Understanding costs a must to survive

VTA says transporters need to understand their costs, as McColl's laments the number of businesses falling over

Understanding costs a must to survive
Understanding costs a must to survive in trucking

By Ruza Zivkusic | May 27, 2011

Transport businesses need to understand their costs if they are to survive rocky times, a conference organised by the Victorian Transport Association (VTA) was told.

The 2011 VTA conference, which was held in Victoria’s town of Creswick this week, saw more than 160 industry members attend.

VTA CEO Phil Lovel says the aim was to educate members how to understand their costs, monitor fuel prices and interest rates and keep track of their compliance costs.

"The conference has come at a very good time but a lot of smaller companies were missing," Lovel says.

"They should have been there but the problem we have is that they’re so busy in their own business for them to get outside and have a look at what they can do is very difficult for them.

"What happens is that their external account becomes very important for them and they have to understand some of the transport industry issues of costing, cost of recovery, fuel levies, compliance and make sure they build those costs into their rates."

Reflecting on
the receivership of road haulage group Viking, McColl’s Transport CEO Simon Thornton says the industry is becoming a field of broken dreams.

"Why are companies failing? It’s all to do with people but the four key things according to me are: poor cost control, poor cash management, poor risk management and poor commercial analysis," Thornton says.

"My experience is not many people have taken much time to think about their real costs. As an industry we are underquoting the work we do and don’t recognise the costs and therefore we don’t make enough to survive."

Understanding the rules of thumb of operations is crucial, he adds.

"McColl’s had challenges with safety three years ago rolling a lot of trucks. We then brought in strict driving rules and we now have 100 percent check log sheets where drivers are forced not to drive too many hours."

The company also drugs tests 20 percent of its drivers.

Murphy Transport Solutions CEO Brendan Hopley says "you can’t manage what you can’t measure".

"Stick to your knitting and keep doing what you do well," Hopley says.

"You need to ask how sustainable your business will be in 30 years time."

Brian McNaught from SCT Logistics says companies also need to consider rail.

"Rail is the most cost-effective mode of transport and is 10 times more energy efficient than road transport. A lot of people are saying we have reached peak oil and expect high fuel costs. Rail will become more viable on shorter hauls and lower volumes – we need to consider that when looking at the logistics chain," McNaught says.

During the conference, Rodney Brown from Central Victorian Transporters in Maryborough called for costly fines for minor work diary offences to be addressed.

"Failure to tick a box or write the rego down at each stop can cost you up to $700. Drivers are leaving the industry as they just don’t want to risk it or have been fined so heavily," he says.

Hopley says more cadetships need to be on offer to young people who want to join the industry, which is struggling to attract drivers.

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