A little bit of tension between buyers and sellers always exists regardless of the product or service. A certain degree of tension is a good thing – it keeps everyone honest. This is as true for the buyers and sellers of freight...
A little bit of tension between buyers and sellers always exists regardless of the product or service. A certain degree of tension is a good thing – it keeps everyone honest. This is as true for the buyers and sellers of freight transportation service as it is for anything else. No one involved in the supply chain will see this as a great revelation. It’s a fact of life.
However, the existence of some level of tension should not preclude the development and nurturing of more constructive and productive business relationships and partnerships. The strength of any relationship, business or otherwise is predicated on some basic traits: good communication and trust.
In an effort to improve the level of communication and trust between the shipper community and the motor carrier community, in 2013 our two associations established a joint forum to encourage informal discussion between OTA and CITA members. The primary goal was to share respective challenges in an effort to better understand their roots, generally aimed at building the relationships between both associations, and their members, necessary to undertake joint efforts to get waste and inefficiency out of the freight transportation system. A further objective was to work together to help address mutual concerns over service levels, capacity and cost.
No doubt both groups held certain biases heading into the discussions. Both groups were likely pre-conditioned to anticipate some of those biases. To some degree at least the carriers no doubt expected the shippers to be less than appreciative of the challenges posed by ever-increasing operating costs, the shortage of qualified drivers and the obligations that a carrier must accept in order to run a safe operation. The shippers on the other hand likely felt the carriers did not understand how their role within their organizations has changed over the years with the advent of purchasing departments, increased use of 3PLs, etc., and the pressures they are under to contain costs and to justify costs increases.
The first meeting of what has become known as the CITA-OTA Shipper-Carrier Forum was held in May 2013 in Toronto. There were few expectations for that first meeting, beyond “feeling each other out.”
But what transpired was actually rather encouraging. In fact, the participants emerged from that first session developing some best practices for both groups to adopt in order to maximize the relationship and, most importantly, they agreed to meet again within six months’ time.
The second installment of the Shipper-Carrier Forum took place in November, again in Toronto. While most of the participants were the same people that had met in May, there were also some new faces and fresh perspectives. The discussion covered everything from when longer-term contracts were appropriate, to what both shippers and carriers need to do to make the bid process more transparent, accurate and fair to the incumbent carrier, to the impact of such things as the tightening of the US rules governing truck driver hours-of-service on productivity; the potential for changes to the transportation of dangerous goods regulations in the wake of the tragedy at Lac Megantic; to the need for all parties in the supply chain to accept their fair share of the liability in the event that something goes wrong. Calculating and administering fuel surcharges was identified as a challenge for both shippers and carriers. Carriers made the point that the fuel charge formula can be whatever shippers want it to be so long as at the end of the day 2+2=4; in other words that the combination of rate and the fuel surcharge leave the carrier whole. Some shippers expressed the view that they preferred their carriers to submit a base rate then charge accessorials for things like dwell time indicating that being charged for those costs separately may lead to a greater opportunity to reduce them.
The shortage of truck drivers was recognized by both groups as a looming threat to the unfettered access to freight transportation service. A study completed earlier this year by the Conference Board of Canada estimates that by 2020, the gap between the supply and demand of truck drivers in the for-hire sector of the industry will reach about 33,000. Market forces will inevitably prevail on such things as driver wages and benefits, which have been stagnant for the past two decades. (According to the Conference Board, since 1986 the for-hire trucking industry has given away 87% of the productivity gains it generated during the period).
The carriers will have to find ways to address the lifestyle issues which are currently a significant concern for people who might otherwise consider a career as a truck driver. But, there is also an important role shippers can play. They can provide spaces at their facilities to allow drivers to park and rest. They can allow drivers access to washrooms and fax machines. This seems like a simple and reasonable thing but it is a huge issue. By minimizing the amount of dwell time a driver is forced to endure they would actually help drivers and companies utilize their time and assets more appropriately to generate revenue. Drivers are paid to drive. Companies are typically paid to move goods. The window they have to get their miles in is restricted by the hours of service. Being delayed and forced to sit waiting to be loaded and unloaded is perhaps the most frustrating thing they have to deal with and it drives many out of the business.
Of course, both groups stated the views they were expressing were as individuals based on what works in their situation and not necessarily reflective – for better but usually for worse – of what others do. A key challenge for this process is to get the shipper community and the carrier community at large engaged in a similar dialogue. It is also expected that the increased understanding will be reflected in direct negotiations between individual shippers and carriers.
It would be easy to be cynical about the process. No one on the shipper-carrier forum is under any illusion that this can be quickly or easily accomplished. But they will continue to meet and to dialogue in the hope that in some small way the process will continue to contribute to the level of understanding and mutual respect of all concerned. Does anyone have a better idea?
In a small way, it also a good example of how associations provide a forum for dialogue and joint action eventually leading to constructive change. Rome was not built in a day. But not talking or not trying to communicate is no solution.