TORONTO, Ont. – As shippers and carriers came together for this year’s Transportation Workshop organized by Motortruck Fleet Executive and Dan Goodwill & Associates, the mood was noticeably improved compared to previous years.

Mike McCarron, managing partner of MSM Transportation may have summed up why in one simple sentence: “It’s a lot more fun having 10 extra loads a day than 10 extra trucks a day.”

Still, as the economy emerges from recession and the trucking industry’s survivors collectively lick their wounds, it’s quickly becoming clear the lessons learned from the past few years will leave a profound and lasting impression on the truck transportation landscape. Some changes will be for the better while others may present new challenges and may even reshape the industry.

“I like to think we’ll emerge stronger and more unified as an industry,” said Michelle Arseneau, managing partner with GX Transportation. And MSM’s McCarron heralded a new era defined by “a newfound level of cooperation” between shippers and carriers.

But while optimism permeated the day’s discussions and the mood was nearly celebratory, the hard reality was that nothing in trucking comes easy or stays static and new challenges are already presenting themselves.

Shipper-carrier relations
One thing shippers and carriers at the workshop agreed on, was the need to work more closely together.

“We were very good a holding our cards close to our chest,” Brian Springer, vice-president of transportation with Loblaw Companies admitted about the past. “We didn’t share a lot of information and we expected to be able to pick up the phone when we needed service and get it on demand. I think over time, you realize that’s not a strategic, long-term way to operate and we have become more collaborative in sharing information with the carrier community.”

Ginnie Vensolvaitis, director, transportation operations with Hudson’s Bay Company (HBC), says the shift towards greater information sharing is also underway in her organization.

“In the past, no-one but a Hudson’s Bay employee would talk to a Hudson’s Bay store,” she said, noting carriers are now able to contact the store directly to arrange delivery times and discuss other opportunities to improve efficiencies. “All of these things are coming together. Not only are we coming out of recession, but we’re awakening to the making of a really slick supply chain and everybody is collaborating with all sorts of ideas.”

That, says McCarron, will be the key to the industry’s success going forward.

“I think what you’re going to find is a newfound cooperation between shippers and carriers,” he said.

Freight volumes and capacity
All the shipper panelists at the workshop projected modest freight volume growth for the remainder of 2011 and 2012. However, the make-up of that freight is changing, especially in Heather Felbel’s world. She’s the vice-president, supply chain for Indigo Books & Music, which has seen its stores stocking more non-traditional items such as gifts and toys as consumers purchase more of their books and music online.

“We’re looking at a change in freight itself, from a very compressed heavy freight (books) to a different type of freight with a higher cube as we move towards toys and gifts,” she said. “The whole portfolio of freight inside our business is the biggest change we’re seeing.”

Carriers, Felbel said, need to understand their customers’ changing requirements and come to the table with transportation solutions. While carriers boldly promise they’ll be more restrained when it comes to adding capacity as freight demand grows, shippers are hopeful that better planning on their part will make it easier for carriers to meet their requirements.

“What we’ve been doing over the last six to eight months, is having weekly supply chain meetings where we’re looking all the way back to China or India at what’s coming at us and we’re able to forecast right from the ship to the port, from the port to the DC and the DC to the store,” HBC’s Vensolvaitis said. “Fixed delivery schedules to our stores allows for a tight forecast and I expect our carrier partners to be able to meet that demand.”

As volumes pick back up, McCarron said he expects to see carriers exhibit more self-restraint than in the past when they were all too eager to add new equipment.

“I think where the concern lies is in our industry’s appetite to add equipment,” he said. “It’s bad business for our industry to add trucks. You can’t throw trucks at problems unless you have commitments from customers to work together. I think capacity will solve itself over the course of time if we work together (with shippers).”

However, Loblaw’s Springer warned that too much restraint could cause carriers to miss out on opportunities.

“Carriers need to be very cautious in terms of walking that line,” he warned. “If they don’t reinvest in their business, they could lose out on some growth opportunities.”

Chris Raynor, branch manager with CH Robinson, said new entrants to the trucking business will emerge to ensure there’s adequate capacity.

“Anybody can go and get a truck and with that low cost of entry, people will start coming back to trucking,” he argued. “They can come in, make money, then rates go down because there’s too much capacity so they leave the industry. I think capacity will follow the rate.”

But MSM’s McCarron quickly doused that theory.

“I disagree,” he retorted. “The trucking industry is not going to attract new entrants. It’s not an attractive business model and no-one is going to go out and invest the millions of dollars required for compliance and for security to get in the game to maybe make five to seven cents on the dollar.”

There is another factor that will influence capacity, and it’s one that GX Transportation’s Arseneau is extremely worried about.

“The driver shortage is huge and I think in the next six to 12 months we’re really going to see the impact the driver shortage will have on our industry,” she predicted. “We need to pay our drivers more in order to attract more drivers to the industry and if we do that, shippers are going to look at their road pricing versus other modes.”

In fact Arseneau said the impending driver shortage may spell the end of long-haul trucking as it’s known today.

“It makes you wonder if the traditional long-haul trucker’s days are numbered,” she said. “Quality of life is an issue. It’s a reality; it’s a difficult life to have and if we are not able to fill those jobs going forward, something structurally is going to change.”

MSM’s McCarron was less apocalyptic about the driver shortage.

“No-one wants to do the job anymore,” he agreed, believing the answer lies in learning how to better train and work with immigrant workers.

Driver shortage or not, shippers are already taking a closer look at other modes – particularly rail.

Mike Owens, vice-president of physical logistics with Nestle Canada, said his company has been shifting freight to rail over the last couple years and “I expect that to continue.” Owens warned rail performance is improving, with the company paying CP Rail a performance bonus last year for the first time ever.

Another source of competition in some cases may be the expansion of private fleets. Loblaw’s Springer noted the company spends $1.6 billion a year on transportation and having gotten its own costs under control, it will be looking to bring more of that in-house using company-owned equipment.

“As an organization over the last 30 years, we allowed our internal operating costs to get out of touch with the industry,” he said, noting the company has renegotiated deals that make running its private fleet more viable. “We’re not looking to bring it all in-house but there are certainly some strategic opportunities now because we have competitive rate structures in place.”
GX Transportation’s Ar
seneau said to achieve success in the future, transportation providers will have to be more than just a one trick pony.

“I think we saw the birth of the new transportation company take place about 10 years ago as people quietly started adding services they didn’t normally offer to their portfolio,” she said.

“A new-style transportation company is able to offer a consultative role that hasn’t normally been in place with the trucking industry in the past and to play an active role in the logistics process and be entrenched in the rail, the air, the ocean as well as the road and to stand behind it and have it be seamless to your customers. At the end of the day, that is going to bring value to the marketplace and bring value to your customers and that’s what people want.”

And for the smaller carriers that lack the resources and the sophistication to compete on that level? MSM’s McCarron said carriers with 50-80 trucks will be hard-pressed to survive as a “pure trucker.”