Robert Ballantyne – Canadian Industrial Transportation Association President
January 1, 2005
MT: 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...
MT: 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?
Ballantyne: Rising transportation costs, capacity constraints in the rail and truck modes, the driver shortage and border security issues are the top four issues for shippers.
MT: 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?
Ballantyne: 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.
MT: 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 high 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?
Ballantyne: 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.
MT: What is the capacity shortage doing to transportation costs and how are shippers responding? Do you see shippers moving to longer-term contracts as a way to shield themselves from future rate increases?
Ballantyne: 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.
MT: 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 time it was in effect what was your perception of the impact on motor carriers and the need for higher rates to compensate? Was the situation as bad as initially feared?
Ballantyne: 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 was able to come up with modified rules that satisfied the court. There was very strong resistance against 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.
MT: Shippers are increasingly looking to intermodal options to reduce their transportation costs, yet the system has experienced extensive delays over the past year. You were a key participant in the Canadian Intermodal 2004 conference in Toronto, which I chaired in the fall. In your view, what’s the real cause of the delays? Is there a solution?
Ballantyne: Containerized shipments are suffering from success. World trade is booming, especially for consumer and other products that are particularly suitable for containerization. The cause of delays and bottlenecks is that carriers, ports and relevant government agencies appear to have been surprised by the rapid growth in this trade over the past year and investment in equipment, people, and fixed plant (or infrastructure) is lagging behind the demand. This appears to be particularly the case involving trans-Pacific trade, particularly with China.
MT: Increased and far more complicated border security is the inescapable reality of 9/11. From the outset both the Canadian and American governments tried to assure shippers and carriers that their legislative initiatives would address both security and efficiency in crossborder trade. How would you rate their performance on meeting that promise?
Ballantyne: I think the results are mixed. No one disputes the need for appropriate security, whether it relates to potential terrorist activity or in the normal handling of dangerous goods. Some of the initiatives to improve both border security and border efficiency will be successful. The FAST program, improved vehicle scanning technology, and Customs Self Assessment are several programs that come to mind. All such programs take time to build momentum and as more people sign on, they will be more successful. The various governments need to be aggressive about putting the necessary border infrastructure and equipment in place to support these programs and to ensure that the desired results are achieved.
MT: Succeeding in such a highly regulated environment requires closer collaboration between shipper and carrier than we’ve seen in the past. How would you describe the current state of the shipper-carrier relationship? Which areas require the most improvement and how is CITA planning to address those areas?
Ballantyne: There is always some tension between shippers and carriers, i.e. between buyers and sellers, and that tension is healthy. I think that generally the relationship between shippers and carriers is okay. In canvassing our membership for the recent Intermodal conference that you chaired, the shippers’ main concern is with the railways. The issues of service quality, congestion, and pricing, especially the railways’ growing use of ancillary charges are issues of concern. There is concern among shippers regarding rising prices in all modes and competitiveness of Canadian industry could suffer if carriers push price increases too high. The areas that need improvement are investment in port, inland terminals and rail equipment and facilities, as well as addressing the truck driver shortages, investment in border facilities and implementation of legislative change, especially with the Canada Transportation Act and the Canada Marine Act. CITA will continue to make its concerns known to the carrier community and will continue its advocacy activities with various levels of government, and with international agencies on issues of concern to shippers. Industry associations’ prime product is “communication” in the broadest sense, and communicate we will.
MT: Let’s talk a bit about your upcoming trade show and conference, TRANSPO 2005. New this year is the fact you have partnered with our sister publication Canadian Transportation & Logistics and have greatly beefed up the conference portion, including a presentation of new research on transportation buying trends, to entice more shippers to attend. But why should truckers exhibit at TRANSPO?
Ballantyne: TRANSPO 2005 is the premier event in Canada for the buyers of freight transportation. At TRANSPO carriers will have an opportunity to meet and market to a large number of shippers from across the country. CITA’s 110+ members include some of the largest buyers of freight transportation in Canada. The transportation conference that is part of TRANSPO will include both carriers and shippers discussing road, rail, marine, and airfreight and will draw a large audience of logistics officers who will also be visitors to the trade show. We have also invited the federal Minister of Transport to address the conference. This is a cost-effective way for motor carriers to get their message to the shipper community.