The strong growth in intermodal transport in Canada is bringing both fortune and frustration to the trucking sector. While shippers' growing passion for competitively-priced intermodal options present...
The strong growth in intermodal transport in Canada is bringing both fortune and frustration to the trucking sector. While shippers’ growing passion for competitively-priced intermodal options presents strong new opportunities for carriers willing to chase after new markets, decades of “solitudinal” thinking is still creating delays that hurt efficiencies.
The growth trend in intermodal transportation in Canada is now without question. Intermodal movements have been increasing an average of 13% each year since 1996, according to figures from the Intermodal Association of North America (IANA).
Canadian National reported that its intermodal revenues for the first quarter of 2003 increased 13%, to $265 million, over the first quarter of 2002. Intermodal has become the largest commodity for Canadian Pacific Railway, at 23% of its business.
Canada’s main ports are also feeding the system. Worldwide, container shipping has increased by 8.5% annually over the last 20 years and our natural deep water ports are becoming increasingly attractive to shipping lines moving to post-Panamax size vessels (vessels so large they can’t fit through the Panama Canal). Although Canada has just 9.9% of the North American population and 6.6% of its retail sales, it handles close to 15% of North American containerized trade with the world. And it has emerged as a transhipment hub for U.S.-bound cargo. Between 1990 and 2000, the value of U.S.-bound cargo transhipped through Canada has increased 209.7% and now amounts to over $28.3 billion. That’s larger than the GDP for the entire for-hire carrier industry.
But is intermodalism in Canada growing too fast for its infrastructure to keep pace? That would seem to be a fair assessment, according to Michel Beauregard, CEO CP Ships Logistics and president of Montreal Gateway Terminals. A side effect of this in Canada, he says, “is that terminals are overloaded with containers and they aren’t moving fast enough.”
Nowhere in the country is this more of a problem than in the Port of Montreal and the Port of Vancouver, according to George Kuhn, the executive director of the Canadian International Freight Forwarders Association. “Everything has caught up more than anticipated. The two worst-affected ports, in terms of lacking infrastructure, are Montreal and Vancouver.”
One insider, who asked not to be named, said “the Port [of Montreal] is a nightmare. Right now there is so much congestion. There is a lack of rail cars; so much cargo is coming in; the traffic is up. This has been going on since the beginning of the year, but this is May and there is still a backlog. But the Port is working to improve things.”
The Port of Montreal posted a gain of 65,176 TEUs, to 1,054,603 TEU, in 2002 over 2001. The need to deal with this growth is reflected in the Montreal Port Authority’s five-year corporate plan, which includes approximately $42 million it has dedicated to container terminal expansion and railway expansion. In the meantime, however, delays in getting containers out of the Port and onto railcars is playing right into the hands of local intermodal carriers, who, once they hook up to a container, can guarantee delivery to Toronto, for example, in about eight hours.
“This [port congestion] is good for trucking. One customer said it might take eight days for a container to get to Toronto. This has opened up some trucking routes that haven’t been there for awhile. Customers are saying that maybe they should stick with the trucks,” says Rod Fabbro, president of Harlyn Transport, which currently has more business than it can handle. Also to his advantage, he notes is that, “there is not a big gap in rates between rail and trucks.”
Ideally, the transfer of containers and information about them between the transportation modes should be smooth and seamless. Yet the reality is that handoffs are often herkey-jerkey – The Port of Montreal is a case in point; discussion of equipment, infrastructure and organisational shortcomings has been heated this year.
“The biggest problem, in my opinion, is that we still have a high degree of “solitudinal” thinking,” says Kuhn. “A steamship line thinks of itself as a steamship line, ports as ports and rail yards as rail yards. Then there are the inland rail yards, which are regarded as cost centres, and are therefore underequipped.
“People talk about their own beefs, and not strategic issues. We have to think of supply chain issues. If we start with the ports we have more problems in winter than in summer; ships have to fight heaving seas, circumvent heavy storms, slow down … often you have more ships arriving at the same time than initially scheduled. A comfortable port schedule can be hijacked by bad weather. You can have a backlog even before you start unloading. Then the panic starts and containers are just taken off and stacked somewhere, which creates more problems when the truckers come.”
Interestingly, both the Port of Montreal and the Port of Vancouver see themselves as playing a leadership role in co-ordination activity between the modes. For example, the Port of Vancouver developed North America’s first Internet reservation system for access to the port by trucks, according to Chris Badger the port’s vice president of operations.
This notion of solitudinal thinking also came up at the Shipping Federation of Canada Centennial Conference in Montreal this April 30 and May 1. “Why aren’t we prepared for growth opportunities?” asked Keith Heller, Canadian National’s senior vice president, eastern Canada division at a round table discussion. “Each of us in the logistics chain focuses on our operations with little regard for our partners. Why do we tolerate a system where ships arrive .. early with little regard for [the organisational consequences]? Sometimes truckers wait for hours at terminals. Sometimes the terminals are empty. These problems drive down value.”
Truckers have suffered alright: The 29-day intermodal trucker strike in Montreal in 2000, which resulted in lawsuits and the passing of Bill 137, which forbids interfering with freight traffic to the port, was at least partly caused by abysmal working conditions for independent truckers, according to Beauregard.
Fortunately, says Fabbro, “The labor strife maybe opened the eyes of company owners so they sat down and negotiated better rates.”
Solutions have been fielded to help reduce congestion and waiting, although there is plenty more room for improvement. When CN moved its intermodal operations from its Turcot Yard to the $47-million Taschereau Yard in 2002, it also launched Speed Gate, an automated camera and biometric technology (electronic fingerprint identification) system that validates truckers identity, activates customers’ bills of lading and issues a ticket to drivers with instructions where in the yard to take the load.
Speed Gate assigns a zone in the yard where to drop off the units, based on destination and the driver gets a transaction ticket that gives him the zone information,” explains Donald Gagn, CN’s Taschereau Yard terminal manager. “The system will ask him if he is doing a pick up and where the container is. A work order is generated in the cranes and the crane operator will know that the trucker is going to drop off a load, or pick up a load.”
The average processing time from the time a trucker begins a biometric transaction to the time he leaves the gate stand is 3 to 3.2 minutes. In the Turcot Yard, it took 6-7 minutes. “Our in-gate capacity has increased from 60-65 trucks an hour. to 110-115 an hour, and it will continue to increase. Now we are working to improve [service] in the yard [to keep up with the gate service],” Gagn says.
Still, there is suspicion that maybe the truck congestion has simply been moved from the Taschereau gates to inside the yard; there is still lots of waiting for trucks arriving between 7:00 a.m. and 5:00 p.m., according to Fabbro.
CN reportedly experienced serious rail car shortages this winter, yet it is interesting that both CN and the Montreal Port Authority categorically blame their woes on a harsh wint
er and disrupted shipping schedules. One industry leader at the Centennial Conference noted that CN offered what he regarded as an astonishingly arrogant explanation for its problems last winter: that CN told shipping industry leaders that it would be able to afford more equipment and infrastructure if only it had the profits to justify them. For the record, CN reported 13 percent higher intermodal revenues for the first quarter of 2003, to $265 million, over the first quarter of 2002.
Ron Tepper, the CEO of Fastfrate, believes CN’s come-one, come-all approach to intermodal carriers is unhealthy for both the railway and its carriers and leads to congestions and delays. Fastfrate has an exclusive Less-Than-Load relationship with Canadian Pacific, and has invested tens of millions in developing co-located facilities across the country that not only gives it quick access to CP’s yards, but ensures a rate of return that allows it to continue investing in information technology, infrastructure and equipment.
“In every city, with the exception of Edmonton, we are very close to them or right at the CP yard. Every container we move does not have to go through the front gate. We have our own gate and entrance. We don’t have [truck waiting] issues,” says Tepper. When you can decongest yourself 10-20% that is significant. CP can deal with the congestion issue by dealing with us. There is considerably less congestion.”
Tepper, whose company enjoys a status befitting its financial commitment to CP, observes, “[If you] don’t create a difference between asset-based carriers and non-asset-based carriers, the third party guys with no assets [will kill] the guys with assets. Our relationship with CP is based on both of us investing so we can offer a better service collectively than we could offer individually.”
The carrier-shipper relationship also concerns Tepper. “Retailers are under enormous pressure because [big companies] come to town and put huge competitive pressures on their competitors. Everyone has seen transporters as the place where costs can be brought down.” But he sees this as self-defeating. He counsels: “Work with your carrier to draw costs out of the system by improving efficiency, not by forcing rates down. By doing that you take the ability away from the carrier to invest in the technologies that shippers need. A carrier that is worth his salt can work with his suppliers to decrease costs by using technologies … not by beating costs down.”
Intermodalism can also help carriers deal with their driver shortage issue. The trucking industry workforce is the oldest in Canada. “We are going to have to work extremely hard just to get warm bodies…Since 9/11 it has been harder to find drivers who want to face the hassles of crossing the border…We obviously have capacity issues in terms of drivers and it might make some intermodal movements more attractive,” Canadian Trucking Alliance CEO David Bradley.
Ian Simpson, director of sales and marketing for Sunbury Transport, a company which does over 12,000 intermodal moves a year, concurs on the driver benefits. He sees a close relationship with railways giving eastern-based motor carriers the ability to access markets in New York, Michigan and Ohio by trucking the freight only as far as Toronto and Montreal, saving their truck drivers from the longer hauls into the U.S. markets.
Another perspective on the challenges to intermodal trucking comes from Bradley: He blames the approach David Collenette, federal minister of transport, for hurting the relationship between truck and rail. He says that while the minister talks about intermodalism, it’s questionable if he doesn’t really have the “uglier” brother in mind: modal shift.
“Any time you start talking about more business for one and less business for another, you cause conflict. That approach has pitted the two modes against each other, at the political level at least, and has done more to work against the relationship than it has helped,” Bradley says.
He is optimistic though – an indispensable attribute for a trucking association president: “I feel we are on the cusp of a new era in intermodal contribution.”
Can the truck-rail relationship continue to expand?
A CEO perspective
The truck-rail relationship was one of the hot issues handled by leading motor carrier CEOs in a lively panel discussion hosted recently by Supply Chain Canada. Here’s what they had to say:
David Bradley, CEO,
Canadian Trucking Alliance
I think intermodal will continue to grow where it makes sense to do so – where it’s either transparent or beneficial to the shippers with some profit to the parties making the move.
The advice I give to people who are interested in seeing intermodal grow, however, is to not oversell it. The truck-rail wars over the last several years have heated up since the late 90s. Some of the tactics that have been employed to denigrate the trucking industry and cast intermodal as the solution to all the world’s ills, so to speak, only serve to get the trucking industry’s back up. If someone is constantly throwing bombs at you, eventually you have to throw a few back. That is totally unproductive and quite different than what I’ve seen happening on the ground between intermodal partners. I’m hopeful we’ve come to the realization that as the economy grows there will be freight for everyone and that in certain cases there are efficiencies to be had from working together.
Doug Munro, president,
It can expand in the future the way it has the last 10 years. Will it? I don’t know. It’s really in the control of rail. The fact of life is that we have a rail monopoly in eastern Canada and a duopoly in western Canada.The problem that I see for TL carriers is that they are competing with the railroads and the railroads have their own competitive lines. They view truckers as semi-competitors and so it is very difficult for these relationships to work. The other issue that compounds this is major, major problems that carriers have when they go into railyards and waiting times are in hours. The railways have to resolve this in order for the relationship to work.
Don Streuber, president,
As a TL carrier we recognize that there are some goods that our customers have that should be moved on rail and we don’t compete in those markets, unless there are service expectations which the shippers would prefer for us to handle. The relationship for rail should be that it carries goods long distances. There are economies of scale but they don’t function on a JIT schedule.
Norm Sneyd, president Highland Transport
I certainly believe there is a continuing market for the truck-rail combination. Whether it’s going to expand or not, I don’t know. It works under certain circumstances. For the most part the customer is compensated through lower transportation costs but it requires flexibility in service. Those that cannot allow flexibility in service, they are going to have to use truck. The minute you introduce a second link to your service you can lose control and then you run the risk of service issues. You also limit yourself geographically; the minute you get into some off-line points you have a problem. If your customers require a dedicated service or a JIT service, they have to go by truck..
Ian Simpson, director, sales and
marketing, Sunbury Transport
Can truck and rail continue to expand? Absolutely. But it really depends on what direction the railways are going to take. We are extremely confused about the direction the railways are taking right now. With our driver shortages, etc. there is an opportunity for railways to expand in this marketplace but if anything they seem to be contracting, and we are not quite sure why.
We own a short-line railway, and we do over 12,000 moves a year intermodally. We believe in it and we see benefits. We also see the benefits from the driver standpoint. Instead of doing long-haul trucking the driver is within a couple hundred mile radius from home. The next move is using a good combination of r
ail and truck so that from eastern Canada, for example, we get to places like Ohio and New York and Michigan by bringing the loads as far as Montreal and Toronto by truck and keeping the drivers closer to home. We see a future there. The third component of our strategy, aside from our over-the-road trucking and intermodal initiatives, is a link with rail that takes certain commodities that work with boxcar and trucking them short distances, usually 250-300 miles. We’ve seen that as a benefit to us. It helps us reposition our trucks and it adds value to our customers.