Some Takeaways from the 2019 Surface Transportation Summit

The 2019 Surface Transportation Summit took place last week at the International Centre in Toronto. The event was co-hosted by Newcom Inc. and Dan Goodwill and Associates, in partnership with the Ontario Trucking Association, the Freight Management Association of Canada and the CSCMP Toronto Roundtable.   Hundreds of shippers and carriers attended the event to learn from the various presentations and panel discussions and to network with other industry professionals.

Josh Nye, Senior Economist, Royal Bank of Canada, kicked off the day by sharing that the global economy has lost momentum, particularly in the industrial sector. Canadian manufacturing has not declined as fast in the United States. Protectionist trade policies are having an impact and are having a downside risk on the outlook. The yield curve is pointing to a heightened risk of recession in the next year or two. At this point RBC expects slower growth, but not a recession.

To maintain economic growth, the banks have shifted to easing monetary policy. The transport sector has slowed alongside industrial production; confidence has declined recently. A strong labour market has supported income growth and given consumer spending a slight boost. Similarly, business sentiment has taken a hit; firms are still planning to invest but capexes will take a hit. Non-energy exports have lost momentum.

David Ross, Managing Director, Global Transportation & Logistics, Stifel Financial Corp. spoke about the “mini freight recession” in the United States this year. He highlighted that the ISM (Institute for Supply Management) Manufacturing Index has dipped below 50, signaling a contraction in production. Strong employment and consumer sentiment have boosted retail shipping. We will need to monitor this index to see if this signals a downturn in the economy.

Mr. Ross shared his concerns about the lack of investment in infrastructure in the United States and the shortage of labour in the irregular route truckload market. Contract rate negotiations are under way and will continue into the New Year. He expects contract truckload rates in the United States to increase by 2 to 3% in 2010.

Stephen Laskowski, President, Canadian Trucking Alliance and the Ontario Trucking Association, expressed his concerns about some truckers circumventing industry regulations. He highlighted that 90 percent of labour growth is coming from immigrants.

The View from the Top panel featured presentations from leaders in five segments of the freight industry. I had the pleasure of moderating this track that included Tim Roulston, Director of Sales and Truckload Operations, Intermodal, CN Rail, who addressed the rail industry, Lucas Murua, Senior VP of Sales and Marketing, Dicom Transportation Group who represented the Courier / Last Mile Delivery sector, Chris Walker, President, M-O Freightworks who represented the LTL sector, Al Boughton, Co-Founder, Trailcon Leasing who discussed fleet equipment leasing and Mark Cascagnette, President, Managing Partner, Lee & Associates, Toronto who spoke about the real estate sector.

There were several themes that came out of these five very interesting presentations. Certainly, technological change is a major factor in every segment of the freight industry. This was identified directly or indirectly, in every presentation. In CN, this is taking the form of enhancements to its scheduled railroading, smart networks and improvements in handheld technology. In Dicom, Ecommerce now represents 28 percent of transportation expenditures. M-O is employing technology to improve network efficiency through improved dock productivity, yard automation and redesigned loading procedures. Al Boughton highlighted the significant increase in trailer renting versus buying, thereby resulting in the need for self-service technology and the evolution in trailer technologies. Of course, the Canadian mandate to be ELD compliant by June 21, 2021 is another technology shaping the trucking industry.

Green strategies were another popular theme. Amazon’s planned purchase of 100,000 electric vehicles was mentioned at the conference. Canadian truckers have their own electric vehicle acquisition strategies. The use of LED lighting, electric forklifts and solar panels was also mentioned by the speakers as green initiatives.

A third theme that was mentioned repeatedly was the challenge of acquiring quality talent. Two panelists mentioned their joint ventures with the Wilfred Laurier School of Business.

One of the most surprising statistics shared in the View from the Top track came from Mark Cascagnette of Lee & Associates. He noted that Toronto is the third largest commercial real estate market in North America (after Chicago and L.A.). He identified the unprecedented market conditions in the GTA including high demand, low supply, high land and construction costs. The current commercial real estate vacancy rate in the GTA is only 1.2 percent.

The morning concluded with the always popular Shipper- Carrier Roundtable. Norm Sneyd, Vice President, Business Development, Bison Transport, discussed the value of his company’s investment in Analytics. He noted the benefits of knowing the Operating Ratio on lanes, regions, and for entire customers. Carriers can manage their businesses much more effectively if they know the costs of serving their customers. This allows carriers to take a more fact-based, disciplined approach to their business decisions.

Sylvie Messier, Corporate Transportation and Customs Manager, Ipex, stressed the importance for carriers to share costing data with their customers. If a shipper is taking 3 hours to load a trailer, the carrier should advise them so their processes can be changed and carriers’ costs can be reduced appropriately.

The always popular (unpopular) topic of RFPs came up for discussion. Norm Sneyd encouraged shippers to take a 2/3-year window when conducting an RFP. Joe Lombardo, Director or Freight, Transportation and Logistics, Purolator agreed that annual bidding is not a good approach. Shippers lose efficiencies in having to transition to new carriers each year. Shippers were encouraged to take a more collaborative, longer term approach to carrier rate negotiations. Sylvie Messier mentioned that there are fewer salespeople on the road. It is important for shippers to conduct strategic sourcing.

The afternoon featured two sets of five concurrent tracks on a range of freight transportation related issues. The day concluded with a strong presentation by Max Valiquette, the Chief Strategy Officer at Diamond Integrated Marketing, on Innovation and Disruption.

With AI, autonomous vehicles, blockchain, drones, electric vehicles and other technological changes hitting the freight industry, this was a very timely and thought-provoking presentation.  Citing the transition from Blockbuster to Netflix, Max made the point that companies need to adapt to, rather than be overtaken, by changes in their environment.  By highlighting the ongoing evolution of the iPhone, he made the point that "Innovation is Iteration."  During the Q & A following his presentation, Max encouraged companies to engage their entire employee team in the Innovation Process.   

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