When it comes to trucking capacity, there’s a perfect storm brewing for Canadian shippers – and it will likely get worse before it gets better.
Several factors are placing unprecedented demands on the industry. E-commerce, for one, is causing a massive planning and capacity crunch, fueling an ever-expanding peak season and higher demands on the last-mile and delivery experience. In fact, shipping speed is now on par with price as the number one delivery feature that matters to consumers most. With demand showing no signs of slowing down – e-commerce revenues are expected to grow in Canada alone by nine per cent per year through 2021 – the pressure to adapt to meet consumers’ expectations will only increase.
A driver shortage is further complicating matters, with an anticipated shortfall of more than 200,000 drivers in North America by 2020. This is due to several factors including age (the average age of drivers on the road in Canada today is 50), with little incentive for younger workers to join a profession that’s not currently recognized as a trade, and which brings with it a demanding lifestyle and long hours on the road.
The industry is also now faced with impending regulations from Transport Canada that will require federally-regulated truckers to switch from paper logs to electronic log devices (ELDs) by 2020. This is a positive step to help keep fatigued drivers off our roads and create an important layer of accountability. Yet as we’ve seen with similar legislation in the U.S., this will likely further tighten truck capacity and require all players along the supply chain to determine how to optimize their network and distribution strategies.
Trade flows, foreign exchange, oil prices, lagging infrastructure – the list goes on when it comes to the demands facing our industry. Such inland distribution challenges were a topic of much discussion at this year’s JOC Canada Trade conference, where I had the opportunity to share some of my thoughts with other key stakeholders from across the industry.
While government regulations and consumer behaviour are largely out of our control, there are many things industry leaders can take control of in this changing market, despite the realities we face. Here are my top five takeaways for how we can – and should – embrace and effect change:
Manage peak properly: Shipping to consumers today is no longer about “just in time” delivery but delivery “at the right time, when I need it.” That applies during peak season too, which now lasts for eight to 10 weeks of the year and sees demand rise as much as 40 per cent over the regular season. It’s no longer an option to start figuring out how to scale up in July; strategic planning must now start almost as soon as the prior peak season has ended. I can’t stress this enough: if service is a top priority, get your capacity sorted out early and always plan for higher-than-forecasted demand.
Ensure ELD compliance: First-class trucking operations in North America are working towards being compliant, and most already are. ELDs automatically record driving time, ensuring that drivers adhere to the maximum allowable number of hours on the road. Their use can also offer valuable real-time data, reducing many inefficiencies. But as we’ve seen in the U.S. where ELDs are now a requirement, some carriers are still not compliant, despite the significant lead time given to prepare. One of the reasons is that some carriers view it as a loss to productivity; for example, many have historically used two log books to account for situations like supplier delays. If a supplier is an hour late and a driver is forced to wait, that’s an hour less that he or she can technically be on the road – unless that hour simply isn’t logged. In a paper-based world, “fudging” hours like this may not be condoned, but it’s easy to do. In an electronic world, it’s near impossible. This is a shift that can no doubt affect capacity, but it’s one that can and must be regulated and managed with proper planning and transparency across the chain.
Look at partnerships in a different light: The industry is evolving, and so must our partnerships. If all players in the transportation sector are truly going to be able to plan properly to meet demand, commitments need to be about more than just short-term contracts that specify rates and volumes. Long-term commitments of five to 10 years with vendors promote partnerships and the trust and confidence to grow and invest in your business. Start by establishing senior-level relationships with key vendors and move to discussions that involve development of operating procedures, how to deal with conflict, what capacity looks like and ultimately, a framework for how you can work together in the long-term.
Treat your people well: Driver shortage is of course a major factor when it comes to capacity challenges, and we need to start seeing more entrants into the market. Driverless trucks are not a foreseeable solution; the public is simply not ready to have autonomous tractor trailers barreling down our highways. More entrants will come with changes in how we compensate people, how we recognize them and how we promote work/life balance. Maxing out a driver’s hours of service may seem like a good strategy until they burn out and exit the industry. This is where ELD regulations will serve us well, too.
Other strategies for long-term retention include investing in training and development, balanced routes with daily returns home, working with vendors to ensure access to amenities such as washrooms and lounges at shipping and receiving docks and of course, better compensation. Partnerships with training institutes and an ongoing effort to work with government to ensure truck driving is eventually recognized as a skilled trade are also key to ensuring a healthy, long-term pipeline for talent.
Embrace technology: While the public may not be ready for driverless trucks, automation can benefit the industry in other ways, such as within enclosed operations. For example, today, drivers are often needed to shunt trailers around in shipping yards. Automating this function will mean drivers can leave the yard and get out on the road, helping to fill capacity needs. Technology built into trucks, such as collision avoidance and other safety features, can also make the driving aspect itself far more appealing to new entrants who may find it intimidating to operate a tractor trailer.
Integrated supply-chain solutions can be also leveraged through technology. Having a multi-mode logistics service provider that can help optimize cost, service and reliability is something all shippers can do. Today, the information and technology exists to allow for an integrated and dynamic supply chain, leveraging different transportation modes to address capacity and service constraints.
There’s no question this requires good management and integration to ensure a defined set of business rules are in place for specific customers and solutions. For example, a shipper may be content with road service for most of the year, when capacity and weather have little impact to service, but may prefer to have a more dynamic ground/air solution for busy or winter seasons, where capacity and road conditions create service inconsistencies. Having the technical solution designed, integrated and negotiated into shipping agreements allows shippers and logistics service providers to “blend” the costs into the rates – so the financial impact is not amplified during one particular season – and the shipper can be confident the same service levels will be sustained year round.
Overall, it’s up to all of us – both large and small players alike – to work to ensure the ongoing health of the industry. Change is difficult, but it’s constant. We must each find our niche and embrace innovation and evolution to face the challenges ahead.