CARRIERS’ CORNER
WELL, IT’S ALRIGHT, WE’RE GOING TO THE END OF THE LINE… In the words of The Traveling Wilburys: you can sit around and wonder what tomorrow will bring, wait for the phone to ring, and for someone to tell you everything…
A
s an industry, we’re constantly sitting at the end of the line, very much on the receiving end of whatever whim industry in general, the government, or greater society may decide we’ll be dealt that day. There’s no better illustration of this than within the many sectors with which we closely associate. The demand for our services can be dictated by international commodity prices determined by a raft of elements well outside the domain of the humble transport operator. Take the mass fluctuations seen in export log prices across the past 12 to 24 months. The intestinal fortitude of many log cartage operators (and no doubt their funding partners) has been repeatedly tested by periods of record prices, followed by taps being all but completely turned off. Conversely, we could look at dairy prices, which are forecast to hit record levels this year. This will undoubtedly lead to bumper demand for key input elements to ensure adequate pasture and herd growth and nutrition, again shifting the demand profile for the transportation required, all of which the ‘consumer’ assumes will simply be scaled and adapted to meet the required need. In both examples, there exists an expectation and understanding that the transport component will simply flex up or down as the demand requires. It will act as a variable component in someone else’s business model, while carrying a very high fixed cost to the transport operator. (Somehow, operators always seem to be able to pull that extra capacity out of the bag when the customer needs it or reluctantly sit idle when they don’t.) As I’ve alluded to in previous columns, it’s undeniable that our sector delivers
110 New Zealand Trucking
value and contributes to the wellbeing of our country that few ever take the time to evaluate and appreciate fully. We forever remain at the beck and call of whoever might need our services. But is the equation in the process of changing, with a greater understanding, appreciation, and ultimately realisation of the value quotient occurring? I watched a very recent Wall Street Journal documentary on the predicted permanent changes occurring within the global supply chain (google “WSJ + Why global supply chains may change forever”). It provides a fascinating summation of how the likes of Amazon and its peers haven’t merely changed the way we shop, but more so the way we physically buy, with the consequent changing expectation and load being placed on delivery services. What the documentary highlights from several angles is that the transport component of the simplest of items (a USB phone charger is used as an example) has, in many cases, more than doubled. Nowadays, customers increasingly buy from a wider range of vendors, rather than purchasing from a single vendor, and are relying on a thirdparty delivery instead of collecting an item themselves. Although the final mile delivery may be completed by a light vehicle, an additional heavy-vehicle leg
has been created somewhere in the mix to get those small consignments to the various distribution hubs. We already see those trends here, accelerated by Covid19 and the housebound population doing their best to destroy credit card limits. The ultimate point of the documentary was that some fundamental changes are occurring from a demand side (customers) that will likely impose permanent changes on the supply side (transport/supply chain), particularly concerning the resources available and their cost, and more specifically variable costing of that resource based on demand. Although this was focused on consumer goods, you can apply the same thinking to anything with fluctuating demand, seasonality or the like. Imagine a situation where operators could generate a significantly higher return on their fleet when demand was at its greatest. There’s no denying that the underlying costs of operating in our sector will only continue to rise. Every current political agenda to reduce the number of road users will directly sheet back to transport operators covering more of the cost to maintain and operate our (substandard) roading network and generating costs that must be passed on. But putting such inherent cost factors aside, at what point will we identify that there is only a finite supply of transport resource and that we must place a higher value on the service being delivered, in doing so, become value-makers, not merely price-takers? …Or will we simply remain at the end of the line?
• 2 • 1
Do you agree with Blake or want to engage with his comment? He’d love to hear from you. Contact Blake at: blake@transcon.co.nz. Blake Noble is managing director of Transcon, a 15-truck general freight operation based in Warkworth, north of Auckland.
May 2022
NZT 21
