This is the sixth and final blog in this series on surface freight transportation within Canada and between Canada and the United States. In this blog I will focus on tips for carriers to help achieve success in the Canadian freight market.

Is the Canadian Freight Market Worth the Investment?

As outlined in the first blog in this series, Canada is a large country, from a geographic perspective, with a population about the size of the state of California. The first question that any American carrier should ask is whether or not Canada is worth the investment in time and resources. As outlined through this series of blogs, when dealing with Canada, there is much to learn about Canadian laws, customs clearance, exchange rates and a host of other issues. Is serving the Canadian market of strategic importance to your company or would another US market (or foreign market) be more profitable? If there is value in the Canadian market, there are a series of steps that need to be undertaken.

Educate yourself on your Canadian freight activity and Canadian carriers

The first four blogs in this series looked at the fundamentals of road and rail transportation within Canada and between Canada and the United States. This blog will focus on a set of Best Practices in Canadian Freight Transportation. Here are a few thoughts to consider if you wish to be proficient in this area.

Educate yourself on your Canadian domestic and cross-border freight

As a starting point, learn as much as you can about your Canadian customers and vendors. It is essential to study the density and packaging of the freight, the proximity of your Canadian customers to rail, truck, air and port facilities and to the closest border crossings. The density of freight moving within the United States and between the US and Canada may differ. Canadians may buy more of your light bulbs and less of your lawn mowers.

Canadian LTL and parcel carriers are very focused on the density of the products being moved. To ensure you pay the lowest rates possible, you need to be fully informed on the characteristics of the freight you manage.

The last blog in this series examined road and rail transportation within Canada; this blog will focus cross-border freight transportation. Please note that there are a set of processes and procedures (http://www.dantranscon.com/index.php/blog?view=entry&id=241 ) that must be followed in order to move goods successfully between the United States and Canada. Please refer to the second blog in this series for details.

LTL Service

It should first be noted that only a small number of American LTL carriers have a network of terminals across Canada. Con-Way, FedEx Freight, YRC Reimer and ABF service the major points in Central and Western Canada. They work with interline carriers to service the remaining points in each province and territory. There are no Canadian LTL carriers that have extensive LTL networks in the United States. While some Canadian LTL carriers have terminals in selected US locations (i.e. Chicago, Los Angeles), most LTL carriers work with partners on the other side of the border.

The following chart displays the logos of some of the major LTL carriers that service the cross-border freight market.

This blog will focus on road and rail transportation within Canada; the next blog will look at cross-border freight transportation.

Rail Transportation

As outlined in the first blog in this series, Canada is large land mass with limited population. As a result, Canada’s two class 1 railways, along with the country’s short line carriers, play a very important role in meeting the needs of Canada’s freight industry. The networks of Canada’s two major railways, CN and CP, appear below.

CN Rail is a tri-coastal railway. It connects Canada’s major ports in Eastern Canada to the ports of Vancouver and Prince Rupert, BC, and the major cities in between and then goes through Chicago, IL all the way down to New Orleans, LA on the Gulf of Mexico. CN connects to the major American class 1 railways to supply cross-border service for the points that it does not serve on a direct basis.

In my last blog, I provided an overview of Canada’s economy and demographics. In this blog, I will outline the importance of trade to Canada, and the United States, and then touch on some of the key variables that facilitate the trading process.

Canada has been a major trading nation for many years. Well before NAFTA was signed in 1994, Canada and the United States were major trading partners. As pointed out in the last blog, Canada possesses many raw materials that are in high demand throughout the world. With such a small population, Canada is not able to consume many of the raw materials that it produces. As a result, 58% of Canada’s exports consist of pulp and paper products, energy supplies (i.e. oil, coal and gas), minerals, food products, fish, seafood and fertilizers. By contrast, 38% of Canada’s exports are manufactured goods, primarily machinery, automotive parts, aerospace and aviation products, equipment, chemicals, plastics and information technology. Ontario and Quebec contain the largest centers for manufactured goods. Western Canada is a key producer of coal, grain, oil, natural gas and potash.

Canada – U.S. Trade

NAFTA has just entered its 23rd year. It was designed to expedite the trading process between Canada, the United States and Mexico. There are $750 billion in goods and services traded annually between Canada and the U.S. Exports represent 30% of Canada’s GDP. The United States is Canada’s largest trading partner; it receives 73% of Canada’s exports and 63% of its imports. Canada receives 23% of U.S. exports and 17% of its imports. Canada is largest export market for 35 of the 50 US states.

On July 1, Canada celebrated its 149th birthday. Just prior to Canada Day, I had the privilege of speaking to a group of industry professionals on the topic of the Canadian freight market during a Stifel conference call. For those of you trying to learn more about America’s neighbor to the north, this and subsequent blogs will capture the highlights from the presentation.

Canada has a population of 36.3 million people, about one tenth the size of the United States and similar in size to the population of the state of California. The majority of the population lives within a 200 mile radius of the US border, the longest unprotected border in the world. About 20 million Canadians live in the major metropolitan locations of Montreal, Toronto, Ottawa, Hamilton, Edmonton, Quebec City, Winnipeg and Vancouver. Canada has the eleventh largest economy in the world.

From a freight perspective, the country can be divided into 4 distinct regions. Each region has its own industries and transportation challenges.

Last night, history was made in the National Basketball League. For the first time in the long history of the league, a team came back from being down 3 games to 1 in the Championship Final to win the series. This is a remarkable achievement in view of the fact that their opponent, the Golden State Warriors, had the best regular season record of all time, having won 73 games and lost only 9 times. The Warriors had an excellent team with two of the best “pure” shooters that the league has ever seen. Moreover, they had only lost 3 games on their home court in the entire season. On top of that, one of their players, Stephen Curry, was the league’s most valuable player.

The Cavaliers managed to win two games in Oakland during the series.  How did they do it? What are some business lessons that one can take away from this astonishing victory? Here is my take.

Change your game plan when it is not working

This is a follow up to the blog on “Passion” (http://www.dantranscon.com/index.php/blog/entry/passion ) that was posted here a few weeks ago and is published in the current issue of Canadian Shipper. While the blog on Passion was inspired by Bernie Sanders, this blog was inspired by Lin-Manuel Miranda, the author and star of the hit Broadway play “Hamilton.”

On Sunday night, during an interview on Sixty Minutes, Lin-Manuel and his parents were asked by Charlie Rose about their son’s early school experience. Mr. Miranda mentioned that he was sent to a school for gifted children. At first he felt intimidated by the school and the intelligence of his fellow class mates. Mr. Miranda then mentioned that once he found “his lane,” or calling at the school, Music, he felt totally comfortable with the institution and his career path.

Hamilton, based on the life of former U.S. treasury secretary, Alexander Hamilton, is the hottest play on Broadway. On Sunday night it earned 11 Tony awards, the second best performance ever for a new play. Mr. Miranda created a brilliant hip-hop musical to tell this story. Some critics are calling Hamilton a trans-formative play that will have lasting effects on the future of Broadway.

Lin-Manuel Miranda was very fortunate to find his “lane” as he described it. Not everyone does. It is interesting that by finding his lane, Mr. Miranda was able to reach extraordinary heights in his career. Here are some thoughts on the key steps in finding a successful career lane.

I grew up in the Muhammad Ali era. Back in the 60's and 70's, heavyweight boxing was a major sport. The Championship fights between Ali and Frazier and Ali and Foreman ranked right up there with the Super Bowl. I have great memories of Don Dunphy and Howard Cosell calling the top boxing matches on radio and television. I had the privilege of seeing many of Muhammad Ali’s fights on television and watching many of his interviews.

There is much to learn from his life. Muhammad Ali was a very gifted boxer, perhaps the greatest of all time. He had a unique blend of size, speed and power. At six feet three inches, two hundred and ten pounds, he was a formidable presence in and out of the ring. But Ali’s success came from far more than his boxing skills. It should be noted that he was not a great student and never learned to read well.

However, he was a very intelligent fellow who possessed a quick wit. His success can be attributed to a number of key factors.

He had a set of principles and beliefs that guided his life

Freight costs represent between two and five percent of revenue in many manufacturers and distributors. They are typically the single largest supply chain expense. When transportation costs begin to escalate, the Transportation department and the Transportation leader can become the “whipping boys” for senior management.

Over the years, we have observed that the companies that are most successful in managing freight costs tend to have a collaborative work environment. They understand that successful freight cost management is most effective in companies where all of the key operating departments - - - Sales, Purchasing, Production, Warehouse and Inventory Management, Customer Service, Transportation and the Customer work together. In other words, freight management is a team sport.

When we visit a new shipper client, there are four things that we typically look for at the outset. They are a:

• 12 month Freight Budget

The 2016 Surface Transportation Summit will take place at the International Centre in Toronto on October 13. The event will be co-hosted by Newcom Business Media and Dan Goodwill & Associates in partnership with the Ontario Trucking Association and the Freight Management Association of Canada. There will be some exciting changes this year.

As always, the conference will be kicked off by a look ahead to the Economy in the year ahead. Carlos Gomes, Senior Economist, Scotiabank will share his overview of 2016 and make some projections for the coming year. For the first time, the Summit will showcase two of North America’s top freight industry investment analysts. Walter Spracklin, Managing Director, Capital Markets, RBC Investment Securities, will offer his insights on the freight transportation industry in Canada. John Larkin, Managing Director of Research, at Stifel Financial Corp., will provide a status report on the current state of the freight industry in the United States.

Wendell Erb, President & CEO, The Erb Group of Companies will provide some commentary on the economy from a trucking company perspective. He will be joined by a Rob Bryson, recently retired Vice-President at Parrish & Heimbecker, who will provide observations and perspectives from a shipper’s perspective.

Every few years I like to take a look at some of the new technology-based entrants to the freight transportation industry to see who are the “movers” and “shakers.” While Amazon dominates the headlines, there are a host of other companies doing some very interesting things in the technology space.

This blog will look at some names that surfaced in the past and some of the new players that are taking freight brokerage to a new level. While new technology is being applied to a variety of freight related tasks (i.e. calculating freight dimensions, dock appointment scheduling), this blog will examine some of the companies are actually in the business of moving freight. They are bridging the asset world with the technology world. I have selected a group of companies that have caught my attention. They are Cargomatic, uShip, Freightera, Freightquote, FreightCentre, Uship, Project44, Logistical Labs and ZRATE.

Cargomatic

Back in the 90s, I had the privilege of leading Canada’s largest Intermodal Marketing Company. Since that time, I have been a big supporter of this service. In our consulting work with shippers, we are often struck by the fact that this service remains undervalued and underutilized. The purpose of this blog is to challenge shippers to revisit and rethink their company’s intermodal activity and help them craft an effective plan within their supply chain strategy.

While intermodal service provides various benefits, the top advantage is that on longer lengths of haul (i.e. over 1000 miles), it typically costs less than over the road truckload service. While transit times are longer in some (but not all) instances, the economies of moving multiple containers on an intermodal train usually provide shippers with a cost advantage. When compared to truck transport, lower fuel surcharges and less exposure to driver shortages are also beneficial.

Over the past decade, all of the class 1 railroads in North America have invested heavily in their Intermodal terminal network and service offerings. As an example, a few years ago, CN Rail built a rail facility in Prince Rupert, British Columbia, the closest North American port to Asia. That port allows for the movement of intermodal containers on a single-line CN train from Prince Rupert across Canada or through Chicago as far south as New Orleans, LA. Here are a few steps to consider in preparing an effective intermodal strategy.

Step 1 – Revisit your vendor and customer service requirements

Many shippers don’t achieve the cost savings they expect from their freight bid exercises. This can happen despite the time, energy and costs that go into these projects. Based on our work with shippers over the past twelve years, these are the main reasons why this happens.

A Failure to Provide Full Disclosure of Requirements and Expectations

As a prelude to the execution of a freight bid, shippers are required to gather and document the scope of their freight transportation requirements. For carriers to bid properly on a shipper’s freight, this goes well beyond volumes, lanes and transit times. Carriers need to understand everything about the pick-up, linehaul and delivery operations. Unfortunately, this does not always happen. The omission of certain requirements can lead to erroneous carrier selections and turmoil after the bid has been completed and the freight has been awarded. Here is one example.

Some shippers require early morning (i.e. 7:30 AM) deliveries. Not all LTL carriers are able to supply this service in all locations on a consistent basis. If carriers are not informed of this requirement in the RFP and then expected to meet this requirement in certain locations after the bid has been awarded, this can lead to service failures and pressure to bring back the incumbent (s).

A Failure to Gain Buy-In and Support from all Divisions and Sister Companies

Every few years I like to take a look at the segment of the freight industry where I got my start, the LTL sector. As I reviewed the landscape for this year’s blog, I am struck by the significant changes taking place in both the United States and Canada.

Revenue Growth Stagnated

Here are links to the top 100 carriers in Canada (http://www.todaystrucking.com/top100 ) and the top 25 LTL carriers in the United States (http://www.joc.com/sites/default/files/u48801/truck-tables_1_0.jpg ). The strong surge in revenue that less-than-truckload carriers enjoyed in 2014 stalled last year, as weaker demand and lower fuel surcharges dragged down LTL trucking’s top line. The combined revenue of the 25 largest U.S. LTL trucking companies declined 0.5 percent in 2015 to $32.1 billion, after shooting up 9.1 percent to $32.3 billion in 2014, according to The Journal of Commerce’s 2016 ranking of the Top 25 LTL Carriers, prepared by SJ Consulting Group. The report concludes that the decline in revenue may have as much to do with falling fuel prices as lower industrial demand.

The LTL Industry has become a “Big Boys” Game

Once you gather the necessary data outlined in the previous blog (http://www.dantranscon.com/index.php/blog?view=entry&id=229 ), it is time to take action. Here is a set of steps to follow to save money on accessorial charges.

Set up a cross-functional team

As you will realize when you review your research notes, it will often take a number of parties (sales, production, and warehouse management) plus the customer in many cases and your carriers to address how to reduce accessorial charges. Once you assemble your cross-functional team, have a meeting to share and discuss your findings and create cost saving targets, action plans, persons accountable and timelines.

Create a report to track success on a monthly basis. Share the report with key stakeholders and follow up with any stakeholder who does not fulfill his/her responsibilities.

A couple of weeks ago, I wrote a blog about the new pricing processes that LTL (and small parcel) carriers are employing to improve the profitability of their operations. I noted that freight carriers are emulating some of the activities that have been undertaken by the airlines such as dynamic pricing (i.e. adjusting rates based on time of day and day of the week) to increase yields on their freight activities.

Similar to the airlines, in recent years, LTL carriers have become more focused and aggressive in seeking payment for additional services (that have distinctive cost elements) that have been offered at no charge or at less than full cost recovery in the past. Many carriers have been focusing on inefficient shipper practices or administratively costly tasks that drive up their costs. They have been turning to their customers to compensate them.

In this blog, I will provide a set of questions that shippers should ask themselves and their customers to understand the current shipping processes that are precipitating accessorial charges and the costs that are being incurred. In the next blog, I will provide some general practices that shippers can employ to mitigate these costs.

Why do Accessorial Charges Exist?

Three years ago I posted a blog entitled Tips for the New Transportation Sales Rep (http://www.dantranscon.com/index.php/blog/entry/tips-for-the-new-transportation-sales-rep-and-his-manager ).  In that blog I consolidated a number of ideas generated in a LinkedIn Sales Management group and added a few thoughts of my own.  To my amazement, it has received over 38,000 hits since it was posted. 

A few weeks ago I received a very interesting inquiry from a self-described “newbie” sales rep.  As a follow up to my February 2013 blog, I was asked about what a new account manager should do if his or her company does not provide either formal sales training or coaching in the basics of the freight transportation industry.  The following is how I responded to this question.

Ultimately, one gets out of a career what one puts into it.  Every individual must take responsibility for the array of skills and expertise that he or she acquires during a lifetime.  It is up to each individual to seek out and acquire the skills they need, not to wait for a particular company to supply them.  As a young sales representative or person in any entry level job in Freight Transportation, here is a pathway to success.

1. Speak with your colleagues in other departments 

Take some time to meet with people in each of the core departments of your company such as Pricing, Operations, Line Haul and Billing to learn as much as you can about what they do.  With respect to Pricing, find out about your company’s costing model.  Find out how it works so you are looking for the right type of freight on the right lanes at rates that work for your company.  Be inquisitive and learn as much as you can from each department.

These are tough times. In a recent issue (February 22, 2016) of the Journal of Commerce, the headline was “Is the US in a Freight Recession?” If a freight recession is defined as two or more consecutive quarters of year/year declines in freight volumes, parts of the US and Canadian transportation economy are certainly there. While we aren’t back into the Great Recession of 2007-2008, there has been a pronounced slowdown in business activity. Trucking industry executives confide that business volumes have tapered off.

This is when leaders are put to the test. Here are some thoughts on how to lead an organization through tough times.

1. Be Visible and Communicative

Don’t hide in your office all day in closed door meetings.  This is sure to unnerve your employees. Be visible and try to maintain a “business as usual” demeanor. Employees pick up on every change in behavior by its leadership team.

It was just a few years ago that the airline industry appeared to be teetering on the abyss. During this tumultuous period, many airlines merged or went out of business. Passengers had the upper hand and played one carrier off against another to their best advantage. One of the tools that helped salvage the industry and significantly boost its financial results has been pricing.  The airlines have become very clever in monetizing every aspect of their business.

If you want food on a plane, you have to pay for it. If you wish to reserve a seat or obtain a seat with more legroom, you pay for it. On many airlines, you pay for every bag you check. If a passenger travels to a specific set of destinations on a repetitive basis, some airlines will create a package deal (i.e. offer a block of tickets at a preferred rate).

The size of a plane utilized is tailored to the volume of passengers on the route. Certain larger size planes are utilized on heavy volume routes during the day and then assigned to less frequent evening fights on lower volume routes. Smaller planes or small regional partner airlines are utilized for flights to remote locations.

Now, with dynamic pricing, airlines adjust their fares based on seat availability, time of day, day of the week and other variables. Low fares are available in the early stages to create critical mass. As a flight fills up, rates go up. Passengers are “manipulated” into taking flights at slower times of the day to balance loads and maximize profits.

The brokers of the freight industry, online travel agents such as Expedia, are also skilled at managing travel data and selling flights, hotel rooms and car rentals. The LTL freight industry is in the process of learning from the airline industry.