Equipment finance executive sees mid-market firms evolving their business practices
The operators in the small to medium enterprises (SME) sector of the trucking industry have taken its efficiency to another level to stay afloat in difficult times, according to a finance expert.
Company failures amongst the cohort below the biggest transport and logistics concerns have failed to soar, despite the increasingly challenging market conditions on both sides of the country.
“Those folk are just so resilient, they’re tough as nails,” Kirk Purchase,
Executive Director Northern Region at GE Capital Equipment Finance, says.
Purchase believes the owner/driver segment has borne the brunt of increased financial and regulatory pressures and in many instances been overwhelmed, while the mid-market has had enough management resources and time to update its business practices.
“Where they’ve made an open commitment to safety and tried to drive as much cost out of their businesses as possible, they’ve kicked on and, in fact, grown,” he says.
Added to that has been a more rational line with customers regarding sustainable business.
“If they were turning over $20 million and they had $4 million of revenue with one customer and that customer want giving them a rate rise or wasn’t paying a fuel levy, the clever operators have gone to that [type of] customer and said, ‘I can’t continue to do this; this is the rate that I need to continue to do your work and this is the fuel levy I need to do your work given that we’ve got the fuel rebate washing off’,” Purchase says by way of example.
Amongst the six companies a week he sees many have been “pleasantly surprised” to have been making more money as a result of this approach.
This more sophisticated approach has led to operators exploring other cost reduction strategies, including reduction in average speed and therefore fuel burn.
Such companies are negotiating with customers for route and delivery-time optimisation where possible to reduce the effects of congestion as well as strategic use of contractors for particular runs.
Other tactics Purchase mentions include use of on-site fuel and discussing quicker payment times with contractors in return for reduced rates.
At a time when IT gains are being brought to bear on statistics and other information in northern hemisphere trucking, he reports that thoughtful Australian operators are on the same path, using ‘big data’ in overlaying the freight rating and seeing where the empty legs are and perhaps identifying customers that they wouldn’t normally achieve a pallet rate for but it’s better than running empty”.
“When you’re looking at a business that has four or five screens showing fatigue speed, fatigue and load optimisation happening, you have that confidence that they are in for the long haul,” Purchase says.