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Paying the going rate
Page 16
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Soaring fuel prices means it is inevitable that hauliers will have to pass on their costs. But are customers willing to accept these rate increases?
Words: Chris Tindall
THERE ARE FEW hauliers as willing to call their customers' bluff in quite such a way as Scunthorpe's John Burgin did, but he reckons that his stance has saved him money.
Last week, CM reported how the boss of steel and general haulier Intake Transport gave all his customers an ultimatum: accept a fuel price surcharge, or it would stop working for them.
In effect, that represented a 7% rate increase since the end of February. Burgin admits it took balls to do it, but he adds: "It's a cut-throat business. What's the point of running at a loss?"
His approach lost him two 'big' customers, but he is unrepentant: "Why should I subsidise the big companies?" he asks. "I don't slip the price up to turn a profit. I want a comfortable profit, but I'm not there every week cap in hand."
And Burgin says that all hauliers must act in this way if they are to remain afloat in the choppy waters the industry is currently sailing through.
But just how easy is it to introduce a rate increase?
The long-ball game
John English Transport, which runs three trucks and mostly carries out container work out of Felixstowe, thinks it's tough.
Owner John English says: "I don't get much choice if I work for a big company. All I do is write telling them how much my costs have gone up and are there any increases in the pipeline. I did that once in October and last week. In October, I got a penny per mile. Then fuel went up and I got 4% from one customer. But it hasn't changed now since October." English says container work has dried up recently, meaning he is not in any position to bargain: -It's quiet, there's no negotiating power out of Felixstowe at all." But he is gritting his teeth and willing to play the long-ball game: "This year will he very telling. If you can come through this year. you might make some money in a couple of years."
Over in the North West, Suttons Group says it hasn't had to resort to the "blunt tactics" that allowed Burgin room for manoeuvre. Suttons' group managing director, Andrew Palmer. says: -What we have in a number of arrangements with our larger customers are fuel regulatory mechanisms. We have a transparent system, which tracks fuel price movement. After a certain point, we apply a level of increase.
"In the past, most of those were done on a quarterly basis. Over the past few years, it has become monthly, albeit monthly in arrears, so there's a cashflow effect, obviously."
Palmer thinks that the chemicals and fuel sector in which it operates in helps: "People are very well informed of what's happening," he explains. "It's not easy, we have to be very clear and open about what we are doing.
"Life is never that easy when fuel costs are going up 20%-plus in a 12month period."
Maintaining your margin
Stiller Group's commercial general manager, John Welsh, says he can't understand why any large organisation wouldn't introduce a fuel price escalator (FPE). It foresaw fuel price rises and introduced FPEs in all its contracted work. Welsh says: "It should be a standard part of any contract. It just maintains your margin.
"When we discuss this with customers, there's almost a resigned inevitability to it; they know from their private motoring. But we get it cheaper through bunker arrangements, which takes a little bit of the sting out of it."
Welsh adds: "Customers are aware of what's going on in the market. I think that some of them are sat waiting for the call. It's down to a company's personal attitude; our position would be very much aligned to Burgin's." •
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