How To Succeed In The Road Freight Industry
This is the second of a four part series that looks at four of Australia’s core industries – Mining Services, Transport, Retail and Manufacturing.
It is generally accepted that the road transport sector is dominated by three companies – Toll Holdings, Linfox and Scott Corporation – and heavily influenced by the multi-national manufacturers and retailers that contract their services.
However, it is important to note that the success of these transport companies is under-pinned by the sub-contractors to which they outsource the majority of their work. Over 85% of the road transport sector is comprised of independent sub-contractors¹ or SMEs.
It’s at the SME level that competition remains fierce, with success determined not only by price but also in terms of service and reliability. This is a difficult balance to maintain during the ‘good times’, let alone during the GFC, or following severe weather conditions such as those still being felt in many parts of Australia.
Demand for transport services is closely linked to economic activity – particularly manufacturing, wholesale/retail trade, and construction activities, all of which have suffered during recent years.
The flow-on effect to transport sector SMEs is evident in the following statistics:
In addition to the challenges of the GFC, economists predict that the flooding across Queensland and Victoria could cost the Australian economy up to $13 billion when lost production and infrastructure destruction are taken into account².
This will undoubtedly result in higher failure rates among sector participants as the impact flows to the road transport sector.
However, this also promises significant future opportunity for those businesses able to navigate current challenges (you might want to read Business Recovery: Where To After The Clean Up? for some useful tips). The road transport sector will be called on to support increased economic activity, particularly in the construction sector as post-flood renovations commence and developers make up for lost time on existing projects.
To ensure their business is one of the survivors, business owners and managers should now be focusing on strategies such as:
- A strong balance sheet – Careful management of working capital, asset utilisation and gearing levels are directly related to a business’ ability to absorb operational shocks or interuptions as well as providing a solid basis for future growth.
- Effective forecasting – A rolling 13 week cash flow forecast will assist in assessing a business’ ability to generate cash to fund current working capital requirements, as well as future acquisition or expansion plans in line with economic recovery.
- Utilisation Management – Extensive experience in fleet management is critical to maximising vehicle utilisation through recruitment of highly skilled staff and implementation of fleet management software.
- Industry Profile – Building a market profile and strong relationships with major industry players assists in securing ongoing assignments.
- Cost efficiency – Monitoring key costs through KPIs and performance dashboards enables timely identification of negative trends.
- Contract Term – Long term contracts can ease the strain of competition and are generally more cost efficient.
Happy strategic planning. In my next blog in this four part series, I’ll examine the retail industry.
Elizabeth Mawby was a former Client Director at Vantage Performance, Australia’s leading business transformation and turnaround firm – solving complex problems for businesses experiencing major change.
¹IbisWorld Report I6110: Road Freight Transport in Australia
² Australia Says Economic Cost Of Floods To Top Other, article, 18 January, viewed 31 January 2011, http://au.news.yahoo.com/world/a/-/world/8664531/australia-says-economic-cost-of-floods-to-top-other/