TOPIC 3 (Continued)
What you really need to know to optimise your operation
Agreeing that Carrier income is derived solely from Third-Party Service Delivery (TPSD) - let’s continue by analysing the second of these 10 challenges, which is: pricing the services rendered.
Road Transport is a rapidly depreciating, capital-intensive, investment
Standard deviations to Shipper/Carrier agreements are set by diligent research into the essential needs in cost-effective freight transportation, mutually beneficial to all three parties, i.e. (Shipper, Carrier and Consignee). One of the most important challenges in achieving this objective is to carefully research a Shipper's primary service delivery expectations and craft an agreement that supports not only the service provider (Carrier) but also those of the Shipper’s customers (Consignees). This is one of the most common disparities within the industry as failure to understand the critical three-way partnership leaves bidders puzzling why they either lose business or money.
Quite apart from securing profitable business, Carriers' primary concern is justifying long-term commitment to servicing debt and shareholder capital. In other words, there is no point in securing new business if you must sponsor it. Turnover is not profit and without it there are no funds to service your investment!
Growth has become a craze in declining markets so unfortunately the increased churn rate of CEOs is largely due to the myth that growth is more important than consolidating businesses that adequately service investment - this applies equally to all businesses - including those of Shippers and their Consignees.
Given this situation, Shippers need to recognise that it is one thing for them to go for the lowest bidder when electing a Carrier to move their freight, provided it does not reflect in substandard service delivery to their customers (Consignees).
To wrap up, the onus is on Carriers to deliver more than just a driver and a truck for X Rand/km in the hope that it all works out at the “cheapest” rate, and this is what distinguishes leaders from their competitors.
Leading Carriers are the ones who look beyond simply cutting rates to secure business – they are the service providers who invest in creating an understanding of what their business partners need in the way of effective road freight services, not only for their clients, but also their Shipper’s Consignees.