How Off-Shoring Effects North American Transportation Patterns

This is part 9 in our 10 part series on North American transportation.

The Change in Transportation Patterns

Over the last decade transportation patterns changed from primarily North/South to East/West.  The state of transportation a decade ago was a flow of raw materials from Canada to Manufacturing in the US and a flow of manufactured goods back to Canada.  This pattern was typical in the US as well with trade between the Northern US states and the Southern US states being similar.  With many finished goods being sourced from Asia over the last decade, North American manufacturing has largely disappeared in comparison to what it used to be.  Manufactured goods now flow inbound from Asia on the East and West Coast of Canada and the United States with raw materials being exported back to China.  As you can guess, this has dramatically changed transportation patterns.

The Major Changes

Net flow of goods from West to East

Most goods from Asia arrive on the West Coast and are destined for markets in the Eastern States and/or Provinces of Canada.

Reduced North/South flow of traffic

Less manufactured goods/raw materials traded between Canada and the US.

Reduced Pricing/Demand on Southbound Shipments

With less demand for raw materials and finished goods from Canada destined for the US, but an increased demand for US freight (either from the US or from overseas) the balance of freight has changed making outbound Canadian Freight less expensive.

Increased Pricing/Demand for Northbound Shipments

Because there are less trucks going south, there is less availability for trucks coming back to Canada.  Thus, a greater demand and higher pricing

Outlook for the Future

The outlook for the future is still being decided.  With a lower US dollar, a high unemployment rate, and cheaper energy costs largely due to fracking operations in the US, it is becoming “cheaper” to manufacture in North America again.  Many companies are taking a renewed look at manufacturing in North America once again.  It results in a shorter supply chain and reduced costs for inventory and transportation, which are significant.  Companies will make a choice that improves their bottom line the most.  Should a manufacturing renaissance take place in North America, I think we will see a return to more traditional traffic patterns for freight in North America.

Here at DSN we’ve been moving freight in North America for over 25 years through many ups and downs and changes in the marketplace.  If you need help getting your freight moving on time, or on budget, please contact us.  We’re here to help.

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LTL Transportation Companies – Direct Service vs. Hub and Spoke

There are two distinct ways that LTL shipments are transported in North America by LTL Transportation Companies.  Most people don’t appreciate the difference.  Here’s an explanation of the two systems and their advantages and disadvantages.

Hub and Spoke LTL Transportation Companies

When LTL freight moves through a Hub and Spoke system it moves from one terminal to another and ultimately ends up at its final destination.  This system of moving LTL freight is typically used by large LTL transportation companies like Roadway, Old Dominion and Fedex.  It is the method most used in the US, by US Carriers  to move LTL freight.  It works like this.

  1.  A local pickup and delivery (P&D) truck picks up various shipments from shippers in a very close geographic area.  When the truck is full, or it’s time for the sort at the distribution center, the truck returns to the terminal.
  2. At the terminal the shipments are sorted and grouped together by the next terminal they are going to.  For example, shipments picked up in Atlanta for destinations in the north, may next travel to a terminal in South Carolina.  These shipments are then loaded on a truck going to the next terminal.
  3. The shipments are line-hauled to the next terminal.
  4. At the next terminal shipments are sorted again and grouped for the next terminal en-route to destination.  This process of sort-linehaul-sort continues till the shipment reaches it’s destination city.  Depending on the distance from the origin, a single shipment could go through five or six terminals.
  5. At destination the freight is sorted again and sent out on a local P&D truck for a peddle run.
  6. Shipment is delivered.

Advantages of Hub and Spoke

  • Inexpensive for small shipments.  This is because many small shipments can fit on the linehaul truck and the cost to pick up is insignificant because the carrier is picking up many small shipments in a close geographic area.
  • Pick up is quick.  Because a local P&D truck is never far away, your shipment will be picked up quickly, usually within a couple of hours.
  • Damage and Claims.  Damage generally occurs when a shipment is handled.  The hub and spoke system requires a shipment to be handled many times.  This increases not only the chance for damage, but loss as well.
  • Larger and heavier shipments become very expensive.  Because most of the cost of this system is in the line-haul and the handling and not the pick up, larger shipments become very expensive because they use up the capacity of the line-haul.
  • Transit times.  Long transit times are typical of a hub and spoke system.  Usually, it takes a day between each terminal plus a day for pickup and delivery.  This can lead to extended delivery times.
  • Poor information.  Because the shipments move through many terminals and pieces of equipment, it’s easy for a shipment to miss a scan somewhere in the process.  The actual location of the shipment can disappear from visibility until it eventually shows up as delivered.

Disadvantages of Hub and Spoke

Direct Service LTL Transportation Companies

Direct Service is a unique way of transporting LTL.  Direct Service is typical of how a Canadian carrier moves LTL.  Typically, a truckload carrier fills their backhaul with 4-6 LTL shipments.  The shipment then moves as a full load to destination where it is delivered, typically, on the same truck.

  1.  Full load carrier drives directly to pickup and loads the shipment.
  2. Same truck may drive to another pickup to get more freight until the truck is full.
  3. Truck drives to destination
  4. Truck delivers the shipments.

Advantages of Direct Service

  • One truck, one driver, less chance for miscommunication
  • One truck, one driver, less chance for loss or damage
  • Less expensive than Hub and Spoke on larger shipments because the cost is in the pickup, which is amortized over the linehaul cost which is significant for larger shipments.
  • Faster transit times.  Because the shipment travels straight through from origin to destination, it doesn’t have to stop at terminals.  This is often much faster as compared to hub and spoke.
  • Can be expensive for smaller shipments.  Because most of the cost is in the pickup, the cost of pick up is significant as compared to a small linehaul charge for a small shipment.  If damage concerns outweigh costs you should choose Direct Service even for small shipments.
  • You might not be able to get a pick up same day.  Because direct service requires intense coordination between shippers and carriers, the pickup order is very important to minimize travel distance.  The “right truck” might not be in your area for pick up today.

Disadvantages of Direct Service

  • Can be expensive for smaller shipments.  Because most of the cost is in the pickup, the cost of pick up is significant as compared to a small linehaul charge for a small shipment.  If damage concerns outweigh costs you should choose Direct Service even for small shipments.
  • You might not be able to get a pick up same day.  Because direct service requires intense coordination between shippers and carriers, the pickup order is very important to minimize travel distance.  The “right truck” might not be in your area for pick up today.

Head To Head Comparison

 

Hub and Spoke

Direct Service

Transit Time Direct Service is generally faster
Cost Better for small shipments under 1000 lbs. Better for larger shipments over 1000lbs
Damage Much lower claims and damage
Off my dock Generally, you can get it of the dock quicker with hub and spoke.
Status and Information Direct service only has one person to communicate with, the driver.  Often much better information.
Special Requirements Poor at adhering to special requirements because many people are involved. Much better at adhering to special requirements because typically only one driver involved.

 

What’s Right for You?

Contact the logistics experts at DSN Chemical transportation.  They are experts in direct service and the intense coordination this requires.  They can help you decide which LTL service is right for you and execute it flawlessly.

 

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The Hardened Border Between Canada and the US Over the Last Decade and the Effect on Transportation

Since that infamous day on September 11, 2001 there have been many changes at the border between Canada and the United States to improve security.  Many of these changes had profound impacts on the transportation industry, in particular trucking companies, who are on the front lines of border crossings every day.

Electronic Notification Systems

In 2004, the transportation industry saw significant changes in their operations.  They were required to electronically notify the border prior to arrival.  Then, at least 1 hour prior to arrival.  This does not seem like a big deal.  However, when you consider that the majority of the Canadian population lives within 2 hour’s drive of the US border, you can see the problem.  Carriers had to be able immediately transmit shipment data to customs since they didn’t have the information until the truck was loaded.  Further, fines were imposed if carriers showed up in error without sending the notification.  Since the initial implementation of this system, requirements for compliance have continually become more stringent and tolerance for non-compliance has  become almost non-existent.

This has become a huge administrative burden for carriers.  They have to take the shipment information on pickup.  Fax/scan/email it back to the office where a clerical person sends it off to  customs and then receive back a receipt from customs that the shipment is cleared to proceed to the border.  This all has to happen within a very small window of time.  This puts a tremendous strain on carriers both in terms of clerical and IT support to make this happen in a short time window.  You can only imagine the cost to a carrier in terms of clerical labour, lost driving time for the driver waiting for the OK to proceed to the border, and IT support to electronically capture and transmit this data in a timely fashion.

FAST, C-TPAT, PIP and other  Pre-Qualification Systems

The border pre-qualification systems while not mandatory, made it almost impossible for a carrier to be competitive in the marketplace without being a part of these programs.  While the idea is to streamline inspection time at the border, the cost of compliance with these programs is borne by the carriers.  From background checks on their drivers to gates, cameras and heightened security measures at their facilities;  carriers spend from tens of thousands to hundreds of thousands of dollars on security measures to become compliant with these systems.

Driver Pre-Qualification

Driver pre-qualification through FAST cards to increase security has also been a huge burden on the trucking industry.  Drivers have to go through security screening and there is a cost associated with obtaining and renewing the cards.  Carriers also have to have an administrative system to track and monitor their driver’s compliance and currency with their FAST cards.

The Effect on Transportation

Security initiatives, while necessary, clearly have the effect of significantly impacting the costs and operations of trucking companies required to meet these requirements on a daily basis.  The shipping public is generally one-step removed from these programs and typically, does not appreciate the cost impact on their carriers as border regulations change.  Many of these costs can be mitigated by working with your carriers to share data, stream-line paperwork and reduce errors.

Here at DSN Chemical Transportation, we’re transborder experts!  We’ve been moving shipments across the border for over 25 years and can help you get your freight moving while controlling your costs.  Give us a call for a consultation on your transborder shipments today.

 

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The Canadian Oil Economy and its Effect on Transportation to Western Canada

The Oil Boom in Western Canada has been great for the economies of the western provinces in Canada, but has wreaked havoc on the transportation systems that exist in western Canada.  Business is booming, but it presents some unique challenges for freight moving into western Canada.

The Imbalance of Freight: Problem Number One

With the growth and boom of the oil industry in western Canada there is massive growth in the demand for materials.  You can imagine all the materials used in oil production that takes place in western Canada.  These materials include pipes, fittings, trucks, earth moving equipment, tools, processing equipment, chemicals, and all kinds of material used in the production of Oil.  Not only are direct supplies in demand but the huge influx of workers that moved to the oil patch need housing, building materials, food, clothing and the like.  All this has to be shipped in.  In comparison to oil, there is very little other manufacturing going on in western Canada.  Agricultural production is the next big industry.

Generally, as economies grow with the influx of people, industry and trade develop and economies also export what they are producing.  In the freight world, this leads to a balancing of transportation.  Goods are shipped from A to B and then A typically needs goods from B and the truck or train can move both directions with freight.  This lowers overall transportation costs.  In the case of western Canada, the demand for goods going to the oil patch are all hard goods and the majority of what is exported from the region leaves in a pipeline.  You can see the evident problem.  There just are not enough trucks to bring freight inbound to western Canada because there just is not enough freight to put on them outbound.

The Cost of Labour: Problem Number Two

As the oil patch grows and booms with the higher barrel price of oil, so does it’s demand for labour.  The oil patch pays high wages in comparison to the rest of Canada due to supply and demand.  They need labour and as long as the price of oil is high they can afford to pay it.  Now imagine what that does as it trickles down through the rest of the economy in western Canada.  Truck drivers, construction workers, and other skilled labourers are a prime target for the oil patch.  Trucking companies have to be competitive with what truck drivers take home in comparison to what workers for the big oil companies make.  Again, it’s a matter of supply and demand.  Truck drivers in western Canada demand higher wages in order to stay in the profession.

The Impact of Poor Freight Balance and High Cost of Labour

Higher wages for truckers combined with a general lack of outbound freight make it tough for western Canadian carriers.  There’s just not enough freight to get trucks out of western Canada to get the abundance of northbound shipments from the US to Canada.  This forces carriers to take outbound loads at far less than cost, and even worse, send empty trucks southbound to the US to get freight destined for the western provinces.

These factors make it increasingly challenging for carriers and shippers to forecast their costs.  Pricing on northbound shipments to the west have been steadily increasing for the past few years while the supply has been tight at best.

Ideas to Better Manage Freight Bound for Western Canada

  • Order far in advance.  Let both your suppliers and carriers know of your needs weeks in advance if possible.  This allows your vendors and carriers to better plan your shipments.
  • Consider the day of the week you are shipping on.  Many western Canadian carriers start their outbound journey early on a Monday morning.  If your shipping point is 3 days from, let’s say Calgary, you can expect that there will be more trucks available on Wed/Thurs of the week.  Plan your shipment accordingly.
  • Limit the need for specialized equipment.  If you have 1 skid of heated or hazardous material, it normally makes sense to ship it with the rest of your freight.  If trucks are tight, it might make more sense to ship your dry freight separately from heated/hazardous/refrigerated materials.
  • Be a shipper of choice.  If your origin point is in the US, you want to make it as attractive as possible for the drivers.  Make sure your waiting area is friendly and drivers are treated courteously.  Get them loaded and out fast.  This makes a huge difference in sourcing trucks.  Drivers know the good and poor places to pick up and deliver.  If you’re a “good” pick up, you’re more likely to get more trucks, faster.

At DSN Chemical Transportation, we have been moving shipments in and out of western Canada for over 25 years.  Heated, refrigerated, dry van, bulk tank are all within our expertise.  If you have difficult shipments to get moving to western Canada, call the logistics experts at DSN Chemical Transportation today.

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How Your Canada US Freight Costs are Affected by the Decline in Canadian Manufacturing

The Change in the Canadian Economy

Canadian Manufacturing has been declining for over a decade.  Jobs have switched to service industries or resource based production.  Meanwhile, the imports from China have increased.  If you’re in the freight business you should care about these trends because they affect your Canada US freight costs and availability.

Employment in Manufacturing (000’s) in Canada

canada US freight costs

Source: Stats Canada CANSIM table 282-0008

Everyone knows the significant change the Canadian Economy has gone through in the last decade.  The shift away from a manufacturing base to a resource and service base has affected millions of people employed directly or indirectly in the manufacturing industry.  The shift in the Canadian Economy has also had a great impact on trucking and transportation.

How the Decline in Manufacturing Affects Freight Patterns.

At one time, Canada was a significant provider of manufactured goods to the US.  While Canada still exports a lot of what it manufactures to the US, in comparison to what is imported from China to the US, and also in relation to what used to be imported from Canada, the current situation can be described as “smaller”.  When more goods were shipped to the US, Canadian carriers had much more predictability in their pricing and profitability.  Because there were much more goods leaving Canada on truck than coming in, the carriers could demand a high price for shipments heading south.  They took a gamble each time that they might find a shipment coming back to Canada and also a gamble at what rate the shipment would pay.  This was a calculated gamble because they knew how much the majority of the revenue was going to be on the shipment because the southbound head haul rate was significantly higher than the northbound back haul rate.  The carriers were used to this situation and rates were fairly stable and predictable.

Then, when the Canadian Dollar started to rise, more goods were imported from China, and Canadian manufacturing plants started to close, the situation reversed.  There weren’t as many southbound shipments to the US and there was still a strong demand for northbound shipments to Canada.  The carriers had no choice but to change their strategy.  Southbound rates fell dramatically.  Carriers sometimes send empty trucks to the US just to get northbound freight.  The gamble a carrier has to take has increased in risk dramatically.  Now, they have to send a truck to the US at a loss, hoping to make a profit on a shipment coming back to Canada.

The Effect on Canada US Freight Costs.

The effect of the changing shipment patterns on rates has been dramatic.  Southbound rates have decreased by about 50% over the last decade on many laneways while northbound rates have doubled.  This situation has had a huge impact on Canada US freight costs.

The Future Balance of Trade?

It’s always difficult to predict the future; many predict that as energy costs rise in the future, the benefit of manufacturing in low labour cost countries like China will be outweighed by the cost of energy to transport the manufactured goods.  Others predict Canada’s resource economy will keep our dollar strong and limit the growth of our manufacturing sector further.  However, the future economy shapes up, the balance of trade between Canada and the US for finished goods has a strong correlation to the movement of transportation costs between the two countries.  This is something to watch when trying to budget your future freight costs.

If you’d like a review of your current freight rates and service levels, DSN Chemical Transportation is an expert in Transborder Transportation between Canada and the US and have been moving freight between the two countries for over 25 years.  Contact us for a free review of your current situation and one of our logistics experts will surely find ways for you to increase service levels and reduce costs.

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Backhauls & How Canada/US Population Distribution Affects Transportation and Logistics

Ever wonder why there are so many trucks in some places and none in others?

Have you ever wondered why there are so many trucks in a particular area and none in others, or why the rates going to a particular place are so much higher than coming out?  Many people would just guess it has to do with supply and demand.  Well, yes it does.  However, if you dig a little deeper you will see the underlying cause has more to do with population distribution than anything else.

For example, let’s take the Toronto and Montreal Markets.  The Greater Toronto Area has a population of just over 6 million people.  The Montreal Metropolitan Area has a population of 3.8 million.  When Toronto and Montreal markets trade goods with each other, you can imagine the market in Toronto is almost double the size of Montreal for almost anything that travels on a truck; Food, durable goods, clothes, building materials, etc.  So when Toronto buys two truck-loads of goods from Montreal, Montreal in turn buys 1 truck-load of goods.  You can imagine there’s a huge imbalance of trucks.  Too many in Toronto who want to go to Montreal to get loads coming back to Toronto and not enough in Montreal to get loaded with goods back to Toronto.  This is why if you drive the 401 between Toronto and Montreal, you will see the train tracks when they run along the highway are full of empty truck trailers going back to Montreal! Continue reading

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Backhauls & How Canada/US Population Distribution Affects Transportation and Logistics

Ever wonder why there are so many trucks in some places and none in others?

Have you ever wondered why there are so many trucks in a particular area and none in others, or why the rates going to a particular place are so much higher than coming out?  Many people would just guess it has to do with supply and demand.  Well, yes it does.  However, if you dig a little deeper you will see the underlying cause has more to do with population distribution than anything else.

For example, let’s take the Toronto and Montreal Markets.  The Greater Toronto Area has a population of just over 6 million people.  The Montreal Metropolitan Area has a population of 3.8 million.  When Toronto and Montreal markets trade goods with each other, you can imagine the market in Toronto is almost double the size of Montreal for almost anything that travels on a truck; Food, durable goods, clothes, building materials, etc.  So when Toronto buys two truck-loads of goods from Montreal, Montreal in turn buys 1 truck-load of goods.  You can imagine there’s a huge imbalance of trucks.  Too many in Toronto who want to go to Montreal to get loads coming back to Toronto and not enough in Montreal to get loaded with goods back to Toronto.  This is why if you drive the 401 between Toronto and Montreal, you will see the train tracks when they run along the highway are full of empty truck trailers going back to Montreal!

How imbalance effects Pricing:  The Backhaul

You can imagine in the situation above, the price of a shipment from Montreal to Toronto will be much higher than from Montreal to Toronto.  And it is!  Many people would refer to the Montreal-Toronto route as a “head-haul” lane and Toronto-Montreal as a “backhaul” lane.  The economics of the situation are that the head-haul lane quickly gets bid up and the back-haul lane quickly gets bid down.

Expanding the Concept to Canada/US Transborder Traffic

The same logic and economics apply to many lanes between Canada and the United States.  To add a further twist on the situation, the majority of traffic between Canada and the United States travels to and from just 4 major centers in Canada:  Toronto, Montreal, Calgary and Vancouver (Winnipeg would be next on the list).  So, if you can picture it, most of the trucks travel between these major centers and major centers in the United States.  For example, Chicago-Toronto is a very heavily travelled lane, so is Toronto-Houston, Toronto-Los Angeles, Toronto-Atlanta, etc.  Major centers to major centers.  It seems obvious, and it is, that you’ll have a better chance at getting freight moved between major centers, timely and at a reasonable cost.  One way will be a head-haul and be more expensive than the other direction which will be the back-haul.

Now let’s consider a point like Twin Falls Idaho.  Vancouver-L.A. traffic misses it, Calgary-LA Traffic misses it, and anything coming from Toronto-Montreal to the LA misses it.  As you can imagine, it would be difficult to ship from there to Eastern Canada.  If you draw lines on the map from the major centers in Canada to the major population centers in the US, it will quickly become evident some places that are “empty” of traffic lanes.  These areas are particularly difficult to move freight on, and expensive.  So, if you’re planning buying from a supplier in Twin Falls, Idaho vs.  a major center, once you factor in the cost of transportation, you’ll probably find it a poor choice.

Evaluating Your Logistics Plan

Many logistics planners just take into account the cost of transportation and miss the bigger picture of population distribution.  While costs is a big factor in many decisions, understanding the underlying reasons for cost differentials in transportation helps you be a better logistical planner.

If you are considering ways to reduce costs in your supply chain, DSN Chemical Transportation has a team of experts with deep knowledge about the transportation and chemical industries standing by to help you.  Contact us for a free consultation.

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How the Canada/US Exchange Rate Effects Cross Border Transportation

Ever Wonder how the Canada/US Exchange Rate Effects Cross Border Transportation?

The exchange rate between Canada and the United States has a huge impact on the balance of trade and truck traffic between Canada and the US.  This article explains why.

What it was like a decade ago

Why did it used to cost $500 -$700 10 years ago for a truckload from Chicago to Toronto and now it costs $1800-$2000.  Why did it go up so much?  As a matter of fact, why did all the Northbound shipment rates go up?

These questions are all directly related to the Canada US/Exchange rate and the balance of trade between Canada and the United States.  Over the last decade there has been a slow and steady appreciation of the Canadian Dollar relative to the US Dollar.  While it’s had its share of roller-coaster rides up and down the net result is a Canadian Dollar at or above par with the US Dollar.

A decade ago, the Canadian Dollar was worth less than 70 cents US.  At the time, Canada produced a wide range of finished goods and Ontario was a real economic powerhouse exporting much of what was manufactured to the United States.  Because the Canadian Dollar was “cheap” relative to the US Dollar, Canadian made goods were very competitive in the US market.

There was a net SOUTHBOUND flow of goods on trucks

At the time there weren’t enough trucks to carry goods to the US.  You had to book a week or so out in order to book space.  However, coming back from the US, if you had freight you got great low backhaul rates because the carriers were just interested in turning their truck around to get home and satisfy their Canadian exporting customers.

EXAMPLE:  A carrier typically needs around $2.00 per mile to be in the black.  Back in the day, when outbound rates to Chicago were $1500-$1600, they could take a load back from Chicago for $500 and still be OK.  Chicago is 500 miles away and a round trip is 1000 miles.  So $1500 out and $500 home got the carrier what they needed.

What it’s like today

Today, it’s a much different story.  With the Canadian Dollar hovering around parity with the US Dollar, Canadian manufactured goods no longer have a cost advantage in the US.  The manufacturing base of Canada slowly but surely lost their biggest customer: The United States.  Manufacturing plants have been closing and there are very little manufacturers left in Canada.  Today’s balance of trade is much different.  If you look at the statistics in dollars, it doesn’t tell the whole story.  Canada still exports a lot of resources to the United States, particularly, energy resources.  These don’t travel on trucks.

Today, carriers have a high demand for Northbound freight to Canada and relatively little demand for southbound freight to the United States (in comparison to how it used to be).  Now, a carrier’s customers are demanding more trucks in the US coming back to Canada.  However, there’s just not enough freight to get them there.  So now the economics have changed.

There is a net NORTHBOUND flow of goods on trucks

EXAMPLE:  Chicago to Toronto is still a 500 mile journey.  The outbound rates to Chicago have fallen to as low as $500.  So, to make the equation work, the carrier needs in excess of $1500 to come home.

Other effects of currency

Because carriers do much more business with US customers shipping to Canada, almost half of their receivables can be in US Dollars.  This is a great risk for a carrier.  Imagine a small to medium carrier might have $500,000 in USD receivables.  Now let’s say the exchange rate between the time the order was booked and the time the customer paid changed by 3 cents.  That’s not an outrageous swing.  3% of $500,000 is $15000.  That could make or break a carrier’s year!  In addition, all the outstanding prices in USD have to be adjusted to compensate.  Many carriers have implemented a currency surcharge to deal with this issue.  The charge increases as the Canadian Dollar rises and decreases as the Canadian Dollar falls.

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Why U.S. Freight is so different from Canadian Freight – 10 Part Series – Part 1

How Geography affects Transportation

Geography and geographic factors significantly affect freight patterns, particularly when you contrast U.S. freight with Canadian and transborder freight. Here are some of the geographic factors that affect transportation:

Population Distribution

In Canada, 80% of the population lives within an hour’s drive of the U.S. border. By contrast, population in the US is more or less distributed throughout large population centers down the East and West Coast, Texas and surrounding the Great Lakes. Freight in the U.S. typically is consolidated and then moves through “hub and spoke” distribution networks where freight is line hauled from one large population center to another large population center. It is then de-consolidated and distributed, or furthered on to another distribution hub. This works well because the distribution centers cover 360 degree zones around their location for pickups and deliveries. This strategy however does not work well in Canada. Since most of the population lives in a thin strip along the US border, freight primarily moves east and west, or to the US and back. The hub and spoke system just isn’t very cost effective when freight only goes in two directions. Freight movements in Canada might better be compared to a bus route where freight is picked up and delivered along the way between origin and destination. This takes a lot of coordination and depends upon the right combination of equipment and space going to the right place for it to work. The other population distribution factor that affects freight in Canada vs. the U.S. is the percentage of the population that lives in just a few urban centers. In Canada, the majority of the Canadian population lives in the greater metropolitan areas of Toronto, Montreal, Vancouver and Calgary. The rest of Canada is relatively sparsely populated. As you can imagine, freight moves from one island of population to another. Rail and intermodal play important roles because of the large line haul components. Transborder freight from the U.S. back to Canada typically moves between U.S. origins and destinations to or from one of the 4 major centers in Canada. This is very different from the hub and spoke distribution common in the U.S.

How Size Scope Affect Transportation

Ontario TransportationCanada leads to some unique transportation challenges. For example, the entire eastern seaboard of the United States from Maine all the way down to almost Florida and west as far as Alabama would fit in just one Canadian province. Ontario, for example, would be of similar size. In the U.S. freight shippers are accustomed to having state to state rates. In Canada, the sheer size of any province makes this impossible.

Weather and Climate Also Affect Transportation

Together with geography, weather and climate are significantly different from most parts of the United States. While some of northern states do get harsh winters, all of Canada gets extremely cold in the winter. There is a real need for heated equipment and temperature controlled transport in the winter months, something that is a relatively minor issue in the United States. This can become a large issue when shipping liquid freight to and from Canada during this season. Additionally, because of the intense cold, in many parts of Canada the ground freezes solid and then thaws in the spring to a very muddy mess. Northern Alberta and Quebec have frost season freight restrictions. The weight legally allowed to be transported by road is restricted on provincial roads to prevent them sinking during the thaw as well as to minimize damage.

Accessibility Affects Transportation

With the exception of Alaska, the U.S. generally does not have the accessibility problems that Canada has. There are many points in Canada that are only accessible by air, barge or ship. There are also many northern points that are only accessible during winter months when trucks can drive on frozen lakes and rivers.

Leave it to the experts

If you are in the U.S. and planning on shipping to Canada, you need some local expertise to help you. At DSN Chemical Transportation you’ll find logistics planners with over 25 years experience in the business. We will help you plan the most cost effective and expeditious movements of your shipments. Call DSN today for a free consultation or quotation on any of your shipping needs.

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Why U.S. Freight Is So Different – Top 10 Reasons

As a transportation company in Canada we deal with customers in both the United States and Canada. The majority of U.S. shippers likely ship 90% or more within the U.S. and less than 10% to Canada. Many shippers in the U.S. may only ship to Canada once or twice a year. The typical question we get from many U.S. shippers who are new to shipping to Canada is, “Why is it so different?” This article is going to kick off a series of articles over the next few months that will explain some of the key differences between how freight moves in Canada, to Canada, and how that is different from how freight typically moves within the United States.

Some of the questions we get about shipping to Canada:

 

  • Typically, U.S. shippers are used to paying less than $100 to ship a small pallet for an interstate shipment. Why does it cost 4x to 5x more to ship to Canada?
  • On the other end of the spectrum, when a U.S. shipper ships over 10,000 lbs they typically ship it as a truckload because it’s cheaper. Why when they ship to Canada, is it that 12,000 lbs doesn’t cost that much more than 10,000 lbs?
  • Why does Hazmat transport cost an extra $25 dollars per shipment in the U.S. and costs 20%-30% of the shipment cost when shipping to Canada?
  • Why did it cost $500-$600 to ship a truckload from Chicago to Toronto 5 years ago and now it costs $1800 or more?
  • What is this currency surcharge all about and why do we need it?
  • Why can’t I get a truck from Chicago to Alberta when I need one? What’s the problem?
  • I’ve got a shipment from Chicago to Detroit and another to Toronto. Why can’t the driver pick up in Chicago, Deliver in Detroit and then continue on to Toronto? It’s on the way!
  • Why can’t I just get a per hundred weight price that covers all of Ontario? I can get a per hundred weight price that covers all of New York State?
  • Why do I need heat? It’s 50 degrees here in Florida? My current LTL freight carrier doesn’t use heated equipment.
  • What is this border crossing surcharge and why do you charge it?
  • Why can’t I just get a bulk carrier to pick up in the next hour, on demand?

 

So, here are the top ten reasons. We’ll cover each one in its own article in the series.

 

  1. Geography
  2. Immigration Laws (Cabotage)
  3. The Canadian Dollar vs. US Dollar
  4. Population Distribution
  5. The Decline of Canadian Manufacturing
  6. The Canadian Oil Economy
  7. The Hardened Border between Canada and the U.S.
  8. Direct Service vs. Hub and Spoke
  9. The Effect of Overseas Manufacturing
  10. The Logistics of the Foreign Driver and the Backhaul.

 

More articles will follow covering each one of the top 10 reasons in more detail. If you can’t wait and have questions about shipping to Canada, please call one of our logistics experts at DSN Chemical Transportation. They are standing by to answer any of your questions.

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