TORONTO, Ont. - A truckload of facts and figures, plus some pithy analysis, was what Lou Smyrlis delivered to those in attendance at the recent Toronto Trucking Association luncheon held at the Weston...
TORONTO, Ont. – A truckload of facts and figures, plus some pithy analysis, was what Lou Smyrlis delivered to those in attendance at the recent Toronto Trucking Association luncheon held at the Weston Golf and Country Club.
Smyrlis is editorial director of Business Information Group’s Transportation Media, which includes Truck News, Truck West, Motortruck and Canadian Transportation & Logistics.
“Over the past five years in particular, we’ve made a concerted effort to conduct a great deal of market research to truly understand what’s going on in the market place,” said Smyrlis, adding Transportation Media conducts six to eight major market surveys per year, in partnership with industry suppliers and associations and educational institutions. “We survey both buyers and providers of transportation services. We believe this provides us with a unique ability to see issues from both sides of the fence.”
Smyrlis then went on to present some of the most recent data collected, particularly with regards to transportation buying trends.
According to the research, more than 80 per cent of respondents (more than 600 shippers across Canada were included in the survey) reported paying higher rates for truck transport. In Western Canada alone, 86 per cent of shippers reported paying higher rates. And more than half of shippers across Canada reported rate increases higher than four per cent.
This after a long period, from 1996 to 2001, which saw negligible rate increases.
According to Smyrlis, many shippers surveyed are beginning to appreciate why rates must rise.
And current conditions appear to indicate the rate increases will be sustained overall, said Smyrlis.
Sixty-one per cent of shippers surveyed reported double digit increases to their shipment volumes in 2004, said Smyrlis. And Statistics Canada records for manufacturing shipments already show volumes are substantially ahead of last year’s figures for the first two months of 2005.
The growth is expected to continue through 2006 with a projected Canadian economy growth of three to 3.5 per cent.
“Almost half of Canadian shippers are concerned there is not enough truck capacity to handle their shipment needs,” he said, which is making them more amenable to higher rates and longer-term contracts to ensure future capacity. Concern over capacity is particularly acute in the truckload sector.
The data also shows that trucking in particular stands to benefit with more than 60 per cent of shippers expecting to increase their use of truck transport this year, said Smyrlis.
Carriers should expect growth from a variety of changes to shipping patterns. Expedited, time guaranteed, ground transport is one way to lower shipper costs. In fact, it’s a lot cheaper than air freight (up to 70 per cent in some cases), something which many shippers are beginning to figure out.
Smyrlis also said there is more business to be taken away from the air freight industry, citing several airport studies, which indicate that shipments were being diverted to trucks. The protective legislation that was put in place to prevent new entrants to the air cargo industry has hindered competition and capacity for freight, forcing shippers to consider other modes, said Smyrlis.
Carriers can also expect to see some of their new business come from the ports. The moving of U.S. bound goods through Canadian ports has increased more than 200 per cent over the past decade, Smyrlis pointed out. And the new ship designs coming on stream are considerably larger than current designs and require much deeper water ports. Canada is blessed with two deep-water ports in Halifax and Vancouver while most East Coast U.S. ports are located in the mouths of rivers, requiring regular dredging, which is subject to environmental impact regulations, while the major U.S. West Coast ports suffer from acute congestion.
Another way carriers appear to be asserting themselves is through implementation of surcharging for items ranging from fuel pricing to detention time.
“What this amounts to, really, is carriers being bold enough to charge shippers based on the shipper’s performance as a client,” Smyrlis said.
But some carriers appear not to be getting the point. Rumours have been circulating recently that some carriers are backsliding on their rates, said Smyrlis.
Carriers should have the courage not to do so, he said.
For shippers and carriers alike, it’s all about understanding and improving supply chain management, said Smyrlis. And doing so can only help shippers improve their financial performance. Smyrlis cited a study, which tracked 861 examples of major supply chain glitches announced by publicly held companies over a 10 period (1989-1998). The study found that, on average, the stock market penalized public companies announcing supply chain glitches with nearly a nine per cent drop in stock price. The bottom line is higher rates aren’t the only reasons for shippers to consider reducing wait times for carriers.
Smyrlis also addressed concerns about the border.
“According to a study by SCL and Industry Canada conducted about a year ago, 70 per cent of Canadian shippers consider efficient border crossing as extremely important to their business,” said Smyrlis.
Yet the industry may just end up shifting away from JIT shipments and towards the integration of warehousing and buffer stock, thanks to a fear of potential border disruptions similar to 9/11, predicted Smyrlis.
Shippers may also choose to simplify their carrier relationships by working with fewer carriers, he added.
And they will want their carriers to provide more services, such as warehousing, inventory control and replenishment, or managing the entire transportation move, which affords carriers opportunities for further growth, said Smyrlis.