Exclusive interview: Robert Ballantyne (March 01, 2005)
March 1, 2005
TN: The Canadian Industrial Transportation Association (CITA), established in 1916, is the longest-serving and the only national organization that specializes in freight transportation from the shippe...
TN: The Canadian Industrial Transportation Association (CITA), established in 1916, is the longest-serving and the only national organization that specializes in freight transportation from the shipper’s perspective.
Your members include some of the largest buyers of freight transportation in Canada. What do you see as their main transportation challenges in the years ahead?
RB: Rising transportation costs, capacity constraints in the rail and truck modes, the driver shortages and border security issues are the top four issues for shippers.
TN: Motor carriers have been hard at work trying to address several of these issues from their perspective for some time. Of course, the solutions often require the buy-in of the shipper. How well prepared is the average Canadian shipper to meet these challenges in your estimation?
RB: The sense that I have is that the knowledge of the logistics issues is not always on the radar screen of management above the logistics professionals and the implications of these issues for the companies’ competitive positions and profitability is not well understood.
Senior managers need to focus some reasonable time on the logistics issues, or ensure that their logistics professionals have the necessary responsibility and authority to protect this important aspect of a business. CITA can play a useful role in assisting companies with increasing their knowledge and understanding of the impacts of the law, regulations, and practice surrounding logistics.
TN: Manufacturing shipment levels through much of 2004, despite a dip in the fourth quarter, and low inventory to shipment and inventory to sales ratios indicate there will be continued demand for transportation services. How is the supply of transportation, truck and rail in particular, looking from the shipper’s perspective? Are your members experiencing the capacity crunch motor carriers have been warning about for over a year now?
RB: There are strong indications that truck and rail capacity will remain tight throughout North America over the coming year. On the trucking side, the driver shortage and border security issues, including border facilities will likely limit the trucking industry’s ability to meet the demand and in the railway industry, there may be a shortage of equipment, shortage of train service people and, in some cases, infrastructure bottlenecks.
The strong growth in containerized freight throughout the world will require a significant increase in the railway container car fleet. The recent announcement of a “co-production agreement” between CN and CPR for service to the Port of Vancouver is a positive step.
TN: What is the capacity shortage doing to transportation costs and how are shippers responding? Do you see shippers moving to longer-term contracts to protect themselves against rate increases?
RB: The supply/demand situation plus increased costs faced by the carriers are leading to increased freight rates for shippers. Because it is currently a “seller’s market” shippers will have a more difficult time in successfully negotiating longer-term contracts.
There is currently a trend in the railway industry to return to tariff pricing instead of long-term confidential contracts. The carriers in both rail and truck modes are resorting to ancillary and special surcharges to recover costs such as fuel cost increases, currency exchange, etc.
TN: One issue that threatened to have an impact on truck transportation costs was the new hours of service for trucking into the U.S. Certainly motor carriers were making much of this issue and its resulting impact on their productivity.
That legislation is back in the courts now, of course, but in the eight months or so that it was in effect what was your perception of the impact on motor carrier productivity and the rates they were subsequently charging to compensate? Was the situation as bad as initially feared?
RB: My sense is that the new U.S. hours of service rules have not been too onerous for truckers. When the court ruled against them, there was strong support from both the trucker and shipper community to leave the new rules in place until the Federal Motor Carrier Safety Administration is able to come up with modified rules that satisfied the court. There was very strong resistance to returning to the old rules.
The new rules do not seem to have had a serious impact on motor carrier productivity. With regard to the impact on rates, it is difficult to say. There are a number of factors currently leading to increased freight charges.