04 five

It’s expensive to keep a truck moving these days. Cruise your balance sheet’s chart of accounts this year and there’s likely heavy-duty pressure on every item: escalating insurance premiums, record-level diesel fuel prices, higher driver wages and benefits, tax increases, new costs associated with U.S. security requirements and border delays… Don’t forget higher up-front prices and perhaps running costs for new emission-fighting engines.

On the other side of the ledger, if you’re taking revenue in U.S. currency, it’s worth less today than it was a year ago. The Canadian dollar, 63-plus cents US in January, was trading above 72 cents during the second week of August. That’s a jump of nearly 15 per cent.

“What else is new?” says Tom Kenny, general manager of Westcan Bulk Transport. The Edmonton company is one of Western Canada’s largest dry and liquid bulk haulers. “Sure it’s tough, but this is a cyclical industry. Aside from the security costs, which really are a wildcard, if you’ve been around long enough you’ve dealt with spikes in fuel, insurance, inflation, driver pay, etc.”

The thing is, he says, are your customers going to pay you more to compensate for these things? Are you going to be able to hold that rate because you’re doing such great work that your customer will ignore all the price-cutters that are circling around you?

When truckers examine the issues that will shape the coming year, new hours-of-service rules coming into force and the spectre of safety ratings don’t immediately pop to mind. No, fleet owners and managers want to talk about rate pressure, cost control, access to capital, and the general state of the economy.

“When I look around at the freight landscape, I see busy trucking operations,” says Jack Bradley, president of MSM & Associates Consulting, a Bolton, Ont., company that offers logistics management advice. Indeed, revenue per employee in the trucking industry increased by 24 per cent between 1996 and 2001, and revenue per power unit was up 11 per cent over the same period.

But even though freight demand is strong, truckers are feeling squeezed by higher costs, tighter credit, and they’re increasingly under the gun when it comes to managing their way through it all.

“Is any of the revenue being generated out there falling to the bottom line?” Bradley wonders. “I had a client who has a whack of cash and wants to get into the trucking business. I told him if he wants to make a mitt-full of money overnight, he’d have better luck sticking his capital in the bank.”

So as we prepared our Outlook 2004 report, we drilled down to five specific issues that we’re confident will have a direct impact on Canadian trucking operations next year: the next round of emission hurdles and its effect on equipment trade cycles; whether international carriers can recoup costs associated with supply-chain security; an intriguing new way to write down equipment purchases; and two crossborder initiatives–driver identification and a requirement for electronic submission of customs data prior to arrival at an international port of entry.

The overriding issue, of course, is simple viability. If you’re not worried about your own skin, you can easily lose sleep over your customers’. “You have to be savvy as heck these days to get the mileage you need out of the revenue you’ve got,” says Bradley. “It’s not a business for the faint at heart.” And next year doesn’t promise to be any easier.