Margins in the transport sector are still under strong pressure. The Dutch trade organisation Transport en Logistiek Nederland (TLN) has conducted a survey among its members. Most of them observed an increase in transport costs while transport rates remained stagnant.
According to a recent survey among TLN members, 50% of transport and logistics companies reported an increase in transport costs in the second quarter of 2019 compared to the first quarter of the same year. Even a greater percentage of respondents, as much as 82%, observed an increase in costs in the analysed period compared to the second quarter of last year.
As 80% of businesses responded, the rates they get from their customers were not higher in the second quarter of this year than in the first quarter. Even on a year-on-year basis, some companies did not record any growth. Prices of services did not change in comparison to the previous year in as much as 28% of companies, TLN indicates.
Fuel prices are the reason for cost increases
The surveyed operators most often mention the increase in diesel oil prices as the reason for the increase in costs. In Q2 of 2019, diesel was on average 2% more expensive than Q1 of 2019 and on average 1.9% more expensive than in Q2 of 2018. Fuel accounts for 23-33% of the cost of services in the industry, TLN estimates.
“Prices in our sector are often not rising fast enough. We have been talking about this for some time now,” explains Jan Boeve, Director of TLN, in an official announcement.
“Negotiations on price increases usually take place every year and I feel that many companies are already paying more attention to this. But the increase in diesel prices is often unpredictable. With the sudden rise in fuel prices, many operators are losing part of their profits,” says Boeve.
Important fuel clause
According to Jan Boeve, it is possible to stay on the safe side when it comes to the loss of profits caused by price rises.
“All you have to do is agree with your customers on good fuel price increase clauses. In this way, we make our profit dependent on the price of diesel, so that hard-working carriers can simply earn a living,” he says.
However, it is important to remember to update the clause as often as possible, e.g. every month. If at the end of a given month the fuel price increased by more than 5% compared to the prices as at the agreement date, the freight rate will also be increased accordingly.
In addition, the organisation also advises that greater attention be paid to fuel economy, which can not only reduce costs but also CO2 emissions.
Rising costs of courier services
The increase in transport costs is observed in both the transport and courier industries. However, courier companies seem to react more quickly to ever-increasing costs by raising prices. There are many examples here: Express & GO! Logistics, Hermes, DPD Germany or DHL. The German branch of GLS also plans to further increase the prices of its services after the increase at the beginning of this year. As Martin Seidenberg, CEO of GLS Germany, announced in an interview for eurotransport.de, in January next year the company will again adjust the prices of its services.
“Last year, we were under enormous cost pressure and this trend is continuing. Today, the courier industry is growing at a faster rate than other sectors of the economy, with a growth rate of 1.6 times higher than the entire logistics market,” explains Seidenberg.
Price increases are necessary to maintain or increase capacity, especially in view of the shortage of staff and the disastrous state of the infrastructure, which is causing increasing congestion.
“This (delivery – editorial note) requires more time, we need to use additional vehicles and do a large number of detours. In addition, legal regulations, such as traffic bans, also hamper operations. We need to plan every minute and put more effort into our services in order to be able to maintain a constant level of quality,” explains CEO of GLS Germany’.
As Seidenberg assures, the company will continue to apply an additional delivery charge during the peak period, i.e. before Christmas.
“We also increase the rates for home delivery, because the whole delivery process is much more expensive here. We will continue to consistently increase the additional charges. We want to make door-to-door delivery a premium service,” adds Seidenberg.