It’s no secret in Ottawa that rail service has been under scrutiny by the federal government- starting with the Rail Freight Service Review (RFSR), and then with the Dinning Report published earlier this year. These processes were undertaken as a result of shipper groups complaining to the government about the quality of rail service in Canada and the gap between customer satisfaction and service.
While these discussions have been ongoing for some years, legislation could be introduced before the end of the year to respond to the RFSR and to the Dinning Report, according to Transport Minister Denis Lebel.
This is an opportune time to bring interested parties up to speed on the reality of rail service today—as seen by railways, supply chain partners and customers themselves.
If we look back five years, it’s clear that railways needed to up their customer service game. At that time, all businesses were dealing with a pending recession and railways were busy adjusting to changing traffic patterns, as well as increased exports to markets that are served by ports, as opposed to U.S. destinations.
Railways were also changing their structure to adapt to pressure from the global marketplace, by finding greater efficiencies and decreasing costs in order to strengthen their competitiveness. These changes were substantial and have led to Canada currently enjoying two of the best railways in the world.
Even through the depths of the recession, Canada’s railways invested almost 20 per cent of revenues in capital equipment and their infrastructure to improve service.
However, the communication with customers was not always what it should have been. While a few of the changes would have been contentious no matter how well they were explained, we know that shippers were apprehensive about some of the measures railways undertook and uncertain about the direction they were going.
Fast forward to 2012 and a very different picture has emerged. Thanks to a combination of railway focus on the whole supply chain, coupled with deeper collaboration with customers and supply chain partners, Canada has a world class rail system to deliver goods across the country. According to shippers themselves, railways have seen a 50 per cent increase in customer satisfaction from 2008.
Based on figures from the World Bank and confirmed by the American Association of Railroads, we now enjoy the lowest rail freight rates in the world. For example, it costs less than $35 to ship a ton of grain from the prairies to the Port of Vancouver- (and canola is currently selling for over $600 a ton). Canadian rail rates are competitive with the U.S. and significantly lower than China and Russia, even though freight rail is heavily subsidized in those and many other countries.
Recently, we have seen a number of supply chain partners and customers, such as all four major Canadian ports, many terminals, logistics and even some forest products companies, write to the Minister of Transport to tell him that the system is now working well and that railways have anted up and delivered what was asked by the RFSR Panel. This includes collaboration agreements, information sharing, low rates and significantly better service, all delivered in a normal commercial environment.
These letters from customers and supply chains partners are significant and demonstrate that trust has been developed. They underscore that customer concerns can be answered in the marketplace without the need for additional regulations (there are already comprehensive remedies for shippers who have disputes and railways in Canada operate under the framework of railway “common carrier obligations”).
If today’s commercial context is replaced with a regulatory framework, it could quickly erode that trust because information that is currently shared between railways and customers, such as status and availability of railcars, could be used against railways to force an “agreement” that will impact other customers. So, the unintended consequence of regulation may very well be to stop the positive momentum we have seen these past few years in its tracks. A regulatory approach could stifle the innovative solutions we have seen from the marketplace, reduce supply chain efficiency and negatively impact Canadian railways and their customers.
It is time to acknowledge that the Rail Freight Service Review, the facilitation work done by Jim Dinning and the related calls for customer service improvements have worked very well.
Any new regulatory approach will not replicate the commercial marketplace- no matter how well it is written. Some important stakeholders have suggested that we pause for a couple of years until the Canadian Transportation Act is reviewed as per statute. In the meantime, all stakeholders could expect railways to continue to improve service, innovate and invest in Canada. This may well be the wisest policy stance under the circumstances.
Michael Bourque is the president and CEO of the Railway Association of Canada. You can follow him on Twitter @BourqRail
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