Executive View: Time for a New Deal — CTA Chairman Evan MacKinnon
October 1, 2003
TN: Both shippers and carriers are looking increasingly at intermodalism. Is it growing too fast for the infrastructure to keep up?MacKinnon: Intermodalism is a key part of transportation's future but...
TN: Both shippers and carriers are looking increasingly at intermodalism. Is it growing too fast for the infrastructure to keep up?
MacKinnon: Intermodalism is a key part of transportation’s future but only if it’s cost effective. There has to be a savings there.
No one has inventories these days and no one can afford to wait on product. If it’s cost effective there is a level of delay that is acceptable but it has to be within reason.
There is still a substantial cost to getting it from the rail yard to the delivery point.
The modes are not totally used to working together. There is also often a lack of communication that plagues us. But it’s like any other aspect to the industry.
At the start everyone gets into it and then after a while certain players decide to specialize and work to improve that area of the industry.
TN: A lot of shippers are outsourcing many of their transportation decisions. How would you characterize the health of the relationship between trucking companies and 3PLs right now?
MacKinnon: Trucking companies/freight brokers/3PLs – that has always been somewhat of a contentious issue.
The title 3PL can have a couple of meanings. It can refer to transportation specialists who through their innovative knowledge of the various transportation modes provide multi-national shippers with an alternative to having their own transportation department.
Unfortunately the term can also be misinterpreted to describe non-asset based freight brokers. True 3PLs provide a necessary service to both the transportation and shipping industry.
Our preference is to encourage shippers to use asset-based logistics companies, these are companies that have been around for many years and they have made a huge investment in the transportation industry; an investment in terminals and warehouse facilities, equipment and people.
TN: In an industry where profit margins are as thin as they are, is this simply a case of there just not being enough room for a middleman?
MacKinnon: There is a big difference when there is one middleman and when there are three or four.
It’s not uncommon to get a load from a freight broker and find out that it came from another freight broker. There just isn’t room for that in today’s rate structures.
TN: Speaking of financial constraints, the high cost of insurance right now is particularly tough on fleets hauling into the U.S. And add to that all the new border security programs. Do you see transborder hauls becoming the domain of a much more select group of carriers?
MacKinnon: I don’t believe so. I know my own company could not survive if it was not an international carrier.
There are very few carriers in Canada that only work domestically. In the U.S. that’s not a problem. I don’t think the smaller carriers have any option either because that’s where the freight is moving.
However some companies will find it more difficult and may exit the market. This doesn’t mean there will be a great exodus. Canadian international carriers for the most part are running tandem-tandem equipment.
If they want to run strictly domestic, the equipment they own today is not compatible with Canadian domestic moves.
What moves domestically within Canada is mostly multi-axle equipment.
For the most part, truckers domiciled in Canada have little option than to operate internationally.
That’s simply where the freight is moving.
TN: Canadian transborder carriers also rely greatly on owner/operators to handle these longer hauls. Do you see the increased emphasis on background checks for drivers crossing into the U.S. creating an atmosphere where carriers start moving more towards the use of company drivers because that way they are in greater control of who they place in their trucks?
MacKinnon: No, definitely not. It’s not really harder to check into the background of an owner/operator than it is with an employee.
The trucking industry today could not afford to replace owner/operator equipment with company-owned equipment.
The financial outlay of putting that many company-owned trucks on the road would be devastating. It’s just not feasible.
There are a lot of reasons why a company would use owner/operators that go beyond the individual behind the wheel – return on investment, financial outlay, etc.
TN: Last year, the Ontario Trucking Association started a formal dialogue with shippers. Can you outline what was the intention of this move and what was accomplished?
MacKinnon: Our number one goal when organizing the meeting was to inform and help the shipping community understand some of the issues we as truckers are faced with today.
There has been much wastefulness of resources downloaded on to the trucking industry and some people feel that accessorial charges need to be added for all these inefficiencies.
The approach the OTA took by forming the shipper/carrier forum was to address these issues and remove them where possible because the trucking industry can’t afford to continue to operate with these additional costs to operations in place, and the shipping industry will definitely be opposed to paying for what is often perceived to be inefficiencies on the part of the trucker.
Many of the inefficiencies have continued to exist simply because carriers have not done a really good job of informing the shipping community that these issues exist.
In a lot of cases they are not difficult to fix.
With better communication between carriers and shippers many of these issues could be resolved without anyone spending additional money.
TN: So where is the carrier/shipper forum right now? You discussed the issues, what’s next?
MacKinnon: We discussed what were the issues, there was an exchange of information, and I would expect another meeting later this year to see where we go from here.
The Ontario Trucking Association called that meeting and we had a phenomenal response from the shipping industry. But it’s still up to the trucking industry.
If there are enough carriers willing to park trucks at shippers’ facilities and not say anything, not charge for it, and not apply an appropriate fuel surcharge…nothing will change.
TN: You’ve been in the industry a long time. What’s your assessment of Ottawa’s vision for trucking? Is it closer to 20/20 or one-eye blind?
MacKinnon: I’m not sure they have a clear vision for trucking. The recent Straight Ahead document from David Collenette, really didn’t propose any great changes in direction.
Nor, did it provide any hope of things like a National Highway Policy.
There were the usual references to more modal integration, but it was a bit more toned down than some of the things we’ve been hearing out of Ottawa in recent years. I think CTA has done a good job of educating the federal politicians and bureaucrats of the real scope of intermodalism and the realities of the businesses that trucking and rail are in.
TN: Are you saying that what is hurting trucking’s relationship with Ottawa is what the industry perceives as favoritism towards rail?
MacKinnon: It’s really unexplainable considering the trucking industry is the single largest employer in transportation.
The job of the truck driver is one of the main occupations for males in Canada. Certainly at times over the past few years we have felt like the role of the trucking industry was not being fully appreciated and there was too much reliance on boosting rail.
A lot of this I think came from a lack of understanding about the freight market which in turn led to some rather over-simplified views not only on truck and rail, but on transportation solutions overall.
I think that is beginning to change and again I credit CTA with improving the awareness in Ottawa of the realities of the market and the service trucks provide. But it remains a constant struggle. We also struggle with the constant change of ministers on the provincial level, and it’s not like these people are coming from transportation backgrounds to begin with.
They are green as green can be when they come in.
You start educating a particular minister on issues specific to the tr
ucking industry and then he is gone and you have to start all over again.
TN: Looking into the future, what do you see as the top issues that will have an impact on trucking?
MacKinnon: The availability to attract top qualified entrants into this industry is an issue that’s going to be with us a long time.
More people are going on to college and university and I don’t think they are doing that because they want to come into the trucking industry.
We are still an industry that, unfortunately, parents don’t tell their children to get into. It just doesn’t happen.
But there are so many other areas to work in our industry besides truck driving.
We need to do a better job publicizing that.
At our company almost 30 per cent of the people working do not drive a truck.