Buckle up: as pandemic wanes, freight costs poised to soar

Dedicated Transportation Can Offer Shippers Cost and Capacity Certainty

As Canada recovers during 2021 from the global pandemic, the economy is expected to experience a boom of historic levels.  The International Monetary Fund (IMF) recently upgraded their estimates for Canadian economic growth, forecasting GDP growth of 5% for 2021, and 4.4% for 2022.  Historically, the average GDP growth for Canada is in the 2% range. 

While this is great news, there is a dark lining to that silver cloud:  transportation costs are rising – and are poised to go much higher.  Statistics Canada reports that in April 2021, the transportation sub-index of the Consumer Price Index (CPI) basket in Canada increased to 148.80 points — its highest rate ever.  According to Today’s Trucking magazine, the freight spot market rates have increased by 19% in recent months – and this is before the coming economic recovery and a surge in demand for trucking capacity.

“Besides the increased freight demand from the rebounding economy, there are other factors driving up transportation costs.  The national truck driver shortage – which cooled somewhat during 2020 due to lower demand in some sectors – is making its return and resulting in private fleets and commercial carriers having trucks with no drivers in them.  Insurance rates in trucking also continue to climb — with little relief expected in the coming years – further driving up costs”, says David Zavitz, CAO at Canada Cartage.

Companies who use common carriers for local, regional, and long-haul deliveries are exposed to this double-whammy of surging demand and declining supply in the freight spot market.  But there is an alternative freight delivery model that guarantees cost certainty and capacity to trucks and drivers – dedicated contract transportation.

“Dedicated contract transportation – or fleet outsourcing – provides companies with guaranteed capacity to trucks, trailers, and drivers on long-term 3- to 5-year fixed rate agreements.  This protects shippers from the wild swings in freight pricing that are happening today. Canada Cartage’s dedicated transport customers enjoy pre-determined rates with modest CPI increases of 1%– 3% per year to cover cost-of-living increases, but there is no exposure in this model to the dramatic cost fluctuations of the spot market.

“The dedicated model also ensures that shippers have dedicated trucks and drivers ready to roll from their manufacturing plant or distribution center every day.  The fear of freight sitting on a shipping dock waiting for a carrier to find an available truck or driver is a thing of the past”, says Jim Latimer, VP at Canada Cartage.

For shippers using common carriers, or even for private fleet operators, there are other cost improvement opportunities, including:

• equipment right-sizing to ensure shippers have the correct fleet size for typical volume days, but don’t have excess equipment just to meet peak periods; peak volumes are managed by Canada Cartage through our volume surge flex fleet
• lower administrative costs as Canada Cartage manages recruiting, hiring, training, safety, routing, dispatch, and regulatory compliance
• route optimization and delivery route re-engineering to reduce wasted kilometers, empty trailer miles, and improve driver productivity
• buying power cost advantages for tractors, trailers, diesel fuel, and insurance
• digitized fleet solutions to improve your customer’s delivery experience with on-line fleet tracking, and automated text and email alerts of delivery ETAs

As the country’s largest dedicated contract carriage provider, Canada Cartage can provide cost certainty, guaranteed capacity, and improve your customers’ delivery experience.  To learn more, contact us at 1-800-268-2228 x 2 or email us at info@canadacartage.com.