‘Cut prices equal cut service levels’

When times get tough, the tough cut prices, hoping they can muscle out the competition by offering low-cost service. But when service quality suffers as a result, it’s not just the company’s reputation that takes a hit but the entire logistics industry’s credibility is lessened. “We managed to keep our heads above water last year. There was a hell of a lot of competition that led to the cutting of rates. What this has done is drop overall rates in the market quite dramatically and it is always difficult to bring prices back up again,” said Warren Jayes of Leo Shipping. As volumes increase again, profits will increase, but this will take a while, he believes. In the meantime, his firm continues to operate on its primary route bringing commodities by road out of Zimbabwe to Durban for export by sea. “The (Zimbabwe) cotton harvest is up 30% over last year, when our company alone moved 16 000 tonnes of cotton. We expect a bumper crop this year, so we expect to move the same amount or more this year. Off season, though, we seek various other commodities for the route,” Jayes said. He sees some light at the end of the recessionary tunnel. “As much as people are complaining about the economy, this year is better than last. We had a pretty good year last year and it has continued this year, but the overall industry has suffered and we are concerned because we are a part of that industry,” Jayes noted.