There is in interesting article in the Thursday issue of the Toronto Globe & Mail that addresses the issue of the differential on the price of goods in Canada versus the U.S.  The situation has become so ludicrous that the article makes reference to Canadian manufactured goods (e.g. Ziploc bags) retailing at a higher price in Canada as compared to the United States. 

Even Canada’s Finance Minister, Jim Flaherty, is at a loss to explain the persistent price gap.  In a brief to the senate national finance committee he wrote, “Canadians are rightly irritated when they see large price discrepancies on the exact same products being sold on different sides of the border. . . I share this irritation.” 

Retail chains such as Costco Wholesale Canada Ltd. blame their global suppliers for charging higher prices in Canada that push up the retail prices on items such as soap and toothpaste as much as 30 percent more than in the United States.  Manufacturers blame retailers for imposing stocking fees and blame their government for imposing bilingual labels.  Nancy Croitoru, president of the Food & Consumer Products of Canada blames the variance on the higher cost of doing business in Canada due to smaller, more dispersed markets which drive up transportation costs.  

Let’s take a look at some of these arguments in light of some other data presented in the report.  J. Crew, the famous U.S. retailer opened in Canada last month with a 15 percent premium on Canadian goods and a steep tax on online purchases.  A week after they opened, they backtracked and dropped the online duty charge.  Abercrombie & Fitch, another major retailer displayed higher Canadian and lower U.S. prices on its price tags.  It backed down and made the two sets of prices equal.

Jim Saunders, a practice leader at consultancy Pricing Solutions in Toronto made this refreshingly honest statement.  “It’s really about what the consumer is willing to pay.”  Thank you Mr. Saunders for telling it like it is.  For many years, the Canadian dollar was well below the U.S. dollar in value.  Canadians have become accustomed to paying more for American made goods. 

Today’s U.S. job numbers coupled with the latest ISM manufacturing report would seem to suggest the American economy is as “flat as a pancake."  We appear to be on the precipice of another Great Recession or Contraction, if we aren’t there already.  What can we do “turn the ship around”?  This is what I suggest.

Political Collaboration and Leadership

We are currently witnessing the battle of the “job creation plans”.  Every Republican candidate for President and even some who are not running are trying to outsmart each other with their competing plans.  President Obama is going to present his job creation plan later this week.  We are going to be bombarded with rhetoric and op-ed pieces all debating the strengths and weaknesses of each plan.  Then these plans have to be captured in laws and run through the House and Senate.  This could take forever before being signed into law by the President.

Isn’t this the opportunity to break the political impasse in Washington by having the leaders of the two parties and their staffs work together to create a unified plan that is going to truly help get Americans back to work?  Isn’t this what the American people want to see, particularly after the debt crisis fiasco of a few weeks ago?  C’mon leaders, show us that you can lead by breaking out of the current paradigm and collectively making something powerful happen quickly.

Business Leadership and Consumer Confidence

This week Canadians lost an exceptional leader and citizen with the sad passing of Jack Layton, the head of the New Democratic Party (NDP), the official opposition party.   The outpouring of grief across Canada and the fact that a state funeral, a rarity in Canada, was held in his honour, is indicative of the impact that Jack had on people across the country.’

Unfortunately I never got to meet Jack Layton but I saw him speak on television many times.  I listened to the messages that he communicated and to his approach to politics and life.  Here are some of the lessons I learned from observing Jack.

Despite the fact that we had differing political views and I did not support many of his positions, I had an enormous respect for his passion, his honesty and his concern for underprivileged Canadians. Jack was a man of convictions and ideals who reached across partisan lines to work pragmatically and for the public good.  He fought for homeless people, abused women and for native Canadians who were mistreated over many years.  These constituencies do not represent large or powerful groups of voters but they were important to Jack.  The homeless were so important to him that he wrote a book on the topic. While never leader of the country, he was able to effect change that helped these groups of citizens.  He listened and cared about the people of this country, particularly of lesser means, and did everything in his power to improve their lives.

The fact that he was a Toronto-based Anglophone politician (who spoke very good French), who was able to win 59 seats in Quebec in the last election, is absolutely amazing.  One of the most lasting images of Jack during his last election campaign was of him wearing a Montreal Canadiens jersey while hoisting a mug of beer in a pub in Quebec.  While many politicians are viewed in the same class as used car salesmen, people respected Jack’s genuineness and sincerity.   Fighting Cancer and recovering from hip surgery, he fought a wonderful election campaign.   Jack was one of the boys, a fighter, who captured the hearts, minds and votes of Quebecers and many other Canadians. 

I also greatly admired his optimism and sense of higher purpose.  He ran in various elections and lost several times.  But that did not deter Jack.  He picked himself off the floor, learned his lessons and fought another day.  Often times he won.  What was remarkable about Jack’s career is that in each of the last several elections, the number of seats held by the NDP increased culminating in Jack becoming the first ever NDP leader to be the head of the official opposition party, a significant achievement.

The wild gyrations in the stock market and the continuing bad economic news, particularly on U.S. unemployment and housing prices, make one wonder if we are coming out of a Great Recession, are experiencing a continuation of 2008-2009 or relapsing into another recession. Kenneth Rogoff, the esteemed Harvard Professor of Economics and Public Policy wrote in a recent paper that “the phrase ‘Great Recession’ creates the impression that the economy is following the contours of a typical recession, only more severe – something like a really bad cold. That is why, throughout this downturn, forecasters and analysts who have tried to make analogies to past post-war US recessions have gotten it so wrong. Moreover, too many policymakers have relied on the belief that, at the end of the day, this is just a deep recession that can be subdued by a generous helping of conventional policy tools, whether fiscal policy or massive bailouts . . .

A more accurate, if less reassuring, term for the ongoing crisis is the ‘Second Great Contraction.’ This was based on  . . . (the)  diagnosis of the crisis as a typical deep financial crisis, not a typical deep recession. The first “Great Contraction” of course, was the Great Depression . .. The contraction applies not only to output and employment, as in a normal recession, but to debt and credit, and the deleveraging that typically takes many years to complete. . .

In a conventional recession, the resumption of growth implies a reasonably brisk return to normalcy. The economy not only regains its lost ground, but, within a year, it typically catches up to its rising long-run trend.

The aftermath of a typical deep financial crisis is something completely different . . . it typically takes an economy more than four years just to reach the same per capita income level that it had attained at its pre-crisis peak. So far, across a broad range of macroeconomic variables, including output, employment, debt, housing prices, and even equity, our quantitative benchmarks based on previous deep post-war financial crises have proved far more accurate than conventional recession logic.”

If Mr. Rogoff’s analysis is correct, it would explain why so many economic indicators appear to be stuck in neutral.  It suggests that truckers should be very caustious about investing in plant and equipment at a time when consumers are keeping their wallets in their pockets and the prospects for economic improvement seem so dim. The “Second Great Contraction” may take years to turn itself around.  For job seekers or even for people employed in the trucking industry, it also highlights the need to be flexible and to create options.    

Over the past several weeks, one of the trucking and logistics groups on LinkedIn has been capturing responses to the question, “How many loads are you turning down per week due to lack of trucks?” As of a few days ago, this question had received 448 comments. I thought it would be interesting to share some of the common themes with the readers of this blog.

Load Turndowns are not Tracked by all Carriers

The number of load turndowns by lane per week is an important KPI. This type of data can be very helpful in allocating capacity to those lanes that represent the best opportunity for strong yields. Some companies keep detailed statistics on this metric. A number of companies are not tracking this data and only have a “ballpark” estimate of the number of loads they are not able to handle. Data should be maintained on the type of freight, the lanes, the frequency of the loads and the rate to make sure that a company is optimizing the utilization of its fleet.

Load Turndowns are a Widespread Phenomenon

Many of the respondents are reporting load turndowns. Some are able to handle all of the volume that comes their way. This seems to be the case among LTL carriers. Among the respondents reporting capacity shortages, they range from a small number to hundreds of loads turned down per month for large carriers.

One sign of tightening capacity is the increase in loads being offered by load brokers. One respondent reported a tripling in the number of loads available from this source.