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So far, so good in ’04

In a column last year, I said that despite the challenges confronting the industry the prospect of improved rates and/or accessorial charges was real, but it would be up to the industry to seize the opportunities created by the ongoing capacity cr...




In a column last year, I said that despite the challenges confronting the industry the prospect of improved rates and/or accessorial charges was real, but it would be up to the industry to seize the opportunities created by the ongoing capacity crunch.

So far in 2004, things seem to be heading in the right direction. Now, one thing I have learned over the years is that it is risky to generalize about what’s going on in the trucking industry.

You will always find people, carriers, shippers, lanes and situations that buck the trend. So I don’t want to over-simplify, but so far so good.

One indication of the changing dynamic is the degree to which the industry is coping with the latest round of escalations in diesel fuel prices. The rack price of diesel fuel is up by almost 15 per cent in the last month alone.

In previous fuel crises, many in the industry have been brought to the brink. Broad shipper acceptance of fuel surcharges was a pipe dream.

But the industry has worked hard over the last couple of years to convince shippers of (and to demonstrate to them with facts) the need for fuel surcharges.

Most carriers now report that they have fuel surcharge arrangements with their shippers (and with their owner-operators).

That said, the surcharges may not always be entirely what the carrier wants or needs to completely offset the price increases, and there are still cash flow implications, and the higher fuel prices go the more difficult it may be with some shippers, but for the most part carriers report good acceptance of the fuel surcharges.

Indicator Number Two: We now are able to assess to some degree the impact after the first 100 days of the new U.S. hours of service regulations. There can be no doubt that the new rules have contributed to a decline in trucking productivity. Most Canadian carriers say that productivity (as reflected by increases in empty miles, shorter lengths of haul, increased cartage costs, larger trailer pools, etc.) is down about five per cent since the introduction of the new regulations.

The 14-hour “working window” has, as we expected, made driving hours like gold. Carriers and drivers cannot tolerate delays of any kind – e.g., at shipper/consignee docks, at the borders, etc.

Carriers have responded to this challenge by refreshing their accessorial charge lists, increasing rates, or a combination of both. Delays and detentions over a specified period and other special services that used to be free are now finally being charged for.

Most shippers are co-operating. They need to get their product moved. Of course, shippers need to be shown proof of delays, so carriers have been paying more attention to their monitoring systems – automated and manual.

The information must have integrity. Carriers are also using these systems to invoice customers for accessorial charges and for managing their drivers’ hours of service.

Many carriers report that the new hours of service rules has prompted a push for more productive relationships with shippers and created more opportunities for shippers and carriers to work together to reduce delays. More and more carriers are implementing some sort of border crossing charge – whether it’s a fixed fee, based on the time it takes, or differential rates based on FAST registration, etc.

As carriers seek more “quality revenue” the general mood is more accepting of rate increases. People are increasingly avoiding online bid systems and choosing to work with asset-based load brokers exclusively.

No doubt many drivers are feeling the full bite of the new U.S. hours of service regulations – losing miles each day, having to spend more time on the road for the same pay.

At the same time accessorial charge payouts to drivers are up. Others are receiving through higher wages. Still others a combination of both. We are hearing more about productivity bonuses and FAST card premiums.

As one carrier recently said to me recently, “we want to deal with our drivers now, so we can concentrate this year on our customers.”

Again, everyone’s experiences will not be the same and these are still early days, but the long-awaited cultural change the industry needs and has been hoping for appears to be underway. You have to work at it.

You’ll need to know your costs and you’ll have to be able to provide your shipper with valid information – but the opportunity is there. n

– David Bradley is president of the Ontario Trucking Association and chief executive officer of the Canadian Trucking Alliance.


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