Small fleets; large worries

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Large carriers are always in the spotlight – they drive trucking association policy, are usually the first to test new technologies, and get a disproportionate share of the headlines. But the reality of the Canadian trucking market is that it’s dominated by small carriers.

Carriers possessing fewer than 10 trucks and earning less than $1 million in annual revenues make up more than 60% of the country’s for-hire carrier population. During the five-year economic growth spurt prior to the recession, their numbers increased considerably, rising by about 20%. And they have hung on through the recession and the subsequent slow recovery relatively well considering the challenges they faced.

As resilient as small carriers have proven to be through the greatest recession since the 1930s, however, there is good reason to worry about their future.

Simply, the numbers I’m looking at look troublesome.

Our annual Transportation Buying Trends Survey of carrier executives across the country, conducted in December and January, found that while 38% of large carriers expect to grow their business volumes in 2013, only 27% of small carriers expect the same. This divide in carrier projections is borne out by research conducted by the American Trucking Associations stateside. While large carriers in the US are doing better, small carriers actually experienced a 4.6% drop in freight volumes from September 2011 to August 2012.

The same divide is found when looking at rates. While three quarters of large carriers expect to charge higher rates, only 39% of small carriers do.

Our research, conducted in partnership with the Canadian Industrial Transportation Association, Cormark Securities and CITT, is also finding a wide gap in purchasing plans based on fleet size. While two thirds of large fleets (100 or more Class 8 vehicles) intend to purchase new trucks in 2013 only 17% of small fleets (5-9 trucks) have similar plans.

Considering these differences it’s no surprise that large carriers are considerably more upbeat about business prospects in 2013 than small carriers. Large carrier optimism for 2013 averages out at 6.6 out of 10, compared to just 5.6 for small carriers.

Seems our smaller carriers have some big challenges ahead of them. But I wouldn’t count them out because the other reality is that transportation in Canada is a tough business. There are many lanes and many customers which simply don’t make economic sense for large carriers to take on. I believe there will always be a need for well-managed, niche-seeking small carriers in the Canadian market place. They have some challenges to overcome, and their numbers may shrink some as a result, but they will not be going away.

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With more than 25 years of experience reporting on transportation issues, Lou is one of the more recognizable personalities in the industry. An award-winning writer well known for his insightful writing and meticulous market analysis, he is a leading authority on industry trends and statistics.

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  • I fit in the “under ten truck” category, and I completely agree with the statistics that are presented. I’m not sure the numbers are bad as they may appear, an unfortunate side effect of stats being studied by percentages only. I’m surprised that as high as 17% of small carriers are buying new trucks. Large carriers need new iron to attract drivers, while the small carriers have found it far more economical to rebuild older, more reliable trucks. All the other stats, I think, show that smaller carriers didn’t see nearly the decline during the recession that larger carriers did. This would explain why 11% less of us expect volumes to grow; we really didn’t lose as much to start with. Same reason why a much lesser percentage of us expect rates to climb. We don’t have the huge truck numbers to support cutting freight rates and still remain profitable, so our rates had to stay somewhat static, The slight drop in small carrier volumes between fall of 2011 and 2012 I think is indicative of the economic climate. With the economy still stagnant, even more “creative pricing” was done, but again, smaller carriers couldn’t or wouldn’t. I treated the recession as a good way of trimming deadwood, either customers or less than desirable staff, so although our numbers may be lower, the one that really matters, profit , is still where it should be.

    • Lou Smyrlis accurately highlights some of the challenges small for-hire carriers in Canada are facing in his blog “Small Fleets; Large Worries.” As a small carrier (my fleet has 35 trucks; a bit bigger than the fleets of 10 or fewer trucks that Lou was focused on but still small) I know far too well how hard it is out there. But, like Lou I also strongly believe small carriers have an important role to play in our industry and always will. One thing that I disagree with Lou on is his comment that large carriers “drive trucking association policy.’ As the latest small carrier to serve as chairman of the Ontario Trucking Association, I can assure you the notion that trucking associations only represent the views and concerns of the “big boys” is, based on my experience, an outdated stereotype usually held by those who are unfamiliar with the association and what it offers. In my view, those that invoke the “OTA only represents the views of large carriers” refrain too often do so when they disagree with a policy position taken by OTA and have no real arguments to bring to bear on the issue.

      Jeff Bryan, President, Jeff Bryan Transport & OTA Chairman