MT: You've said of your company that "being on time, all the time, is no longer the criteria by which CFF is judged by your customers." What does set CFF apart from its competitors?Tepper: For us to b...
MT: You’ve said of your company that “being on time, all the time, is no longer the criteria by which CFF is judged by your customers.” What does set CFF apart from its competitors?
Tepper: For us to bring value to a customer we have to be able to reduce his costs. We don’t want to take that out of our running costs, of course, so we want to find ways for them to use information that brings their entire supply chain costs down. To that end we have done a lot of investing in technology. We have our own programs, our own programmers. We have been able to sit down with a number of customers and work with them to design programs that are going to give them information that they don’t otherwise get any where else. Any information that is placed on a bill of lading we can capture. For example, if a customer wants to know how many “blue” boxes he is shipping to Calgary versus “red” boxes in a particular month, we can give him that information if it’s on the bill of lading. A lot of larger companies have that information but not in a format that makes it easily usable; smaller companies don’t have that information available to them at all. Another example is the fact our customers can go on our Web site and change the delivery time of an order that’s in transit. Any large consignee can look at that and see the appointment times and say ship all these at one time so he is not receiving five different trucks with five different orders. He can then better manage his labor costs. We do have a lot of money invested in tractors and trailers but we also have a lot of money invested in technology and we see that as giving us a bigger bang for our buck. The information that we provide is what separates us from other competitors.
MT: Does this emphasis on technology help you fight the downward pressure on rates prevalent in trucking?
Tepper: No. It helps us retain the business that we have. It’s a very competitive market place. Rates are always a factor. All things being equal we will be more effective selling because of our technology. I think it’s incumbent upon us to use the technology we built for customers to also reduce our own costs. We like to consider ourselves as a Cadillac in terms of the service we provide but even Cadillacs today are having problems selling against Chevies. The distinction in our service is there, I’m not sure we get paid for that distinction. We’ve had to learn how to live with a Cadillac service and Chevy pricing and that’s where our technology has helped us. And we don’t shy away from spending money to make ourselves more productive. Our head office building is a testament to that. We are sitting on 40 acres in a prime location but the productivity of being able to get between ourselves and the rail head for the intermodal operation is costing us significantly less now that we have our own private road into the railway. That goes a long way in our being able to afford to operate buildings as big as ours are.
MT: Last year you signed a 10-year, $400-million partnership with CPR. Why the strong belief in the future of intermodal transportation and in CPR’s service in particular?
Tepper: I think there is going to be a big push to move more freight by rail. Anything over 700-800 miles is more efficiently moved by rail than truck. When you have weekends in play, unless it’s expedited freight, there’s only one or two days of the week that it would make sense to ship it by truck versus rail. For example, if you ship to Winnipeg from Toronto on a Thursday you get in there Friday night by truck, Saturday night by rail. If the consignee is not open on Saturday or Sunday, as is likely the case, you can ship it Wednesday, Thursday or Friday and all of it is going to be for Monday delivery whether it’s going by truck or rail. So why pay a truck price if you can do it by rail which is less expensive? Also, CP has shown that they are willing to invest in intermodal. They see intermodal as the growth engine for the railway over the next five or ten years and we share this view. They are seeing larger shippers condensing their shipments down to meet the JIT requirements of their consignees. CP acts as the longhaul carrier and we become the arms and legs of the move, doing the pick ups and consolidations and deconsolidations, etc.
MT: Similar growth was expected in the past but didn’t quite materialize. What’s different this time?
Tepper: It’s part new technology and part acceptance by shippers. Steamship lines are doing more business in North America and all of that either moves intact or gets transhipped intermodally. The automotive JIT business that used to move by truck is starting to move by rail. Years ago the railways didn’t get a lot of automotive stuff because they couldn’t meet JIT requirements. But you can be a JIT carrier even if your service takes a day or two longer than truck provided you are consistent with your delivery schedule. The technology is also there now to be able to track shipments accurately. A shipper feels safe giving CP a unit that’s destined for Laredo, Texas whereas maybe five years ago they wouldn’t. There is a general acceptance that an LTL or TL intermodal carrier can be just as effective as a truck carrier.
MT: Tell me about your Calgary intermodal facility.
Tepper: We are building a warehouse and cross dock to become a distributor for smaller shippers that would like to ship in larger quantities but just don’t have customers buying in larger quantities. We will consolidate orders, allowing them to save on their transportation costs and offer their customers better service at the same time. We should be operational May 1.
MT: How would you like to see CFF positioned 10 years from now?
Tepper: There is going to be consolidation of carriers, through attrition or mergers and acquisitions. There are just too many people nipping away at the same piece of pie for it to be healthy for anybody. Customers are going to keep pushing us to reduce our costs so we can continue to reduce our rates. The only way to reduce our costs the way they want us to is through productivity gains. Those gains are going to come through more throughput. We have the capacity, because of the way we’ve invested in new buildings, to double and triple our throughput. We would like to be a full-service provider and be able to walk into the offices of any customer in North America and be able to offer him a full list of services so he can get his product to market and be competitive. We would also like to have more of a presence in the overseas market. The amount of product coming from overseas is astonishing. We would like to move it to the next level and offer a consolidation service on the other side. Today the goods come in and we break them apart and send them all over Canada. There is no reason we can’t do that work in Hong Kong or China and it would be less expensive to load the units from there and send them directly to North American destinations.
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