By Christopher Williams
Will the transportation sector become a network of mobile data centres with robots steering ships, trains, planes and trucks? Virtually speaking, yes, said speakers at the Canada Logistics Conference for supply chain logistics professionals, presented by CITT (Canadian Institute of Traffic and Transportation) and hosted by Port Saint John, October 26-28. A multi-modal panel spoke of tech-rated developments that could close the hatch on traditional transportation methods.
Air cargo is top gun for speed
Stephen Phillips, Senior Strategic Account Manager, Air Canada Cargo, said that in his 15 years in the airline’s cargo division, he has seen “unprecedented growth”. “We’re a belly carrier, so new passenger flights add more cargo capacity,” Phillips said. Global airlines carried 51.3 million tonnes of goods in 2014 which is only one per cent of total cargo, but tallies 35 per cent of cargo value. He noted emerging trends include 3D printing, a shift from B2B to B2C, and the presence of online retail giants Alibaba and Amazon—the latter which recently became an active participant in the air cargo business.
Lithium batteries were noted as a recent air security embargo due to last year’s catastrophes and accidents resulting from spontaneous combustion of such batteries. Phillips said air cargo also faces terrorist threats, drone interference and regulatory challenges. “We want to eliminate the bottlenecks. For example, we are looking at perishable customers like fishermen becoming known consigners at the packaging stage who are fully accredited in a supply chain that is secure and efficient.”
Louis Bergeron, Energy East Vice-President for Quebec and New Brunswick with TransCanada, was on hand with current observations about fuel supply security. “I can’t remember the last time I had to do a presentation without fighting my way through opponents and big signs,” quipped Bergeron, who recapped the benefits of the proposed $15.7 billion Energy East project, which would bring 1.1 million barrels per day to major oil refineries in Montreal, Levis and Saint John. “Oil will be here a long time for our clothes, our phones and the tools we use on a daily basis,” noting that Canada currently imports 50 per cent of its oil from the US, Venezuela and the Middle East. “We can reach energy independence,” insisted Bergeron.
Rail Service Improvements
Ryan Ratledge, COO, Central Maine & Quebec Railway (CMQR), the successor to infamous Montreal Maine & Atlantic Railway (MMA), says “It was a challenging period in the wake of the Lac Megantic disaster that took place under previous ownership. “Having bought the assets of bankrupt MMA in 2014, we are now going to have a higher presence in Saint John, and we’re building brick and mortar customers along the railway with a concentrated focus on our ports.” He said there is now a stronger, faster rail service in the region and said it wasn’t always that way. “CN was dominant out of Saint John, and NB Southern and MMA had a connection with CP, but it was it was a 10-mph network. Now, after $30 million in infrastructure investments (mainly rails, ties and ballast) since 2014, it’s a 25-mph system.”
CMQR won the 2016 Regional Railway of the Year award from Railway Age magazine. The Class 3 short-line freight railway runs through Brownsville, Maine and interchanges with CP outside Montreal. Searsport, Maine and Saint John are the key ports along the route. Rail cargo from Saint John is now arriving in Montreal within 38 hours, or less.
Another panelist for the “current state” was Matthew Hoag, Director, Operations and Commercial, DP World Americas Region, the fourth largest container operator in the world which services 77 ports, including Saint John starting January of 2017. Started up in Dubai in 1972, DP now holds nine per cent of the world container market share and has eight new major developments underway. In addition to new operations in Saint John, DP recently acquired the highly automated London Gateway terminal in England and the Fairview container terminal at the Port of Prince Rupert, BC.
Saint John goes Post-Panamax
“We are investing in modern handling equipment in anticipation of larger ships,” said Hoag, who a few days later welcomed the addition of two post-panamax gantry cranes in Saint John Harbour. DP World in partnership with Port Saint John, the governments of Canada and New Brunswick, will be embarking on a $205 million infrastructure modernization program expected to be completed in 2021.
“The cranes will significantly enhance container handling capacity in our Port in the short-term,” said Jim Quinn, President & CEO, Port Saint John. Andrew Dixon, Port Saint John, said DP and “our major container terminal modernization project, will position Saint John as a fully equipped deep-water port.”
Panelist Hoag predicted there will be further consolidation of the major container shipping lines. He also sees the “arms race to build the largest ships” subsiding which, combined with mergers and alliances will eventually stabilize container shipping prices. “In the short-term we will see some more casualties as we are two to three years away from stabilization in the container shipping industry,” Hoag submitted. “These cranes in Saint John will help put us in a good position for the future.”
Let those Data Centres roll
Wayne Power, Group VP, Transportation and Logistics Division, J.D. Irving, Limited, said his local company employs 15,000 and operates a diverse portfolio of forest products, offshore vessels, transportation companies, even french fry exports. “We are big believers of moving away from trucks, trains and ship transportation—toward rolling data centres,” said Power. “These are intelligent assets and we need to figure out how to take this data and optimize our operations. We are also working at deeper integration with our customer’s planning and seek future logistics talent such as those with BBA degrees with majors in logistics, to compete globally.”
Questions for the panel segued into “uberization” which is clicking rapidly across all transportation sectors, putting traditional business into the hands of “rogue providers”. “Oh, I think there will soon be Uber trucking,” prophesied Power. “There is a niche part of the market that works for taxis and couriers, and it makes sense that it would go into some level of trucking.”
The Uberization of Trucking
Moderator Joel MacKay, President of Mactrans Logistics Inc., pointed out that Garret Camp, Uber Co-Founder and a Canadian, is now third wealthiest person in Canada at $9.18 billion. “Every industry is now a tech Industry,” MacKay reinforced.
Panelist Justin Bailie, Co-Founder and CEO, Rose Rocket of the San Francisco Bay area, automates everything except trucks. “With taxies, Uber has eliminated the dispatcher creating a disruptively cheap go-to-market strategy where they are about 50 per cent of the cost of taking regular taxis, so that is the core of what uberization is about.”
Who will be the Uber of trucking? “Just in the time since we started talking about doing this presentation, there have been new companies getting in on this,” said MacKay. “They buy market share even if they lose money, just to gain market share, and they are great at recruiting people. Technology can help fill an empty mile and solve a lot of problems. Amazon can do all of this today but I find their apps are shipper-side, so how do you know where the trucks are in real time? This is lacking.”
Dwayne Johnson, Director, Omni Retail Solutions, SCI, Canada Post, agrees when there is more technical play on the driver side to see everything on one dashboard, “someone will grab onto this and people will tend to follow. I don’t know when, but there is a groundswell. It is happening stateside right now.” But Johnson predicts it will be tougher for Canada with its lower population density and a wider landscape.
Beer me “Otto”
In August, Uber purchased logistics provider Otto for $680 million—for the tech, not the trucks. The panelists showed a video of a Budweiser beer delivery shipped via “Otto” autonomously. Johnson said Uber is interested in the autonomous truck “as it could then eliminate the driver, gaining even higher revenues.” He added that liability “is something that happens to the product” and as a broker he assumes companies and carriers have insurance certificates. “People should watch out for this,” Johnson cautioned. “They need to centre their model on this brokerage aspect.”
Bailie has pitched ideas in the “Silicon Valley” where he perceives a higher risk tolerance and a determination to win. “Depending on your idea and who you are, these things are doable and the people in the Silicon Valley understand trucking better than I thought.”
About 27 tech start-ups that match truckers with loads—both full load and less than truckload—have raised more than $180 million in venture backing since 2011, according to research firm Armstrong & Associates. Asked, “Why are there not more Canadian companies doing this? Bailie answered “It’s about taking one’s head out of the sand and just saying it’s real and happening, it will happen to you, or with you.”
Transportation Buying Trends
Lou Smyrlis, Editorial Director, Canadian Shipper, estimated there are almost a million people in the transportation and warehousing sector, representing 4.2 percent of Canada’s GDP. “If you include private fleets like Sobeys, it’s over six per cent, not including couriers, and that’s larger than paper, metal manufacturing, more than arts and entertainment, clothing and the alcoholic beverage industry.
Smyrlis said short-term “freight-o-nomics” trends indicated freight volume growth in 2016 was disappointing. “Only 34 per cent of shippers actually increased freight volumes in 2016 while 31 per cent actually decreased freight volumes and 31 per cent kept volumes about the same. Only 54 per cent expect freight volume increases in 2017 with 41 per cent expecting flat freight volumes in 2017. Only 30 per cent of Eastern Canadian shippers expect to increase freight volumes next year, his data revealed. He expects LTL truckload carriers and couriers to grow revenues by 27 per cent in 2017, compared with growth of 48 per cent in 2016. The survey said most shippers believe the cost of the latter services will increase moderately next year— between two and five percent—depending on the tightening of capacity. “Because the economy has slowed, there is less than balanced capacity which puts downward pressure on rates. However, Smyrlis expects that a growing US economy will provide greater export opportunities for Canadian firms next year.
Put on your 3D glasses now
Smyrlis described witnessing the 3D printing of an actual car in less than 48 hours at the Detroit Auto Show. “Think of the impact on transportation. Cars today have 30,000 parts that need to be moved to the assembly line. The 3D car has only 50 components and was made right there in front of us. It reduces the need for storage and remote locations, and transportation. All they need to do is download the parts from the internet and produce it right there with no need to transport it.” He estimates a fifth of manufacturers are now using this technology and 50 per cent are considering it. He considers transportation of footwear, toys, electronics and plastics have the most potential for disruption. Some 3D printers are already available for home use under $2000,” added Smyrlis.
Concurring with earlier panelists, Smyrlis counts Uber transportation and autonomous vehicles among his top long-term buying trends. “With Uber and its competitors coming, we will probably experience a quantum shift in delivery and automated warehousing and procurement, probably within the next ten years. To be realistic, it needs density of freight (like Johnson pointed out) and I only see this happening in centres like New York and Toronto.”
Smyrlis also described driving in a state-of-the-art truck. “When the driver switched to autonomous mode, he turned around and started talking to us. It was a freaky feeling. There was a heck of a lot of traffic on the road with a lot of wind, but this truck handled it perfectly. You hear that the public will never go for it, but I don’t think that’s true because we are already getting used to cars that park and put on the brakes for you.” He acknowledged there are also consequences of software bugs making a 40-tonne truck veer out of control a terrifying image to the public and legislators.
Other discussions at the Conference included Succession Planning, Improving the RFP Process and Power Pitching. Port Saint John facilities tours were held while two cruise ships were in port, and a Maritime Kitchen Party was hosted by the CITT Saint John Area Council.