Vol. 17 No. 1
January, 1987
|
Keep the Ball Rolling
Stay Safe in 87
|
 Railway Gearing Up
to Meet Trucks Head-On
|
CP Rail's Railrunner offers faster, more effective transportation
of goods to and from important markets in U.S. mid-west.
As part of a continuing series on the federal
government's proposed "Freedom to Move" legislation (Bill C-18), this issue of CP
Rail News examines the changing scope of competition between rail and truck
transportation.
|
Competition is a healthy economic force. It sparks innovation and
improvements.
The railway says it is concerned, however, that many of the provisions of the federal government's proposed
"Freedom to Move" legislation ( Bill C-18 ) would limit CP Rail's ability to compete on
even terms with other railways and other modes of transportation - particularly with the trucking industry.
According to Rob Ritchie, CP Rail's vice-president, marketing and sales, the government's plan to
change the face of competition in Canada could seriously affect the railway's ability to invest in the
improvements it needs to compete more aggressively.
GROWING PRESSURE
"Every day, CP Rail is facing growing pressure from other transportation modes", Ritchie said in
an interview with CP Rail News. "This pressure is already being felt on railway revenues because the
railway is increasingly limited in the extent to which it can pass on all its costs to customers".
Trucks have always competed with the railways for business. But, because of recent developments and proposed
changes in the way government regulates transportation, truckers will be able to expand their range of service
and their ability to compete.
Initially, improved trans-provincial highway systems allowed trucking companies to expand their
inter-city runs. Even so, railways were able to offer better service and pricing for
long-haul shipments. Today, however, improvements in fuel efficiency and truck technology have
meant the truckers' traditional range of 800 to 1,000 kilometres is expanding.
The trucking industry is now positioning itself to compete for business in ranges exceeding 2,400 kilometres -
more than twice its traditional range.
"Many commodities previously thought to have been firmly held by the railways are now in a zone of
transition and are threatened by competition from the trucking industry. The result is that there are new
pressures on both volumes, margins, and profits", Ritchie said.
STRONG LOBBYING
As well, there's a strong lobbying effort being mounted to convince provincial ministries of transportation
to further increase truckers' reach through relaxation of regulations governing the length and weight of rigs.
This effort already has been successful in many provinces and American states, where 26-wheelers
and 34-wheelers are cutting into territory previously the domain of railways.
JUST IN TIME
Another reason trucks are making headway is that significantly higher gross vehicle weights ( GVWs ) are
being allowed on Canada's highways.
"Provinces are in the midst of standardizing GVWs, meaning trucks will be able to increase their range. As
well, a new regulatory environment would allow U.S.-based truckers to enter the Canadian market to
much larger degree. This would serve to increase the pressure on both Canadian trucking and rail", Ritchie
said.
In addition, many manufacturers are implementing systems to reduce the huge inventories previously needed to
support their operations. Called "Just in Time", or JIT, the system co-ordinates
suppliers' deliveries with production requirements.
For example, automobile manufacturers have arranged to have parts delivered to their plants within hours of
when they're needed on the production line. Car companies are turning to trucks to provide this highly
time-sensitive service.
Taken together, these new developments are adding to the pressure already being felt by railways to compete
effectively.
"CP Rail isn't sitting idly by, however. We've committed energy and money to offset the changing
competitive environment", Ritchie said.
"Railrunner", a special two-way daily freight service linking Montreal/Toronto with
Chicago, is a good example of how the railway is changing its services to meet, or better still, beat
competitors.
Railrunner offers customers faster, more effective links with important markets in the United States midwest.
U.S. customers also can reach markets in Canada more effectively.
CP Rail's new terminal in Detroit is another example. It allows the railway to improve the way it handles
traffic to and from the United States. The result will mean smoother, quicker service.
DIRECT INVOLVEMENT
As well, CP Rail has developed specialized rail/truck services for many commodities such as concentrates,
lumber, petroleum products, and steel. Transfer terminals have been constructed at strategic locations to group
or distribute this type of traffic. These facilities provide a more efficient means of linking
short-haul trucking with medium and long-haul rail service.
And the railway's marketing and sales force is more directly involved in developing business at the local level.
"We have regrouped our national sales and service organization within Canada and given it a mandate to
concentrate on local business development, in particular new business that might be going to trucks",
Ritchie said.
Another improvement is CP Rail's sophisticated computer system which allows sales people to spend less time
doing routine tasks and more time developing business. Computer links with customers have improved the time it
takes to get rate and route information about their shipments, making it easier for them to do business with
the railway.
"We now have the hardware to meet truck competition in major, medium, and long-distance
corridors - and to reach beyond the range of CP Rail lines for traffic we might not otherwise get",
Ritchie said.
"But we have a long way to go - because we believe we can change and modify our product. This new product
will have to satisfy customer needs for speed, reliability, and flexibility. And it must be provided at a cost
that will be sufficiently attractive to shippers to justify investing in it".
IMPROVING POSITION
Ritchie says many of Bill C-18's provisions would have a negative impact on the things the
railway is trying to do to meet the existing competitive pressures.
"Capital spending is the only way for CP Rail to acquire the means to compete - to produce a new product
through replacement and upgrading, new facilities and equipment, and new technology".
"They are the key to improving our competitive position against trucks and their growing ability to
provide good service over longer and longer distances", Ritchie said.
To do this, he says, the railway must take a hard look at finding practical ways to provide better service,
to price more competitively and "find ways we can free up the necessary investment to achieve those
goals".
But, he cautioned, if railway revenues are further eroded under Bill C-18, while costs do not go
down to match, the ability to invest will be severely limited.
Railways always have maintained a price advantage over trucks when it came to moving high volumes over long
distances. Conversely, trucks have ruled the roost with lower volumes over shorter distances. But there's an
area in-between known as the "truck competitive zone".
Ritchie sees this zone as where the battle for business between truck and rail will be fought the hardest.
"We have to be concerned with costs. Competing becomes futile if the price the market is willing to pay is
insufficient to pay the long-term cost of providing the level of service the customer demands. A
lot has been done to hold the line on costs and to improve efficiency, but we still have a long way to
go".
This CP Rail News article is copyright
1987 by the Canadian Pacific Railway and is reprinted here with
their permission. All photographs, logos, and trademarks are the property of the Canadian Pacific Railway
Company.
|
|
