Inside Logistics

Leaders discuss state of trucking at OTA convention

November 9, 2012

TORONTO, ON–Leaders from five trucking companies met this morning at the Ontario Trucking Association’s annual convention to discuss the state of the trucking industry, and issues of concern to all as the new year approaches. Steve Paikin, host of TV Ontario’s senior editor and anchor of The Agenda, moderated the session, and panel speakers included Rob Penner, Executive Vice President and Chief Operating Officer, Bison Transport, Jeff Bryan, President, Jeff Bryan Transport Ltd., Scott Tilley, President, The Tandet Group, Gord Smith, President, Manitoulin Transport Inc., and Ron Tepper, CEO, Fastfrate Inc.

What’s the state of trucking for these executives?

There are pockets of strong activity going on, depending on location.

“It’s everywhere from flat to very busy, depending on location,” said Ron Tepper, who noted that the timing of things has changed, and it’s a “tough business to crew to”.

Manitoulin Transport’s Gord Smith spoke of a concern over a “flat fall” going into the winter months.

The up and down market is probably the hardest on the drivers, said Tilley. Tandet Group,

“They are looking for regular work. When we’re running some big mileage, they’re happy. When we turn it off they get restless and so do we. The challenge is to try and keep everybody on an even keel,” he said.

“ have been stealing from our logistics business and consuming our own freight (to keep drivers utilized),” said Penner, adding that there are still many fleets, especially south of border, that are struggling to renew their fleets in terms of investing in new equipment.

“If you look at our budgets going forward we’ve kind of flat lined it-we’re probably looking at GDP plus two%. But we’ve all been here before-there’s a top and a bottom to a cycle, and the top may not be for 2013 but beyond,” he said.

According to Smith, “the best case scenario is that things are likely to go sideways for a few years. In the worst case scenario, things will go down,” he said.

“I think we’re pretty well there at the top and that things are going to stay flat. We have to tell people in our organization to figure out how to make it work,” said Bryan.

“We tell people if you want to earn more you have to earn more, bring forward ideas, think out of the box. That’s the only way you will move your organization forward,” said Tilley.

How is that kind of message being received in the organization?

“It depends on the generation. For the most part people like to be challenged to think differently, although most people do come to work for a paycheque. But when you give people the leeway they come up with some pretty interesting ideas. We’ve had so many things come out of that process,” said Tilley.

“It’s a  different conversation depending on where in the country  you’re having it–we’ve acknowledged we have to create avenues-where are employees going in the organization? Can we provide something other than a singular line career path? Can we educate them? We are trying to make ourselves the most challenging to our employees so they want to be proud of the organization and come to work in the morning,” said Tepper.

Penner said at Bison there is a message of cautious optimism. 

“We know we’ll experience some pressure on pricing but we’ve built a bunch or projects, opportunities for people to win. These are pay for performance programs that are starting to work,” he said.

Many carriers are experiencing issues around overcapacity in some lanes though Smith said you can always push more freight through the terminals in an LTL environment.

“I think there’s overcapacity in segments and there are ways to deal with it. I think it’s a short term problem though and we may be underwater very quickly with the ability to serve our customers, once the economy improves,” said Penner.

“We’re under capacity on the northbound and we’re trying to capitalize on that-making sure our operations guys understand that strategy,” said Bryan.

“In general in the marketplace there is still too much capacity-we’re all chasing the same freight to a degree. But there are a lot of old trucks out there that will eventually not be able to run anymore. Old trucks and old drivers are going to retire. The challenge for us will be to put ‘buns’ in those seats,” said Tilley.

“We have way too much capacity for what we require. There are 37,000 trucking companies competing with low barriers to entry. As long as there is this much capacity we will not have pricing power in the industry. I’m not big on regulation but I think it should be a lot more difficult to get into our business,” said Tepper.

Frustrations are high that thresholds for entry in the industry are so low.

“We’re not sending rockets to the moon; we’re driving trucks up and down the road. We all know there are good operators and not so good operators out there. Those are the things that are frustrating for us-that people can get into this business without a lot of thresholds,” said Tilley.

“But these thresholds should also not be preventing competition-we’re better than we were ten years ago because there is that competition. The regulations that do make sense are things that level the playing field, like EOBRs. Our drivers complain but for the most part they like what the tool can do for them,” he said.

Smith said it’s not about more regulation, but more enforcement of the current regulations, like driver CVOR s.

Lack of good driver candidates plagues trucking companies

Tepper said he doesn’t have a shortage of drivers right now, “but we’ve got an expensive system to hire-we have all company drivers,” he said.

 “The quality of the applicant is scary,” said Penner of the scarcity of good drivers in the industry.  He said that Bison hires about nine of 100 applicants.

“We have had to put people in place to constantly monitor and train drivers on proper equipment inspections-that is so important to us to keep our equipment safe,” he said.

Tilley echoed concerns that driver candidates are showing a lack of technical expertise and know how.

“We’ve noticed we’ve got a whack of drivers that don’t know how to read a map properly, or plug in the correct information in the GPS, said Bryan.

Tandet Group’s strict hiring process includes a strict pass fail psychological test and Tilley has been resisting changing that narrow band between successful and non-successful candidates.

The drivers he wants “are the ones that can think of doing business the way you want your business done.”

Tepper said that in his company they’ve changed their strategy of recruiting so that “driving should be a two to five year experience before moving on to other things in our company”, so that drivers can gain a deeper understanding of what vendors and suppliers face.

To recruit and retain drivers in some areas of the country, many companies are trying to ensure the drivers’ work and family life gets attention.

“We’re a little better spaced in terms of the fact that 90 % of our driver group in LTL are home every day. It’s a little more challenging for the TL guys. Certainly, though, in areas like Alberta we are having issues. We’re now buying residential homes to attract our drivers there,” said Smith.

In northern Alberta, added Tepper, with an oil industry that often offers sign on bonuses of several thousand dollars, plus higher pay rates,
trucking has a hard time competing for candidates.

Are trucking companies doing new or different things on salary or benefits to get people to stick around?

“The retention is ‘pay fair and treat them fair’. It really is about equality, giving drivers the opportunity to hear what’s going on, to give some input,” said Tilley, who said he recently took an owner operator  out for what turned into a six hour breakfast, when the o/o said he was going to quit.

“I think our driver retention is more important to us than anything-we’ve got a driver advisory board that keeps us well informed about what it’s like to be a driver, and we build programs to help satisfy what they want. Pay programs have gotten more complicated-there’s some regional complexity, though our base rate has not changed. Our turnover rate for this calendar year is 18 % and we force half of it,” said Penner.

“One of the things we’ve noticed is that flexible home time accommodation means so much more than money. With all our new hires, we’ve also put two driver mentors in place and this has helped as well,” said Bryan, adding that their turnover rate is at seven %.

The Ministry of Transportation has recently made it easier to get an AZ license.  Is the truck driver training industry doing enough to bridge gaps in driver abilities?

“Our pass rate is not only related to the ability to drive a truck. It’s also closely tied to work history. 1/10 fails road test, 3/10 fail inspection requirements. Those who fail the road test don’t work for us,” said Penner.

“I think training is everything-people should understand you don’t have a driver just because they have their license. It’s up to the carrier to form a lot of that training,” he added.