After more than a dozen years of deregulation in Canada, carriers have squeezed every ounce of productivity and efficiency out of their operations that they can.Any shipper thinking truck rates are he...
After more than a dozen years of deregulation in Canada, carriers have squeezed every ounce of productivity and efficiency out of their operations that they can.
Any shipper thinking truck rates are heading any way but up, had better think again.
The upward pressure on carrier cost structures is coming from a broad spectrum of external sources. Fuel, insurance and driver costs are all on an upward spiral.
Diesel fuel prices have moderated since the beginning of the year, but remain at or above the average for all of 2000.
While the warm, summer temperatures are likely to bring some short term seasonal stability, the outlook for fall and next winter is worrisome.
Analysts note that production of diesel fuel is being shifted towards gasoline. With gasoline refining enjoying increased margins, this trend is expected to continue, raising concerns over diesel inventory levels.
Recent environmental measures adopted in the U.S. and Canada will also push up trucking costs. Stringent North American regulation of truck engine and fuel emissions will put further pressure on fuel prices and equipment costs.
Both countries are mandating sulphur content in diesel be reduced to 15 parts-per-million (ppm) from the current level of 500 ppm, by 2006.
This action is intended to reduce the emissions of particulate matter – which has been linked to lung cancer – by over 90 per cent. Although estimates vary depending on the source, the anticipated diesel price increase as a result of this measure is expected to be in the range of between two and 20 cents per litre.
Changes to fuel standards are designed to complement the tough new U.S. Environmental Protection Agency engine emission standards that will kick in with the 2007 model year.
In order to meet the mandated emission reductions, not only will ultra-low sulphur fuel be required, but engines will have to incorporate additional component technologies such as particulate traps and NOx absorbers.
As with fuel, forecasts of the cost impact of these changes vary, but are believed to range between a thousand dollars to as much as $15,000 per vehicle.
Capacity in the truck insurance market has shrunk as major underwriters shift to more favorable risks. This has driven up insurance premiums and prompted talk of an insurance surcharge for the first time.
While the slowdown of economic activity is having some dampening effect on the driver shortage in the short-term, analysts expect the labor market to tighten further, pushing driver costs up.
Statistics Canada estimates that 13 per cent of Canadian truck drivers are over 55 years old while only five per cent of the current driving force is under 25.
These represent the highest and lowest figures in these respective categories for any occupation in Canada.
There are ways that shippers can help to moderate the impact of these external factors.
What’s needed is a true partnership between shippers and carriers. Shippers must recognize the key role that the carriers play in their supply chain and involve the carriers in decision-making.
Shippers should also work with their carriers to:
Establish realistic delivery pick-up and delivery windows that take into account highway congestion, road construction and closures, Hours-of-Service regulations, among other factors.
Treat the truck drivers with respect and allow them access to their employee facilities.
Pay freight bills on time.
Deal only with reputable freight brokers if they are going to go that route.
Communicate with all participants in the supply chain.
Be ready to receive/ship goods at the allotted times and neither keep drivers waiting nor horde trailers.
Finally, all shipper associations and their members should become more engaged in the regulatory process.
In particular, the shippers’ voice needs to be heard at the parliamentary committee hearings on proposed new truck driver Hours-of-Service regulations and the development of a new national transportation strategy, both of which were recently announced by federal Transport Minister David Collenette.
Public policy, legislation and regulation can all have a significant impact on the productivity and efficiency of the trucking industry.
Clearly, rail interests will be pushing their anti-truck agenda during both processes.
Shippers have a key role to play in ensuring that their market advantages they have enjoyed are not eroded by government regulation. n