Weathering economic volatility
MISSISSAUGA, Ont. — Are small or large carriers better equipped to deal with economic slowdowns and recessions? That was one of the questions posed by Truck News publisher Lou Smyrlis when addressing a fleet panel at today’s Surface Transportation Summit.
Wes Armour, president and CEO of Armour Transportation Systems, says the diversity of a large fleet can help it adjust to declines in freight volumes.
“I think coming out of a recession for large carriers is easier to do,” he said. “We usually have more resources and more variety of customers.”
For example, Armour said his company hauls both potato chips and beer – two products that typically see an increase in demand during recessions.
However, Mark Bylsma, president of Spring Creek Carriers, countered that smaller fleets tend to be more nimble and able to adapt more quickly to changing customer needs.
As for the Canadian recession that set in over the first two quarters of 2015, Armour said his company didn’t suffer, thanks to its diversity. Port of Halifax volumes remained strong and Atlantic Canada doesn’t tend to experience the economic volatility that’s seen in other parts of the country.
“We looked at 2015 as being a very positive year,” he said, with the exception of winter weather-related issues.
Bylsma said his company “held our own” through the downturn in early 2015.
“The first four or five months (of Spring Creek’s fiscal year) we were tracking well then the wheels fell off somewhere around February,” he said. “I’d say we’re pleased with our year-end results, given the recession. We were able to maintain previous years’ numbers.”
Looking ahead, both Armour and Bylsma are fairly confident about the Canadian economy in 2016. Bylsma noted that in 2014, manufacturing GDP outperformed real GDP growth, which was the key to healthy freight volumes. That reversed in 2015 but with the weak Canadian dollar, Bylsma is expecting manufacturing to strengthen, which should translate into stronger freight demand.
Armour is encouraged shippers are seeming to place more value of late on building relationships with their carriers than putting their freight up for bid.
“We are seeing less tenders than we have before,” he said. “A tender doesn’t give you an opportunity to use imagination, to give new ideas. We can’t say, ‘We could do this with LCVs, through intermodal, short sea shipping’ – the tender doesn’t allow it. We’re finding now small and large shippers are sitting down with us and saying ‘I can’t afford much of an increase,’ and we get creative. Many times they end up with no increase, maybe even a decrease (in rates), because the shipper was flexible…we really look for savings rather than rate increases but in tenders you don’t have that opportunity, it’s what’s the guy down the road going to bid?”
While Bylsma and Armour agreed capacity isn’t tight at the moment, they both expect that to change as the industry continues to face a dearth of qualified drivers. Shippers that secure long-term agreements with their carriers will be the ones that have trucks available to haul their freight when the economy picks up steam, Armour pointed out.
“If things get really tight, you’re going to stay and deal with the customers that treated you right and did contracts with you long-term,” he said.
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