The 2013 Surface Transportation Summit is scheduled for October 16 at the Mississauga Convention Centre.  This year’s event, co-hosted by Dan Goodwill & Associates and the Business Information Group, will focus on a range of topics of interest to Shippers and Carriers.

The first track will explore the economic outlook for 2014.   The Summit will be utilizing a new format this year.  The three speakers, a leading Canadian economist (Carlos Gomes, Scotia Capitol), a trucking company President (Doug Munro, Maritime-Ontario) and an industry consultant (Charles Clowdis, Global Insight) will share their knowledge and insights in a dialogue about the key factors that will drive the economy next year. 

This session will be followed by a CEO panel.  Each panelist will provide their perspective on where the transportation industry, or their segment of the industry, is heading.  The panel will consist of Wes Armour, President & CEO, Armour Transportation Systems, Jacquie Meyers, President, Meyers Transportation Services, Fabi Richenberger, President, Northbridge Insurance and Peter Harrison, AVP, CPCS.  This promises to be a thought-provoking session.

Following a short networking break, the next track will look at outsourcing fleet management to a third party.  The panel will consist of two individuals.  Angelo Sarracini, President of Bailey Metals, a large shipper, will talk about the process of evaluating the option of transferring the freight transportation work from an internal fleet to a dedicated fleet specialist.  Jeff Lindsey, the President and CEO of Canada Cartage, will outline the conversion process and highlight some of the Best Practices in Dedicated Fleet Management.

Intermodal transportation has long been a key component of long haul transportation, both domestic and cross-border.  Many shippers still don’t have a full understanding of how and when to use intermodal service in their supply chain strategy.  This track will feature a panel discussion among the executives of four companies that are all heavily engaged in this sector.  Keith Reardon, VP of Intermodal Services at CN Rail, Ron Tepper, Executive Chairman & CEO of Consolidated Fastfrate, Neil McKenna, Vice President of Intermodal Transportation, Canadian Tire and Barry O’Neil, Executive Vice President, Hub Group Canada, all experts in the field of intermodal transportation, will share their thoughts on the role and value of this service.

Pierre Berton, the late, famous Canadian author noted in his book, “The Last Spike,” that CP Rail has held a respected place in the country’s history.  He wrote that “no other private company, with the single exception of Hudson’s Bay Company, has had such an influence on the destinies of the nation.” For most of the past 15 years, CP Rail faced stiff competition from CN Rail as Paul Tellier and Hunter Harrison led the company’s move from a bloated government run enterprise to a highly profitable public company.  In fact CN’s operating ratio of 61.3 is not only the best among the major North American railroads, it is one of the best of any company in the transportation industry.

The fact that CP Rail lagged so far behind CN Rail and the other class 1 railways in North America led the activist investor Bill Ackman, of Pershing Square Capital, to launch his “palace revolt” proxy battle that resulted in the replacement of CP’s former President with Hunter Harrison, whom he brought out of retirement to drive the railway’s profit improvement.

As we pass through the last quarter of this year, Canada’s two largest railroads are heading down separate tracks.  With an operating ratio is the low 80’s, Mr. Harrison has embarked on a series of actions to reduce costs through improved asset utilization.  This is another way of saying that CP Rail is planning to move its equipment more quickly and efficiently, to become Canada’s second “precision” railroad.   It is seeking to accomplish this by undertaking a series of initiatives.  These include:

• Building trains at CP’s intermodal terminal in Vancouver with blocks of cars for long haul destinations. This reduces stops and streamlines connections.
• Increasing average train lengths to 7,000 to 12,000 feet
• Speeding up the fueling of trains
• Improving daily scheduling
• Investing $1.2 billion in 2012 and $1 billion in 2013 on key infrastructure projects
• Working with customers at both ends to improve coordination

The net result of these changes is that CP Rail now provides 4 day transit times between Vancouver and Chicago and Toronto.  These changes represent half of the transcontinental trains that CP launches daily across its network.  Mr. Harrison is not expecting an overnight drop in the company’s operating ratio.  He told Bloomberg News that he is targeting about 65 percent in the next four years.

Shippers appear to be taking notice of improved service on both major Canadian railways. 

In last week’s blog, I tried to capture what appears to be the sentiment of a majority of economists.  Their prediction is for slow growth not just for 2012, but also for several years after that.  In the next two blogs, I will outline some of the approaches taken by shippers and carriers to bolster profits during the upcoming slow times.  The following are a number of the strategies that are playing out among North American carriers.

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