Operating Costs of Trucks In Canada 2005

Logistics Solution Builders Inc is responsible for the accuracy of data and analysis contained in this report. The information presented does not necessarily agree with the views of Transport Canada.

Transport Canada File Number: T8080-05-0242
Logistics Solution Builders File: LSB 2005-08

Table of Contents

EXECUTIVE SUMMARY

1.0 INTRODUCTION

1.1 Goals and Purpose

1.2 Vehicle and Freight Configurations Investigated

1.3 Current Issues In Trucking

2.0 COST TRENDS

2.1 Cost Component Trends

2.2 Resulting Over-All Truck Operating Costs

2.3 Cost Proportions By Component

3.0 APPROACH

3.1 Overview

3.2 Vehicle Configurations and Equipment Life Cycle

3.3 Assumptions

3.4 Cost Components

3.4.1 Driver Costs

3.4.2 Fuel Costs

3.4.3 Repair Costs

3.4.4 Cleaning Costs

3.4.5 Transport Costs

3.4.6 Tire Costs

3.4.7 Depreciation Costs

3.4.8 License Costs

3.4.9 Indirect Costs: Administration, Interest, and Insurance

3.4.10 Operator Profit Margin

4.0 FINDINGS

4.1 Basic Cost Findings

4.2 Gravel and Winter Operations

4.3 Longer Haul Trucking In Canada

4.4 Canadian and US International Corridors

4.5 Owner Operator Trucking Options

4.6 Use of Rail Intermodal For Line Haul Trucking

EXECUTIVE SUMMARY

This 2005 edition of Operating Costs of Trucks in Canada is the latest edition in a report series sponsored by Transport Canada since 1972. Prior editions are available from Transport Canada. The most recent prior edition is the 2003 study.

The current report presents activity based cost estimates for truck operations in various North American jurisdictions:

• Every Canadian Province as well as Yukon and the Northwest Territories.

• Five US Regions.

• A Longer Distance Inter-provincial Canadian East-West Corridor.

• Three Longer Distance International Canada-US Corridors (West – Central – Eastern).

Cost levels reflect 2005 mid year or annual weighted average prices for trucking industry inputs in major population centers within each region for a mid-size trucking operation (25 to 500 vehicles in a fleet).

In addition to investigating trucking operations, the report also compares door-to-door truck transportation services to rail intermodal Container on Flat Car (COFC) and Trailer on Flat Car (TOFC) services for short, medium distance and long distance transportation.

Major Trucking Industry Input Cost and Price Comparisons

Key factors that changed trucking industry costs from 2003 to 2005 are:

• Canada’s currency has been revalued upward by 13.5% compared to US currency, a compound annual increase of 6.5% per year.

• International prices for crude oil have been rising substantially, driving annual diesel fuel cost escalation at a 12% compound annual rate of increase in Canada and a 26.2% compound annual rate of increase in the US.

• Wage increases have trended upward since 2003, partially reflecting a shortage of skilled drivers, at a 2.65% compound annual increase for US based drivers and a 4.9% compound annual increase for drivers in Canada.

Resulting from the foregoing and other input cost changes, overall operating costs of trucks have risen over the past two years as follows:

• Canadian regional trucking costs have increased since 2003 at a 2.8% annual compound increase rate.

• US trucking costs from 2003 to 2005 increased even more substantially than Canadian costs, however when restated in equivalent Canadian $ terms, they remained relatively constant between the two years. This reflects the 13.5% upward revaluation of the Canadian dollar, in relation to the US dollar, for this time period.

The case study trend comparisons in question are for similar vehicle configurations operating at the same relative level of productivity. Thus cost trends do not directly reflect possible productivity gains that may be occurring through increasing average payload utilization or by increasing the average annual utilization of vehicles (hours worked, or kilometres traveled per vehicle) by the trucking industry.

More specific underlying component cost trends for equipment purchase; wages, fuel and licensing components are provided in the main body of this report.

Detailed presentation of the case study methodology and assumptions follows in Chapters 1, 2 and 3 of the report, with summarized results of the various case study investigations presented in Chapter 4.

A detailed breakdown of specific cost components is provided in each of the case files for each province and region. These include:

• Intra-regional cases, include each province or US region. eg. BC, ALTA, etc.

• A set of Canadian long distance cases. CANEW which represents Canada-East-West, and

• Six International corridor long distance cases (INWESTCA, INEASTCA, AND INCENTCA for Canadian operators on these corridors) and (INWESTUS, INEASTUS, AND INCENTUS for US based operators on these corridors) as well as

• The two axle urban truck cases are in the file STRAIGHT.

The detailed case study files were provided to Transport Canada. These are available under separate cover.

Comparing Rail Intermodal and Direct Truck

Door to door transit times, transport costs and over-all logistics costs were compared for direct trucking and rail intermodal service on three corridors. For the short corridor, Toronto to Montreal (547 km), all costs were lower for direct truck. On the intermediate distance corridor, Toronto to Winnipeg (2084 km), transport costs for rail intermodal were lower – however total logistics costs (including provision for additional inventory needs and time value cost for money) favored truck if the trailer/container load was valued at $75,000. Winnipeg to Toronto slightly favored truck both in terms of transport costs or the time value aspects. The longer corridor, Toronto to Vancouver (4342 km), substantially favours rail intermodal services for both transport costs as well as over-all logistics costs.