Legacy carriers and newcomers have created two trucking industries
Earlier this summer I accepted a speaking gig at the Truck Training Schools Association of Ontario's annual conference. The session, "Making cents (sense) of our industry," was intended to be a deep dive into trucking for the driver-training crowd. No problem, I said to myself.
After almost 40 years in the racket, I can read the tea leaves. Then I took a long, hard look at the stuff floating around the industry's cup. I saw long-unresolved issues around hiring drivers.
Uncertainty about what's legal. I saw dynamics among industry players that are hard to explain to people who aren't insiders. This speech was going to be a bigger challenge than I thought.
Here's what I learned while trying to write it.(Photo: istock)
Two trucking industries
Understanding trucking in Canada starts with accepting that there are two very distinct trucking industries. In the blue corner are the legacy carriers. Often multi-generational, these carriers and their subsidiaries dominate the Today's Trucking Top 100.
They have a reputation for investing in technology, safety, and equipment. They pay their drivers as per CRA requirements but are having trouble finding drivers willing to be paid as employees. In the red corner are newcomer carriers.
Many are owned by immigrants who are often also relative newcomers to trucking. These companies grew rapidly after the 2008 economic crisis as gig work became normalized on a larger scale. They recruit from within their ethnic communities and pay their drivers as independent contractors.
Direct 'indirect' competitors
If two trucking industries in one doesn't make sense, how about the notion that these two factions also compete?
Legacy carriers rely on an outside sales force to attract the contract customers they covet. For them, freight brokers are not customers but a necessary evil so they can fill in the gaps when customers can't. Their biggest threat is the growing legion of third parties (3PLs, forwarders, brokers) wanting to manage their customers' transportation.
Their scale and tech savvy make brokers formidable competitors. Ironically, newcomer carriers are the engine of the third-party market. Without them freight brokers would be unable to move loads and take contract customers from legacy carriers.
Hence, these two groups are direct "indirect" competitors. Make sense?
To scale their customers without adding assets, most Legacy carriers have brokerages or other third-party divisions. Some of the largest brokers in the country operate below the radar and under their fleet's brand.
This is where it gets interesting. Like their third-party competitors, Legacy carriers use newcomer carriers to move freight they can't cover. Seems like cheaper spot rates (which are void of fuel surcharges) make for better margins at the brokerage division.
During my Q&A session it was brought to my attention that many legacy carriers participate in the gig economy through driving schools often owned by newcomer carriers. Using your competitors to haul your customers' freight and to train your drivers isn't wrong. But talk about swirling tea leaves...
Changing of the guard
When we invested in Rite Route a year ago, part of our plan was to rely on my network of legacy pals to move our customers' freight.
Unfortunately, my network is evaporating. Legacy carrier owners are exiting in droves. They worked hard.
Their families are wealthy. Their Ivy League-educated kids aren't interested in the business. The exact opposite is happening with newcomer carriers.
They are starting up in record numbers. Their owners see trucking as a ticket to prosperity in Canada and their families are embracing the industry like never before. A lot of the newcomer carriers I know have the same hungry look in their eyes that many of my trucking peeps (including me) had in the early '80s.
Many aren't even newcomers anymore. They're formidable, established carriers. New blood is good for trucking.
It's especially important for trainers to understand the dynamics of the industry's various businesses so they can develop safe, responsible, professional truck drivers no matter who hires them or what they haul. I don't know if I explained our "two industries" issue as well as I could have. But I do think it's important to raise it.
Hats off to the TTSAO for giving it a forum.