Time for Some New Business Models to Spur More Competition in the Canadian Freight Industry
February 26, 2014
February 26, 2014
Two developments over the past five years have reshaped the Canadian Freight Industry. The Great Recession in the late 2000s caused many Canadian trucking companies to shrink in size or leave the freight industry. During the past couple of years, there has been considerable consolidation in the small parcel, domestic LTL over the road and Intermodal segments of the Canadian freight industry. Shippers looking for a national courier or LTL carrier now see many familiar brands in the hands of a small group of companies.
Shippers worrying about whether there will full and fair competition in the Canadian freight industry in the years ahead can take solace from what is happening south of the border. Our American friends experienced the same economic downturn in 2007. Some experts believe that as much as fifteen percent of the freight capacity in the United States left the market during the Great Recession.
The good news is that as this capacity left the market, several emerging trends suggest that new strategies and business models are providing increased competition in the LTL sector.
Build a Carrier Partnership Network
Some significant carrier partnerships and alliances have been formed to provide more competition on the national and regional level. In an effort to compete with the national LTL players (e.g. YRCW, FedEx Freight, Old Dominion etc.), The Reliance Network was formed. It brings together:
Averitt Express and its core network of 13 Southern states.
Canadian Freightways and Kingsway that cover Canada.
Lakeville Motor Express services the Midwestern US states.
Land Air Express covers New England and upstate New York.
Mountain Valley Express services the Pacific Southwest
Peninsula Truck Lines services over 950 cities and towns throughout the Northwest United States.
Pitt Ohio is the LTL partner that services the mid-Atlantic states.
For regional Canadian LTL carriers seeking to provide both intra, inter-provincial and cross-Canada LTL service, this is one model to follow. There are a number of quality asset-based regional Canadian LTL carriers that could form alliances to provide another national or super-regional LTL network.
Grow your business with an Asset-Light Model
In recent years there are several “asset-light” LTL carriers that have emerged in the United States to provide another level of competition on a super-regional or national basis. Three companies to examine are Roadrunner Freight Systems (https://www.rrts.com/Pages/Home.aspx), Shift Freight (http://shiftfreight.com/) and Daylight Transportation (http://www.dylt.com/). In each case the company has combined some its own assets with its partners’ assets and linked them together on an integrated IT platform to offer a complete LTL service within their respective geographic networks. This is similar to what was done in Canada years ago as new domestic LTL intermodal operators created service networks by renting terminals on rail lines in major Canadian cities, integrated them by using local cartage companies in each market to do the local P and D and the rail lines to provide long haul transportation. These American companies have come up with a modified version of this model in their service areas.
Use a Non-Asset-Based Model
A third approach is to provide national or regional LTL service on a totally non-asset-basis. There are various models that can be looked at. The LTL and Intermodal markets have been growth sectors for freight brokers and freight management companies in recent years. Recent surveys have shown that the LSP share of the LTL freight industry has been growing in recent years. Then there are the web portal players that allow shippers to log in, enter their origin and destination points and let the technology (and the carriers backing them up) provide the required service. I wrote about several of these companies in a couple of blogs last year (http://www.dantranscon.com/index.php/blog/entry/quotemytruckloadcom-and-freightopolis-enter-the-automated-freight-brokeragefreight-portal-space, http://www.dantranscon.com/index.php/blog/entry/innovation-and-technology-come-to-the-freight-brokerage-industry ).
Canada is a large country in terms of geography with a small population. It is very costly to build or buy a truly national asset-based small parcel, LTL over the road or intermodal terminal network. But as many name-brand players are acquired by the industry giants, this creates an opportunity for entrepreneurs with vision, determination and the business skills to take one or more of these business models and apply them to the Canadian freight market.
Dan Goodwill, President, Dan Goodwill & Associates Inc. has over 30 years of experience in the logistics and transportation industries in both Canada and the United States. Dan has held executive level positions in the industry including President of Yellow Transportation’s Canada division, President of Clarke Logistics (Canada’s largest Intermodal Marketing Company), General Manager of the Railfast division of TNT and Vice President, Sales & Marketing, TNT Overland Express.
Goodwill is currently a consultant to manufacturers and distributors, helping them improve their transportation processes and save millions of dollars in freight spend. Mr. Goodwill also provides consulting services to transportation and logistics organizations to help them improve their profitability. All posts by Dan Goodwill