MT: You will post revenues of about $80 million for 1999, an impressive 10-fold increase since abandoning your dry bulk hauling roots 12 years ago. Risk taking appears to be an important part of your ...
MT:You will post revenues of about $80 million for 1999, an impressive 10-fold increase since abandoning your dry bulk hauling roots 12 years ago. Risk taking appears to be an important part of your growth strategy — you were one of the first to enter the multimodal market; you tuned out the naysayers and opened a container port in Saskatoon one thousand miles from tidewater and later another in Winnipeg; you operate a logistics division that offers services in all modes; and you invested in new technologies few Canadian carriers would touch at the time. Yours is not a company that’s happy with maintaining the status quo, is it?
Marcoux: This is a company that’s all about change. That’s a pretty accurate reflection of the culture we cultivate.
MT:Let’s examine some of those strategic risks in more detail. Back in 1987 you managed to make the transformation from a dry bulk carrier concerned about how deregulation and a downturn in the agriculture sector would cut into its business, into an expedited carrier that could boast Canada Post as its premier account. How did you pull it off?
Marcoux: We had been dabbling in the dry van business with two local companies and we happened to be in the right place at the right time when Canada Post had a national strike in the fall of 1987 and one of the incumbent carriers (the now defunct Route Canada) refused to cross the picket line. We did and started carrying the mail to western points and after the strike was over they offered us a two-year contract which was what was remaining on Route Canada’s contract for western Canada. They gave us a week to make up our mind. We had to put 25 trucks and something like 60 trailers into our system to manage that business. We had some quick decisions to make and we decided to dispose of our bulk hauling assets and contracts and become a full load contract carrier on the basis of the contract with Canada Post.
MT:As critical as the Canada Post account was to your operation, eight years later, in 1995, you willingly took another chance by basing your rate proposal for the Canada Post business on cost instead of market price. As a result, you lost your biggest account. Why did you decide to stick to your guns?
Johnston: At that point in time Canada Post represented 22 per cent of our revenue base. We realized that we were in a spot where we were going to be dictated to. In consideration of our aim for longevity of the organization we felt we needed to run this like a company in any other industry as opposed to what we had seen practiced in this business where people have a tendency to price to market and not realize it until it’s too late. We did a thorough costing model and approached the bid on that basis and weren’t going to be leveraged into a position where we were going to be cross subsidizing a certain element of our revenue base.
MT:That decision to walk away from your biggest customer rather than tender a bid below cost sounds very much in line with your recent decision to quarterly review how shippers treat your drivers and walk away from their business if necessary.
Marcoux: Part of the reason we, as an industry, are having trouble attracting professional transport operators and keeping them is the way they get treated by shippers and receivers. The bottom line is we are a long haul carrier and the people we want to attract to work for our company want to move the truck not hang around docks. They don’t want to shrink wrap, they don’t want to repallitize and they don’t want to provide lumping services, and I don’t blame them. That’s not our business, that’s the warehousing business. That’s where the mentality shift has to take place. It’s not only the food warehouses, although they’re the worst culprits, but warehousing in general. Part of the reason for us doing this is to identify those customers who have unrealistic expectations. We’re going to work with them to either modify or pay for those expectations or we are prepared to walk away from the business.
MT:It could be argued that within the industry carriers treat drivers with little more respect than do shippers or consignees. I noticed you refer to drivers as “professional transport operators.” Can a mere change in title make a difference in how drivers are thought of or treated?
Marcoux: The reason we introduced the term “professional transport operator” — and now very seldom will you hear anyone in our company refer to them as drivers — is to change our mentality. We felt that calling them professionals would start a change of mindset towards treating and thinking of them as professionals. It’s amazing how well they respond in kind when you start to treat them as professionals.
MT:You actually go one step further by expecting all your salaried staff to spend two weeks on the road with your drivers — sorry, professional transport operators. Do you see an appreciable difference in their understanding of life on the road as a result?
Johnston: It’s a bit of a culture shock for most. The realities of functioning in cities like Toronto and New York as compared to Regina or Saskatoon are quite humbling and they come back wide eyed and very much appreciative of the challenges our operators face. Conversely, our operators are quite satisfied with the fact that the organization is trying to break down the barriers of “us” and “them” and trying to get a better appreciation of the expectations placed upon them.
MT:Speaking of challenges, you were one of the first Canadian carriers to embrace multimodalism. What prompted you to do so?
Johnston: We were working with Fortune 500 companies that had gone from steel wheels to road with the focus on Just- in-Time delivery. But there was an interest by some companies to capitalize on the economics of rail and serviceability of truck and use intermodal. We were providing services to Canadian Tire and Proctor and Gamble and for us to keep those accounts moving forward we had to be able to extend to them intermodal service. The bottom line was we either offer them a multimodal service option or we would have lost that business directly to rail.
MT:Still, it must have been difficult trying to establish a relationship at a time when the two modes were more used to slinging insults at each other than working together. What convinced you that you could succeed in working together and restrain the new venture from cannibalizing your existing business?
Marcoux: Obviously the railroad knows what commodities you’re tendering to them to move and there is that potential that if they wanted to they could go out and secure all of our business in a heart beat at a rate lower than what we have…But we really do believe that we have a unique relationship with CP Rail. We had established a relationship with some of their senior people through our Container Port of Saskatchewan, which we created to facilitate international overseas shipments of containers. We just sent them a letter one day suggesting that the benefits of that relationship could be put into place on the trucking side as well and that we felt there were some opportunities to use the strengths of our services combined with the strengths of their services to grow market share and to work as partners. After a few meetings we reached an agreement that this would not be just a contractual relationship but it would be a partnership where we would meet regularly to discuss opportunities and issues…We are the only wholesale account they have and we have jointly approached accounts recognizing that in some cases we’re better off to have the business because it involves a larger compliment of trucking and some cases we concede that CP is better off to deal with some customers direct. Intermodal sales make up 15-18 per cent of our total sales and there is more growth expected in this sector than in any other.
MT:You recently placed an order for 102 new trucks, which w
ill bring your power unit total to almost 400. And you’re also buying 455 new trailers. You certainly have the kind of “iron” associated with a trucking company but with your ventures in intermodalism, container ports and logistics do you still consider yourself to be one?
Johnston: We’re a transportation company not a trucking company. Basically what we do is provide transportation solutions. We look for the most cost-effective way of conducting the business. We look at trucks and trailers as tools. When you examine intermodal service there’s a cost differential of about 25 per cent compared to trucking. And the old paradigm that rail will “get it there when they get it there” no longer exists. For the most part, with on-rail service from eastern Canada to western Canada the intermodal container will arrive as quickly or even earlier than a single-driver operated truck running in accordance with the hours of service regulations.
MT:This definitely doesn’t sound like typical trucking executive talk.
Johnston: When we sit down with our rail partner, in our minds our thrust is to increase our market share and migrate the TL volumes that are moving internationally and domestically in North America that we believe both economically and operationally should be moving on rail not truck.
MT: Your company was reportedly the first in North America to spec a bulk order of the industry’s first electronic engines, and one of the first in Canada to employ satellite communications in its daily operations. You embraced multimodalism and opened container ports a thousand miles from tidewater. Be honest, how much of those decisions are based on research and how much is gut feel?
Marcoux: The balance has changed over the years. If we go back to our heady days in the late ’80s and early ’90s, probably 80 per cent of it was gut and 20 per cent was actual strategic planning and budgeting, preparing business plans. Today it’s probably the reverse. We’re very well equipped for analyzing our existing traffic lanes. We have all of North America broken down into zones that are exclusive to our use and all of our reports are based on that. So we have some information we can rely on to identify strengths and weaknesses in our system and then we look for business to complement the existing business.
MT: Where do you see this company five, ten years down the road?
Marcoux: Our goal is to become the best transportation provider in North America. And there is no goal that we have that speaks to the size we want to be or the number of trucks we want to have or what our top line revenue should be. We believe those things will take care of themselves if we can live and breathe our mission, vision and core value statements. If we strive to be the best we will have untold opportunities to grow our organization. We believe that our quest to be the best is all about people; not trucks, technology systems, or processes. While these things are all important tools that people need to facilitate their abilities to deliver exceptional service, it is ultimately our people and their commitment to believing and living our mission, vision and core values that will set us apart from our competitors.
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