The cost of moving freight

by Derek Clouthier

CALGARY, Alta. – There is more than one option for businesses when it comes to transporting goods from the manufacturer to the their doorstep, and diverse costs are associated with the various modes.

Whether it be by air, sea, rail or truck, each transportation mode offers its own benefits and setbacks when it comes to getting a product from point A to B.

Reg Johnston, owner of RJ T&L Consulting, was hired by the Calgary Regional Partnership (CRP) to assist its economic development department in determining some of the more cost effective methods of moving freight in the Calgary region in an effort to entice business development, such as a warehouse distribution hub, in the area.

The CRP is a collaborative network of 14 municipalities in the Calgary region that have agreed to work together to try to ensure growth occurs in a sustainable manner. With more than 1.2 million people in the area, the CRP was established to prepare Calgary and the various surrounding communities for what is expected to be a population of over 1.8 million in the next 60 years.

The partnership not only works to encourage business growth, but also community planning and regional transit.
Johnston, who acts as a logistics consultant for the CRP, said economic development planners set their vision years into the future to determine, for example, where a developer might want to put a distribution warehouse, and whether Calgary would be feasible location.

Part of Johnston’s job is to determine the cost of moving freight in the Calgary region, taking the four modes into consideration.

Though many factors come into play, Johnston said transporting goods directly by truck is the second most expensive method, behind only air. But depending on the distance a product is being moved, as well as the cost of fuel, truck is often the most attractive option.

“Now that you’re seeing fuel prices come down, truck is actually getting more competitive on certain routes than rail,” Johnston said. “Truck is going to be getting some business from rail when fuel goes down, but it will be losing some business to air freight.”

The amount of freight each mode can carry is also a key factor.

“The reason why rail is cheaper than trucks is first, the most you can put on a truck is two, 53-ft trailers, and you can put 100 cars on a train,” Johnston said. “And rail is heavy, so once you get it moving, you can keep it moving easily, you don’t have to stop it at every intersection…there’s only a couple engines associated with the whole 100 cars as opposed to one with every two.”

Johnston said moving a product by sea is the cheapest method because a boat has no friction over the water compared to rail or truck, and ships can carry a large amount of freight on a single unit.
In addition to distance, speed also plays a factor in determining which mode of transportation is best for any particular situation.

“If I can get raspberries to the shelf two days quicker, that really increases the chance of selling them,” Johnston said. “Whereas if they get any kind of spots on them, then they are worthless, so you might want to fly raspberries to certain locations because that extra couple of days of shelf life may mean the difference in making a sale or not.”

Comparing the two modes of ground transportation, Johnston said rail is much better for longer distances and not so much for shorter deliveries, as a lot is involved when shipping by rail – the train has to go into the yard, get sorted, be assigned to a 100-car train, get out of the yard, travel to its destination, get pulled and finally have the product transported (usually by truck) to the customer.

“There’s a day or two on each side of a rail move,” said Johnston, “So when you’re talking about a 3.5-hour drive between Calgary and Edmonton, that time difference is so high that people are going to be willing to pay the (extra) cost.”

Johnston said the Calgary-Edmonton corridor would always be subjugated by truck, given the fact that the distance is just not viable for rail.

“It’s the perfect distance for truck to dominate,” he said. “So there is a geographical aspect to it, there’s a speed aspect to it and sometimes there’s even an environmental aspect to it.”

Dependability was another element businesses should consider when moving freight.

As Johnston explained, when a customer knows the exact time it takes to transport goods from one point to another, time becomes a non-factor, as it is considered to be dependable.

On the other hand, if the same distance or route takes 45 minutes one day and 90 minutes the next, time becomes an issue, and may be lost because whoever is delivering the goods must assume it will take them 90 minutes to make the delivery.

“The same thing happens in supply chain logistics,” Johnston said, adding that truck has a significant advantage over rail because the customer knows it’s going to be there within hours as opposed to within days, meaning there is less variability.

“Some grocery retailers have hour timeslots for truckers. They say, ‘Be there between nine and 10 or don’t show up.’”

Other constraints associated with rail and not with truck include a lack of flexibility and the inability to rush a shipment to a particular customer.

Advancements in truck technology have also helped the mode of transportation continue to grow.

“The invention of long combination vehicles did a ton for trucks,” said Johnston, adding that it resulted in anywhere from a 30-40% savings for the industry. “That gives it range that it didn’t have.”

Johnston said anything the trucking industry can do to reduce its fuel consumption would ultimately help, both from a financial perspective and public image, and make it more competitive with rail.

“If I was an industry that was known for burning a lot of CO2 and wanted to be around for a number of years, I’d be looking at ways to make myself more sustainable,” Johnston said.

He added that the industry has made huge strides at curbing its greenhouse gas emissions, but there continue to be a lot a pressure points on the system, and with the demands on truck transportation, it can be difficult to run a trucking fleet profitably.

“I don’t think I’ve run into many trucking companies that want to do an unsafe job,” Johnston said. “They have a public safety thought in mind.”

Ultimately, Johnston said companies must do back calculations and figure out the best option for them when it comes to moving freight.

“Trucking has this great niche between air and rail where it’s pretty fast, has middle-ground cost effectiveness, it’s quite flexible and it’s going to dominate lanes that are three, four, five even six hours apart,” Johnston said.

“It’s a safe mode of ground transportation and a lot of our freight in Canada moves around on that mode, so it’s a very important piece of our infrastructure.

“It pushes the goods around that are the veins of our economy.”

Have your say

This is a moderated forum. Comments will no longer be published unless they are accompanied by a first and last name and a verifiable email address. (Today's Trucking will not publish or share the email address.) Profane language and content deemed to be libelous, racist, or threatening in nature will not be published under any circumstances.