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December 2012Publication No. 12-08
Part 1 - Industry overview
Road freight
Contents
1 Industry overviewThe Australian logistics industry contributes 3.1% to GDP. Given Australia’s size and distance from major overseas markets, its indirect contribution is even greater.
2 Competitive environmentThe road freight industry is highly competitive. Given powerful customers, low barriers to entry and high rates of substitution, price led competition is prevalent.
3 Profitability and costsThe competitiveness of the road freight industry is reflected in lower industry returns. With average profitability of just 6.2%, the dividing line between success and failure is narrow.
4 OutlookThe task of freighting goods around Australia continues to grow. Whilst the rate of growth is projected to moderate, demand will not be a concern over the short or medium term.
5 ChallengeFuture productivity gains are limited. Therefore as demand increases the industry will face increasing issues with congestion and driver shortages.
6 RegulationThe industry is subject to a vast array of regulations that lack uniformity between states. High compliance costs restricts productivity.
7 The last mileThe acceleration of growth in online retail is driving a need for structural changes in the way goods are transported. There are opportunities for some road freight operators.
8 Key success factorsTo succeed operators must be cost and risk focussed, but must also develop non price differentiators.
The Australian logistics industry has overall revenue of $94 billion and directly contributes approximately 3.1% to Australian GDP. Its indirect impact is significantly greater. Given Australia’s size and distances from major overseas markets, the efficiency of the freight transport system has a profound impact on the competitiveness of Australian manufacturers and exporters.
Industry overview1
4
Modal competition within the non-bulk freight sector is relatively low, due to road freight’s dominance in terms of price, speed and convenience.
Only road freight can offer a door-to-door service without transport mode changes and, as such, is quicker than rail or coastal sea freight alternatives. As a result, in 2012 road freight accounted for 84% of Australia’s total freight.
However, road freight is the most fuel intensive and increasing cost efficiencies of rail freight are making this an attractive alternative for some inter-capital city freight.
The position is reversed with bulk freight. In 2010 rail freight accounted for 81% of all bulk freight within Australia.
Three broad transport modes (interstate, intrastate, capital city and courier) have a roughly equal share of road freight revenue, although going forward intrastate is forecast to lose some ground to interstate and capital city.
Each segment has differing levels of competition and are serviced by different vehicle configurations.
Australian logistics is a $94 billion industry comprising road, rail, air and sea freight, together with warehousing and handling. Road freight is the predominant mode of freight transport.
Logistics industry revenue (2012)
Road$50.2b
Warehousing and handling
$14.4b
Sea$5.5b
Postal mail$4.4b
Rail and air$3.8b
Freightforwarding
$15.5b
Source: IBISWorld.
$94b
Road freight revenue (2012)
Interstate$16.8b
Intrastate$16.5b
Capital city$8.7b
Courier$8.2b
Source: IBISWorld.
$50b
5
• Fastest growing segment in the prior five years, with continued growth outlook driven by increasing inbound container freight (which is then predominantly distributed throughout Australia via interstate road freight).
• Sydney’s container ports are operating at full capacity, requiring some container freight to be shipped to Melbourne and then transported by road to Sydney.
• Predominantly serviced by rigid and articulated vehicles.
• Articulated trucks have the highest utilisation rates, running laden (with goods) 72% of the time in 2010.
• Articulated trucks carry 12% of freight by billion tonne kilometre. This is despite only accounting for 2.3% of registered trucks in Australia. This is due to the larger size of vehicles and greater distance travelled.
• Intrastate transport captures road freight services within a state and excludes transport to and around capital cities.
• The distances involved mean that larger articulated and rigid trucks provide much of this service.
• Low levels of regional population and manufacturing growth have seen demand for this segment remain essentially flat over the past five years.
• Serviced predominantly by light commercial vehicles which tend to have relatively low utilisation rates (due to the difficulty in obtaining return loads within an urban environment).
• This segment has a particularly high level of competition (and consequent low profitability) due to low entry costs (second
hand light vehicles are not expensive) and the high driver availability (specialised driving skills not required).
• Growth in online retailing and increasing focus on the “last mile” is creating opportunities in this space.
Transport modes
33%(increasing)
4.8% p.a.Interstate
33%(decreasing)
0.8% p.a.Intrastate
34%(increasing)
2.4% p.a.Capital city and courier
Market share Growth (past 5 years)
6Over the past five years, the road freight industry has struggled firstly with rising fuel costs and then with falling demand following the GFC. Improved conditions in the past two years have attracted new entrants into the market.
In the five years to 2008, the price of diesel more than doubled. As costs escalated, operators were forced to lay off drivers in order to stay afloat. Many left the industry. During 2008 and 2009 almost 7,000 operators (15% of the total industry) ceased to operate.
2008Profits beginning to return to more normal levels, although ongoing global economic uncertainty and weak business and consumer confidence continues to subdue growth in demand.
Improving profitability continued to attract new entrants, at a growing rate of 4% per annum.
2012Despite continued weak retail sales (which were due more to price deflation and a strong Australian dollar than to consumers buying less products), sales volumes (and hence freight volumes) enjoyed a recovery.
Improving productivity attracted new entrants into the industry, resulting in a 3% increase in new establishments.
2011Weak consumer spending continued to subdue demand, exacerbated by manufacturers running down their inventories as business confidence remained cautious.
2010Whilst oil prices tumbled following the GFC, demand for road freight fell for the first time since 1991 as the GFC impacted demand from key customer segments such as manufacturing and retail.
Flat demand following a period of unprecedented high costs took a toll on the balance sheet of many operators, forcing many out of the industry.
2009
Entrants/ competition
Profitability
Revenue/ demand
Rapid growth
Legend:
Moderate growth Flat growth Moderate decline Rapid decline
2The road freight industry is highly competitive. Smaller operators in particular have little influence over major costs such as fuel and labour or over the price they are able to charge their customers. They are price-takers. Even larger operators struggle to differentiate their services from those provided by a large number of owner/drivers and small operators who drive down price by engaging in price-led competition.
Competitive environment
8The road freight industry is highly competitive, with a large number of owner/drivers and small firms willing to undercut price in order to secure volume.
Major costs are fuel and labour. Operators have no influence over fuel costs and the price of labour is largely benchmarked against labour opportunities in other industries.
The barriers to entry for non-specialised freight are low. Metro freight in particular has low driver requirements (a normal drivers license is often sufficient) and the large number of owner/drivers within the industry is reflective of this.
Customers are often large and powerful and negotiations around price and non-price conditions can be very imbalanced in their favour.
General road freight is viewed by most customers as a commodity product and the ease of switching suppliers is also often low.
Bargaining power of supplier
HIGH
Threat of substitutes
HIGH
Barriers to entry
LOW
Bargaining power of customer
HIGH
Competition
HIGH
Supplier
Customer
Barriers to entry
Substitutes
9Almost 60% of demand for road freight comes from manufacturers, wholesalers and retailers. As such, road freight volumes are closely linked with general economic activity.
The predominant freight type is fast moving consumer goods and foodstuffs. The latter often require specialised transport such as refrigerated trucks. Retailers often serve a similar freight mode transfer role to wholesalers in those industries where retailers deal directly with suppliers. Retail
19%
Wholesalers act as intermediaries between upstream and downstream industries and, from a freight perspective, also often act a point of transfer between freight modes (such as receiving goods in bulk from a single supplier via line haul road or sea freight, and dispatching them via shorthaul road freight to multiple customers). The increasing penetration of online retailing is challenging established freight models.Wholesale
13%
Freight demand from the Construction industry has been subdued over the past five years, in line with historically low levels of construction activity.Construction
12%
Demand from agriculture varies according to growing conditions (for example, freight volumes were subdued during the mid 2000s due to drought conditions).Road freight is generally used to transport grains and livestock but has competition from rail freight due to cost advantages of bulk rail freight.Agriculture
11%
The primary modes of transport used by the mining industry are rail and sea freight. Road freight is generally used to transport equipment and provisions to mine sites and to provide links between rail and sea freight transport nodes (e.g. road freight is used between mine sites and sea ports where rail links are not available).Mining
8%
Largest market segment, primarily due to outsourcing of non-core activities such as inward and outward freight during the 1990s. Demand concentrated in Victoria and New South Wales, reflecting the concentration of manufacturers in these states.Demand dependent on downstream demand for wholesale and retail goods.Manufacturing
27%market share
Note: Other customer categories account for 10% of overall demand.
Outsourced freight services are a key component of a customer’s overall supply chain. In an increasingly competitive industry, freight service providers should focus on differentiating themselves by actively strengthening these supply chains.
Customer’s customer
Transport/3PL provider
Customer Driver
Extended supply chain relationships
Core supply chain relationships
While not controlled by the transport company, the customer relationships of its customer require strength in order to grow or maintain delivery volume.
Strong senior management and customer service relationships are crucial in order to:
• win contracts
• renegotiate terms
• solve problems
• improve overall value chain
• identify and exploit opportunities
Whether employees or ‘subbies’, driver metrics are crucial:
• retention
• safety
• revenue/driver
“The drivers are as important as sales reps...they see them more often.”
Drivers are often ‘on site’ at customer premises and function ‘as if’ employees.
The competitiveness of the road freight industry is reflected in low industry returns. With average profitability of just 6.2%, the dividing line between success and failure is narrow. It is imperative that road freight operators understand and measure their costs and resist the temptation to buy new volume by underquoting.
3 Profitability and costs
12
The cost structure for shorthaul and linehaul varies, reflecting the differing fleet configurations and average trip distances between these two sectors. Shorthaul costs are dominated by labour (57% of total costs), whereas fuel and labour are the largest cost component for the linehaul sector.
Over the past four years total costs have increased by 2.6% per annum for shorthaul and 2.8% per annum for linehaul. Whilst overall cost increases were similar between the two sectors, linehaul was more volatile, reflecting the greater exposure to fuel costs.
Average industry profitability in 2011–12 was 6.2%. Whilst this is 40% below the average for all Australian industries (10.2%), it still represents a significant improvement on recent years. (Average profitability in 2008/09 was a marginal 4.9%.)
Cost breakdown (shorthaul)
Road freight transport costs (2011-12)
LabourCapitalMaintenance and tyresFuelAdministrationInsurance and registration
ProfitCosts
Source: Transeco.
Cost breakdown (linehaul)
Source: Transeco.
Source: IBISWorld.
57%
12%
10%
9%
8%4%
LabourFuelMaintenance and tyresCapitalAdministrationInsurance and registration
30%
30%
14%
10%
10%
6%
6.2%93.8%
Total cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
13
Over the past four years driver costs have increased by 3.5%–3.6% per annum. Driver costs are influenced by many factors including:
• relative wage movements in other industries
• labour force participation rate
• unemployment rate
• ageing of the workforce
• existing EBAs
• future legislative determination (such as Fair Work Australia)
• level of demand for road freight transport
The workforce is ageing and, as older drivers exit the industry, skills shortages are becoming apparent. The average age of an Australian truck driver is approaching 50 years old and over the next 10 years, the recruitment of around 15,000 new drivers will be required to replace drivers retiring or exiting from the industry.
The driver shortage is more keenly felt in the linehaul sector, where specialised skills are required to drive heavier trucks with a wider range of configurations. These drivers are also more likely to be attracted to higher paid opportunities offered in the mining sector. By contrast, shorthaul drivers tend to be relatively less skilled and immigration inflows underpin supply.
As a result, linehaul driver costs are projected to increase at a higher rate (4.9% per annum) than shorthaul drivers (3.6% per annum) over the next five years.
In larger road transport operations, drivers often operate under a number of very different EBAs. This complicates payroll administration and can lead to issues with timesheet fraud. A standardised agreement with transport unions and staff can lead to efficiencies and allow ’Super Hour‘ overtime costs to be more closely monitored to give management visibility on unusual spikes in driver hours.
Labour costs represent the largest cost component for shorthaul operators (57% of total costs) and the second largest component for linehaul operators (30% of total costs).
Fatigue management
The National Transport Commission has identified fatigue as one of the most significant risk factors impacting heavy vehicle safety. Contributing factors include driving long distances, overnight shifts, industry payment practices and historical work practices. Increased compliance in relation to fatigue management will increase driver costs. Modelling by Transeco suggests overall costs could increase by 1.4%.
57%Shorthaul
30%Linehaul
Percentage of total cost
3.5%Shorthaul
3.6%Linehaul
Percentage per annum increase (last four years)
LabourTotal cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
14
The price of fuel has witnessed a rollercoaster ride over the past five years, peaking at US$160 per barrel in 2008 (a more than 100% price increase over five years). The introduction of fuel surcharges by larger players in the industry helped to pass on some of the additional cost to customers, but small and medium sized operators often lack the bargaining power to negotiate a variable pricing mechanism with their more powerful customers. With margins already slim, this cost increase was the final straw for many smaller operators, who were forced to exit the industry.
At the height of the fuel price increase, Toll reported fuel accounted for almost 45% of their road fleet operating costs.
Over the past four years fuel prices have increased by an average of only 1.9% to 2.0% per annum. Slowing global demand has seen the price of oil fall back; with the result that fuel costs now account, on average, for 25% of total operating costs.
However, the low annual increase is distorted by the peak and crash in 2008/early 2009. Over the three years from March 2009, the fuel price index has actually being increasing at an average rate of 6% per annum.
Over the next five years fuel costs are expected to continue to increase, albeit at a slower rate than the price spike in 2008. This should allow larger players to continue to pass on much of the increase to their customers.
Fuel and other costs can often be reduced by ensuring drivers follow planned routes. Even small increases in distance travelled can have a huge impact on profitability. Vehicle monitoring technologies and route optimisation software can provide management with a greater level of control over vehicle-related direct costs.
Fuel is one of the largest costs for the Road Freight Transport industry, accounting for around 25% of revenue for the industry as a whole. Fuel is a volatile input cost and the industry’s attempts to protect profit margins by passing on cost increases to customers has had mixed results.
Fuel
9%Shorthaul
30%Linehaul
Percentage of total cost
2.0%Shorthaul
1.9%Linehaul
Percentage per annum increase (last four years)
Carbon price
The introduction of carbon pricing to the industry will have an impact from 2014, when $509 million will reduce the rebate on fuel excise. This will result in a 1% increase in costs although most of this additional cost is expected to be passed through to customers.
Total cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
15
EBITDA is not the right measure of performance because it does not capture capital costs. When assessing the performance or value of a road freight business, EBIT (or some other measure that takes into account capital costs) should be used.
Re-investment is not required simply to replace an ageing fleet. It is also required to meet newly introduced compliance standards and to take advantage of cost saving efficiencies such as newer fuel-efficient engine technologies.
There is a tendency for traditional transport owner-operators to ‘invest’ profits back into the fleet and view the equity in fleet as a form of personal savings. This approach is dangerous. Not only does it lead to a highly concentrated investment, but can also lead to poor returns when compared with a more effective debt/equity finance mix.
Road Freight Transport companies have high asset bases that depreciate quickly. Capital costs account for around 10-12% of total operating costs.
Capital
12%Shorthaul
10%Linehaul
Percentage of total cost
1.0%Shorthaul
0.5%Linehaul
Percentage per annum increase (last four years)
Total cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
16
Around 60% of maintenance costs are labour related and 40% are related to hard and soft parts. In turn, around 40% of parts are purchased from overseas suppliers. Given these dynamics, whilst rising labour costs have exerted upward pressure on maintenance costs, these have been offset somewhat by the strength of the Australian dollar dampening price increases in European spare parts.
Over the longer term maintenance costs are expected to increase as the Australian dollar weakens against strengthening European currencies, although the timing of this remains uncertain. In the near term, rising general labour wage rates will be the major driver of maintenance cost increases.
During times of low revenue growth and profitability, smaller and mid-sized operators tend to delay expenditure on routine maintenance and non-essential repairs. A Transport Workers Union survey revealed that 56% of drivers surveyed had forgone maintenance during 2008 due to low profitability during that year. As such, there tends to be a strong relationship between maintenance expenditure and distance travelled/revenue.
With the closure of Australia’s last remaining tyre production facility in April 2010, all new tyres are now imported. Major determinants of price are exchange rates, rubber prices and offshore production costs. Linehaul tyres are particularly sensitive to raw material cost movements as they have a higher rubber content than smaller tyres used on rigid trucks and vans.
The market for used tyres is small and diminishing, mostly due to the perceived safety risks of operating with used tyres. However, there is a growing market in recapped tyres. Small and mid-sized operators in particular are generating demand for this lower cost alternative to new tyres.
Maintenance and tyre costs have increased between 2.3% (shorthaul) and 2.9% (linehaul) per annum over the past four years.
10%Shorthaul
14%Linehaul
Percentage of total cost
2.3%Shorthaul
2.9%Linehaul
Percentage per annum increase (last four years)
Maintenance and tyres
Total cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
17
Whilst there has been some increase in insurance costs (largely due to increasing accident rates in 2010 and 2011), the major increase in insurance and registration costs has been due to significant registration increases for B-Doubles. These increases came about due to the withdrawal of subsidies for B-Double configurations that were originally introduced to encourage adoption of this fleet configuration.
The Council of Australian Governments (COAG) and the Australian Transport Council (ATC) agreed in February 2008 that heavy vehicle registration and fuel-based charges should be adjusted annually to maintain recovery of road costs. There is some conjecture that by fully recovering road costs from the road freight industry, the industry may be ‘overcharged’ for inefficient road construction and maintenance practices.
In the current financial year A-trailer increases in B-Double registration charges will moderate but the overall trend is for registration increases. 2-axle rigid truck registration will increase 29%, and Double and Triple Road Train registrations will increase 21%.
Under the current regime, the medium term outlook for registration charges is dependent upon road use volumes and changes in fleet configurations. Based on current trends, registration costs are anticipated to rise by around 2.8% per annum over the next five years.
With the exception of B-Double registration costs, insurance and registration costs have increased only moderately over the past four years.
4%Shorthaul
6%Linehaul
Percentage of total cost
1.2%Shorthaul
5.1%Linehaul
Percentage per annum increase (last four years)
Insurance and registration
Total cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Fuel cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Driver cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Capital cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Maintenace and tyres cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Insurance and registration cost index
Mar08
Dec08
Sep09
Jun10
Mar11
Dec11
70
120
130
80
90
100
110
Source: Transeco.
Shorthaul
March 2008 = 100
Linehaul
Pressure from large customers to reduce prices is often compounded by many operators lacking commercial analysis. If all costs are not fully understood, it is likely operators will underquote.
Kilometre analysis should take into account the vehicles likely base point (Melbourne) and likely return point (depot or next pick-up - Shepparton)
$/km $
Fuel 0.66 636.43
Labour 0.53 510.73
Overnight and meal allowance 65.00
Repairs and maintenance 0.10 95.90
Tyres 0.03 25.89
Registration 0.04 36.44 Insurance 0.01 13.43 Depreciation 0.23 218.65
Overhead allowance 0.32 310.72
Total cost 1,913.18
Profit margin 7.50% 143.49
Price for job 2,056.67
Ballarat to Wagga Wagga | 544 km | 6.5 hours
Melbourne to Ballarat | Ballarat to Wagga Wagga | Wagga Wagga to Shepparton 959 km | 11.5 hours
Wagga Wagga
Ballarat
Sydney
Melbourne
Canberra
Shepparton
Wagga Wagga
Ballarat
Sydney
Melbourne
Canberra
Estimated profit of $120 is actually a $568 loss.
Original trip estimate 544km
Actual trip distance 959 km
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Contacts
MelbourneLevel 24333 Collins StreetMelbourne 3000Victoria AustraliaTel: +61 3 8623 3333Fax: +61 3 8623 [email protected]
SydneyLevel 5 Chifley Tower2 Chifley SquareSydney 2000New South Wales, AustraliaTel: +61 2 8257 3000Fax: +61 2 8257 [email protected]
PerthLevel 1137 St Georges TerracePerth 6000Western Australia, AustraliaTel: +61 8 9220 9333Fax: +61 8 9220 [email protected]
TownsvilleLevel 675 Denham StreetTownsville 4810Queensland, AustraliaTel: +61 7 4724 5455Fax: +61 7 4724 [email protected]
Singapore30 Robinson RoadRobinson Towers#12-01Singapore 048546Tel: +65 6593 9333Fax: +65 6593 [email protected]
AdelaideLevel 470 Pirie StreetAdelaide 5000South Australia, AustraliaTel: +61 8 8212 6322Fax: +61 8 8212 [email protected]
BrisbaneLevel 1412 Creek StreetBrisbane 4000Queensland, Australia Tel: +61 7 3338 0222Fax: +61 7 3338 [email protected]
New ZealandLevel 16 Tower Centre45 Queen StreetAuckland 1010New ZealandTel: +64 9 307 7865Fax: +64 9 377 [email protected]
