OPERATING COSTS OF TRUCKING AND - BCTA

[Pages:80]Final Report OPERATING COSTS OF TRUCKING

AND SURFACE INTERMODAL TRANSPORTATION IN CANADA

Submitted By:

By Ray Barton Associates Ltd.

In association with

Logistics Solution Builders Inc.

and

The Research and Traffic Group

March 31, 2008

Operating Costs of Trucking and Surface Intermodal Transportation in Canada

TABLE OF CONTENTS

TABLE OF CONTENTS ..................................................................................................2 List of Exhibits .................................................................................................................3 1.0 Introduction ...............................................................................................................4 2.0 Truck Costing ............................................................................................................5

2.1 Methodology .........................................................................................................5 2.2 Cost Components Summarized ...........................................................................17 2.3 Overview of Findings and Trends........................................................................30 2.4 Comments about Reliability of the Unit Costing Method......................................31 3.0 Effects of Fleet size .................................................................................................36 4.0 Private vs. For-hire fleets.........................................................................................38 5.0 Owner-Operator Cost Survey ..................................................................................40 6.0 Rail..........................................................................................................................43 6.1 Rail Rates ............................................................................................................43 6.2 Rail?Truck comparisons ......................................................................................46 7.0 Marine Movements..................................................................................................49 7.1 Halifax-Boston .....................................................................................................49 7.2 Montreal-St John's...............................................................................................50 7.3 Sept-Iles ? Trois Rivi?res.....................................................................................51 7.4 West Coast Movements.......................................................................................51 7.5 Cross Lake Ferry Operation Oswego-Toronto .....................................................51 APPENDIX A SUMMARY OF BASE CASE TRUCK COST ANALYSIS RESULTS .............................52 APPENDIX B RATES FOR HAULING CONTAINER CHASSIS SPECIFIED CORRIDORS.................67 APPENDIX C SUMMARY OF OWNER OPERATOR ANALYSIS RESULTS .......................................70 APPENDIX D COSTING ANALYSIS OF OSWEGO-TORONTO FERRY OPERATION.......................77

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada List of Exhibits

Exhibit 2.1: Equipment Configurations for Case Studies......................................6 Exhibit 2.2: Main Population Centres Assumed For Each Region ......................17 Exhibit 2.3: Representative Driver Wages ..........................................................19 Exhibit 2.4: Fuel Costs ........................................................................................21 Exhibit 2.5 Purchase Cost of Power Units ..........................................................24 Exhibit 2.6 Purchase Costs for Trailer Units .......................................................25 Exhibit 2.7: Licencing Fees and Weights ............................................................27 Exhibit 2.8: Unit Tractor-trailer Cost Comparisons Over Time ............................30 Exhibit 5.1: Owner-operator Costs ......................................................................40 Exhibit 5.2: Comparison of Owner-operator and Fleet Vehicle Costs .................42 Exhibit 6.1: Intermodal Rates for Selected Corridors CN Rail .............................44 Exhibit 6.2: Intermodal Rates for Selected Corridors CP Rail .............................45 Exhibit 6.3: Comparison of Truck Costs and CN Rail Rates Selected Corridors.46 Exhibit 6.4: Comparison of Truck Costs and CP Rail Rates Selected Corridors .47 Exhibit 7.1 Comparison of Marine Rates and Truck Costs Halifax-Boston .........49 Exhibit 7.2: Comparison of Marine Rate and Truck Costs Montreal ?St Johns..50

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada

OPERATING COSTS OF TRUCKING AND SURFACE INTERMODAL TRANSPORTATION IN CANADA

1.0 Introduction

Since 1972, Transport Canada has sponsored research and publication of "Operating Costs of Trucks in Canada", a report series that was expanded in 1986 to include comparison of direct trucking to rail intermodal transportation. The most recent edition of this study was prepared for Transport Canada by Logistics Solution Builders Inc. in 2005. For the 2007 edition of this project, the title is changed to "Operating Costs of Trucking and Surface Intermodal Transportation in Canada" and the scope of investigations has been enlarged. Objectives for this project are as follows:

Provide estimates for year 2007 Operating Costs of Trucks and Intermodal Transportation Services in Canada.

Reflect differences in the truck operating cost structure associated with a sample of provincial and territorial regions in Canada.

Reflect the comparative truck operating cost structure for International (US Based) operations.

Depict differences, if any, from base case trucking service options including use of owner operators, variations with fleet size, and private trucking costs compared to for-hire trucking costs.

Provide comparative intermodal transportation service costs for: o Specified rail intermodal services and direct trucking costs o Specified short sea shipping services and direct trucking costs

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada

2.0 Truck Costing

2.1 Methodology

The approach used for this update of trucking costs is the same methodology used since 1972, and widely accepted by the trucking industry and private fleets for evaluating operating costs to provide trucking services to users.

Documentation of this approach has been widely described in prior editions of Operating Costs of Trucks in Canada. Furthermore, this method has been presented to open industry seminars, called the "Know Your Truck Costs" series, sponsored by the Canadian Industrial Transportation League (now CITA), the Propane Gas Association of Canada, the Alberta Motor Transport Association and the British Columbia Trucking Association. In this context, the method has been widely exposed to industry and generally accepted in these forums.

We follow essentially an activity based approach that itemizes each case study's distance travelled, operating speeds, fuel consumption rates, and all additional work hours not driving (i.e. waiting time, loading / unloading time) where drivers and equipment are "on duty".

The foregoing activity measurements result in specified costs for over the road operation of trucks. Vehicle related costs include driver costs, fuel costs, repairs, tires, equipment ownership and licensing. The latter two costs are proportional to the number of vehicles needed to haul a given volume of freight, within a given timeframe.

In addition to the direct hauling activity related costs, provision is made for assignable indirect costs for the fleet business. These include over-all administrative activity (management and supervision, billing and accounting, information technology, sales and marketing, and provision of business premises for operating the fleets), interest costs for moneys invested in equipment and for working capital of the business, insurance costs and an operator profit margin.

Whether the trucking operation is for-hire, or part of a private fleet, providing an operator profit margin in the assessment of over-all operating cost (or user cost) covers the costs associated with the fleet business owner earning a "return on investment". -- either an operating margin to cover return for investment in a forhire fleet, or for "opportunity cost" when a firm invests monies in a private fleet operation. In 1972, industry profit margins of for-hire trucking were generally significantly higher than is common today -- hence earlier Operating Costs of Trucks in Canada editions set operator profit at 10% of revenues.

Currently, operator margins tend to be lower, perhaps averaging from 2.5 to 5% of revenues for industry leading fleet operations. Exceptional trucking operators can still earn margins around 10% -- for example these are comparable to

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada margins reported by express transportation companies operating a premium service (e.g. trucking division of UPS, according to Transport Topics' Top 100 for 2004, for example). As compared to the earlier studies, the current study compares three margin levels: 10%, 5% and 2.5% operator profit margin -- enabling the user to tailor the costs to their understanding of the particular trucking market being benchmarked. To enumerate all of the foregoing cost components, an Excel based costing spreadsheet is used to calculate annual component costs for a single vehicle -operated as part of a fleet operation -- for each of the following vehicle configurations shown in Exhibit 2.1. Costs are enumerated as total and component costs of the vehicle for a year, costs per hour, and costs per kilometre.

Exhibit 2.1: Equipment Configurations for Case Studies

Five Axle Semi Trailer (Van)

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada Exhibit 2.1: Equipment Configurations for Case Studies Five Axle Semi Trailer (Flat deck or Lowboy)

Five Axle Semi Trailer (Liquid Tank)

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Operating Costs of Trucking and Surface Intermodal Transportation in Canada Exhibit 2.1: Equipment Configurations for Case Studies

Five Axle Container Chassis

Six Axle Tridem Semi Trailer (Van)

Six Axle Tridem Semi Trailer (Flat Deck) 8

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