Take advantage of the tools available to help your business

In News5 MinutesBy Nick LeggettJune 17, 2022

Rising costs are impacting road transport operators throughout the country. New Zealand, like the rest of the world, is facing inflationary pressures. The transport industry is particularly vulnerable and at risk because we are a service industry.

We estimate the cost of fuel as a proportion of a transport business has gone up from about 15 to 20% to about 30 to 35% – a massive jump. Wages and other costs are also increasing.

The main question that transport operators need to consider is this: Are you recovering the costs from your customers and passing them on, or are you absorbing them? Many small businesses, in particular, do not fully understand their costs and may feel reluctant to explain to customers that higher costs need to be reflected in the rates.

My big message for operators is to know your costs. Transporting New Zealand is in a unique position to help members by giving them access to the Grant Thornton Index. All members are entitled to access this quarterly cost index. It is not a price index and it does not tell businesses how much they should charge; rather, it shows members the respective cost movements in the typical components that contribute to transport rates. Grant Thornton updates the data quarterly based on what it sees in the market and Waikato University undertakes a representative survey of transport businesses every five years to ensure the data reflects market conditions.

We are happy to provide advice on how members can use and apply the index to their business.

To help with fuel costs, many businesses use FAFs (Fuel Adjustment Factors) to pass costs on; however, we are mindful the application of these is complex and can only be fairly determined if operators understand what fuel represents as a percentage fuel of their total rate. For our members, they may wish to re-read the advisory we issued to them on 28 March this year. We would also encourage you to have a chat with membership manager Fiona McDonagh or membership advisor Vicki Harris to see if you can get a better deal through one of our fuel schemes.

The Government has reduced the RUC component for the industry for three months, by about 36%. It has since extended that to 21 September 2022. We are very much fighting in this space and the Government listened to us when we asked for that extension. Now we are asking the Government to extend it again because international oil prices have gone up, not down. To pass those increases back to the industry at this time would be not only unpalatable but would add an additional stress.

Next week we will put out a survey asking operators questions about the pressures they are facing around fuel and other costs; how they are dealing with that in their business; and what additional information and support they would like to receive.

We have already seen some examples where companies have been forced to shut up shop. In the States, fuel prices are just making it unbearable for some operators. We want there to be a flourishing number of small operators in New Zealand. There is a risk that our supply chain is going to come under further stress if operators don’t run viable businesses, and the potential for freight not to be delivered and supermarket shelves to be empty if we don’t have the required number of transport companies in operation to do the work.

Now is the time for operators to think about some of those issues. Transporting New Zealand advocates to Government and politicians about these issues on behalf of members and makes suggestions on what they can do to ease the pressure on the industry that is carrying our economy.

In the meantime, we do have some helpful tools such as the Grant Thornton Index. I urge members to access it, have a look at it, and think about how you can apply it to running a business that passes on its genuine costs to customers.

By Nick Leggett, CEO, Ia Ara Aotearoa Transporting New Zealand