"We've got to wake up and realize it's our turn. If you don't realize what's going on in the market place and are not passing on significant increases to your customers, you are going to miss one of t...
“We’ve got to wake up and realize it’s our turn. If you don’t realize what’s going on in the market place and are not passing on significant increases to your customers, you are going to miss one of the best opportunities I’ve seen in the Canadian trucking industry in 37 years.”
That was the uplifting message about the prospects for next year, voiced by Laidlaw Carriers president Stan Dunford at the CEO Forum, a new addition to the Ontario Trucking Association’s annual convention this year. (And by the way, congratulations to the OTA for an excellent idea. I hope it will become a mainstay of the annual convention.)
Stanford is a man who has built his reputation in the trucking industry on telling it like it is, but can the potential for significant rate increases really be that strong going into 2004? Stanford’s optimistic outlook is based in part on the same concept I began discussing in this column last month: an anticipated shortage of capacity that will place upward pressure on rates.
Although admittedly still debatable, with some key industry players such as Yellow Transportation president and CEO James Welch not being as bullish on the potential for a capacity shortage as Dunford, it’s safe to say many leading carrier CEOs do expect a capacity crunch next year, particularly if the U.S. economy continues to perform the way it did in the third quarter of this year. But whether carriers and owner/operators will be able to reap the benefits of the expected shortage of supply for their services will depend a lot on how well they heed the lessons of the past.
And I believe the first, and perhaps hardest, lesson to learn is that in many cases the problem lies within. Carrier actions over the past decade are as much to blame for the inability to bring in meaningful rate increases – even during the greatest economic expansion this country has witnessed – as is the pressure brought to bear by tight-fisted shippers. As Welch points out, the “market always wins” but I think it fair to say that in many cases short-sighted measures by inexperienced carriers helped tip the scales.
Too often have carriers fought to take over accounts without understanding their true costs. Too often have they been cajoled by their customers into serving lanes or offering services that were unprofitable. Too often have they been too timid to ask for reasonable rate increases. And too often have they chosen to compete against each other on things that deserved industry-wide acceptance, such as a reasonable fuel surcharge during the diesel price spikes that put so many eastern Ontario carriers out of business a few years ago.
The need for rate increases must be properly explained to shippers, and carriers must be aware of how those increases make them compare in the eyes of customers who have other modal choices.
But in the end, if carriers are to get the increases they want, they’ll have to learn to say no when necessary, and not be afraid to fire unprofitable customers.