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Transportation trends 3 min read

What's on the horizon for Canada's transportation industry: trends and insights from CWB's expert

Understanding your cash flow is crucial at any point, but it's especially important during times of change.

Like a harried commuter paused at a red light, Canada’s trucking industry is in “watch-and-wait” mode after years of turbulence spurred by COVID and changing consumer demand, one of CWB’s lead industry lenders, Arjun Uppal, says.


The background: sharp turns since 2020 

Canada’s 100,000-plus logistics and transportation companies – the majority of which crisscross the continent carrying freight in trucks and trailers – have been riding a roller-coaster of ups and downs since 2020.

That logical cautiousness is a dramatic shift from the early years of the pandemic, which saw hauling prices soar as e-commerce changed the market, durable goods became more scarce, and supply chain snarls choked deliveries around the world.

Canadian entrepreneurs responded by investing heavily: in equipment, in land and office space, and in hiring.

“There was so much opportunity for transportation companies to grow,” says Uppal.

“Some freight rates multiplied three-to-five times. The numbers of trips went up. Companies started buying trucks and trailers.”


Impacts of economic shifts on the industry

By 2023, as Canadians returned to bricks-and-mortar retail and inflation cooled what demand remained, the outlook had changed. The bankruptcy in August 2023 of American trucking mainstay Yellow Corp. showed even the continent’s giant operators weren’t immune to the downturn.

“Canada’s bigger players are best-positioned to weather some of these cracks, but even some of our major companies are feeling the pinch. Like everyone, they’re waiting to see what the Bank of Canada does with interest rates, and when,” Uppal says.

“Some companies have seen their interest-rate costs double, if not triple. A lot of loan facilities are linked to prime, and that has had a real impact on margins.”

Uppal says he and his CWB colleagues have seen some consolidations in the industry – bigger companies snapping up smaller operators – and even some established players have ceased operations.

But there are green shoots on the horizon, the banker says.


Reaching a pivot point

“We’re seeing equipment costs start to stabilize. Inflation seems to be steadier, which is good news for fuel prices. We could be at a pivot point where more aggressive and fearless operators start to expand,” Uppal says.

“If you have good data, good liquidity, a good understanding of cash flow, you have a better chance at being the last operator standing and the first operator forward.”

That understanding of cash flow is crucial.

A recent CWB white paper on the importance of modernizing cash flow management revealed that nearly half of Canada’s small- to medium-sized businesses – including those in the transportation industry – manage cash flow manually, with spreadsheets and paper records. Six in ten Canadian businesses have had challenges managing cash flow.

The white paper suggests most operators understand the benefits of automated digital tools but, as Uppal says, it’s difficult to invest in substantial changes when day-to-day margins are tight.

“Our customers are savvy. They understand the benefits of long-term investment in digital technology. But when those decisions are up against short-term survival, the long-term view gets deferred.”

Keeping up with the changes

Among Uppal’s customers, investments in new tools often didn’t keep pace with the demands of frenetic growth early in the pandemic.

“If you had an operation with two or five trucks, perhaps it was enough to have one person in accounting managing it. But when you’ve grown your company, quite quickly, to 100 trucks, and you’ve invested in a new yard, it’s so important to invest in knowledge,” he says.

“Automation ensures the most relevant numbers are front and centre. You shrug off human error and you gain insights and a path to better decisions.”

If an operator does transition to digital tools, a trusted lending partner can be there to help keep the business’s goals on track and to point the data and technology in the right direction.

Even more specifically, Uppal says, banks can respond in uncertain times with nimbleness and flexibility. Paying close attention to seasonality – upping lines of credit when freight lanes ramp up and drawing credit back when business is slower – is just one way an expert lender can help.

“We don’t come up with these solutions overnight,” he says.

“It takes years of watching the industry and the business itself before you can work closely with a customer, roll up your sleeves, dig into the business plan and really lean into understanding their needs. It’s a complex space right now and we’re here to help owners make sense of all of it.”