Comment: Uncertainty—the new normal
Ongoing COVID impact, fuel cost increases, and other global issues are proving to be challenging for the trucking industry
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The COVID-19 pandemic has put huge pressure on global supply chains
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Considering that more than 90% of all freight moved in New Zealand each year is carried by the trucking industry, totalling 258 million tonnes and travelling 3.3 billion kilometres, it’s easy to see the critical role the industry performs in the New Zealand supply chain.
The COVID-19 pandemic has put huge pressure on global supply chains, causing worldwide production issues, congested ports, and a huge increase in demand for products. The crisis in Ukraine has only added to global supply chain issues, as countries further adapt supply sources to counter the turmoil.
The trucking industry is being put under unbelievable pressure from all directions at present, including the ongoing COVID impacts, the tragic situation in Ukraine, out of control fuel cost increases, supply issues with parts and equipment, workers’ mental health and fatigue, increasing truck crashes and serious health and safety incidents, sustainability, and new technologies, increasing driver shortages, ferry disruptions, and ever-increasing Government regulation.
Almost a perfect storm of events challenging even the most experienced trucking operators. The COVID pandemic of the last two years has been a challenge for everyone.
Especially for the trucking industry, as it has stepped up in a time of adversity to keep the country supplied with all day-to-day essentials, which keep society functioning and keep the economy going by getting those important overseas exports to market.
COVID is continuing to create havoc in people’s lives, with many people unable to work until they get a negative test result or must isolate. This, in turn, is putting immense pressure on businesses as they try to adjust workloads to keep operational.
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The trucking industry’s low margin model is no longer sustainable
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Hopefully, the experts are correct, and we’re over the worst of the pandemic. The crisis in Ukraine is certainly a concern not only for Ukrainians and wider Europe but is also impacting the New Zealand economy on the other side of the world.
We’ve seen the impact on diesel fuel costs, which have doubled in the last 12 months. The supply of urea for Diesel Exhaust Fluid has become challenging for many countries, as Russia and China provide most of the world’s supply.
Our suppliers tell us that New Zealand should be OK, but any restrictions on this supply would impact our industry hard. Ukrainian and Russian factories assemble motor vehicles and supply parts for many European, Korean, and Chinese manufacturers.
Russia is the world’s leading exporter of natural gas, supplying much of Europe, who may need to look for an alternative energy supply. If this crisis continues for long, the impact on the world economy and New Zealand by default will be enormous.
The New Zealand economy is certainly heading into a period of uncertainty, with substantial Government debt, rising interest rates, inflation rates that have not been seen for a generation, rising costs of products and services, and supply issues. Some suppliers are now quoting lead times for new orders of over 12 months.
This has the potential to impact severely on our industry with increased costs and an already tight labour market putting upward pressure on labour rates. Recent Government temporary financial relief on Fuel Excise Duty for petrol vehicles and Road User Charges for diesel vehicles are appreciated but—given the scale of cost increases in the last 12 months—it’s effectively only a drop in the bucket as a long-term solution.
The ongoing labour shortage is one of the industry’s biggest issues. Now the borders are reopening, we need to get the Government to look at the immigration settings for truck drivers, as our neighbours in Australia are trying to entice more Kiwi drivers to move across the ditch.
For the average trucking operator, all these world events are largely out of their control. But sitting on your hands and hoping the situation will go away is not the best plan of action if you want to stay in business for the long term.
This is the time to look at your business models and see if they are structurally sound. It’s time to rewrite your business plan and reinvent your business to suit the new normal and 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’re 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.
Check out NTA at nztruckingassn.co.nz or contact us on 0800 338 338 or info@trucking.nz.
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