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DG&A's Transportation Consulting Blog

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The new year has started with a bang with TFII's planned purchase of the LTL Freight division of UPS.  TFII is a large Canadian freight transportation conglomerate and it's deal is unique in some ways but not in others.

The challenge for many Canadian LTL carriers has been to establish a solid arrangement with a profitable, reliable US LTL partner so they can jointly secure lucrative cross-border freight. Since the United States population is ten times the size of Canada’s, historically it has been financially difficult for a Canadian LTL carrier to purchase a major US LTL partner. Besides the cost, an acquisition of this nature only makes sense if the Canadian carrier is prepared to compete in the U.S. domestic LTL market.

As a result, most Canadian LTL carriers that have been interested in cross-border LTL freight, have formed partnerships with or more U.S. carriers. These partnerships typically last for a few years until one of the following things happen. The U.S. carrier decides to buy a Canadian carrier or cartage company in one or more Canadian cities and enter the market under their own banner. Alternatively, the one partner becomes frustrated with the other partner due to a lack of sales production. The carriers then must seek other partners or another group of partners as replacements. This partnership arrangement has been prevalent for decades.

A Brief History of Canadian Purchases of U.S. LTL Carriers

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As we begin the new year, trucking companies throughout North America are facing the same challenge - - - finding qualified truck drivers. There are several forces shaping the supply of drivers.

The coronavirus is making drivers sick and some have not come back; the virus is also causing older drivers to retire. A surge in business volumes is being experienced in various sectors of the freight economy. Strong market demand and capacity shortages are encouraging more requests from shippers for committed capacity. Having done their homework, some of the biggest shippers are prepared to pay a premium to secure the capacity they need.

As increasing numbers of people work from home, and with the closure of many restaurants and stores, there has been a remarkable upswing in Ecommerce activity. Thousands of drivers have been added to the workforce to perform local deliveries. During this period, an estimated 30,000 drivers have been disqualified in the new U.S. Drug and Alcohol Clearinghouse.

Trucking companies are creating a range of programs to recruit and retain drivers. Roehl Transport (https://www.roehl.jobs) announced a new program to add truck driving jobs to qualified people who stepped away from their commercial driving career for other non-driving employment. “The Roehl Relaunch Program is open to former truck drivers who may have left trucking for positions in construction, manufacturing, retail, and other industries as well as current drivers in local trucking jobs who may not be getting the income they need . . . Drivers who complete the Relaunch program will be given credit for their prior experience rather than starting over at entry level driver pay rates.”

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Covid-19, and its effects on our personal and business lives, was clearly the major story of 2020. This topic was covered in the previous blog.  The impacts of the other major news story, the Biden / Harris election, will play out over the next four years. However, there were several other surface transportation events over the past 12 months that were significant. They are summarized below.

1. Digitization advances in the world of Freight Transportation

Digitization, the replacement of manual, paper-based information processes with electronic ones is transforming the industry. The benefits are clear. Shippers obtain precise data on cargo, from pickup to delivery, on which to base decisions. Carriers have more data on how and where they serve specific shippers and on their true costs. The wave of digital technologies already transforming truckload and brokerage is reaching into LTL, driven in part by larger supply chain changes and by the explosion of e-commerce.

Technology is not the problem; some trucking companies have been electronically sharing data with customers since the 1980s, first via electronic data interchange (EDI) and more recently via application program interfaces (APIs). The roadblock is in the process, in implementing digital standards, and in getting customers to buy into going digital.

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The Covid-19 pandemic, and the response of the Canadian and U.S. governments and citizens to the virus, is clearly the major story of 2020. The pandemic did not just have impacts on the health of many Americans (i.e. over 11 million cases, 250,000 deaths) and Canadians (i.e. over 306,000 cases, 11,000 deaths); it also had significant impacts on our personal lives, business operations, and freight transportation. This blog will highlight the huge effect of Covid-19 on so many aspects of our lives; an upcoming blog will capture some of the other top freight stories of the past year.

1. Covid-19 – The Impact on our Health and Personal Lives

Millions of Americans and Canadians have been infected and continue to be infected at an escalating rate. Personal reactions have ranged from mild flu-like symptoms to significant health issues to death. To protect oneself from contracting the virus, many citizens have begun wearing masks and other PPE, limiting the size of groups with whom they interact and trying to maintain six feet or more of distance between themselves and others.

The lack of national strategies in Canada and the USA on testing, tracing, and quarantining have resulted in a protracted and extensive virus spread. Varying guidelines on mask utilization, industry sector lockdowns and re-openings, and varying leadership approaches have created confusion, fragmented responses, and disappointing results. Many citizens must stay home if they tested positive, if they had symptoms, or if they had to be quarantined. Many primary, secondary and university students are now participating in online learning rather than attending schools. The year is ending with at least two potentially effective vaccines, which will likely be distributed during the first six months of 2021.

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Freight volumes are at record levels on many lanes this fall. Load rejections, freight embargoes and rate increases are now becoming the norm. Even driver shortages, which started to dwindle in the early stages of the pandemic, are once again a factor in securing capacity to move freight. Motor carriers have leverage as to the shippers they wish to serve. For the past several decades, many shippers have turned to a commonly used tool to secure capacity and competitive rates, the freight bid.

My colleagues and I have reviewed many bids over the years and have successfully conducted dozens of these projects for our shipper clients. In some cases, we have been asked by carriers to help them prepare responses to the bids they receive. We have also reviewed RFPs for many other kinds of services including software procurement, organizational structure review, transportation, and production process efficiency. In so many cases we have remarked that our services would have been just as valuable helping the bid or RFP issuer craft a document that met basic professional standards for quality through attention to detail and exacting editing.

Sure, carriers will respond (sometimes) to poorly crafted bids, but they do so with a somewhat diminished opinion of the requesting company. This is only natural – we all tend to be editors and evaluators, especially of documents that require time and effort to prepare a response.

What separates the successful from the unsuccessful RFPs? This is what we have observed.

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