Questions for this interview were prepared by members of LQ's Board: Jim Davidson, CEO, The Wheels Group; Mary Holcomb, PhD, University of Tennessee; and Clifford Lynch, Executive Vice President, CTSI.
LQ: With increased border security, what have TL carriers done and/or are doing to ensure compliance, and are these additional costs being passed on to the shipper? (Jim Davidson, CEO, Wheels Group)
David Bradley: Truckload carriers—and the industry as a whole—have taken steps to comply. It's been an incredible situation whereby at least a dozen major initiatives, all purportedly focused on security, have been introduced since 9/11. It has certainly increased the cost of shipping across the border for carriers. It has made the supply chain less predictable and less reliable. Are carriers passing those costs along? Today, I would say that they are not, or at least not all of them. Over the years we've seen carriers begin to impose accessorial charges for border delays or security surcharges, but in the current climate it's more difficult to make those stick. It depends on each company. I couldn't begin to estimate the costs to the Canadian and the U.S. industry, but it certainly has to run into several hundreds of millions of dollars in the past few years alone.
LQ: In many quarters trucking continues to have a somewhat negative image. What would you suggest could be done to improve this perception by the public? Is there value in going down this road at all—why bother? (Jim Davidson)
David Bradley: First you have to look at how these perceptions germinate. If anyone has ever been cut off by a truck, it has probably affected their perception of the industry. If we want to solve the image problem, the solution starts on the highway. Because we share our workplace with the public, there's an added responsibility to be at our best at all times. An uneventful and safe trip receives no attention; the only time we get attention is when things go wrong. So we need to continue to improve upon our already impeccable safe-driving record (compared to motorists). We must ensure that our drivers are appropriately trained and that all carriers are compliant with the safety regulations. We may never get the adulation of the public, because there is always going to be that uneasy tension between different-sized vehicles on the road, but at least we can neutralize some of the negative sentiment. Some of our major technological advancements and new environmental initiatives need to be better communicated to the public. On the other hand, you can waste a lot of money on PR programs that go nowhere. For me, it's what happens on the road that is most important.
LQ: What is the industry doing to unite stakeholders along a common front in order to influence legislation that impacts carrier/shipper/customer operations, profitability, and federal/state revenue tax policy? (Mary Holcomb, Ph.D., University of Tennessee)
David Bradley: The Canadian Trucking Alliance (CTA) and Ontario Trucking Association (OTA) have taken a broader view of these issues. We have recognized, for example, that because we share our workplace with the public, we must be safer and support enforcement. We must support common sense regulations—we must lead in that regard. Similarly, on the environmental front we need to show that we are a part of the solution, not just a part of the problem.
Lobbying, building coalitions, and bringing stakeholders together—all of those things that people have written books about—are still not exact sciences. I think we are viewed as being firm in our views but reasonable. We put a lot of effort into policy development, into getting the industry on board, and while we may not always achieve complete unanimity, we try to have most of our bases covered by the time we approach government.
In regard to taxes, the industry's knee-jerk reaction has been to oppose any and all mention of them. If we had taken that attitude 50 years ago, we wouldn't have an interstate highway system and a world-class highway system in Canada. There comes a time when we must look at a fairer, more progressive way of taxing, and be prepared to come forward with recommendations instead of opposing for the sake of opposing. Having said that, there are a host of antiquated, outdated and regressive taxes that burden the trucking industry, particularly with regard to key business inputs. These need to be changed, to enhance the competitiveness and economic well-being not only of carriers, but of the economy as a whole.
LQ: Are there any viable solutions on the horizon to address the driver shortage, other than increasing pay? (Mary Holcomb)
David Bradley: How deep the driver shortage is at any given time depends on the region and where we are in the business cycle, but there is no doubt that we are facing a significant, long-term, chronic shortage of drivers going forward. We have the oldest workforce in the country and are not attracting anywhere near our fair share of young people into the industry.
What is the solution? Compensation is always part of the equation. Thirty years ago, truck drivers were well paid compared to other occupations that required a similar level of education, for example. That balance has been lost now. In order to make a slightly above-average wage, truck drivers have to work a lot more hours than other workers at the same pay scale. Money aside, the more difficult question is how new drivers can cope with the lifestyle, given that the nature of the business involves long-distance travel and irregular hours.
The capacity issue is what really drives rates and profitability. In turn, it's the availability of qualified drivers that drives capacity. Compensation for drivers will come under upward pressure as the supply of drivers shrinks, and that in turn will inevitably lead to pressure on freight rates in order to recruit and retain drivers.
LQ: In many cases the line between line-haul rates and fuel surcharges has become blurred. Do you believe a revamp of the method used to recover increases in fuel costs is called for? (Clifford Lynch, Executive Vice President, CTSI)
David Bradley: My view on it is pretty simple: Trucking companies need to generate a certain amount of revenue in order to remain whole. How you slice the pie—rates or surcharges—in the end doesn't matter; two plus two must still equal four at the end of the day. I know some shippers now want to change the fuel surcharge formulae their carriers are using. I look at this as a case of the shippers wanting their cake and eating it too. Now that the fuel price is going through the roof, you cannot decide to stop paying the fuel surcharge unless you are prepared to make an adjustment in rates. Fuel is poised to take over from labor as a carrier's largest component of operating costs. You would be hard-pressed to find an industry that's more efficient than trucking. We can always tinker with the margins to improve efficiency, but deregulation has wrung out all the blood in that stone, so at some point the customer has to pay the true cost.
LQ: What is the major barrier to good carrier-shipper relationships—those that recognize the issues that each face and the value they add to the process? (Clifford Lynch)
David Bradley: It starts with respect. Within the broader business community—not just the government or the public, but within the business community itself—freight transportation is taken for granted at best, and is often looked at as a necessary evil. A lot of people talk about partnership but not many practice it particularly well. There was more cooperation a few years ago, when the costs of transportation were escalating and shippers had to pay to get service and keep their carriers.
Another barrier we face is the propensity for more shippers to use third parties. The real customer—the shipper—is often not part of the equation anymore. So the ability to partner in order to improve joint efficiencies and productivity is limited and sometimes obstructed by the fact that the key players are not at the table. I'm sure this will draw a reaction from some people in that business, but it's something I hear quite regularly from carriers that have to work with 3PLs, for instance.
LQ: Now that demand is down substantially and there is more capacity, there is a lot of talk about shippers getting even‚Äù with trucking firms. That isn't how a partnership works; is this just the nature of the shipper-carrier relationship? (Mary Holcomb, Ph.D., University of Tennessee)
David Bradley: It comes back to that issue of respect. In 2003 to 2005 there was certainly more balance in the marketplace and more room for negotiation. I don't think anybody who is interested in sustaining their relationships is sticking it to people, nor do I think that the profits generated in the trucking industry during that period came close to the kind of profits that are generally made in our customers' businesses. I think that this reflects a silly, shortsighted view of business. The current situation is not permanent. When some semblance of balance is restored—and it will be—the driver shortage will ensure that, regardless of the level of freight growth, carriers will want to work with people who truly wish to partner with them and with whom they have a good relationship. Ultimately it comes back to this issue of respect within the transportation community, which at times is sorely lacking.
Questions for this interview were prepared by members of LQ's Board: Jim Davidson, CEO, The Wheels Group; Mary Holcomb, Ph.D., University of Tennessee; Clifford Lynch, Executive Vice President, CTSI; Walter Zinn, Ph.D., Ohio State.
LQ: We are all reading about "greening of the industry"—describe three real examples of partnerships where that carbon footprint is being tackled as a true objective—and where is the ROI? (Jim Davidson, CEO, Wheels Group).
Bill Graves: As an association, we have spent the last year developing a sustainability policy, which our member companies have embraced. We fully understand the importance of becoming better environmental stewards, and so do our customers. The current issue is how to reduce greenhouse gas emissions. This is relevant because if we can succeed in reducing our consumption of fuel, especially as it is trading at record prices, we can improve our bottom line. But more important than the bottom line, is that it's simply the right thing to do; it's the right way to conduct our business.
One initiative that we support is a partnership with the United States Environmental Protection Agency. The program is called Smart Way and is designed to help companies—in our case trucking companies—learn about best practices. We are encouraging our member companies to become a part of Smart Way and to embrace other initiatives identified by the ATA.
Our plan promotes strategies to reduce idling through more targeted investment in our infrastructure. We propose reductions in speed limits, which will cut down on fuel consumption and greenhouse gas emissions, and we call for the voluntary use of speed governors on trucks. In fact, we have actually called for an addition so that trucks will be governed at a maximum speed at the time they're manufactured; and we may also re-examine regulations that restrict a longer combination of vehicles in some parts of the United States.
LQ: Urban congestion is reaching pandemic proportions. How could the carrier industry best tackle this issue and begin to see some real movement? A few major cities are implementing congestion pricing, etc. to enter specific zones - is this a solid solution and what are the other viable "best alternatives"? (Jim Davidson)
Bill Graves: We have made an improved surface transportation bill in 2009 a number one priority for the American Trucking Associations. What we would like to see in the next re-authorization is Congress making an active effort to use the resources we have at our disposal for the projects that will make the biggest difference in alleviating congestion. This is not to say that there hasn't been an effort to do that in the past. But given the exponential growth in the U.S. population, and a failure in the recent past to keep pace with infrastructure investment, we must obtain the maximum benefit from the dollars we spend in both road and bridge construction and maintenance.
A bottleneck study completed by the U.S. Federal Highway Administration was successful in illuminating where some of this money needs to be spent. We have made it very clear that we support a continued strong federal goal in national infrastructure. Devolving authority to the states is not a good option. Our position is probably not surprising, coming from a trade association that mainly represents people who are engaged in interstate commerce, but we would like to see consistency in the way that roads are designed, built and maintained. We want every state to have the finances and resources to keep their roads in good condition.
Other approaches, such as congestion pricing (where certain hours are made available to both commercial vehicles and the motoring public to travel in and out of the city) are a concern because commerce does not take a few hours off every day. There is a constant demand for the products that we are moving to be delivered. So while there may be situations or places that might benefit from these solutions, we think it is better to make sure that we have enough infrastructure in this country to handle all the throughput of commercial and non-commercial traffic.
LQ: In many quarters, trucking continues to have a somewhat "negative image". What would you suggest could be done to improve this perception by the public? Is there even value in going down this road at all- why bother? (Jim Davidson)
Bill Graves: In any industry, one person has the ability to ruin it for everyone else, and trucking is no different. There are individual operators out there who are not committed to safety and customer service. Quite frankly, we are in favor of enhanced traffic safety oversight enforcement that will make it difficult for those kinds of people to be in business, because they do a disservice to all of us.
It is crucial that the trucking industry continue to tell its story, and it starts with the indispensable nature of what we do; there is a constant demand for the products we are moving to be on the store shelves and at the manufacturing plants. Our failure to tell this story creates a scenario where many public officials, perhaps through a lack of education or information, are more inclined to pass laws and regulations that are counterproductive to our industry. We think that the image campaign helps mitigate some of the bad perceptions people may have about the trucking industry. The industry makes an enormous economic contribution through the millions of Americans whom we employ. So, like every other industry, we have an important story to tell about the role we play in contributing to the growth of the U.S. economy.
LQ: What is the industry doing to unite stakeholders along a common front in order to influence legislation that impacts carrier/shipper/customer operations, profitability, and federal/state revenue & tax policy? (Mary Holcomb, Ph.D. University of Tennessee)
Bill Graves: Again, I must talk about infrastructure. Historically, we have gone to Capitol Hill seeking support for increased investment in infrastructure. But in many cases, we weren't willing to help pay for the enhanced investment we requested. That has changed. We now understand that you don't get something for nothing, and that we have to be a part of the solution if we want to see improvements in infrastructure. We have also come to appreciate that the ultimate beneficiary of that infrastructure—while it's trucking in the operational sense—is really the economy.
In the last few years, we have been in conversations with everyone from the National Association of Manufacturers, U.S. Chamber of Commerce and National Industrial Transportation League, to some of the big box retailers like Wal-Mart who are beginning to see the impact that congestion, missed deliveries and delays in pick ups have on their bottom line. They are starting to understand and appreciate that by going together to Capitol Hill and advocating for improved investment, everyone's productivity and profitability, and not just the trucking industry's, will increase.
LQ: Do you believe the cost of improvements to the highway infrastructure should be funded by increased taxes, more toll roads, or both? (Clifford Lynch, Executive Vice President, CTSI)
Bill Graves: In the past we were good at knowing what we were not in favor of—and it generally involved paying more taxes or fees—while still wanting progress on new infrastructure investments. At this time, our association certainly has come to appreciate that you can't have something for nothing. We continue to support the fuel tax as the most viable method of having a broad user-based pay for infrastructure. We appreciate that there are places throughout this country where toll roads work and are likely to work in the future. There are some creative financing options being explored which might make sense and work in some places. But all in all, the country needs a national commitment to infrastructure investment, and we think that the fuel tax is our best option at this time. In the future, we may begin to transition away from fuel taxes as we change the type of energy and vehicles we use, but we're just not there yet.
LQ: Is the demand pattern slowing to indicate that we are going into a recession? If so, to what degree? (Walter Zinn, Ph.D., Ohio State)
Bill Graves: All I would be doing now is repeating what our chief economist, Bob Costello, has said. I don't think we see a pattern that would suggest a recession in this country. In fact, in some segments of the trucking industry, there is still some fairly robust freight movement. Flatbed operators or drive-in operators that haul construction materials or automobile parts are certainly seeing a dramatic slowdown in their business, but I think we have reached the bottom, and been there for a while now, so I don't expect it to get much worse. I have an optimistic outlook that before the year is out, we will pick up the pace a bit and weather this storm rather quickly.
Questions for this interview have been prepared by members of LQ's Board and colleagues; Jim Davidson, CEO, The Wheels Group; Mary Holcomb, Ph.D., University of Tennessee; Clifford Lynch, Executive Vice President, CTSI.
LQ: Please provide us with an overview on your role as the chairman of the CTA.
Claude Robert: It's important to preface these remarks with an overview of the general landscape of the industry.
In 1988, the Canadian government deregulated the trucking industry. Transport Canada, which had been responsible for federal and provincial infrastructure development, delegated power involving the administration of transportation to Canada's provinces, enabling the federal government to walk away from this responsibility to a large extent. The federal government also transferred money in the form of federal equalization and transfer payments to the provinces, which were designated for the infrastructure and administration of transportation. The provinces were also given money to develop transportation departments, which would oversee the provincial and federal rules to be applied to interprovincial and international carriers. Over the years, the provinces have used that money to look after their own provincial infrastructures. However, over the last five to eight years there have been more industry concerns regarding transportation safety, the harmonization of transportation practices between the provinces, and how the provinces apply those funds to their transportation infrastructure.
The main goal of the CTA is to look at the relationship between the provinces in Canada as well as the dynamic of trade between Canada and the U.S. to ensure shipments are moving as fluidly as possible. The CTA is responsible for ensuring that federally recognized carriers that work inter-provincially and internationally comply with the Federal Labor Code. Finally, the CTA investigates the method by which taxes are issued, as they are not the same across all of the provinces; some taxes are federal, such as basic fuel tax and some are provincial, such as the road tax. This is a matter of concern for the trucking industry, especially those with businesses that reach across Canada and into the United States. We have similar concerns with regard to regulations, which are decided federally, but implemented differently from province to province because each province has a final say in their application.
As the CTA's Chairman of the Board for the last two years, my biggest concern has been our relationship with the United States. There have been a lot of changes in the U.S. since 9/11 and Canada must adapt to these changes. Many of the regulations imposed in the U.S. are not in alignment with Canadian law. The Canadian Human Rights Act is a primary example. We are often in dialogue with officials in Washington who want to impose rules that are not in harmony with Canadian human rights regulations. Once Homeland Security calls for regulations to protect the U.S. against invasion, Homeland has authority over virtually any human rights charter. In this context, it is quite a challenge to deal with the various departments in the U.S. in order to achieve a smooth flow of trade transactions between Canada and the States.
With regard to Canadian domestic transportation, a high-level CTA priority continues to be the harmonization of transportation regulations between the Canadian provinces. I have been travelling a lot across Canada and I'd suggest that there are four distinct regions, which could be likened to distinct countries, within Canada. Each region has its unique interests. To begin with, there are the Eastern provinces, with their unique challenges. They are located far from the largest markets in North America, and with a small population base they compete in today's highly competitive worldwide environment. Another region is Quebec and Ontario. Their economies have some similarity in terms of growth and expansion, but very different bases. Quebec is an important producer of raw materials and commodities. Ontario's prosperity is fuelled, to a large extent, by the automobile industry. The change in the value of the Canadian dollar in relation to the U.S. dollar, plus the Free Trade Agreement and the Auto Pact — now enable you to bring cars to Canada from the States with no tax. As a result, more Americans are looking at concentrating their production within the United States and Ontario's economy is suffering. Then there are the middle provinces—Alberta, Manitoba and Saskatchewan—that have great economic prosperity largely because of petroleum and commodities such as wheat, barley and soya. It is very important to recognize that these three provinces have contributed a lot to farming, but today petroleum is their primary commodity. This is why the problems or challenges in those provinces are different from other regions. They have a shortage of labor; people are allowed to work as many hours as they want. Their cost-of-living has gone up 15-20% per year in the last few years. For example, a truck driver in Calgary who may have been receiving $17 is now receiving $27 or $30 an hour. He is also getting a premium of $10 an hour if he spends more than 120 hours per month with one carrier. They do not have the same expectations that we have in Quebec or Ontario. Lastly, there is British Columbia, which is a service-oriented economy. B.C. is also rich with lumber, which comprises an important part of B.C.'s trade with California, Oregon and Washington State. In fact, B.C. is more connected to the States than Canada when it comes to trade.
My major role at the CTA is to work with my peers to establish fluidity across the country in terms of regulations and business for our sector.
LQ: With the significant change in the relationship between the U.S. and Canadian dollar during the past year, what are carriers and shippers doing to protect themselves against this swing in dollar valuation? (Jim Davidson)
Claude Robert: There is a huge amount of pressure on shippers. Everyone expects the lowest rate, which is prompting trucking companies facing dire business circumstances and even bankruptcy, to reduce their rate to a point that does not enable them to cover their costs. There's also a shortage of drivers because drivers are often not being paid what they deserve. Consequently, many are leaving the industry. Thirdly, carriers are bidding on contracts, but too often these Requests for Proposal (RFPs) focus on the cheapest price instead of incentives to innovate and create value. When the shippers use the cheapest price as the primary criterion for their selection of a trucking company they often find the end results are not on par with their expectations.
In this context, it is very important that truck companies and their executives make informed decisions when they respond to RFPs. The transportation groups of major companies are under considerable pressure from their top management; the Vice Presidents of Finance, shareholders and the stock market, to manage the top and bottom lines of their business. If management focuses too much on today's corporate performance without taking sufficient stock of the future in their business practices, investments made by people in these transportation companies could be disappointing.
LQ: Are there any viable solutions on the horizon to address the driver shortage other than increasing pay? (Mary Holcomb, Ph.D.)
Claude Robert: We need to be concerned about many issues in trucking; the U.S.- Canada border, what the shippers really want, and how we are going to deal with an aging population of drivers, all on the verge of retirement. These elements are going to influence our industry down the road either positively or negatively. The new generation of truck drivers does not want to be away from home for two weeks. In Canada, at my company, our drivers are home every weekend. In the United States, when I go to the ATA, drivers are often gone for an average of two and a half weeks. It's only a matter of time before this becomes a larger issue. In the States, for example, they often have turnover of more than 100% annually. In our company, the turnover is less than 7%.
LQ: With regard to technology, what do truckers see as the ‚Äòmissing gap' in technology that would make them more efficient? (Mary Holcomb, Ph.D.)
Claude Robert: The technological systems that people would like to see frequently require deep pockets. The main reason that our company can afford this technology is because we developed our proprietary technology system in-house, over a period of twenty years. Now we have state-of-the-art systems. However, I should emphasize that our company is not positioned to service shippers who only focus on the best price. They will use carriers who are driving at 120 km on the highway that may not be sufficiently appraised of their true costs, such as their fuel cost. Generally, these are small carriers that cannot afford sophisticated technology, nor pay their drivers on par with larger companies.
This is an industry where the entry fee merely requires you to lease a few trucks and buy a phone. Such entry requirements are totally wrong. On the other hand, too often companies have outsourced so much that their employees have zero expertise in transportation and they are not sophisticated buyers of transportation services. It is important to consider the value of technology in this context.
LQ: In many cases, the line between haul rates and fuel surcharge has become blurred. Do you believe a revamp of the method used to recover increases in fuel costs is called for? (Clifford Lynch)
Claude Robert: A fuel surcharge should represent real costs to a carrier, but until there's a regulation that compels everybody to cover this cost, it puts the onus on the transportation firm to justify and recover it. For example, consider a shipment that is going from Toronto to Chicago, with the return trip from Indiana. A lot of empty miles are involved; who pays for the empty miles, sleeping and hotel time? It is important to recognize that a carrier is entitled to recover its costs through either increase in rates or the application of a full fuel surcharge.
There are other considerations to be mindful of if we are looking at transborder trade. For example, if a Canadian carrier is going into the States—we are not allowed to conduct trade or business between the states. If he delivers a shipment from Canada to Tennessee, he cannot take a shipment from that state to Ohio. He must drive to Ohio without cargo. Or, if you consider a driver who is going from Montreal to Atlanta, he must sleep for two nights based on today's regulations. Who is going to pay for the motel or the fuel to keep the diesel engine running if it's winter? How do you plug these costs into the equation? Americans tend to negotiate on a cost-per-mile basis, but this does not afford payment for required downtime, namely, sleeping time. The driver drives for eleven hours every day, and eight hours is allotted for sleeping. The truck is probably idle when the driver rests, or you have an auxiliary power unit (APU, which is a heavy-duty truck idling management solution.). The driver is able to run the APU to power heating and air conditioning systems as well as hotel loads. It also provides power for battery charging while the main engine is off.
Either you invest in an APU, which is an additional cost, or you cover the cost of the fuel to run an idle truck. Once you estimate that the cost of fuel is $5 a gallon in Canada, it is easy to calculate that the driver has spent ten dollars an hour for sleeping. That's eighty dollars, so when he is driving for eleven hours and the best he can do is 500 miles, what happens to those eighty dollars? The shippers often don't recognize these costs.
LQ: What have you done to improve and sustain relationships with your shipper-base? (Clifford Lynch)
Claude Robert: Increasingly, our company supplies customers with information reports. Some of the larger companies can develop and compile this information on their own, but a lot of companies have their stats based only on sales, and sales do have a relationship with the successful delivery to the customer. However, there's a link missing between the pickup and delivery of a shipment that is important. It could be warehousing, distribution, the supply chain or the transportation. For many of our customers, our firm offers this information link, to provide all of the data they require to make informed business decisions.
A cost is a cost, but it's the way you manage this cost that makes a difference. It's the person that you have between the cost and the final result that makes a difference. You can buy a truck at the given price, but if the driver isn't properly trained or motivated, even if it's the cheapest truck in the world, your costs are going to be high in comparison to a company that has a cost that is a little higher, but managed better. If we want to improve productivity in today's world we need to change our methodology, eliminate waiting time, plow our roads better, account better for hours of service and adhere to regulations, but most importantly, we need to manage and know our costs.
Questions for this interview have been prepared by members of LQ's Board: David Closs, Ph.D., Mich State & LQ Executive Editor; Jim Davidson, CEO, The Wheels Group; Mary Holcomb, Ph.D., University of Tennessee; Clifford Lynch, Executive Vice President, CTSI; Walter Zinn, Ph.D., Ohio State.
LQ: Do you believe that your best practices are a differentiator in your business? (Jim Davidson, CEO, The Wheels Group)
Al Boughton: Absolutely. While we are not a national company, our business has grown steadily and we are now the leader in Ontario and the Greater Toronto Area (GTA). The bases for our growth are our best practices, which ensure we offer a high quality service, a quality product and professionalism.
LQ: What differentiates you from the competition? (Jim Davidson)
Al Boughton: We have built this business on honesty and integrity, and while a lot of people make the same statement, we practice it. We have been consistent with the method we use to manage our business.
Our strength is not just in having a good product and ensuring that its specifications are correct, but also ensuring that it is properly serviced. We have custom designed software that allows us to manage a fleet for our customers. We can always track the cost, and always track the trailers. When customers ask us for an analysis of their costs, we can provide them with a detailed break-down; we can advise them in areas where they may be spending too much money. All those factors set us apart. When somebody asks us for information, we can not only provide it, we can provide it in a matter of minutes and then use that information to make better decisions for the next order. Our company is only in its sixteenth year, but many of the leases we signed are ending. Customers are coming back and asking, How do we do this better, collectively?‚Äù This shows that we have established a rapport with our customer.
LQ: Are your best practices shared with your competition by your customers for their benefit? (Jim Davidson)
Al Boughton: Large clients look for competitive quotes, and tell our competitor: Right now we are dealing with Trailcon, and they have great I.T., people, operations and equipment.‚Äù The competition often echoes this view with a, me too‚Äù, response. The uneducated buyer might decide to work with them without investigating their claims. An educated customer, on the other hand, will ask competitors whether they invest in real estate, technology, and their people in order to service their customers.
LQ: How are transportation firms---rail, water, air—working together to improve supply chain sustainability for their clients? (David Closs, Ph.D., Mich State & LQ Executive Editor)
Al Boughton: Everybody, by necessity, is forced to share information due to the economic situation and the fierce competition. Necessity is the mother of invention. When the economy is strong and everybody is doing well, the industry does not have the same level of collaboration.
LQ: What is the industry doing to unite stakeholders along the common front in order to influence legislation that impacts carrier, shipper, customer operations, profitability, and federal/state revenue and tax policy? (Mary Holcomb, Ph.D., University of Tennessee)
Al Boughton: The only way we can make great strides in this industry is through the efforts of associations, such as the Canadian Trucking Association (CTA), the Ontario Trucking Association (OTA) in Canada; the American Trucking Association (ATA), and the Intermodal Association of North America (IANA) in the U.S. Harmonization is a daunting task. It can't be done without the lobbyists and the people who know how to access the decision makers. Today, unfortunately, there are many carriers who don't support these associations. I feel that everyone should be putting strength behind these associations; we can inform them of what needs to be done to make transportation and logistics seamless. The only way this can be accomplished is if everyone pays their dues so that the associations can do their job to the best of their abilities. We must support any associations that are making an effort to better the industry.
LQ: Do you believe the cost improvements to the highway infrastructure should be funded by increased taxes, more toll roads, or both? (Clifford Lynch, Executive Vice President, CTSI)
Al Boughton: I am against the public paying for roads through a new tax in Canada. The tax on gasoline and diesel is supposed to pay for infrastructure, but it's not being applied to infrastructure. Instead, these tax funds are going to a general government fund. If they create a dedicated tax for infrastructure and improvements, it won't be long before that tax also disappears into general funds. Another point of contention is the double-tax on toll roads: fuel and highway taxes. I'm not against toll roads; I'm against the government introducing a new tax when they already have a tax that is supposed to fund highway infrastructure. We can't help but wonder what has happened to the other money. There must be a reasonable expenditure on infrastructure and accountability.
LQ: Two transportation issues are of most interest at this time: one is whether the demand pattern is slowing to indicate we are going into a recession? The second is where you do see technology going? (Walter Zinn, Ph.D., Ohio State)
Al Boughton: Canada had an estimated $313 billion in trade revenues with the U.S. in 2006. The trade levels in 2007 were down 3.5 % from 2006. When you calculate 3.5% of 313 billion, divided by 20,000 per truckload, this reflects an estimated 500,000 fewer truckloads or products in 2007.
The transportation industry is first to feel a recession. The economic overview shows the United States is in a recession, which will hurt Canada. We continue to move manufacturing jobs to China and the general population continues to buy foreign automobiles, which has been the life-blood of Canada for a long time, particularly in Ontario. I don't think Canada's economic downturn has hit rock bottom. The U.S. economic picture is also troubling, particularly when you look at Michigan, Ohio and Pennsylvania and talk to the people in the manufacturing sector that are no longer employed. The U.S. has accumulated a deficit in the tens of trillions of dollars. They also have an aging population, 40 million people without healthcare and a costly war.
LQ: We are all talking about the greening of the industry‚Äù - describe real examples of partnerships where that carbon footprint is being tackled as a true objective and where is the ROI? (Jim Davidson)
More and more, we will invest in technology such as clean-burn fuel efficiency and roll-resistant tires. All sectors of the industry must work together to combat issues like empty miles. When you have fuel at the cost that it is today, empty miles are just something that you can't tolerate anymore. With better management in technology and with improvement in I.T., we, as an industry, can work together to prevent empty miles.
Questions for this Executive Interview were prepared by members of LQ's board and friends of LQ: David Closs, PhD, Michigan State University, and LQ Executive Editor; Jim Davidson, CEO, Wheels Group; Mary Holcomb, PhD, University of Tennessee; and Clifford Lynch, Executive Vice President, CTSI.
LQ: How are transportation firms (motor, rail, water and air) working together to improve supply chain sustainability for their clients? (David Closs, PhD, Michigan State University, and LQ Executive Editor)
Paul Delp: The intermodal collaboration we've experienced to date has resulted mostly out of necessity, but the results have paid huge dividends for the client. Look at the successes at the ports of L.A. and Long Beach and at the Port of Virginia, where new and improved rail service is moving more containers to and from the port facilities. Even though direct competitors are working together to improve intermodal rail service, it just makes sense to put trailers on flatcars to move them long distances.
LQ: Urban congestion is reaching pandemic proportions. How could the carrier industry best tackle this issue and begin to see some concrete movement? A few major cities are implementing surcharges, etc. to enter specific zones—is this a solid solution, and what are the other viable best alternatives‚Äù? (Jim Davidson, CEO, Wheels Group)
Paul Delp: The success of the congestion fees in London has been questionable at best. It appears that the cost to administer them outweighs any perceived benefit. We'll wait and see what happens in New York City. The Association of State Highway Departments (AASHTO) predicts that by 2035 there will be one more truck following every truck traveling on our highways today. Carriers must be sure they are utilizing their carrying capacity and not making unnecessary city trips. Since the United States has one of the lowest weight limits for trucks in the developed world, we are going to see a lot of trucks on our highways until the weight limit is increased. Canada's maximum gross weight is 138,000 pounds, while the United States has a maximum weight of 80,000 pounds. Additionally, we must do a better job of linking all modes of transportation. Shippers can start by ensuring that their products are being transported in the most cost-effective manner; for example, shipments of paper products, forest products and certain consumer products should be in rail cars if they need to travel distances of 500 miles or more.
LQ: In many quarters trucking continues to have a somewhat negative image. What would you suggest could be done to improve this perception by the public? Is there even value in going down this road at all—why bother? (Jim Davidson)
Paul Delp: An estimated 85 percent of all of the freight in the United States is moved by truck, and as long as American consumers want to buy products, trucks will be the predominant mode of transport in the supply chain. Incremental improvements like increasing the maximum gross weight for trucks, truck-only lanes and transloading are only a few of the many options available to continue moving the growing volume of freight and slow the increase in the number of trucks.
The American Trucking Association and many state trucking associations have marketing programs designed to improve the public image of trucks. Trucks continue to operate at improved safety levels: accidents per miles driven are down significantly year after year. In addition, trucking companies are providing driver-ambassadors to meet with various organizations, and to demonstrate for the general public what drivers can and cannot see in their mirrors and explain why trucks need more space to make turns safely.
LQ: How are trucking companies leveraging technology, human resources, business processes, etc. to create real innovation that is recognizable to both the shipper (us) and the customer? (Mary Holcomb, PhD, University of Tennessee)
Paul Delp: Two examples come immediately to mind: Some trucking companies are limiting the maximum speed their trucks can travel; that is an obvious benefit when we are traveling in our cars. And GPS tracking systems can now send email messages to the receiver, alerting him that the driver will soon be at his dock.
LQ: What is the industry doing to unite stakeholders along a common front in order to influence legislation that impacts carrier/shipper/customer operations, profitability and federal/state revenue and tax policy? (Mary Holcomb)
Paul Delp: We are working through memberships in three industry associations that I am familiar with, namely the American Trucking Association (ATA), the International Warehouse Logistics Association (IWLA) and the National Industrial Transportation League (NITL). All of these organizations have very active and influential governmental affairs committees that work together with other industry associations as stakeholders to promote legislation.
Legislation similar to the proposed 25 percent tax credit for rail infrastructure investment is a good start toward revitalizing the rail industry, for example. However, legislation to re-regulate the railroads and take them back to the pre-Staggers era will slow the progress the Class 1's have made. Decades of deferred maintenance is finally being corrected, but the rail system needs more double and triple tracking, with grade separation and grade crossings minimized or eliminated in certain corridors.
LQ: Are there any viable solutions on the horizon to address the driver shortage, other than increasing pay? (Mary Holcomb)
Paul Delp: If the U.S. Congress would wake up and develop an improved immigration policy . . . it may not be the entire solution, but it would help. A true immigration policy would help bring in the talented workers this country desperately needs, to ensure continued productivity and the prosperity that has always made this country the envy of the developed world.
LQ: Do you believe that the cost of improvements to the highway infrastructure should be funded by increased taxes, more toll roads or both? (Clifford Lynch, Executive Vice President, CTSI)
Paul Delp: Both. This issue cries out for a real national transportation policy. It has been suggested that the last national transportation policy (during the Eisenhower administration) developed the interstate highway system, and since then Congress has been loath to come to grips with the need for a new national transportation policy and to fix our failing infrastructure. An efficient, well-maintained infrastructure is essential for the movement of goods and people in order for the U.S. to remain the most productive and innovative nation on the planet. Most fuel tax revenue is based on a cents-per-gallon plan that has not been increased since 1993, and the Highway Trust Fund is almost broke. With the 2009 Highway Reauthorization Bill looming, today it's time for Congress to do the right thing before our supply chains grind to a halt.
LQ: What is the major barrier to good carrier-shipper relationships—those that recognize the issues that each faces and the value they add to the process? (Clifford Lynch)
Paul Delp: The key to the success of any relationship is open and honest communication. And profitability is the ingredient that makes a good carrier-shipper relationship.