Pricing tools help transporters minimise contract pricing risk

Forecasts indicate that the demand for freight transport will grow in South Africa by 200- 250% over the next 15 to 20 years, according to the Department of Transport. Some corridors, such as those between Gauteng and Cape Town, which account for 50% of all corridor transport, will grow even faster. This creates a number of growth opportunities and paves the way for new entrants to the market – but while the barriers to entry to the transport industry are low, the risk can be high, cautions economists.co.za’s Mike Schüssler. Furthermore, the roadfreight industry is set for a number of additional, but largely unpredictable, price shocks this year – including carbon tax and projected fuel hikes – which make it challenging for fleet operators and even small emerging transporters to set contract prices. “We all know that the margins in the road freight business are low – and on average were 3-4% last year – and that means any shock from interest rates, currency, fuel and insurance will knock out all profits,” said Schüssler, pointing out that insight into these fluctuations could help drive a more sustainable business Standard Bank’s vehicle asset division said in a recent blog that one of the most important things to do when running a sustainable transport company was to understand all the costs involved. Besides capital outlay for equipment and vehicles, other expenses have to be considered. These include additional security features; routine servicing and maintenance of vehicles; fuel costs; accounts and invoicing; insurance and administration costs. Schüssler, who believes that information can be a great liberator, told FTW that his company had developed monthly contract price adjustment indices for the road freight sector to help adjust and then benchmark their prices as well as measure what they were spending on certain services or items and look at where and how they could save money. There are other tools designed to help transport operators plan their costs. The Gauteng Freeway Improvement Project (GFIP) has introduced an e-toll calculator to allow operators to plan their routes and calculate the costs ahead of time. The Road Freight Association also regularly updates fuel prices, toll fees and e-toll fees on its website.