I realize things slow down in the industry around Christmas time, but more and more I come across freight that pays below or just above the operating costs. Just the other day, I was about to quote a US broker on a flatbed load from ON to IN. Before I even started, he asked me if I was a Canadian carrier because if so I probably would not be able to do it for the rate he was looking for. Indeed, he was right I could not even come close. The question I have been asking myself for some time now is “How do they do it?” Are really the operating costs of US carriers that much lower that they can run for so much less? And if so, what Canadian carriers can do to even out a plying field and be more competitive?
How to stay competitive?
- Thread starter WALTERK
- Start date
10
Thus lies the problem with trucking.
Here is exactly why the internet has not really helped this industry.
The inherent problem here is that freight goes from one place to another. There are carriers at both ends.
The quantity of freight going from one direction in the lane does not equal what is going in the other direction.
Simple, supply and demand.
What exacerbates the problem is the rate a large carrier can get from a client. This due to a greater availability of tractors and the ability to drop trailers and other restrictions imposed by the shipper. A larger carrier will get quite a bit more for an equivalent load, sometimes up to 30% more than a smaller carrier. Add to this the fact that they can afford seasoned sales staff that also can get the highest rate possible from their client.
This carrier now has a 30% advantage from the get go in one direction and also has volume.
This carriers goal is to find a return load for the large volume equipment he is sending in the opposite direction. Thus he can afford to bid quite a bit lower on his return. A rate most likely too low for you.
Prior to the advent of load boards, the large carrier may have had trouble finding equipment to satisfy the lane and would have to price it considering what he had to pay in case he could not run his own truck. There was only the telephone to communicate and plan.
Now with the advent of load boards, this is no longer a worry. He simply posts the load and thousands will see it, and someone always ends up taking the load.
Here is exactly why the internet has not really helped this industry.
The inherent problem here is that freight goes from one place to another. There are carriers at both ends.
The quantity of freight going from one direction in the lane does not equal what is going in the other direction.
Simple, supply and demand.
What exacerbates the problem is the rate a large carrier can get from a client. This due to a greater availability of tractors and the ability to drop trailers and other restrictions imposed by the shipper. A larger carrier will get quite a bit more for an equivalent load, sometimes up to 30% more than a smaller carrier. Add to this the fact that they can afford seasoned sales staff that also can get the highest rate possible from their client.
This carrier now has a 30% advantage from the get go in one direction and also has volume.
This carriers goal is to find a return load for the large volume equipment he is sending in the opposite direction. Thus he can afford to bid quite a bit lower on his return. A rate most likely too low for you.
Prior to the advent of load boards, the large carrier may have had trouble finding equipment to satisfy the lane and would have to price it considering what he had to pay in case he could not run his own truck. There was only the telephone to communicate and plan.
Now with the advent of load boards, this is no longer a worry. He simply posts the load and thousands will see it, and someone always ends up taking the load.
30
US carriers are more versatile than Canadian carriers. When a US carrier arrives in IN he can go anywhere in the US and Canada from there. A Canadian carrier, on the other hand, can only come back to Canada. Thus a US carrier might be a little more likely to call the ON to IN a cheap backhaul..loads out of IN to other US points pay quite well. A Canadian carrier must return to Canada...they are limited to picking Canada bound loads.
2
Alx,
You definitely bring some valid points. However, I believe there must be more than just the advent of load boards and the negotiating power of a big carrier to get a better rate on a load and then farm it out to a smaller one as cheaply as possible that sets apart US and Canadian carriers ability to compete. If that were the case than MacKinnon Transport Inc. and a few others with their seasoned sales staff and buying power would still be around. I suspect that there are some fundamental differences in the two environments that the companies have to operate in such as insurance rates, taxation, etc.
You definitely bring some valid points. However, I believe there must be more than just the advent of load boards and the negotiating power of a big carrier to get a better rate on a load and then farm it out to a smaller one as cheaply as possible that sets apart US and Canadian carriers ability to compete. If that were the case than MacKinnon Transport Inc. and a few others with their seasoned sales staff and buying power would still be around. I suspect that there are some fundamental differences in the two environments that the companies have to operate in such as insurance rates, taxation, etc.
30
Most of the American carriers that send trucks here do it as part of a 'dedicated fleet' sort of thing or in some cases are figuring in an expected deadhead in their rate to come here (usually enough to get them to Detroit or something). So they're able to do the freight from Canada to the US cheap. Same as an intermodal carrier will probably give you a better rate to Chicago than anyone else because the expected deadhead is already figured in on the inbound to Canada.
Additionally, the currency advantage we once had is long gone and when put together with a soft economy and high US unemployment, more American carriers will actually send their equipment here.
I say it's a market adjustment -- we will get to the point here where rates per mile from Ontario will mimic Eastern Seaboard outbound. In some cases they do, in others not yet.
It has little to do with the internet.
Additionally, the currency advantage we once had is long gone and when put together with a soft economy and high US unemployment, more American carriers will actually send their equipment here.
I say it's a market adjustment -- we will get to the point here where rates per mile from Ontario will mimic Eastern Seaboard outbound. In some cases they do, in others not yet.
It has little to do with the internet.
10
US/ Canada
I had just begun scraping at the reasons why rates are so greatly varied, I am sure we could go on for hours.
I did not catch the issue of US versus Cdn. carriers and operating costs.
I fully agree in that the American Carriers have it much easier because of the freight selection available to them. They can haul from one hot point in the US to another, while we can only go in and out.
Another factor aiding their Growth ( and downfall) is the ease of credit availability.
I am certain that the advent of load boards has aided in diluting the rates on a global scale.
It used to be that carriers would forge a close rapport with other carriers and freight brokers working their lanes. Back in the old phone days, they were professionals and could rely on each other and were in it for the long haul. It was not the take it or leave it attitude we are so used to in the market now.
You are not going to forge much of a relationship with someone, 3000 miles away that will most likely be replaced next week with someone that knows even less than the previous one did.
3 axle flatbeds in California for one !
I had just begun scraping at the reasons why rates are so greatly varied, I am sure we could go on for hours.
I did not catch the issue of US versus Cdn. carriers and operating costs.
I fully agree in that the American Carriers have it much easier because of the freight selection available to them. They can haul from one hot point in the US to another, while we can only go in and out.
Another factor aiding their Growth ( and downfall) is the ease of credit availability.
I am certain that the advent of load boards has aided in diluting the rates on a global scale.
It used to be that carriers would forge a close rapport with other carriers and freight brokers working their lanes. Back in the old phone days, they were professionals and could rely on each other and were in it for the long haul. It was not the take it or leave it attitude we are so used to in the market now.
You are not going to forge much of a relationship with someone, 3000 miles away that will most likely be replaced next week with someone that knows even less than the previous one did.
3 axle flatbeds in California for one !
30
Alx,
You make good points.
However, in this day and age one has to recognize that American transportation companies that choose to come here will give us a run for the money in many ways. This wasn't the case years ago when the dollar was favorable and there was a way better balance of OB freight to support IB. Back in those days, Americans were at a disadvantage because of the dollar, and because they generally had a hard time building the relationships to get decent freight out of here (ON/QC) at the time. But now, with the market the way it is, everyone struggles for OB anyway.
There was a comment below about US companies getting more $ for the same haul that Canadian companies will do coming north. There is some validity to this, but not as a primary award.
Let's say you have a shipper that loads the majority of loads from a trailer pool (based in the US). If they can't get a truck from their Canadian carrier base and need to move the load, they may just load from the pool and 'take it up the hoop' to move the load.
You make good points.
However, in this day and age one has to recognize that American transportation companies that choose to come here will give us a run for the money in many ways. This wasn't the case years ago when the dollar was favorable and there was a way better balance of OB freight to support IB. Back in those days, Americans were at a disadvantage because of the dollar, and because they generally had a hard time building the relationships to get decent freight out of here (ON/QC) at the time. But now, with the market the way it is, everyone struggles for OB anyway.
There was a comment below about US companies getting more $ for the same haul that Canadian companies will do coming north. There is some validity to this, but not as a primary award.
Let's say you have a shipper that loads the majority of loads from a trailer pool (based in the US). If they can't get a truck from their Canadian carrier base and need to move the load, they may just load from the pool and 'take it up the hoop' to move the load.
30
We pull from a plant around Indianapolis, it is one of our suppliers and we haul exclusively into Canada for them, we get what we consider a very good rate for the work. Every once and a while their traffic department screws up and gives the load to Schnieder, they charge over $400 dollars more for the same load and take twice as long to get it here. We deal with about 19 different manufacturers in the states and what we find is they do not have a clue what shipping costs to Canada are, we actually purchase the product from them so they are more open with us the discount they give us for picking up at their dock is huge. We find the US is willing to pay for service where most Canadian manufactuers want the cheapest rate possible first and service second.
30
I think the sooner we stop reminiscing about the "good old days" i.e. the days before load boards and other new technologies, the better off we'll be. Sure, I operated my business using a dog-eared three ring binder full of carriers names and numbers, but I also shopped at Woolworths and had never even heard of Wal Mart. Things have changed. The days of structuring your rates to fit your operation have changed to structuring your operation to fit the rates. I'm positive that we all have examples of employing new technologies to reduce costs and therefore become more competitive.
10
my two cents...Driver wages (connected to cost of living), cap cost of equipment and parts, INSURANCE, and income taxation rates are the biggest differences.
Ask any DOT down there too, Canadian trucks by and large are in better mechanical condition than the American counterparts. So not only do we spend more for each repair, we do more of them.
I also believe the point to point US is the other big factor. We build an LTL for Texas, and are a little lean...tough luck. They, and some of us, can make up the difference picking up a piece in Louisville to continue on to New Mex. or anywhere.
For TL, we have to find a reload in close proximity. They can take a 100 or 200 mile load between drop and reload to make revenue to offset their empty miles.
Ask any DOT down there too, Canadian trucks by and large are in better mechanical condition than the American counterparts. So not only do we spend more for each repair, we do more of them.
I also believe the point to point US is the other big factor. We build an LTL for Texas, and are a little lean...tough luck. They, and some of us, can make up the difference picking up a piece in Louisville to continue on to New Mex. or anywhere.
For TL, we have to find a reload in close proximity. They can take a 100 or 200 mile load between drop and reload to make revenue to offset their empty miles.
30
I would agree that smaller Canadian fleets are generally better maintained than small American ones. For larger carriers though, I think the opposite is true but it's more that they turn their equipment faster (ie trade it sooner or just lease it).
There is a huge differential between a small fleet or owner-op buying a truck and a larger fleet ordering the amount of units they do at a time. It's much like the car companies -- buy a fleet from them and you pay nowhere near retail. They also get a pretty good discount off rack fuel rates.
American company-trucks also tend to be equipped more sparingly than Canadian ones. The more prominent Canadian fleets tend to offer drivers trucks which are pretty darn loaded.
As far as buying service vs price, the same can be said on both sides of the border. Usually when the goal of the transportation people is to maximize the efficiencies at the docks of their facilities, or they're tied to a high service industry, the rates are better because they're more focused on value added services. Distributors/wholesalers/traders etc tend to be more focused on price and will knowingly let the service be lower to get a better price. I'm not saying it's right ... but it is what it is. I just try to avoid the latter.
There is a huge differential between a small fleet or owner-op buying a truck and a larger fleet ordering the amount of units they do at a time. It's much like the car companies -- buy a fleet from them and you pay nowhere near retail. They also get a pretty good discount off rack fuel rates.
American company-trucks also tend to be equipped more sparingly than Canadian ones. The more prominent Canadian fleets tend to offer drivers trucks which are pretty darn loaded.
As far as buying service vs price, the same can be said on both sides of the border. Usually when the goal of the transportation people is to maximize the efficiencies at the docks of their facilities, or they're tied to a high service industry, the rates are better because they're more focused on value added services. Distributors/wholesalers/traders etc tend to be more focused on price and will knowingly let the service be lower to get a better price. I'm not saying it's right ... but it is what it is. I just try to avoid the latter.