COMMENT: Brace yourself
Monday, 02 July 2012
With fuel approaching 40% of a road freight company's outgoings, Neal McBride of Hellman UK tells operators how to brace for more economic crises
The downturn came after six years of steady growth with Eurostat reports showing a 10% decline in 2009 compared with 2008. It was not until 2010 that the industry started to show some signs of growth.
For Denmark, France, Italy and Austria it was closer to 40%, and it was this decline that went hand in hand with the increasing competition within the industry.
Here we are in 2012 and anyone with a keen eye for transport would tell you that the current state of the eurozone could once again cripple the industry’s growth.
The fact of the matter is that it does not take a logistical genius to tell you this; the signs are there for everyone to see.
Spain is the latest country within Europe to get a bail out, which could perhaps give us an indication of the difficult times ahead.
For road freight companies to partake in steady growth, which is slowly returning to the industry, they must be more cost effective, more efficient and prove that their customer service is second to none with growing competition.
Matthew Marriott, Commercial Director of Hellmann Worldwide Logistics UK, has noticed several trends in the industry post-crisis and the main trend is maximising assets.
Hellmann, a leading groupage operator in the UK, has implemented several strategies to help grow its business while managing costs effectively.
Customers are ordering less and, in some cases, not at all and this seems to be the trend across all markets. With the industry seeing a small decline in April because of the uncertainty of the eurozone, could the groupage line hauls leaving the UK be going out lighter than usual?
On some key part-load accounts the loss on the line haul can be managed effectively as long as the right part-load accounts are used correctly.
Consolidating groupage with the part-loads has proven to be a key strategy when planning trailers for export so the losses are minimum or not at all.
There will, however, be other opportunities for groupage and part-load operators during the decline when customers order less and store fewer inventories.
Full-load operators will be hit the most as customers ordering full loads will order part-loads meaning part-load operators will lose out on customers now ordering smaller 1-4 pallet consignments.
Another major problem for full load operators is maximising profits on round trips. Back loads are essential and this is the same for groupage operators; knowing how to best plan space on the trailer is vital.
Technology can help freight operators to use their assets to their full potential and thus reduce costs. Full load operators might want to use software such as carrier net, which helps plan the best route for the journey and keeps operators updated on the progress of the vehicle in real time.
Groupage operators can also make use of several trailer planning tools in the market. These will help strengthen shipment control and have massive benefits when controlling costs and time constraints.
If these tools are used then companies will reap the rewards as the vehicles are used to their full potential. This has never been more important as rising fuels costs can wipe out profits if companies are not careful with their planning.
When I finalised my thesis on rising fuel costs and the effects on road transport companies, the impact was 30% of the total annual operating costs.
Now in 2012 the annual operating costs are at about 40%, which represents an all-time high.
Customers will always be on the lookout for a company who can offer a better service than their current provider but what they don’t always realise is that there is a cost associated with that service.
For transport operators to stay on a level playing field with the competition they must, before it’s too late, increase their utilisation and manage their costs closely to keep them as low as possible, all the while meeting expectations of demanding customers who are looking for ever increasing value for money.
They must keep a close eye on the competition, decide how best to manage the rising fuel duty and make sure the strategies that they implement are actually benefiting the organisation.
All this is easier said than done but the companies out there that will survive and continue to grow are those that implement smarter strategies and actually make them work.
- Neal McBride is Development Manager at Hellmann UK
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