Live at The Pond: Five Questions for Guillaume Pelletier

Thomas on Dispatch – Guillaume’s 16-month old son

Harderblog recently caught up with reload operator extraordinaire Guillaume Pelletier, Vice President, RCP Transit Inc.
Dakeryn Industries has enjoyed a strong working partnership with RCP Transit since 1995.

1) How have Electronic Logging Devices (ELDs) impacted truck capacity at RCP Transit?
Right now, we’re handling the same volume as we were doing before the ELD – but differently. Drivers can’t lose time anywhere, they’re running like crazy! As soon as they move the truck, the clock starts; they have 14 hours to complete their day (11 hours of driving + three hours work/on-duty). It’s changing the way they’re driving.

2) Changing in what ways?
Before ELD, drivers could stop to eat, take a shower, do maintenance – now they need to sleep 10 hours in a row! I never sleep 10 hours! I used to have 9 out of 10 drivers sleeping in their truck – now I have three out of 12. And we need to pay extra. Truckers are leaving the reload earlier in the morning, deliver by noon, p-up their log and come back home by 17:00/18:00. My mechanic needs to work overnight or on the weekend. I need more trailers since we don’t have anyone to load at night anymore. I had to hire an extra local driver only to deliver all the back hauls. It’s costing big money.

3) In the face of the ELD mandate, what is RCP Transit doing to be a “U.S. truck shipper of choice”?
We have changed the way we dispatch – it’s hard to explain. Overall, improved communication with customers. Our hours of service for truckers have been fully optimized. It’s more work on the dispatch side, but we have good partnerships in place.

4) How about freight rates?
We’ve been running with the same freight rates out of both our reload locations in Coaticook, Quebec and Island Pond, Vermont, for almost five years. But last week we announced higher freight rates effective June 1st. We probably should have increased rates six months ago, but our goal was to run with the existing rates at least through Q1 to accurately determine what was needed. We want to stay as competitive as possible to continue to grow the business – but waiting until now to raise rates has cost us significantly more then I was expecting! With our trucking company, we were probably short $80,000 for the first three months of the year. We were expecting to handle 20% less loads per week, but that never happened. So we’re handling the same number of loads, but driver salaries are up 20%, our insurance costs are up 30%, and fuel is going totally crazy! Unfortunately those expenses are out of our control.

5) Any shipping relief in sight?
There are fewer truck drivers every year. People are desperate for trucks! Right now there is such a shortage of trucks, people are calling us non-stop everyday. You wouldn’t believe it! We cover one out of every five loads we’re offered. It’s not easy refusing business everyday. The worst part is I am losing my broker. And prices continue to climb. For example, Montreal to Plainfield, CT a truckload of steel pays around $2000.00. How can we compete with that?

Related: America doesn’t have enough truckers

RCP Transit’s Reload in Island Pond, VT

11 Questions for 2018

Here are 11 questions that Harderblog will be watching in 2018, in search of answers:

1. Will rhetoric of military strike pass the ‘tipping point’ into war with North Korea?
2. Will the Bitcoin excitement be fading, or prove to be a bubble?
3. Will the extreme weather patterns evidenced in 2017 be as pronounced in 2018?
4. Will Trump take steps to call a halt to the special prosecutor’s investigation into Russia’s interference in the 2016 U.S. presidential election?
5. Has integrity lost some of its lustre as a perceived prerequisite for leadership success?
6. As higher lumber prices effectively offset impact of duties, will Canadian major producers’ newly-hedged investments in U.S. production assuage any further concerns companies such as West Fraser and Canfor might have about the ongoing Softwood Lumber dispute?
7. Will Germany repeat as FIFA World Cup champions?
8. Will the powers that be acknowledge that the remanufacturing (value-added) segment of the Canadian forest sector is being unfairly penalized in the application of the AD/CVD?
9. Will softwood lumber be incorporated into NAFTA?
10. In view of the fractured supply chain, will lumber buyers abandon the “just-in-time” model in favour of securing coverage that satisfies longer-term projected needs?
11. Will broccoli, the least-trusted vegetable of 2017 among lumber traders and the general population, retain that notoriety in 2018, at the same time as the world watches broccoli’s favorability surge to number one in Scotland?

Corrections

Markets have a way of redefining terms of the trade. Hot markets lend tolerance to ‘prompt shipment’. Market corrections, not so much. These days, ‘just in time delivery’ comes with caveats such as ‘subject to availability of trucks’. Market conditions present unique challenges to guarding supplier/customer relationships. Some have suggested that markets, like politics, frame questions of definition around who holds the power. In some instances, that is known to shape performance strategies in relation to commitment around short run versus long run considerations. It’s suggested that the transactional approach is not the most desirable for building enduring relationships among customers or voting constituents. A favourite response from one supplier known to be under pressure on late shipments: “In the end we’ll all get to heaven”. We’re in it for the long run, but we appreciate that even our most valued, understanding customers’ patience is stretched when lumber ready for delivery is awaiting wheels.

IMG_5330

Saint John, NB (20 Nov 2017)

 

Can’t See the Forest for the Trees (Guest Post)

I have to admit, I am not smart enough to totally understand all the concepts within the softwood lumber dispute. It is beyond me how a small group of people (U.S. Lumber Coalition) can continually try to hold a whole country hostage in spite of the fact that International Courts have proven them wrong time and time again.

It is also beyond me how the U.S. Department of Commerce can not only continue to support what seems to be a money grab but also seem to be able to differentiate the amount of alleged damage each company has contributed to the U.S. Lumber Coalition through mysterious, arbitrary numbers and selective testimony.

Be all that as it may, everyone both inside and outside of the industry understands that the only real damage being done is to the little guy. It is not a shock that this continued dispute only drives up the price of lumber to both U.S. and Canadian consumers and all the while the rich guys on both sides of the border get richer.

What my simple mind does find shocking is that with all the smart people involved in this process, nobody is talking about the “unintended” consequence of the anti-dumping and countervailing duties (AD/CVD) as it is applied.

In March of this year, I had a long conversation with Wendy Frankel, Director, U.S. Customs & Border Protection Liaison Unit, International Trade Administration (ITA), U.S. Department of Commerce (DOC). I took great pains to explain to her that by applying the AD/CVD on the selling (border) price, the DOC is actually subsidizing the U.S. Secondary Remanufacturers as opposed to creating a level playing field. Applying the AD/CVD to the first mill price would be far more appropriate as that is where the alleged damage exists and it would not affect the competitiveness of the secondary market. Ms Frankel was clear that subsidizing the U.S. remanners was not the intent and I will try to take her at her word.

The math is simple:
A Canadian independent remanner buys 2×8-20’ SPF on the open market from a mill in B.C. at $639/M delivered Vancouver. This remanner turns that wood into 2×8-20’ Fascia Combtex Prime and sells it to a U.S. customer for $1000/M. At the rates announced November 2nd in the final determination, the Canadian company will pay approximately $208/M in duties (calculation simplified for presentation) thus “grossing” $153/M before processing costs. A U.S. remanner buying the same lumber and selling to the same customer at the same price would pay $133/M in duties thus “grossing” $228/M before processing.

It seems undeniable to me that this significant difference is a clear subsidy.. a subsidy that would not exist if the duties were applied to the first mill price.

Since my conversation with Ms Frankel in March, I have approached fellow remanners (too expensive to fight), industry associations, and Government officials and nobody will take the time to have the conversation with me (although one individual did offer to meet me in the parking lot for suggesting he was not doing his job).

After all of that, I am left with a few questions:

1. Is this dispute legitimately about levelling the playing field – or just a recurring disguise for greed?
2. If somebody like me who admittedly is not the sharpest knife in the drawer can see this so clearly, why can’t the smart people?
3. Do the negotiators actually see the consequence – but both sides are holding ‘first mill’ as a negotiating point in spite of the fact that it was the basis of taxes in the previous agreement?
4. Do politicians just accept that there will be collateral damage in disputes like this and are willing to potentially sacrifice the small independent remanufacturers?
5. Am I missing something?

I guess only time will tell.

Roy Falletta, VP Finance & Administration
Dakeryn Group of Companies

Gig Economy

Who knew? A recent study predicted that by 2020, 40 per cent of American workers would be independent contractors. We’re told the switch to gig work is first and foremost about employers moving to what is efficient for them. Here in Canada, 85 per cent of companies recently surveyed figured they will increasingly move to an “agile workforce” over the next few years. It’s part of a “gig economy”.

The “gig economy” is an environment in which temporary positions are common and organizations contract with independent workers for short-term engagements. For lumber types, this may conjure images of portable sawmills and seasonal workers in the woods. For some lumber traders, the concept smacks of impermanence and flies in the face of marketing effectiveness that pays homage to building longterm relationships. Even so, the gig economy finds shared identity in today’s world of transactional strategies and realpolitik.

 

~Tricks and Treats~

The coldest air of the season is flowing into Western Canada today, but a beautiful starry night’s in store for Vancouver this evening. At our house, pretty sure we’ve managed to turn our pumpkin inventory 8 times since Labour Day. A quick check of the 25 Horribly Inappropriate Halloween Costumes for Kids confirms Dorothy, Toto, and this Dad are all good to go. Happy Halloween!

The Art of the Deal

By definition, lumber traders earn their living through negotiation. Most days, the process is more nuanced than “buy low – sell high”!

Trade deals involving negotiation are making news on many fronts these days. Online articles readily offer varying principles, guidelines, and rules for effective negotiation. One such report in the Harvard Business Review offers what the author terms “four ‘golden rules’ to be the most helpful towards productive negotiation outcomes.”

Some have been known to describe successful outcomes around strategy of ‘winning versus losing’, or characterizing established trade deals as “the worst ever”. However, experienced lumber traders know that successful long term customer-supplier relationships, as with international trade deals, are built on effective “win-win” negotiations.

Current NAFTA negotiations are taking shape around what has been described as a list of ‘demands’ from the parties involved. While noises and threats of cancelling NAFTA eminate from some quarters, serious folks tell us to keep focus on the real work of negotiations that recognize there are benefits to be gained for all in working toward effective updating of the deal. Thus the ‘golden rules’ as spelled out in HBR that parallel different stages of a negotiation are interesting to view in the light of negotiations underway on many fronts.

1. The background homework: This serves as a good reminder that any beginning of negotiation calls for need to understand the interests and positions of the other side relative to your own interests and positions.

2. During the process, don’t negotiate against yourself: It’s pointed out that this is especially true if you don’t fully know the position of the other side. This is a recommendation not to give in too early on the points important to you. Wait to better understand which points are more important to the other side.

3. The stalemate: We’re told that there will often come a point in a negotiation where it feels like there is zero room for either side to budge. Both sides are stuck on their position and may have lost sight of the overall goals of the negotiation. If you recognize that you’ve reached this point, see if you can give in to the other side on their issue in exchange for an unrelated point. My Dad relates the story of how my parents negotiated the sale of their first home in Prince George 52 years ago, when a transfer back to Vancouver by his wholesale lumber employer, Ralph S. Plant Ltd, necessitated sale of the home. When negotiations seemingly reached a stalemate over price, Dad recognized that the unfinished basement in the home had been mentioned as one of the sticking points. The prospective buyer, a self-described handyman, was satisfied to point of successful closure on the sale with offer from my Dad to include a trailer of fine Carrier studs, sufficient for completion of the home’s basement.

4.To close or not to close: That is, whether you drive too hard a bargain, cannot reconcile on key terms, or feel that the deal is just too rich for your blood, it’s suggested you “make the offer you want to and let the other side walk if they don’t want it.” This is not to say to be offensive or to low ball, but rather, to be honest, straightforward on what you are willing to do, and explain that you understand if it doesn’t work for them and that it is the best you can do.” No doubt this rule garners respect among all parties involved, including buyers and sellers of wood.

Aspirational Lumber Labors

A social media article at Quartz this week categorizes blogging as aspirational labor. Social media researcher and author Brooke Erin Duffy describes ‘aspirational labor’ as “a forward-looking and entrepreneurial enactment of creativity.. seen as something that will provide a return on investment.” Broadly speaking then, we might comfortably frame our work trading lumber under the umbrella of ‘aspirational labor’.

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Influencer Marketing?

The degree to which intermittent posts at Harderblog are “influencers” on a road to personal riches, so far at least, is undetermined. We mostly share questions and topics gauged to hold common interest with our 135 followers to date – valued subscribers who include Mom and Dad, two uncles, and my cousin Dean. According to “influencer marketing” experts, a blogger needs at least 1,000 followers to be considered a “super blogger” or “super influencer”. At this lofty subscriber level, we’re told advertisers come calling. It’s much cheaper for a brand to reach out to a super blogger’s “organic following” than it is to place an ad in a magazine or on TV. The article at Quartz cautions that there are risks in abandoning your blog for a week, or “you see a huge dip in your followers”.  It’s a risk we accept as a part-time blogger, and full-time lumber trader.

 

Subscribers? Brother Matt, Nephews Cal and Seb, Paul – Quilchena on the Lake (4 Aug 2017)

 

~~~
Musical Refreshment

Project Funkify continues:

What’s wrong with this picture?

We’re told that “rising material costs” were a significant factor in the wake of 51% of U.S. home builders raising prices last month. This according to surveys conducted by John Burns Real Estate Consulting, noting this ratio marks only the second time in the last 10 years more than half of new home communities raised prices – the highest rate since the dramatic surge in U.S. housing prices in 2013. Meanwhile The Economic Calendar reports here that “cost pressures” can help to explain why housing starts and permits have been relatively uneventful over the past few months. The National Association of Home Builders (NAHB) suggests that this trend of firming confidence in the face of underwhelming housing data is liable to continue due to “supply-side issues.”

Aside from unprecedented seasonal B.C. wildfire impact on lumber markets, restricted fibre supply looms on the horizon. At the same time as questions of housing affordability challenge builders and consumers across the continent, does it make sense for narrowly defined interests of The U.S. Lumber Coalition to seek further price-increasing tariffs on lumber imports?

Some of the groups that are hurt by foreign competition wield enough political power to obtain protection against imports. Consequently, barriers to trade continue to exist despite their sizable economic costs.
The Concise Encyclopedia of Economics

More: Canadian Wildfires Choke Lumber Supply to U.S. Home Builders – WSJ

Close?

While industry spokespersons are being tight lipped about progress in softwood lumber negotiations, rumours abound.

Last Friday, word circulated that Canadian Minister of Foreign Affairs Christina Freeland and United States Secretary of Commerce Wilbur Ross “shook hands” on a ten year Softwood Lumber Agreement restricting market share. This rumour seemed to be congruent with perceived political motivation to achieve a managed trade agreement ahead of potential NAFTA negotiations. By Monday however, a declared state of emergency due to mega-fires in B.C. superseded quota chatter. Then CIBC Capital Markets cautioned that any proposed settlement could be vetoed by the U.S. Lumber Coalition. The rumour fizzled Monday afternoon when in a Madison’s Lumber Reporter follow-up, we were told a source close to the U.S. Lumber Coalition had cleverly confirmed that Minister Freeland and Secretary Ross “surely shook hands” on Friday but “did not shake hands on a deal”. In an update just this afternoon, CIBC Capital Markets noted the framework of the rumoured “handshake deal” was almost identical to a proposal the two sides were reportedly close to agreement on two weeks ago before it was rejected by the Coalition.  CIBC estimates the probability of an agreement between the two countries by the end of August at “greater than 50%”.

~

As recently as last Thursday, the only talk about forest fires in this province was about how few were burning (“three or four”). Suddenly 140 fires started Friday, followed by nearly 100 more Saturday, and a few dozen more Sunday. It’s interesting to learn here how a below-average fire season in 2016 and an unseasonably wet spring in 2017 may have made the forest more susceptible to fire, fueling the unprecedented spread over the weekend. Mills watch with anxiety as the wildfire season, just begun, is impacting Interior communities and forest operations. The Vancouver Sun reports West Fraser, Tolko, and OSB manufacturer Norbord are among the companies that have suspended operations around 100 Mile House and Williams Lake, with 1,000 employees from West Fraser alone off work due to the closures.

Robots and Lumber Traders

Robots are increasingly being blamed for job losses these days. At the same time its been said that robots can’t perform as well as humans when it comes to “complex social interactions”. According to Science Daily, researchers recently found that personality factors are the best defence against losing your job to a robot.

Humans outperform machines when it comes to tasks that require creativity and a high degree of complexity that is not routine. As soon as you require flexibility, the human does better. The edge is in unique human skills.
– Rodica Damian, assistant professor of social and personality psychology, University of Houston

In assessing the threat therefore that robots pose for replacing lumber traders in the marketing function, could it be that the critical determinant may involve evaluating the degree to which lumber trading is deemed to involve “complex social interactions”?

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We’re told the study’s findings also suggest that traditional education may not be fully equipped to address the rapidly changing labour market. With that in mind, I read with interest Thomas Friedman’s column in today’s New York Times, Owning Your Own Future. Friedman argues that in the face of automation (“accelerations set loose by Silicon Valley in technology and digital globalization”), the self-motivation to learn – and keep learning – has become the most important life skill. He quotes education-to-work expert Heather E. McGowan: “Stop asking a young person WHAT you want to be when you grow up. It freezes their identity into a job that may not be there. Ask them HOW you want to be when you grow up. Having an agile learning mind-set will be the new skill set of the 21st century.”

Political analysts will long debate over where Brexit, Trump, and Le Pen came from. Many say income gaps. I’d say.. not quite. I’d say ‘income anxiety’ and the stress over what it now takes to secure – and hold – a good job. The notion that we can go to college for four years and then spend that knowledge for the next 30 is over. If you want to be a lifelong employee anywhere today, you have to be a lifelong learner.
– Thomas L. Friedman, New York Times (11 May 2017)