It’s an unprecedented time for the Australian road transport and logistics sectors.
Periods of sustained instability, like the one it has just weathered, customarily create downturns that many other sectors find it difficult to immediately recover from.
Instead, across the movement of freight and goods, it drove massive growth that would help shield the more established businesses from the hikes in costs as economies around the world were inevitably beset by widespread inflationary environments.
Was this the “new normal” governments liked so often to talk about? The cost of doing business remains one of the most identified operational pain points among many of the major carriers even if the circumstances that surround it are varied and frequently in flux.
The industry is the sum of many different sectors that all diverge in accordance with supply and demand, equipment and external market forces, among myriad other aggregating considerations.
The pressures on businesses and suppliers at the moment have never been greater according to Amanda O’Brien CEO Xtreme Freight.
“It’s a price war out there,” says Amanda. “The bigger companies are eating up the smaller ones.”
Transport costs, which have increased by up to 30 per cent over the past year, have made it a much tougher market to compete within, as slim margins continue to shrink.
The many corresponding factors arisen from challenges common and new to compliance, route access, staffing shortages and a softening economy have little bearing on shippers, freight forwarders and brokers who are, as usual, demanding the best price.
Since coming out of the pressurised years of COVID, Amanda has never seen the market like this.
“Given compliance regulation, human resources, all of those things in Victoria in particular, are just decimating business because there’s more resources required for those areas and the pie is getting smaller,” she says.
“Equipment costs, premiums and insurance — it’s an unprecedented time in the supply chain.”
Insurance renewals, traditionally calculated around the CPI, are coming in quite aggressively.
Last year interest rates for equipment and fleet hovered around 2- and 3 per cent. Businesses this year are now being forced to refinance at 6- and 7 per cent as insurers react to current market conditions by imparting additional premiums on customers which are causing additional adversarial forces.
Rod Brown Managing Director at the Maryborough-based Central Victorian Transport, says maintenance costs have skyrocketed, with parts prices in some cases doubling.
“Cost recoveries are proving very difficult. New equipment is taking far too long to get hold of,” he says. “We’ve been belted in every direction.”
Since its inception, Chain of Responsibility (CoR) has been a good thing according to Rod.
Underlining it though are many issues associated with dealing with clients who don’t understand the terminology let alone their liability he says.
“CoR affects everyone from the loading company right through to the receiving company,” he says.
“If the forklift operator overloads the vehicle his employer is liable for the overload. If demands are made by the receiving company that the freight needs to turn up no matter what then that’s putting pressure to potentially break the law. If a driver exceeds his driving hours the fines are horrendous.”
But the pressures generated by the client base can also be caught up in the chain of responsibility.
A positive development, according to Rod, is if the dispatch personnel on the receiving company are aware of their responsibilities. This will, most certainly, change the way they do business.
“But you’ve still got plenty of irresponsible corporates out there,” he laments.
For some businesses, especially those in the bulk carrying sector, the return to shorter lead times on equipment and more stabilised diesel prices have made 2024 less troublesome than the previous years where rate rises restricted businesses to a perpetual cycle of catchup.
“The leap frogging costs saw rise upon rise so often by the time a rate rise had been negotiated with customers the next one was due because everything had gone up in the interim,” says an executive at one leading fleet. “The pricing always seemed to be three months behind.”
Over the last 18 months the cost of fuel, which has been reasonable in contrast to April in 2022 when the price went up 42 cents a litre in one single month, has helped immeasurably.
“That put some fleets in a position of either passing on the cost or withdrawing their services,” the executive continues. “Now things have settled back to some normality and equipment is far easier to get a hold of. It’s just a matter of discipline.”
Others, however, have found moving the same amount of volume of freight this year has resulted in an increase of activity.
At All Purpose Transport a 22-pallet load previously moved on a semi-trailer is now being moved across five days on separate rigid trucks.
“We’re doing more job activities and less freight if that makes sense,” says Paul Kahlert, All Purpose Transport CEO.
“Post-COVID everyone has got their supply chains back in order and what they’ve got is a smoother flow of freight coming from overseas whereas during COVID a ship would arrive, and it would have 30 containers of stuff on it that had to get sent into warehouses. What you’re getting now is the just-in-time freight is starting to work a lot better.”
As the economy slows equipment usage changes with it. Last mile freight movements are no longer as reliant on bigger loads, reducing the demand for semi-trailers according to Paul.
“Our body trucks and rigids are working more,” he says.
“People are buying more frequently, but they’re actually using different equipment. We have dropped the actual freight volume, but increased our vehicle activity.”
The cost of doing business in the present-day environment of course goes beyond just overheads.
“We worked hard during COVID, and everyone got fair and equitable freight rates going and the minute it gets a little bit quiet because of the amount of competition we all start cutting ourselves to pieces,” Paul notes.
“Somehow the transport industry fights really hard to get rates to where they should be and then as soon as we get them to where they should be we then have an expectation set on us to start reducing those rates and it just seems like a crazy thing to do for us as an industry.”
Dean Wrigley, Freight Assist Managing Director, has seen a trend in customers downtrading as a downstream effect from the increasing pressures on spending.
“For us, the objective is we need to be smarter, operate less vehicles, move more freight, reduce operating costs and just sort of ride the waves at the moment like what other companies are doing,” he says.
“It’s a very competitive market we’re in. We’re up against a lot of players that are unfortunately going in trying to buy freight at the moment just to keep their doors open and as a result keep feeding the beast as they say.”
Loss in one area, however, can deliver gains in another. While the scarcity of labour force is an ongoing issue widely acknowledged the impoverishment of key personnel might have abated for the moment, at least in Dean’s experience.
“I think with the downturn that we’re experiencing across Australia, what it’s done is released a lot of quality people back into the market which has given us better selection opportunities which we haven’t seen for a good five, six-plus years,” he says.
David Simon, CEO Simon National Carriers, shares a similar view.
“Perth has been difficult for ten years, but something changed in Perth in the matter of a few weeks about 18 months ago,” he says.
“Then suddenly we were getting good applicants and plenty of them from the same ads which six months prior you were getting only one or two applicants who weren’t really qualified. Volumes have dropped in some sectors that have freed up capacity there. The availability of drivers and drivers wanting to work for viable companies has probably been better than it has been for a while.”
It’s a widely accepted fact that there has been an exodus of experienced drivers in recent years in protest of the encroaching regulatory framework.
That’s not an outlier for any industry as they undergo rapid change and are reformed. But valuable competencies among the group may have gone along with it.
“An awful lot of experienced drivers have left the industry because of the insane fines for petty indiscretions,” says Rod. “You know, $756 because you don’t tick a BFM box, but you haven’t worked more than 12 hours anyway is just ludicrous. When you take that into account you’ve got people leaving the industry purely and simply because of the risk of fines for very incidental matters.”
If delivering with maximum efficiency, one of the industry’s chief causes, is to be satisfied as safely as possible, reducing an experienced talent pool through a full court press of superintendence would seem to betray this fidelity.
Rod is of the opinion many layers need to be stripped from the bureaucracy with a major refresh in mindset needed, with the aim of making decision-makers more available.
“It’s not this layer upon layer of tasks and enquiries being stuck in a referral churn,” he says.
“TNT some years back along with a number of other major corporates stripped out the middle manager layer. Those at the top had to step down a bit and those at the bottom had to step up. The people at the bottom were talking to the ones who were going to make the decision. As much as there was fear that it wouldn’t work it obviously did so.”
Too much of the process regarding compliance and approval relies on consultants according to Rod.
“It takes too long to get things signed off on,” he says. “Be it within the transport industry or the housing industry or whatever, it’s just overburdened with bureaucratic requirements.”
While luring experienced drivers back to the industry is a tough ask, making the sector more attractive for younger people to enter is a challenge industry is rising to albeit slowly.
An infiltration by inexperienced people new to industry and asked to handle specialised vehicles is part of the problem according to Amanda.
“Keeping solid operators and making the industry attractive to others is really causing some major headaches although we’ve got a strong core and training, and more training is part of our philosophy,” she says. Rob Dummer, Formerly General Manager Operations Lindsay Australia, believes the issue runs deeper than just a shortfall of drivers.
“There’s not much of an incentive for a young fellow to jump into a truck when he can go and pull beer for $60 an hour even if you have to work all night,” he says. “The industry doesn’t have the same glory it once had.”
It’s a point worth dwelling on. Is the industry relevant to young people? Is there enough social status? Does it need more glamour? How can the generation gap be straddled when attitudes to work seem so far apart? There exists a clear difference in expectations as to what constitutes suitable hours according to Rob.
“The generation coming through has a whole different view. They want to do as much work as they can in five days and the other time is time out,” he says.
“I’ve pretty much worked seven days a week over much of my time and you don’t think anything of it. The problem is our industry has to keep going. People won’t eat.”
Familiar with the perishable division at Lindsay’s, having worked there for 27 years, Rob says the appetite for fresh produce is not declining. There is, in the final analysis, no choice but to run seven days a week. It’s unavoidable.
“You can’t get away from it. Everyone wants fresh food,” says Rob.
“Like a resort or restaurant, you’re open seven days a week. On weekends we expect to go to a restaurant to be able to eat. But someone has to work in order for us to do that. That work life balance is always going to be a hurdle.”
All Purpose Transport is one of the carriers well equipped to overcome shortfalls of key personnel. In 2012 the business took an approach dedicated primarily to training internally.
In the last two years as it transitioned out of COVID, the company started developing a leadership course for senior managers. That led to a mid manager training course. These are all 12-month courses explains Paul.
“We’re starting to reap the benefits of having done internal training with our people. So rather than going out to the market and poaching people from the industry we’re actually developing our people from within,” he says.
“We’ve got some really talented people coming through our business now and they’re from our grassroots. They’re not coming through with preconceived ideas of how to run a business. They’ve been taught our way rather than someone else’s way.”
Freight Assist has been growing at around 26 per cent per annum over the last ten years.
While that phenomenal rate of growth is likely unsustainable, adding new business is an area the company is naturally focused on.
One of the big changes Freight Assist has recently implemented is in its management structure. An experienced new general manager has come in and grabbed the bull by the horns helping to turn the company’s operational structure around for the better according to Dean
“For the first time ever, we’ve got BDMs in Brisbane and also in Adelaide now. So, that’s been working extremely well for us,” he says.
“The next step for us is to eventually get in a commercial-type manager for the business that can manage the sales team and take that responsibility away from myself. I’m happy with where the business is at the moment.”
The theme of viability is set to become increasingly crucial going forward. David Simon anticipates it will be at the forefront of many industry conversations in the foreseeable future.
“It’s very tough for a lot of people out there. There’s a lot of new players that haven’t experienced a downturn who are struggling at the moment,” he says.
“They’ve got new fleet and no work for it. It’s certainly going to be a good lesson for a lot of people. The good days don’t last forever. It is a volatile industry with volumes that go up and down.”
The importance of robust business models — models that can insulate companies from prolonged periods of decline — cannot be understated given the uncertainty of the moment.
“We know the volumes are not always going to be at peak levels. That’s something we’ve got to deal with and don’t overextend ourselves and structure ourselves for that,” he says. “It just means we stick with our strategy.”
But is there something that road transport, in its pursuit to be better, can learn from other industries?
“I think other industries can learn a lot about our resilience and capacity to deal with challenges,” says David.
“I’m sure there’s plenty we can and always do learn from others but I think there’s a lot more others can learn from us.”
He adds, “The Australian trucking industry is particularly good at dealing with challenges and getting on and delivering for our customers. There’s plenty we can learn but I’ll take nothing away from what we can teach.”