OBAC Urges Owner-Ops To Say No To Cheap Freight
OTTAWA, ONT. (May 1, 2005) – Responding to the recent protests and road blockages in the Vancouver area, the Owner-Operator's Business Association of Canada is advising its members that blockades and protests will have little, if any, impact on fuel pricing, and serve only to alienate truckers from the communities they serve.
“Rather than clambering after governments to cut fuel prices, owner-ops should be focusing their attention on the real problem – inadequate haulage rates – and going after their customers to start paying what it costs to have their freight moved,” says OBAC chief Joanne Ritchie. “Tax exemptions and rebates are band-aid solutions when what's needed is open-heart surgery.”
These are watershed times, Ritchie says. With strong economic growth driving increased demand for trucking services and driver shortages squeezing capacity, there's never been a better opportunity to improve the rate structure.
“There's plenty of evidence that customers are willing to pay more to have their freight moved, and the vast majority of shippers are paying surcharges to offset skyrocketing fuel prices,” she says. “If owner-ops aren't seeing the benefits, their carriers are either not collecting appropriate surcharges or are not passing them through to the contractors.”
OBAC suggests all owner-operators begin conducting a critical cost analysis of their operations to determine the scope of the shortfall in rates. For example, at 80 cents per litre, an owner-operator achieving a reasonable fuel mileage of six miles per gallon (IMP) is paying 60.6 cents per mile to run the truck. When fuel was at 50 cents per litre, it cost only 37.8 cents per mile to operate – a difference of nearly 23 cents per mile. At current haulage rates, fuel eats up the lion's share of revenue, leaving little for payments, maintenance, wages, or profit. This is the kind of rationale owner-ops need to bring forward when approaching their customers for rate increases.
“Owner-operators have a huge amount of clout in this market, and many of them just aren't taking advantage of it. They've got to get over the idea they have to settle for less because there are a dozen drivers lined up to take the job,” Ritchie says. “That's simply no longer true. Buying into the myth and continuing to work for less than it costs to run the truck allows carriers to get away with charging substandard rates. This keeps the bad carriers in business. As long as they have a workforce willing to haul for less than it costs to run a truck, the carriers have little reason risk angering their customers with the prospect of rate increases.”
Ritchie points out that the carrier associations are urging their members to use this tight market to regain some lost ground in rates, and she says it's high time owner-ops took a little of that advice too.
“This is one area where I'm in complete agreement with the Canadian Trucking Alliance,” says Ritchie. “When David Bradley [CEO of the CTA] says 'sometimes you've got to say “no” to your customers,' I say Yeah, Buddy."“Our customers are the carriers; let's give them a resounding 'no,' showing that we mean it by withdrawing service from carriers who aren't compensating their contractors appropriately by paying reasonable rates, offering a full pass-through of a realistic surcharge, or capping fuel prices on yard fuel.”