Canadian trucking industry adopts surcharges

Canada's trucking industry is experiencing a period of unprecedented growth accompanied by dramatic change, with rising commodity prices, an evaporating driver pool, and stringent border security measures driving down the bottom line for the nation's privately owned mid-sized carriers, according to a Grant Thornton report on the industry. As various surcharges pile up at firms straining to maintain profitability, the trucking industry is at risk of becoming a business of nickels and dimes, with the potential to pass on significant cost increases to Canadian consumers.

Recently released, Grant Thornton Trucking Insights 2007 reports that the cost of doing business has never been higher than in today's highly regulated and ultra-competitive environment, but the nation's stressed supply chain may have a blind spot when it comes to sharing the burden of escalating transportation costs. The report finds that senior executives in the trucking industry expect to increase billing rates in response to growing cost pressures, but shippers struggle to absorb the increases for the following reasons:

- Surcharges have emerged in almost every major cost category at carriers struggle to cope with external cost pressures that may be here to stay.
- Escalating prices at the pump have driven the adoption of fuel surcharges across the board.
- Currency surcharges have helped to bring the soaring loonie back down to earth on international routes.
- Increased border security and delays at customs have given rise to security and wait time surcharges.

"Most of our clients are making attempts to assess surcharges to the shippers for cross-border shipments. Sometimes they are flat charges or they can be a percentage of the value of the move. Irrespective of how they are assessed, it is critical that the shippers provide adequate compensation to the carriers in order for these amounts to be passed along to the drivers", says Paul Coleman, Partner, Grant Thornton LLP.

With the adoption of realistic and flexible costing models that insulate firms from the shocks of shifting market forces, the time for Canada's trucking industry to secure future profitability is now. If not addressed, the current crop of cost increases may end up being just the thin edge of the wedge for Canadian consumers.