NZ TRUCKING ASSOCIATION - Coming out the other side of Covid-19

Monday, June 15, 2020

This is the time to readjust your rates to a more sustainable level; the trucking industry’s low-margin model is no longer sustainable.

New Zealand has always depended on the trucking industry to deliver its essential supplies, food, medical supplies, hand sanitiser, beverages, household goods (including toilet paper), and a whole range of consumer goods. It is just that most people did not realise how important the trucking industry was to their daily lives until the Covid-19 pandemic came along. This has been the trucking industry’s time to shine, and shine it has thanks in no uncertain terms to the men and women behind the wheel of many trucks across the country who have kept New Zealand moving through this crisis. The effect of the Covid-19 pandemic on trucking operators has varied across the sectors. Those that have been carrying freight for supermarkets and essential services businesses have never been busier, putting extra trucks, trailers and drivers on the road, and they are well placed to come out the other side of this crisis. Then there has been the other extreme, the trucking operators servicing the hospitality, tourism, retail and logging sectors to name a few, who have been basically parked up during the level 4 lockdown.

They have been struggling to keep staff employed, put food on the table, meet their financial commitments, and have fast used up what little cash reserves they had in this traditionally low-margin industry. Even now that the country has moved to level 3 these trucking operators are going to struggle for a long time yet. If they are one of the lucky ones whose customers are back up and fully trading, they will still have to carry themselves financially, covering the cost of wages, fuel, RUCs, and other expenses until they get paid – which could still be another 60 days or more away. Then there are the trucking operators whose customers are casualties of the Covid-19 pandemic, who will never reopen again. These trucking operators may have stranded assets that were set up for specific customer requirements. They will have some stark choices to make. Can they find alternative work for this capital equipment? Can they reinvent their business in a different sector? Do they try and sell this capital equipment at a substantial loss? Or will they also become a casualty of the pandemic?

One thing is for certain, things will never be the same again, well, certainly not for a very long time. So how long before things settle down and we see the ‘new normal’, whatever that may be? That is certainly the million-dollar question that everyone in the trucking industry is asking. We are heading into a recession, that is for certain; we just do not know how long it is going to be and how hard it is going to hit us. Predictions are that unemployment is going to double at a minimum and that many businesses will never reopen. People who do not have a job are not going to spend money, so that means less freight will be moved. This will have a flow-on effect on the trucking industry. So now more than ever is the time to protect your cash for the long road ahead, so that you can come out the other side of this recession. The old saying ‘cash is king’ has never been truer than it is now.

This is the time to look at your business models and see if they are structurally sound. It is time to rewrite your business plan and reinvent your business to suit the ‘new normal’. This is the time to readjust your rates to a more sustainable level; the trucking industry’s low-margin model is no longer sustainable. The days of cutting a competitor’s rate just to get the work are long gone and are a fast race to the bottom. But first, you need to truly understand all your business costs. If you need help with this, the New Zealand Trucking Association can help. Association members enjoy free access to the association’s industry respected business cost modelling service, which will accurately detail your actual costs so that you fully understand the rates you need to be charging to be financially viable. Now more than ever is the time to belong to the New Zealand Trucking Association, as we are well placed to help you navigate your way through these challenging times, with sound industry-based advice, cost modelling, significant industry experience, compliance, advocacy, tools and resources, networking opportunities, and substantial cost savings.

If you would like to find out more about what the New Zealand Trucking Association can offer your business, then please give me a call on 021 754 137 or email me at dave.boyce@nztruckingassn.co.nz.