Inflationary environment puts pressure on margins

MANAGING COSTS in a highly inflationary environment is a key challenge for the express freight industry. “The rising costs of aviation and ground fleet are dramatic and hard-hitting,” says SA Express Parcel Association chairman Garry Marshall. “If you consider that fuel alone makes up around 35% of your vehicle operating costs, the knock-on impact of the dramatic increases is huge, putting pressure on margins and putting up prices.” But he believes growth will continue. “Generally speaking in a developing country growth in the express industry is four to five times GDP, and we’re easily achieving it. Although it’s tougher it’s no different from the rest of the economy.” The industry, however, is not as simple as it used to be in terms of asset ownership – information systems and technology are costly and there are big demands on local players to keep pace with international technology. “The result is that margins are tighter than they have ever been – the turnover is higher but so are the costs.” And while smaller companies appear to be holding their own, Marshall believes that medium-sized players are feeling the pain. Success, he says, relies on the fundamentals which are network, working capital, proper assets and knowledge