A sluggish economy, excess capacity and downward pressure on trucking rates have made 2016 a difficult year for trucking providers. That was the main takeaway from a panel discussion on Thriving in Challenging Economic Times at the Surface Transportation Summit by Newcom Business Media.
The panel featured Jonathan Wahba, chief operating office of Kriska Transportation Group and Bison Transport’s Grant Naslund. The session was moderated by OTA VP of communications Marco Beghetto.
As reported by Truck News:
Wahba said Kriska is managing through the downturn by focusing on two “buckets”: tactical and strategic. The tactical efforts refer to day-to-day initiatives, such as reducing costs, since carriers today have little leverage with shippers to increase rates. Wahba said labor, fuel and equipment comprise a trucking company’s three biggest costs. Kriska is focusing on reducing its fuel and equipment expenditures, to the extent possible.
“On fuel, we believe we can have an advantage over some of our competitors if we have the most fuel efficient trucks on the highway,” Wahba said. “We work with the OEMs on how we spec’ them and reward drivers for the right behaviors. We try to get a lot of excitement within the fleet around not wasting money on fuel.”
As far as strategic, long-term initiatives go, the focus has been on keeping borrowing costs as low as possible when making acquisitions or buying new equipment.
“We want to make sure all our debt is appropriately priced,” Wahba said.
Equipment spec’ing gets a lot of attention at Bison Transport as well, according to Grant Naslund, director, eastern operations.
“On the road, cost reductions start with spec’ing the right equipment,” he said, adding that building a network of trusted vendors also reduces costs when breakdowns occur. In the office, Naslund said, cost cutting efforts are focused around automation of tasks such as data entry.
The current combination of abundant capacity and slow freight growth have made rate increases tough to come by. But Wahba said there are still some forward-thinking shippers looking to build partnerships with carriers to ensure they have capacity available when the pendulum swings.
“We certainly see a dichotomy of our customers,” he said. “The majority are in a buy for today, use the market to drive lower costs mode and the minority have a longer-term view. Conversations with those customers are quite different.”
With Class 8 truck sales in sharp decline and the impending arrival of regulations that could reduce trucking’s productivity and chase non-compliant fleets from the industry, Wahba said excess capacity in the market won’t last long.
“The number of trucks being ordered by the industry is below replacement levels,” he said. “We know in the future we will get back to a scenario where the market is tight.”
Wahba said the shippers with a longer-term view are more likely to be serviced when capacity tightens.
Another area where shippers and carriers can work together is driving waste out of the system, Wahba added. He cited the Safe Haven parking project Kriska developed with Unilever as an example. Unilever set aside a number of parking spots so drivers could sleep at their facility rather than choose between stopping early and parking at a truck stop far from the delivery location or traveling on and parking illegally or unsafely closer to the distribution center.
“Little items around drivers’ time is what we really focus on,” he said.
This becomes even more important when using electronic logging devices (ELDs) to manage driver hours-of-service, added Naslund, something all fleets operating in the US will have to do by the end of next year and even domestic carriers within Canada sometime thereafter.
“They are absolutely coming,” Naslund said of ELDs. “We use them in a positive fashion. Being able to see where time is wasted in a driver’s cycle is something we’ve been able to capitalize on.”
Bison has an analytics team that examines unproductive driver time, empty miles, profitability of various lanes and dwell time and feeds weekly reports to operations. Naslund said Bison’s drivers accepted ELDs and few operational changes were required when they were implemented. Bison is, however, making changes to how it delivers freight with an eye towards improving its drivers’ work-life balance and retention.
“A load from here to Calgary will likely touch nine drivers,” he said, adding Bison now does more switches on long-haul deliveries so drivers get home more often. “Guys get home every day or every second day and are able to have that work-life balance while still having that over-the-road experience.”
One positive about the current sluggish environment is that the driver shortage has subsided – for now.
“The driver shortage has been on the back burner this year,” said Wahba. “Finding drivers this year has not been our number one business challenge.”
“The economy, being as soft as it is, is masking that problem,” Naslund agreed.
However, both agreed the shortage of qualified drivers will resurface as soon as the economy and freight volumes pick back up.