With a rail shutdown of unprecedented proportions looming, some logistics companies are using trucks to transport goods that would otherwise have been transported by rail. However, the benefits of this strategy are limited.
Since February, trucking companies have been monitoring the possibility of a large-scale strike and organizing additional transportation capacity, says Stephen Laskowski, president of the Canadian Trucking Alliance.
“The freight forwarding industry, which normally transports freight by rail, is adapting and now shifting it to trucks,” he said.
Calgary-based Jori Logistics began making the switch late last week. Company president Sam Woods said the looming strike would primarily affect shipping containers, which are normally transported to and from the port by rail.
“We’ve already had to transfer a lot of products that were supposed to be transported by rail to trucks,” said Woods, whose company transports a wide range of goods, from oilfield equipment to clothing to food and beverages.
“If there is actually a strike, we will be forced to load everything onto trucks, which would be a kind of wild stampede.”
On Monday, the union representing thousands of workers at Canadian Pacific Kansas City (CPKC) announced a 72-hour strike at the railroad. CN Rail said workers will be locked out at the same time if no agreement or binding arbitration award is reached.
As the conflict continues, both companies have already begun reducing their deliveries in preparation for a possible strike or lockout.
According to the Canadian railway company, the two companies transport goods worth around $1 billion every day.
For companies in all sectors of the economy, there are no easy answers to the question of what should happen to goods that are normally transported by rail.
According to Fraser Johnson, a professor at Western University’s Ivey School of Business, railroads typically carry about 66 percent of freight traffic in Canada when considering both the number of tonnes and the number of kilometres transported.
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“Freight forwarding companies are really geared towards short-haul and last-mile deliveries,” Johnson said.
Jon Finnimore of FMI Logistics said his company has also begun shifting consumer goods, dry food and industrial products from rail to trucking.
This entails costs, as transporting products over long distances by road is more expensive than by rail.
“If you’ve ever been stuck at a railroad crossing and seen two intermodal containers stacked on top of each other and seen the trains go for miles – now each of those containers has to be transported by an individual driver or a team of drivers,” says Finnimore, executive general manager of FMI’s freight team, who is also based in Calgary.
Finnimore said he does not expect the shift to trucking to be permanent beyond potential rail bottlenecks. “It may prompt companies to store their products closer to their customers to mitigate such disruptions.”
But cost is not the only thing making the switch difficult. John Corey, president of the Freight Management Association of Canada, warned that trucking is not an easy replacement for rail.
Certain goods such as grain, coal, potash and lumber are practically impossible to transport by truck, he said, and it is unlikely that many companies that transport these goods will be able to use trucking as an alternative.
In addition, there are not enough trucks or drivers to handle this potential surge in demand, said Laskowski of the Canadian Trucking Alliance. While there is more capacity in the industry than usual due to the sluggish North American economy, that is not enough to offset a potential outage at two Class One railroads.
Woods of Jori Logistics expressed particular concern about the potential lack of trucks to remove sea containers from ports, resulting in high daily storage fees.
Workers at Canada’s two largest railroad companies could go on strike as early as Thursday. CBC’s Clara Pasieka explains what impact this could have on public transit and the city’s local businesses.
He and Finnimore said they encourage their customers to also consider air transport or storing non-essential shipments.
While dealing with supply chain challenges is commonplace in the industry, Woods said the rail stop threatens to be particularly tricky.
“We’re used to having to pivot and face challenges – but if everyone does that at the same time, it’s certainly going to be a huge problem,” Woods said.
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