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Addressing influences to the bottom line

The Business environment for companies involved in temperature-controlled distribution and storage has become increasingly more complex, cost-driven, competitive, and challenging. Complicating matters are progressively more stringent requirements on quality and product safety, the cost of going “green,” and labor shortages.

The largest changes in the industry have been in two areas. One is the growth of temperature-controlled storage warehousing square footage, along with many new players competing for market space.

The other significant area of major change is the increasing involvement with third-party logistics providers (3PLs) and the growth of private fleets.

That is the opinion of Matthew Bowles, an official with Grant Thornton, the US member firm of Grant Thornton International Ltd, one of the leading global accounting, tax, and business advisory organizations.

Fuel

The latest impact on the industry, he said, has been the increasing price of fuel, which is having a major consequence on all sectors of transport, large and small alike.

“While the larger carriers have more financial resources to hedge fuel, or to make investments in technology to reduce fuel cost, all fleets need to be working on cost reduction as a whole, of which fuel cost is the major focus.

“Investment in routing and logistics technologies is an intelligent decision,” Bowles added.

Along with the rising cost of fuel, fleets have the challenge of contending with environmental mandates and the nation's faulty infrastructure.

Equipment

One of the solutions that Grant Thornton has been working on with clients is to change their vehicles and equipment to better address these challenges.

“This change in equipment not only provides significant cost reductions in fuel, as much as 70% in some cases, it also provides reductions in emissions that meet or exceed US EPA requirements,” he said. It is wise for fleet managers to be investigating the use of alternative-fueled vehicles and alternative fuels as a way to reduce operating costs.

Competition

As consolidations within the industry continue, to compete with larger industry players, smaller companies “need to be focused on positive revenues and secession planning if they are not interested in being a buyout target for a private equity firm, or an object for investors looking to acquire a carrier, cold storage warehouse facility, or customer contracts.”

To better weather current market conditions, Bowles advised fleets to take a hard look at their operations to see where costs can be better managed and operating efficiencies gained.

He further suggested that fleets consider their current pricing structure and the associated fuel surcharges to be sure they are, at the very least, not losing money. He knows of some companies that take loads paying less than the fuel cost to move the freight, and that “is no way to operate.”

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