The survey released this week by ANZ analysing the trucking industry shows us the smaller operations in the industry need to start getting smarter. As margins are squeezed by the general economic conditions, the big boys in the industry can afford to wait it out and take a lower margin in their overall business.
For the smaller business, this is not an option. There is not enough fat in the job and cash flow is constantly under pressure when the fleet has fewer trucks. Trucking is such a high revenue/low margin business the smaller operator is constantly trying to get invoices paid just to be able to pay the wage bill, fuel bill and truck repayments. The margin for error is very small.
At the same time the big fleets probably buy their trucks cheaper, get a few cents a litre off their fuel and can spread costs over many sites to get a lower average. The decks are loaded against the small guy on just about every level.
Add in the cost of compliance and accreditation, plus permits and registrations, and you have higher outgoings again. Someone with 15 trucks probably needs at least one person on the compliance tasks full time, just to stay out of trouble. You can bet your bottom dollar the fleet with 1,000 trucks doesn’t have a compliance officer for every 15 trucks.
The big corporate customers prefer to deal with the big trucking operators on their contracts. The big fleet can be a one-stop-shop for all the company’s logistics needs and there is only one supplier to audit in terms of chain of responsibility etc. As a result, the smaller operator may still do the work, but as a lower paid sub-contractor, or even as a subbie to a subbie to a subbie.
With all of the odds stacked against them the small operators still keep going and still represent a large proportion of the trucks on our roads. How do they do it? For some it’s simply a matter of holding on for grim death, gritting their teeth and just surviving.
However, there is a group of operators who have worked out how to survive, while fighting this uphill battle. The answer is to get smart, offer a service the big boys can’t, to operate in a niche where the big fleets struggle to be able to operate and get their normal margin out of it.
There are countless operators out there who have found an area where the customer cannot get the right kind of service they are looking from a big anonymous national operator. If they offer the right kind of service then the customer is willing to pay a premium. They may be looking for a better presentation at the end-user delivery point. They may need more flexibility and the ability to drop everything and get the job done ASAP.
There is also that innovative streak in the trucking industry. Work out a way to deliver freight more effectively by developing a trailer design or inventing new loading equipment, to improve productivity.
In the trucking industry of Australia we have a great tradition of small smart operators coming up with new ideas and making a more than a few dollars out of it. The surveys may be telling us the trends are heading towards the big fleets, but we need more of the smaller fleets to buck the trend and get even smarter.