 9 to 5 as you can get in the trucking industry. You’re going to find that supply chains are going to shift a bit because of the shortage of drivers. Rail is going to pay a bigger portion of it. And final-mile deliveries is going to become a lot more crucial.”
Carusi said he believes that educating shippers will be important in the future. “They need to understand their production schedules a little better and try and move ahead,” he said. “Booking trucks is happening farther and farther in advance these days, which is part of the capacity crunch and the more we understand production schedules the more we can predict what’s going to happen next week and the more we can move efficiently and on time.”
“More live-loading,” added Roch. “The brokers that are just trying to move one load, it’s just not doable anymore.”