Food for thought in 2014

The new year brings with it the need for a fresh look at the business of trucking. This is the time to set goals and look for new opportunities in 2014. The economic climate looks to be heading in a positive direction, albeit slowly, and there are signs of structural changes in the distribution of goods.

2014 Transport and Logistics Insights from Ferrier Hodgson tries to identify the kind of trends the transport industry needs to be aware of in the year ahead. Our industry represents 15 per cent of Australia’s gross domestic product, generating $201 billion each year with links to every aspect of the nation’s economy. Of this figure, road transport represents $48.3 billion in revenue for the 42,000 trucking operators in the country.

 

Three new opportunities are identified as important in 2014. An increase in the volume of agricultural exports to Asia is being predicted, with transport being a vital part of the equation. The growth in online shopping is having the effect of increasing the volume of goods being delivered direct to homes. Incoming containerised freight continues to rise at quite a pace following an 80 per cent rise in the past ten years.

 

As a result of these changes the trucking industry will have to adapt and grow to meet the challenge. Much of the new business involves large multi-national companies which tend to prefer to deal with larger blue chip operators and not small local contractors.

 

“Primary contracts are shifting to the industry majors who can demonstrate the advantages of global scale, competitive rates and freight visibility while demonstrating best-practice safety processes,” says the report.

 

The increase in online shopping does, logically, mean there will be a reduction in the number of freight movements in and out of distribution centres servicing traditional retail outlets. At the same time, new technology development continues to move ahead. Integration between business and their transport suppliers control systems often means more investment in equipment for the transport operator, either in vehicles or in the operations and billing control systems.

 

Fuel costs continue to rise and show no sign of ever going back down. At the same time, the reduced costs reckoned to flow from a National Regulator look like a long time coming, as disputes and hold ups continue. Add to this a shortage of skilled drivers and increasing traffic congestion in the capital cities, and the cost base for the industry remains difficult to quantify.

 

In their report, Ferrier Hodgson see good opportunities for smart operators who embrace change. However, there is a word of warning to mid-tier road operators struggling with difficult trading conditions and high levels of competition. They are squeezed between cheaper smaller operators and large competitors who can offer better customer service. As a result, they become price takers, reduced to sub-contractor status.

 

“Operators with a focus on establishing and maintaining a niche offering, bolstering their safety and compliance regimes, embracing collaborative networks and adopting new technology, will stand out from operators who ignore the challenges,” concludes the report.

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Author: Tim Giles

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