Over the Road June 2024

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Robert D. Scheper

Don’t blame your competition for a business model you picked!

I have had the pleasure of visiting several Asian carriers in the last few years. We also have many Asian clients at our firm, and I have seen this segment of the industry grow immensely since my wife and I were driving over 30 years ago. Our firm could easily be described as multi-cultural since our employees collectively speak more than 8 languages. The cultural differences of our clients are easily distinguishable and usually highly enjoyable.

Canada is not a ‘melting pot’; it tends to be more of a ‘patch quilt’ of different cultures. There are sometimes entire small cities that are represented by only one or two nationalities. It’s what sets us apart from the United States. The expectation in the US historically is for people to abandon their nationalities and become a US citizen. Canada does not expect that of our citizens, hence the pockets or districts.

When foreign business practices are brought to North America it can become a problem, certainly not insurmountable but an issue nonetheless. The contrary is also an issue. North American business practices being confronted by foreign practices can also cause discomfort. Let me give you a significant example.

Carriers listed on the stock market can often have access to nearly unlimited capital resources. A large conglomerate of carriers owned by a public entity has additional costs that a small/medium-sized carrier does not have (i.e. multiple administrations, overhead

from headquarters etc.). Therefore, there can be significant “dis-economies of scale” when this business model is utilized. Carrier conglomerates that have $30-40+ million headquarters with accompanying overhead costs cause a disproportional ‘top heavy’ cost structure. Therefore, in an economic downturn, large carriers/conglomerates’ profits can often be hit the hardest.

Contrarily, I’ve seen carriers operate out of a basement with the wife doing administration and the husband dispatching 25-40 trucks. Operationally, this business model is insanely efficient compared to the ‘North American’ concrete, brass, glass, and marble expectations. The difference is often double-digit contributions to the bottom line.

Similar in nature to these efficiencies is the mindset of human resource management. The Asian business model is hyper-entrepreneurial in nature. Not just from the management of a business but from employees as well. I admire the independent attitude the Asian market has towards government… ‘if we can find a way to remove the government from our lives… we will’.

This leads us to the topic of Incorporated Drivers again. Although my points in the past are well stated (it will be most likely decided by Politics and Courts, not by Press or CRA) the argument of its net effect on the industry is highly debatable. Yet, here is a recent quote by Alain Bedard, CEO of TFI International. “Our Canadian business will

shrink, absolutely, because of Driver Inc.” he said. “People will lose jobs — good-paying jobs — at TFI because of Driver Inc.’s unfair competition”

Alain Bédard, Chairman and CEO of TFI International Inc. as reported by Christopher Reynolds, The Canadian Press, April 26, 2024.

I contend once again that any loss of jobs will have little direct origin in the Incorporated Driver controversy. As my PODCAST described, the competitive advantage described is an illusion at best… non-existent most likely.

First, what RATES are being compared between the two systems? I know drivers who are driving for 35 cents per mile, some for 45 CPM, some 55 CPM and others for even more. Who is being paid what? If conventional drivers get paid 45 CPM and Incorporated Drivers get paid 50 CPM there is ZERO difference competitively. If they both get paid the same rates (which is yet to be determined) the benefit may still be irrelevant. The missing payroll information and relative comparison make the argument indefensible. It’s an argument without data.

At HIGHEST calculation, non-payment of CPP, EI etc. represents 9-10% of payroll (both employer AND employee) and payroll represents only about 35% of freight cost, therefore only <3-3.5% MAXIMUM. We must also remember that CPP and EI are technically NOT TAXES… they are ‘mandatory’ contributory programs. If the driver doesn’t contribute, they don’t benefit. If they want to pay it themselves rather than having their employer pay it, the net result is a voluntary agreement to be paid less. Doesn’t supply and demand determine what an employer pays an employee? Aren’t employee wages a part of the free market system?

Does the ‘North American’ model assume that all drivers are/should receive the same rate of

pay? Can industry legislate supply and demand of the free market like that? The Vancouver Port is trying to legislate that all drivers be paid the same rate. Will THAT be the rate every driver/ operator will be paid across Canada? This discussion opens a meritocracy ‘can of worms’ that North American Carriers may not wish to open.

Some business models are far too top-heavy to survive competition with an efficient one. If supply and demand is allowed to operate freely, it should/will squeeze out the inefficient businesses. My money is on the ‘Non-North American Models’. They tend to at least appear much more cost-effective and fiscally humble, though admittedly without looking at their statements it’s inconclusive to confirm.

All that said, it’s still my opinion that if people lose jobs, it will most likely be because administrative overhead at a North American Model Carriers was too high to sustain itself during a prolonged industry downturn. The Driver Inc. discussion is a red herring.

About the Author:

Robert D. Scheper is a leading Accountant and Consultant exclusively serving the Lease/ Owner operator industry in Canada. His first book in the Making Your Miles Count series “taxes, taxes, taxes” was released in 2007. His second book “Choosing a Trucking company” is the most in-depth analysis of the independent operator industry today. He has a Master degree (MBA) in financial management and has been serving the industry since he and his wife came off the road in 1993. His dedication, commitment and strong opinions can be read and heard in many articles and seminars. You can find him at www.makingyourmilescount. com or 1-877-987-9787.

CHECK OUT THE PODCASTS AT “YOUTUBE. COM/@MAKING YOUR MILES COUNT”

THANK YOU TO ALL OUR DRIVERS.

A Trucking Recession? Preparing

For a

SAFETY DAWG

Chris Harris

New Job?

storing it for future use, would be to take a picture of it. Then you send the picture to yourself and keep it for that future job. So, step one is to capture your data to reflect what an excellent driver you are.

Good day Truck Drivers. The Canadian economy seems to be in a large rut. Many trucking companies are not hiring. Freight is moving but the low amount of freight is allowing shippers to pay and get unbelievably low shipping rates. The economy seems to be in a hole and trucking is certainly in a recession.

So, what should you do? Well, I want to give you a few tips for driving safely. Because if you continue to drive safely and efficiently, when the recession changes, you’ll be in a good spot for a new position if you need one.

My first tip: Start collecting data now! What data can a truck driver collect? Most ELD systems currently have a driver scorecard. If you are a good driver with good numbers on the scorecard, then I encourage you to capture this information. The easiest way to capture this info without your current employer knowing that you’re

Tip two: Be prepared. While things are slow right now, they are not going to remain slow forever. Now is the time to update your résumé and make sure that it is accurate. When it comes to your past employment, make sure you have all the information, such as dates of employment, the name of the company and their address as well as a contact name and phone number. An email address would also be very helpful. You know that every application form asks you for the name and address of your past employer as well as the contact person and phone number. The safety person you apply to would love it if you also had an email address for your contact

person. It helps to set you apart from others by making the safety person’s job so much easier.

Tip number three: Be crash and incident-free. It is extremely important for truck drivers to always keep their driving record clean. And the driving time before you apply for a new job is critical. You want to make sure that all your inspections are clean, and there are no charges to you as a driver. And you certainly, at the very least, don’t want any crashes to be on your record.

Tip number four: Watch out for speed cameras, and red-light cameras. In many of the provinces across Canada, you can get camera tickets. I’m sure that you are aware that when you get a camera ticket, there are no points for you the driver or whoever is operating your car. However, that is not the same for a trucking company. In many of the provinces, when a speed camera ticket is issued, it often is accompanied by points for the national safety code profile (CVOR) of the province. Yep, points for the carrier. And every city and jurisdiction seem to be adding more cameras to our roads every day.

After all, it is easy money for the city. So even though you do not get points on your license, the company will be assigned points on their provincial profile. And that hurts everyone at the company.

Tip number five. Tip number five is perhaps the most difficult. It is to be patient. And in this slower economy, it will take a longer time for you to find a new home. It’s going to take a lot of phone calls, some emails, and maybe even just knocking on doors. If you need a new position right now, it will take work.

So that is it. Five tips for getting through this trucking recession. One. Collect the data. Two collect all the necessary reference data. Three, no tickets and no accidents. Four, watch for those darn cameras and five, be patient.

Safe driving,

Chris Harris

Top Dawg, Safety Dawg Inc. 905-973-7056

chris@safetydawg.com @safety_dawg (twitter)