The Rules of Survival: Transport Sector Being Threatened by Recession

30 Nov Blog

It is predicted that Australia will enter a recession within 18 months, with the transport industry, in particular, bracing for additional pain as interest rates continue to climb and operators are struck hard by higher fuel prices, a tight labour market, and continued supply chain bottlenecks.

According to a business consultant, claiming that a recession would not occur will be disastrous for transportation companies that have survived more than two years of pandemic-related obstacles.

The road transport business is critical to Australia’s economic activities. There would be no people or freight moving if the transportation business did not have the necessary capacity and capabilities. Australia would effectively grind to a halt.

According to the Australian Securities and Investments Commission (ASIC) report on insolvency data, 339 enterprises in the transport, postal, and warehousing industries filed for insolvency in the 2018-19 fiscal year. The greatest of them was the December 2018 bankruptcy of Redstar Transport, which threatened the jobs of its 400 employees. The problems are not restricted to Australia, as there is speculation of a transport industry slump in the United States.

As per ASIC’s research, the top three reasons for business failure are insufficient cash flow, poor strategic management, and trade losses. From their perspective, several key causes are contributing to the immense stress the business is now under:

• Expensive fuel costs
• A competitive business characterised by an overabundance of operators lowering costs,
• Less work available and customers who refuse to raise their rates to compensate your expenditures, resulting in unprofitable routes
• Drought and bad weather have hampered agricultural transport, and
• Cashflow issues are caused by recurring gasoline, loan, salary, and maintenance expenses while waiting for consumers to pay.

Over the next three months, the operators should plan and prepare, and here are some pointers to help:

• Reduce your expenses right now – Make cutbacks immediately, eliminate bad debt, and renegotiate loan terms, service contracts, and insurance premiums rather than waiting until income collapses. Examine your fleet to verify it meets demand, and sell or swap unneeded or underperforming cars. Stock up on extra parts immediately so you don’t have to wait if availability or delivery is delayed.

• Upskill your team – Set aside time for your employees to train in new areas of your firm so that if you are forced to cut expenses, you may look at repurposing your workforce. Investing in training may also result in their moving to a region where there is a labour shortage. Talk to your staff about taking on extra shifts or taking on a hybrid position; they may have abilities that aren’t being used that may be useful.

• Measurement is essential for management – It is important to make it a weekly practise to check on important company KPIs, such as bookings that have already been made and those that are on the horizon, costs, and cash on hand.

• Get ready to change direction – Consider how to keep your vehicles on the road and whether you can extend your services to other regions. Are the trucks available for rental by other businesses, or can you hire a truck and driver temporarily. Diversifying in any way will be beneficial in the long run.

• Keep up your fleet – It’s time to evaluate if you typically upgrade your fleet every three years or less and look for strategies to keep your present fleet in good condition. To avoid depending on buying new cars, compare prices and arrange service agreements. Install GPS monitoring devices and check to see whether your staff are making the most efficient journeys and stops.

• Look after your own mental – Everything is unclear during recessions, but whether you are an employee or a company owner, it is in your best advantage to not panic, establish a plan, and take care of yourself.

It’s time to create a plan, and it doesn’t have to be complicated. Start with creating a basic budget, refinancing high-interest debt, and keeping your spending under your income.

One of the most crucial industrial global foundations is the provision of transportation and logistics services. With so many obstacles in the sector, it cannot thrive at its best. The entire world of trade will suffer without reliable logistical assistance. The question is, are we ready to cope with this recession?