Harbour Link Blog Archive
Posted 2012-04-16 by Harbour Link in opinion
The purpose of this Blog is to discuss the service and operational issues that are impeding the container drayage sector’s ability to efficiently service the Port of Vancouver caused by the constraints imposed by PMV’s TLS licensing system.
Before discussing the impediments of TLS it is important to define the meaning of a Full Service Operator ("FSO") and Owner Operator ("O/O):
Full Service Operators: An FSO is a container drayage company that has a direct business relationship providing drayage services for the port’s customers, i.e. shipping lines, importers, exporters and 3PL providers. It is through this business relationship that FSO’s have built their business. An FSO makes significant investments in rolling stock, land, buildings, staff, computer dispatch systems to support their trucks and container chassis fleets (approx 4 chassis per truck) that are needed to provide container drayage services for customers.
Owner Operator: An O/O is a private owner of a truck and works for an FSO. O/O’s do not have direct customer relationships. The O/O is contracted by an FSO to provide a tractor and driver for an hourly fee or a fixed sum per container trip. The O/O is compensated for his services by the FSO in accordance with the Vince Ready compensation MOU enacted into law by the Federal Government. The O/O provides only the truck power and driver needed to perform the trucking service required by the FSO. The O/O works under the operating authority and the National Safety Code (NSC) of the FSO and the FSO provides all trailing equipment (chassis) and all other support services required by an O/O to perform drayage services for the FSO.
WHAT IS A TLS LICENSE AND WHO IS IT ISSUED TO?
The truck licensing system (TLS) was adopted in 1999/2005 by the Vancouver Fraser Port Authority (aka Port Metro Vancouver or PMV) for the purpose of helping stabilize the container drayage sector following a dislocation of services at the Port due to wildcat strike action taken by owner operators.
The functionality of the TLS system involves the issuance of a TLS license by PMV to individual O/O or to an FSO for each truck the Company controls directly through ownership or term leases. (Harbour Link Container Services is an FSO). The TLS license permits the holder to enter the Port to pickup or deliver containers.
RULES, APPLICATION & IMPEDIMENTS
The TLS licensing rules established by PMV provides for two license categories: one to perform Local container drayage and the other to perform Long Haul container drayage. The limitation imposed on each TLS license prevents an FSO from deploying a truck with a Long Haul TLS license to pick-up/deliver a Local container when transiting the port to deliver /pickup a container that is destined to, or originates from a long haul destination (points east of Hope and Cross Border traffic). No such limitations apply for the holders of a Local TLS license. Why trucks with a Local TLS are permitted to handle both local and long haul containers when a Long Haul license is restricted to Long Haul container transactions only is perplexing. There is no cost difference between the two license categories and a reasonable explanation has not been provided by PMV. A speculative probability may be because most trucks with a Local TLS are incapable of performing long haul work. Why? Because most trucks deployed to perform local work are not equipped with sleeper cabs, or the tractors are approaching their “sell by date”, have high mileage and are no longer able to endure the rigorous demands required to haul containers through mountainous terrain, etc. This however does not explain why a Long Haul TLS license is restricted.
Commencing in 2011, PMV imposed a $300 annual fee for each TLS license issued or renewed. This was done to offset PMV administration costs related to the TLS system. Little consideration was given by PMV to the fairness in applying the fee to allow for the fact that a Local truck can haul an average of 4 to 5 containers in/out of the port each day, whereas a Long Haul truck by the nature of the long haul work may require access to the port only once, or if a regular carrier, no more than once a day to as little as a couple of times a week. A more fair and equitable methodology would be for the fee to be container based, wherein a fee is applied against each container handled by a truck in/out of the port.
In 2007 PMV imposed a Moratorium on the further issuance of any TLS licenses. This Moratorium was revised in 2011 by PMV reinstating the issuance of TLS licenses for Company owned/leased trucks. The Moratorium continues to remain in place for O/O, which prevents any FSO from recruiting owner operator trucks for their fleets, unless the O/O is already the holder of a TLS.
The apparent objective of the Moratorium is to transform the Port’s truck model from Owner Operator to Company owned trucks. This is an admirable objective, but it fails to consider the practicalities of the business implications (including collective bargaining union agreements) and the operational dynamics needed to replace owner operator fleets with Company trucks. In the case of Harbour Link we have added approximately 10 Company trucks in the last 6 months to accommodate increased customer volumes and are in the process of adding more Company trucks to accommodate the evolving changes of customer drayage requirements and customer volumes plus the addition of new customers.
Buying Company trucks requires substantial capital outlay and takes considerable time before the trucks can be delivered by the vendor and readied for deployment. Adding Company trucks does not enable an FSO to respond to immediate surges in business, but is a workable strategy to accommodate long term business growth. The biggest challenge for all FSO’s is how to respond to immediate surges in business. A case in point is the recent decision by one of our customers to switch from loading containers on rail at the port, in favour of relaying between 50 to 100 containers per day by truck to the railhead. This switch flows from a temporary glitch in the supply chain that is expected to last for about 1 to 2 months. The circumstances of this switch do not provide a business case to buy Company trucks, which in any event would take between 2 and 3 months to acquire, when in fact the trucks are needed now. How then does a FSO respond to such changes in business demands when the Moratorium prevents an FSO from hiring additional O/O. The present situation (caused by the Moratorium) makes it impossible for an FSO to add O/O trucks to be able to respond quickly to sudden changes in drayage demands by customers (as described above), or to accommodate the ebb and flow in container volumes that are an intrinsic element and an evolving daily dynamic of the container drayage business.
To compound the restrictions created by the inflexibility of the present TLS licensing system, another challenge is the inability of FSO’s to recruit qualified drivers to operate Company trucks. Why? Because the pool of qualified drivers once available has rapidly declined as baby boomers (the core of the industries drivers) exit into retirement. The exit of retiring drivers from the industry is further exacerbated by the disinterest of younger generations to want to drive truck as employees of FSO’s to fill the job demand.
The adoption in the mid eighties of the O/O model is probably the root cause and reason why the drayage industry is in the situation of not being able to recruit suitably qualified drivers to drive their trucks. There is, however, a large available pool of non TLS owner operators readily available to accept work, which, as previously noted, cannot be hired because the Moratorium prevents an FSO from hiring them even though they are urgently needed by FSO’s to:• Accommodate business spikes by customers in a manner to maintain seamless supply chains. • Achieve the changing dynamics in container drayage requirements by the port’s customers. • Accommodate the Port’s steadily growing “year over year” container trade.
As a point of interest, container volumes moved by truck in/out of the Port in 2012 equated to about 50% of PMV’s total container volume, which in 2012 was approx 2.5 million TEU. Port volumes are forecast to double within the next 10 years.
To solve the truck shortage problem that the TLS Moratorium has created, many FSO’s (Harbour Link included) have been forced to engage O/O to perform long haul work that do not have TLS licenses. This is extremely costly and results in the need for all containers transported by the non TLS trucks to be handled through an off dock container terminal for relay by a second driver (a local driver with a TLS) to shuttle the long-haul containers in/out of the port. This extra step is adding $200 to $300 to the drayage costs of containers destined/originating to/from points outside of the Vancouver Lower Mainland. The consequential result: the Moratorium imposed by PMV has forced an unnecessary cost increase on Canadian importers and exporters that depend on long haul container drayage to get their goods to market.
It is also creating growing dissension by the long haul drivers who do not have a TLS license, who rightly feel discriminated against by being prevented access to the port by PMV when they:a) Fully comply with all the requirements specified by PMV to qualify for a port pass and a TLS license as a member of an FSO’s fleet. b) Transport import/export containers for the lion’s share of the journey yet are not permitted by PMV to complete the leg in/out of the port.
We have been told that the TLS truck licensing system is controlled by a steering committee, which includes representatives of PMV, the BC Ministry of Transportation and Infrastructure, Transport Canada and the Federal Ministry of Transport.
In our opinion, the TLS system as presently structured is preventing FSO’s from being able to deploy their truck fleets efficiently. It is also preventing the ability of all FSO’s from deploying their fleets in a manner to accommodate surges and to adjust to the highs and lows associated with the daily movement of both local and long haul container traffic. BY way of example, we at Harbour Link are engaged in both long haul and local container transport and frequently have surplus trucks that normally work Long Haul sitting idle (a slow Long Haul day) when truck power is urgently needed to transport local containers. Our contracted O/O’s with Long Haul TLS licenses sit idle due to the restrictions of the TLS system when they could be engaged performing local moves to maximise TLS fleet utilization and service performance to customers. The situation equally applies to the 14 non TLS licensed O/O trucks in our fleet.
During the past year we have made numerous appeals to PMV to permit the deployment of long haul trucks in the local market to fit the peaks and valleys of the local and long haul business. We have also urged PMV to allow FSO’s to add both Company owned trucks and new O/O trucks to their fleets and we continue to advocate for all TLS licenses to be issued in the name of the FSO.
The negative impact of the present TLS requirements / restrictions is seriously impeding the container drayage sector’s ability to manage business growth and the supply chain demands of the port’s customers.
The purpose of this blog is to highlight the serious negative impact, the added cost, and the service impediments/failures that are being encountered daily by the drayage sector to service the port’s customers, all created by the PMV Moratorium that prohibits an FSO from adding supplementary O/O to their fleet for port purposes.
For the above stated reasons we urge all stakeholders to contact the Steering Committee and PMV to help fast track the adoption of changes to the TLS licensing system.
To provide a guide to the changes we believe are needed to the TLS licensing system, we have compiled below a summary of recommended changes we think should be made to the TLS system. We believe these changes will help all FSO’s to optimize the deployment of trucks in a manner that will enable them to achieve operational efficiencies and to enhance service levels for the benefit of all port stakeholders.
These recommendations are supported by the drayage sector (through a consultative process) wherein the overriding consensus of the drayage sector is for TLS licenses to be granted by PMV only to Full Service Operators and to be modified to achieve the following:a) Establish a universal TLS license (a common license for all trucks) which permits any truck with a TLS license to pickup or deliver any container, regardless of whether it is Local or Long Haul, Full or Empty. b) Establish a policy that limits the issuance of TLS licenses only to Full Service Operators (FSO). c) Require all FSO’s to substantiate they have both customer support and an inventory of trailing equipment (chassis) (leased or owned) under their direct care, custody and control to support the truck licenses. Require each FSO to substantiate they conduct their business in full compliance with the safety standards of the National Safety Code (NSC) by having a minimum 12 month “Satisfactory” carrier safety rating. d) Require each driver that applies for a Port Pass to validate employment with an FSO by providing PMV with a letter issued by the FSO. Enact a policy that when an O/O leaves the services of an FSO, the Port Pass of the driver shall be suspended pending re-engagement by an alternate FSO. e) Enact a policy that when an FSO directly engages an O/O as part of an FSO’s fleet, the TLS issued to the FSO for the O/O truck be restricted exclusively to the designated FSO and only for the period the O/O remains with the FSO. f) Require the TLS to be removed by the FSO upon termination of an O/O services. g) Permit an FSO to add O/O’s and Company trucks to their fleet in order to effectively manage peak demands, business growth and to be able to respond to the changing drayage dynamics of customer requirements. h) Consider the merits of switching the TLS license fee from a fee per truck to a fee per container for all containers that transit in/out of the port by truck. Such a change would provide a more fair and equitable methodology for the distribution of costs on all containers that transit the port by truck.
In our opinion, the TLS license issued by PMV should be UNIVERSAL in its scope and application for all trucks. All TLS trucks must be able to perform local or long haul work as required by the FSO in managing their business. This will provide the flexibility needed by an FSO to deploy their truck fleet more efficiently, provide assured daily work for all trucks and reduce operating costs by enabling the FSO to use their entire truck fleet to perform a combination of long haul and local transactions in step with daily requirements.