EDITORIAL: Keeping up with costs the big management challenge

By: Jason Whittaker

Date: 24.07.2008

Seventy percent of trucking operators now spend at least 40 percent of their operating budgets on diesel, according to a

Seventy percent of trucking operators now spend at least 40 percent of their operating budgets on diesel, according to a poll on the ATN website. Forty percent of operators, of the more than 100 who responded to the poll, spend over half on fuel.

The result is a startling reminder of how much the truck operating environment has shifted. In the three months to June alone diesel costs skyrocketed some 27 cents across the country.

The great difficulty is not so much the rise itself, but the speed in which it’s happening. The contract negotiated last week will not cover fuel costs for the following week.

For over a decade ATN has offered its readers a reliable cost index to track operating costs quarter-by-quarter. It remains an independent and credible source on operating budgets and rate structures.

But it is vitally important operators input their own costs into the model. The database will only truly reflect the movement in costs if you tell it how much money, and what percentage of your budget, you are spending on individual items like fuel, wages, depreciation, etc.

Some customers and prime contractors have used fuel costs set at 30 percent of a typical operating budget to justify minimal rate increases. This is deceptive and downright immoral.

The index measures average costs across the quarter – the fuel figure, for example, is the retail price averaged across capital cities for the three months. It does not represent the highest cost of diesel throughout the quarter, nor the current cost of diesel post-quarter.

Costs are moving too quickly for operators to be locked into inflexible long-term contracts. Fleet owners need to negotiate increases regularly to keep pace with the volatile price movement in fuel, using sources like the ATN-PKF Truck Operating Cost Index to map where operating costs are moving.

We cannot make the case for you. Only you know how much you’re spending on the business, and only you can present a rational argument to customers for profitable and sustainable compensation going forward.

That, sadly, is the only secret to managing a business in this very new operating world.

What do you think? Send us your feedback.