‘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.