Industry Issues: Tune Into This Reality Show and Be a Survivor
March 1, 2004
It has been said that there are few, if any, industries that have less control over their destiny than trucking. Economic conditions, currency fluctuations, world oil markets, insurance industry machinations, demographics, borders, laws, regulatio...
It has been said that there are few, if any, industries that have less control over their destiny than trucking. Economic conditions, currency fluctuations, world oil markets, insurance industry machinations, demographics, borders, laws, regulations, demanding customers, the weather and even disease and pestilence all impact on industry prospects.
The current revenues and profit margins are simply not sustainable. By any measure, the industry has surely reached its limit in terms of how much more cost it can absorb.
For many owners, they would have been better off if they had put their money in Canada Savings Bonds.
Is it any wonder that we have a driver shortage, that every day we hear of drivers getting out of the industry and so few people seem prepared to get in?
The cauldron that has been building steam in recent years could be ready to boil over into what one industry CEO has termed, “the perfect storm.”
And the winds of this storm may be blowing in a new reality which could provide the trucking industry with more control over its destiny than it has seen since deregulation and improved prospects for a long overdue correction in freight rates, returns on investment and driver compensation.
Of course, some will say we have heard all this before and there was still always someone prepared to cut rates or pursue market share at the expense of earning a reasonable return. No one can be blamed for being skeptical this time around. Well, the industry can continue to wallow and implode on itself or it can at least try and take control. Some people may be surprised by the results.
So what’s changed? What is this new reality that appears to be emerging?
The fact is there is little if any excess capacity anywhere in the system these days. And with the economies in both the US and Canada coming on-stream, there promises to be a deepening capacity shortage.
Trucking is not as easy a business to get into as it once was and this is leading to a deceleration in the number of new entrants. Insurance premiums are prohibitive and driving many out and keeping others away.
The new security environment and tougher safety enforcement are daunting for those who don’t know what they are doing and are making it harder to fly under the compliance radar.
Shippers who want and need the service levels to which they have become accustomed will not have the choice – and the power – that they had in the past. So ask for that rate increase.
Get paid for delays and waiting time. Say no to hauling at a loss. And, what if the shipper says no? Yes, you will have a decision to make. But, where will they go? To the carrier down the street?
They might try, but can the carrier down the street handle the business? Do they have a fleet of trucks parked up beside the fence?
There have been numerous examples lately where a shipper has dumped a carrier only to come back a short while later asking the carrier to work for them again.
Shippers will be less able to play one carrier off against the other. Will they turn to the railways?
I doubt it. And besides, the railways are at full capacity too.
Even if a carrier went out and bought more trucks who would drive them?
With a shrinking and aging workforce in Canada, the driver shortage is only going to get worse in the years ahead.
Moreover, issues like hours of service and border delays cannot be resolved on the backs of the drivers.
Many carriers are already reviewing what they pay their drivers and over time we might even see a trend towards hourly wages as opposed to pay based on mileage.
In the end, the fleets that have the drivers will win.
The skeptics have reason to doubt that much will change. After all, the industry has been its own worst enemy for so long it’s hard to see it in any other light.
And, it’s easy to sit in an association office and say this or that should be so, when you don’t have to live it everyday.
Granted, but it would be a shame not to try.
The next few months will be critical in establishing whether the correction in rates the industry so desperately needs and deserves will begin to take hold.
Even if the industry seizes the opportunity, it will take time for markets to adjust, and there will no doubt be bumps along the road, for many, but there just may be some light at the end of the tunnel.
– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.