Costs are running away from truck operators. Darting and weaving with such speed, such stealth, to be for some almost completely elusive.
Costs are running away from truck operators. Darting and weaving with such speed, such stealth, to be for some almost completely elusive.
The rise and rise of fuel prices has reached critical mass in the public consciousness. But what’s caught some by surprise, perhaps, is just how much that has eaten into operating budgets.
The majority of truck owners spend more than 40 percent of their budget on diesel, if ATN’s web poll of hundreds of readers is any guide (the record number of respondents is just one indication this is priority number one for fleet owners).
Worryingly, almost a third of operators are seeing more than half of their budgets handed over to the fuel companies.
That’s when things start to get very tight indeed.
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 per litre across the country.
It’s hitting hard. Queensland-based landscape supply carrier A&J Cartage tells ATN its fuel bill has blown out from $45,000 per month less than five months ago to $70,000 now (see August edition of ATN magazine). And that’s just a local operator.
“We just can’t make ends meet,” Director Anthony Cartwright says. “Fuel is digging into our profit and there is nothing left.”
One industry representative reckons at least five operators are going broke every week because they can’t pay mounting fuel bills — bigger and even high-profile names seem to be filing for administration every month.
The great difficulty is not so much the rise itself but the mercurial speed in which it’s happening. As a number of exasperated operators have expressed, the contract negotiated last week often won’t cover the fuel bill this week.
ATN’s Truck Operating Cost Index — designed by chartered accounting firm PKF and available as a downloadable spreadsheet from Fullyloaded.com.au — tells part of the story. With diesel even at 40 percent of overall costs, operators would have faced bills up to 10 percent steeper in the June quarter compared to the preceding three months.
But there’s more to the story. The index measures average costs — it’s unable to consider the day-to-day fluctuations in fuel prices against more fixed costs like wages and registration charges. Fuel prices swung wildly throughout the quarter, and climbed even higher in July.
The cost index (and others like it) remains a reliable and independent source on operating budgets and rate structures. But it can’t make the case for you.
As fuel bites harder, as the rebel owner-operators grow angrier, the finger is inevitably pointed at the most high-profile contractors and particularly at the big retailers. If they know who they are — and there’s every chance many have no idea the impact rate structures have on the carrier market — they should be ashamed.
The Federal Government has now tasked the National Transport Commission (NTC) to investigate remuneration and pay schemes in the transport industry. But it seems more a populist play with a hollow, familiar outlook.
Michael Quinlan, the academic who wrote the landmark study into trucking safety and sustainability and will now head this latest inquiry, will tell you almost nothing has changed in the half-dozen years since he wrote the original report. The cry will again come for mandated rates, but that’s even less likely to happen than significant fuel price relief.
The onus, however unfairly, is squarely on the individual operator. If running costs are putting the squeeze on you’re going to need to be flexible.
If the big retailer can’t pay you a profit margin don’t work for them. If the customer won’t review rates at least every month rather than every quarter then dump them.
To do that your customer base needs to be sufficiently diverse to ride the peaks and troughs of volume and rate movements. And the contracts with those customers need to be flexible enough to keep pace with fuel prices. The days of customer exclusivity and locking into long-term contracts may have gone.
Then it’s just about presenting the rational argument to customers for profitable and sustainable compensation for your hard work.
It may sound glib, but that, sadly, is the only secret to managing a business in this very different game.