With the news about the decision to place Scott’s refrigerated logistics into liquidation after a meeting of its creditors earlier in the week, it does mean that there is going to be a Scott shockwave through the industry.
This is a very large operation to go down and and it’s going down owing a lot of people a lot of money. It has been losing a lot of money for quite some time. One report suggested it was recording monthly losses of $8 million dollars from 2021 until it closed.
The shock wave will come in several ways. One is simply the psychological shock of such a major major player in the refrigerated transport industry disappearing from the scene. Second of all, there is the shock within the supply chain about who will we be able to pick up the slack and handle the work as the freight task continues, with one of the major players missing. Three, there are all the subcontractors to the company who are regarded as unsecured creditors, and they’re going to struggle to get any money out of this liquidation process.
Although the shock will continue to reverberate through the industry, there may be a couple of things which may help. One is that there will be a large number of secondhand refrigerated trailers coming onto the market, which will be very useful for any operator wishing to pick up the work, which the Scott operation was handling
As we know the second hand equipment market has been running hot for the last couple of years. An injection like this may bring secondhand prices down to a certain extent.
Lessons will be learned from this liquidation and one that many in the industry will observe is the fact that a large proportion of the deals which have been done where institutions from outside the trucking industry have come in and purchased operations, then tried to manage them, have struggled to make the money they would normally expect out of a business investment.
People working in the trucking industry do understand the nature of our industry and set their projections are adjusted lower in terms of the return on investment calculation. This does mean they have to be very extremely careful with the capital they do invest in the business. Investors have to ensure that every single aspect of every investment makes a contribution to the profitability of the overall operation.
Perhaps this is the area where the large corporates who move into the trucking industry, look at businesses accounts, but don’t have a clear idea of just how tight the trucking market is and how difficult it is to run a successful operation and make enough money to satisfy outside investors.
It has been done and many do it very successfully, but this is not the first time we have seen outside investment coming into the trucking industry and struggling to survive. Probably the only unique thing about this latest debacle is the fact that it’s such a large collapse and its shockwaves will reverberate through the industry for quite some time.
The events of the past weeks, with a Scott shockwave through the industry, will make people feel insecure and it will also make it difficult for operators already in the industry to get outside investment to help them develop into the future to face the new challenges which the industry faces.