Fuel protests – good or bad publicity for the transport industry

Probably good, that’s what sheeple are like.

I can’t be arsed explaining how I’ve formed my opinion but I actually think that there’s a very good chance that high fuel prices will be good for the same day courier industry in the long term.

Not particularly good for anyone in the short term I admit – but you can’t make an omelette without breaking a few eggs.

Roll on the £2 litre.

Posted under Protests & Strikes

Posted by Alec at 6:13 pm, June 5, 2008

5 Comments so far

  1. Alec added on  June 5th, 2008 at 19:37

    From 90p/litre to 125p/litre is a MASSIVE 7pplm (3.5p per mile travelled) difference. (based on 45mpg)

    On average I’m paying around 10pplm more than I was this time last year. It would be even higher if some of the regular people I use would put their rates up like I keep suggesting.

    The point is that EVERYONE PAYS THE SAME FOR FUEL. There isn’t one single courier company in the UK that’s immune to rising fuel costs. Shit still needs moving, somebody has to burn the fuel to move it and the fuel needs paying for.

    If the wankers that still pay their subbies 50p/mile can’t get any more subbies then they’ll either have to put their prices up, make less profit, or go out of business. Even TNT Sameday (in Manchester anyway) have upped their subby’s rates by 10p/mile.

    Things are changing in the industry because of the rising costs but I’m starting to think that the change is actually quite positive.

  2. Alec added on  June 5th, 2008 at 20:18

    I missed your posting Mick.

    As I’ve said in my reply to Jeremy we’re taking a long term view on this. If people want to charge us more we’ll pay it. If people are offering us rates that are so low that I can’t see a business model that could support them then I’ll tell them.

    Why would the rate we have to pay double though? Based on 30 mpg (lwb) and 90p/litre fuel cost per mile travelled is 11.57p plus VAT. At £2/litre it’s 25.78p plus VAT. That’s 28.42/plm difference (assuming only 50% utilisation). I can live with a 30p increase on a 90p charge – the customer’s not going to find anyone with magic free fuel after all.

    We’re expecting to make about £8000-£10000 less profit this year on a slightly higher turnover than last year. I can live with that as it’s way beyond time that the industry hade a good shake-up.

  3. Alec added on  June 5th, 2008 at 21:37

    There aren’t any alternatives, end of story. They either put up with having a line down at £10k per hour or they pay for a courier.

    What you’re seeing at the moment is people trying to cope with change by trying out the alternatives – sending things on the overnight and discovering that it doesn’t arrive, trawling through yell.com to get a £5 lower price etc. It doesn’t take long for them to discover that we’re the only solution to a lot of their problems. If we say XXp/mile then that’s what it costs.

    They have to get used to our new pricing structures and we have to get used to each other’s. Some of us may need to look at exactly how much (or little) our costs have actually increased.

    What you may see is that the ‘express light haulage‘ side of the industry is slower to be able to pass prices on to their customers than the ‘same day courier‘ side. ”Express light haulage’ (goods moved as part of the normal business process) is more tied to the prices that the pallet networks and groupage operators are charging – there’s a 2-3 month lag on the fuel prices being passed through.

  4. Alec added on  June 5th, 2008 at 22:11

    Sorry about the length of this, bedtime reading while you’re supping your cocoa I think:

    I’m certain it won’t make me the most popular person on here but I’m beginning to think that I might actually be in favour of high fuel prices.

    1) Higher fuel prices mean less school run traffic, less ‘let’s go for a drive’ traffic and more thought into whether a journey is really necessary. I’ve noticed a big rise in commuter car sharing over the last few months – people stood on corners waiting for a lift.

    2) Higher running costs mean higher barriers to entry into the business. It becomes harder to do what we’ve all done already – set up with a bit of spare cash or a credit card and build up a business. I’m all for the entrepreneurial spirit but an absence of new entrants into the market is certainly stopping the influx of new competitors willing to run at silly rates. At the same time, and I don’t really enjoy writing it because I think of many of these people as my friends, some of the less ‘financially aware’ courier companies are being forced out of the business, making it easier than ever to sell. I can’t really say I enjoy what’s going on at the moment but it’s really quite interesting. It’s certainly been interesting watching it develop – courier companies desperate for income offering bizarrely low rates, following the ‘turnover = profits’ model, then realising that the customers who are so eager to shop around for the cheapest prices are themselves struggling and take months to pay, and/or change to another, even cheaper, supplier after a few months.

    3) Customers are now less inclined to move their goods themselves. Except for in a very few cases an end user delivering their own goods never achieves more than 50% vehicle utilisation – they go out with a load and they come back empty. Most transport businesses could easily achieve more like 70% (financial) utilisation, just under 50% based on a single ‘hotshot’ and (I’d hope) at least another 20% earnings per mile based on co-loads, backloads, cheaploads, palletloads or whatever else you want to add on to your run. The higher the fuel costs go the more inclined the punters are to use courier services – we’re just in a transitional period while they get used to the idea.

    4) On the actual ‘same day courier‘ type deliveries that we specialise in – documents, data, computer parts, machine parts, worthless shite etc – we seem to have had the “jump into the car and do it myself” lot suddenly decide that they don’t want to do it because of higher fuel prices. Because of tax changes company cars have gone out of favour over the last few years and many employees receive a vehicle allowance and tax free payments under the mileage allowance scheme. It had become seen as a bit of an earner for an employee to deliver that urgent tender personally in their own car and earn a tax free bonus for doing it. The allowance hasn’t gone up at all since it was introduced though and it’s suddenly looking less attractive. Tax changes have also made it less attractive for companies to supply their employees with company vans that can be used for an occasional delivery – that’s not connected with fuel prices though.

    5) The higher cost of oil is making airfreight costs rise at a faster rate than road transport costs providing more scope for European direct deliveries. At the same time higher fuel prices across Europe are making the advantages gained by foreign transport companies more marginal – a 15p/litre advantage on a £1.30/litre cost is less useful than a 15p/litre advantage on a £0.90/litre cost.

    6) As mentioned by someone in another thread, the pallet and parcels networks are all increasing their rates and adding high fuel surcharges making it easier to sell against them and more lucrative to co-load, backload, or whatever-load, these type of consignments.

    I could go on but I’m sure you get the picture. I’m not saying that I’m absolutely certain that I’m right about any of this and I’m not asking anyone to trust my opinion, I’m just saying that things aren’t necessarily as bad as everybody seems to think and that high fuel prices may actually bring a few benefits to any of us who are prepared to embrace change.

    Ever rising fuel prices seem to be inevitable over the next few decades as demand for oil in China and India increases at an exponential rate – the feeling in the oil industry is apparently that the oil price will fall slightly in the short term and then continue to rise at a more gradual rate into the future. There’ll be no going back to fuel prices rising slower than inflation, which is what we’ve experienced for the last 20 years. If this is the case any short term cut in fuel duty would just temporarily delay the inevitably higher pump prices and would only mean that the Government would need to raise some more tax from another source – still from us though. On the other hand the oil companies would probably take advantage of a cut in the duty rate to add a few pence per litre onto their profit margins.

    To put things into perspective – in January 1990 I was paying 39p/litre for diesel, today we’re on £1.25(?). My fuel cost per mile travelled then was 3.65p + VAT, my fuel cost today (assuming the same fuel consumption) is 11.49p + VAT.

    Correcting to allow for inflation (81% between January 1990 and May 2008) and it turns out that in real terms my fuel cost per mile travelled has increased by 4.88p + VAT.

    Now factor in the lower fuel consumption of modern vehicles, the virtually static acquisition costs (c£6500 + vat for an Escort van even back then), the lower servicing costs (3000 mile oil changes back then for diesels), the unavailability of backloads (no CX etc), the (much) higher cost of owning a mobile phone, insurance costs were about the same as today.

    In short, most of the other costs are about the same or lower, fuel has increased above inflation – but in pence per mile terms it’s not really ‘killing the business’.

    The problem is (and always has been) courier companies offering their customers prices that don’t take real costs into account and either paying their subcontractors rates that are unsustainable (for the subbies) on a long term basis or going out of business owing their subcontractors money.

  5. Alec added on  June 5th, 2008 at 22:21

    I don’t think it will alienate the sheeple at all, they’ve got more to lose than us from these stupid fuel prices. We’ve got perfect justification for passing the prices on. Sheeple can’t ask for a wage rise based on their choice to work for an employer that’s based 40 miles from where they live.

Trackbacks

Leave a Comment

Name (required)

Email (required)

Website

Comments

Comments