The Meat in the Sandwich

The trucking industry is very much the meat in the sandwich, in the ongoing arguments about charges by the big stevedores. So called infrastructure charges are simply price gouging by the very small number of powerful national companies, who are running our ports, to maintain their margins at the expense of transport companies already running on much thinner margins.

After the latest announcement this week, the Victorian Transport Association is urging its members to pass on the charges to their customers in order to make the end customer pay for the increased cost for the truckies at the sharp end. Easier said than done!

The trucking industry has a bad record for passing on cost increases in a rational manner. The industry has grown used to living on a knife edge of minimal profit margins on substantial turnovers. This is something which would be regarded as reckless at best by the rest of the business community.

No, the cost base goes up and the trucking company squeeze one of their cost centres and improve efficiency just a enough to make a couple of cents in the dollar and are satisfied with the result.

Anyone who is willing to put their head above the parapet and suggest they should pass on all of the cost increases they have endured directly to the customer, runs the risk of having their head blown off in the rush by the competition to get the work at the old price.

It hasn’t always been the case, we have an example of how to do it in recent memory, or have we forgotten already? Back in the period between 2004 and 2006 fuel prices went through the roof. The price of a litre of diesel would hit new highs every month over a period of years.

With fuel coming in at number two in the cost charts for every trucking company the pressure was excruciating and something had to be done or everyone was going to go out of business.

Why were they going to go out of business? Because they had trained their customers to expect the transport operator to absorb any rise in costs without passing it on in higher freight charges.

Things were getting ugly and something had to be done to staunch the flow of cash out of the hands of the truckies straight into those of the fuel companies. The customer wouldn’t accept a price hike, so what could be done?

Luckily, some bright spark came up with the concept of a fuel surcharge and, because every trucking company was coming up with the same basic idea, there was no escape for the customer, there were no rivals willing to take the work at the old rate without a fuel surcharge.

What happened? The customers begrudgingly accepted the surcharge concept and everyone got paid.

Those operators getting squeezed by the big boys in the ports could do with getting together and coming up with a similar concept right now, before the cut-throat nature of the industry does some real economic harm.

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