Inside Logistics

Infrastructure headaches

Shippers feel the pain


Canadians burn an extra 287 million litres of fuel per year stuck in traffic.

January 12, 2011
by Emily Atkins

MM&D MAGAZINE, NOVEMBER/DECEMBER 2010: Nearly three quarters of Canadian supply chain professionals report missed deliveries as a result of infrastructure inadequacies. Emily Atkins reports on exclusive new research.

Transportation infrastructure in Canada has long been a sore point for those working in the supply chain. Common wisdom says that we don’t have enough and what we do have is aging and clogged with cars and trucks.

In partnership with our sponsor, RBC, MM&D decided to ask our readership what they thought about infrastructure in 2010. We asked them how infrastructure inadequacies affect their business, and what they would like to see done to improve the situation.

We found that a whopping 72 percent have experienced missed deliveries that they blame on poor or insufficient infrastructure. A majority—52  percent—also cite increased costs, such as labour or fees or penalties, and 25 percent say they have lost sales due to issues with infrastructure. Additionally, 17 percent report warehouse congestion, 14 percent report stock-outs and nine percent report product spoilage or obsolescence as a result of infrastructure problems.

These are significant numbers that reflect the growing congestion on our roads, particularly in major metropolitan areas. Those in the industry rate transportation infrastructure in Canada’s major cities as only adequate.

On a scale of zero to 10, the average scores ranged from 5.3 for Greater Vancouver/Lower Mainland to 7.0 for Edmonton. In between were Winnipeg and Montreal at 6.7 out of 10, the Golden Horseshoe in Southern Ontario at 6.7, and Halifax with 6.8.

Five percent rate the infrastructure as inadequate (scores of zero to three out of 10) in Greater Vancouver/Lower Mainland, while in the Golden Horseshoe/GTA six percent of respondents ranked infrastructure in the zero-to-three range.

Road congestion was the chief bone of contention, particularly in the Vancouver/Lower Mainland and Golden Horseshoe/GTA regions, as seen in the following verbatim comments from respondents: “As a port city, Vancouver needs to step up its infrastructure,” and “Time lost due to congestion in the GTA is the reason for the lower grade.”

Although many respondents report having extra costs and delays associated with infrastructure, they do not find that these are the issues keeping them up at night. Respondents are most concerned about fuel prices, with 58 percent ranking this in their top three concerns. Coming in second is equipment availability, with 55 percent ranking it in the top three; placing third is border issues.

Infrastructure ranked fourth, with 38 percent. Regulations, labour issues and security received 29, 28 and 26 percent respectively.

Rising oil prices and a looming capacity shortage appear to be on many shippers’ minds as the recession slowly recedes. These have much more immediate effects on costs and profitability than infrastructure, and can be directly managed. Infrastructure cannot be controlled by an individual or company.

Solutions

Solutions to infrastructure problems come in two forms for the users of that infrastructure: adaptation to the failings, and fixing the problem. First we asked about adapting to the problem.

When asked about work-arounds, 29 percent said off-peak deliveries would be their first choice. Twenty percent said creating more or smaller distribution centres closer to their customers would be their first action, while 16 percent said they would shift their freight to another mode. Twelve percent would divert containers to another port, while 11 percent thought road tolls would be a good interim solution.

When asked about longer-term solutions to the infrastructure issues, more roads was the clear leader, with 42 percent selecting this option as their first choice of solutions. When aggregated into the top-three ranked priorities, roads lead with 75 percent, and improved rail infrastructure placed second with 65 percent. Less than half (43 percent) rate improved public transit, new toll roads (42 percent), and improved harbour infrastructure (for short-sea shipping) (28 percent) as top-three priorities.

Some other “big picture” suggestions by respondents include:

“Governments should take the lead in developing infrastructure that can keep up with growth.  Regulators are all-to-quick to develop plans for growth in major centres without planning for new roads and ways to move people and product.”

It’s clear that shippers have many issues to deal with in 2010. In our post-recession economy, it appears that while infrastructure is on the list of irritants, it’s not at the top. Shippers have to worry about more pressing issues like the price of fuel and capacity if they want to run a profitable business.

When times are better, infrastructure will become a greater irritant, especially as we see freight traffic increase in all modes. Hopefully by then, those responsible will have the funding and will to ensure our infrastructure is adequate to the load.

Study Methodology

The online survey was conducted among 178 supply chain professionals in Canada between September 21 and October 8, 2010. The study was sponsored by RBC Royal Bank and conducted by Rogers Publishing Ltd on behalf of MM&D magazine.

Who participated?

Just under half (47 percent) of respondents move freight within Canada directly themselves, while 70 percent do so through a service provider and 53 percent only use a service provider.  Respondents ship freight both locally and regionally (73 percent), inter-provincially (77 percent), across the country (75 percent), and internationally (71 percent). Respondents were located across the country and across industries. Respondents have worked in supply chain for an average of 18.2 years. On average, their organizations spend $6.7 million on transportation and logistics.

Image courtesy of Robert Jack, Wikimedia Commons