On the possible eve of an unprecedented railway stoppage, some logistics firms are enlisting trucks to ship goods that otherwise would’ve been sent by rail — though there are limits to how much this strategy can help.
Since February, shippers have been watching negotiations between the country’s two major railways and the union that represents workers, and lining up extra trucking capacity as a contingency plan, said Stephen Laskowski, president of the Canadian Trucking Alliance.
“[There’s] an adaptation by the shipper industry who typically would move freight by rail and now shifting that to truck,” he said.
Calgary-based Jori Logistics started making the shift late last week. Company president Sam Woods said the looming stoppage primarily affects the ocean container side of the business, which is typically taken to and from port by rail.
“Already we’ve had to move a lot of product that was going to be moved on rail to truck,” said Woods, whose company transports a range of goods from oilfield equipment to clothing to food and beverages.
“If the strike does happen, then we’ll just be forced to shift everything to truck, which will be kind of a mad dash.”
Both Canadian National Railway (CN) and Canadian Pacific Kansas City (CPKC) are on the verge of locking out thousands of workers early Thursday if they can’t reach a deal with the respective arms of the Teamsters union representing 9,300 engineers, conductors and yard workers.
The Teamsters union representing workers at CPKC had also separately served a 72-hour strike notice to that railway on Sunday.
As the dispute has continued, both companies have already started to scale back shipments in preparation for a possible strike or lockout.
The two companies move roughly $1 billion worth of goods per day, according to the Railway Association of Canada.
There are no easy answers for businesses across the economy trying to figure out what to do with goods that would typically be transported by rail.
Rail companies typically handle about 66 per cent of the freight in Canada, when both the number of tons and the number of kilometres transported are taken into consideration, according to Fraser Johnson, a professor at Western University’s Ivey School of Business.
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“Trucking companies really are designed for short distance and last mile deliveries,” said Johnson.
Jon Finnimore, with FMI Logistics, said his company has also started to transition from rail shipments to trucking shipments for consumer goods, dry foods and industrial products.
This has come at a cost, he said, given that it’s more expensive to ship products long distances on the road than it is by rail.
“If you’ve ever been stuck at a rail crossing and you see two intermodal containers stacked on top of each other and you see those trains go for miles and miles and miles — [each] of those containers have to now be trucked by a single driver or by a team driver,” said Finnimore, executive general manager with FMI’s freight team, who is also based in Calgary.
Finnimore said he doesn’t expect all or part of the transition to trucking to become permanent beyond a possible rail shortage. “What it could do is push companies to store product closer to their customers to mitigate these types of disruptions.”
Cost isn’t the only thing making the shift difficult. John Corey, president of the Freight Management Association of Canada, warned that trucking isn’t an easy substitute for rail transportation.
Certain commodities — like grain, coal, potash and lumber — can’t practically be moved by truck, he said, and it’s unlikely many companies moving them will be able to use trucking as an alternative.
There also aren’t enough trucks or truck drivers to handle this potential surge in demand, said Laskowski, with the Canadian Trucking Alliance. While there’s more capacity in the industry than usual due to a sluggish North American economy, it isn’t enough to make up for a possible stoppage at two Class One railways.
Woods, with Jori Logistics, said he’s particularly concerned there may not be enough trucks available to take ocean containers away from the ports, where they will rack up daily storage fees.
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He and Finnimore said they’re encouraging clients to also consider air transportation or to put non-essential shipments into storage.
While dealing with supply chain challenges is par for the course in the industry, Woods said the rail stoppage threatens to be a particularly tricky one.
“We’re used to kind of turning on a dime and having to deal with challenges — but everyone doing this at once is going to be a giant issue for sure,” said Woods.