Q&A: Driving greater efficiencies in your business
The transport sector’s contribution to the South African economy is significant, which is why we’ve developed a sector-focused approach to support transport and logistics businesses to meet their unique industry needs.
Controlling costs in the business
What is the importance of efficient cost controls in a small transport business and how can Standard Bank help with the unique financial needs of this sector?
Controlling costs is an important factor in the transport and logistics industry.
As a business owner, it’s important that you understand the costs you need to control and the costs that are beyond your control.
An automated, cost-effective transport and logistics system can help to provide visibility, reduce costs and increase customer service levels.
One of the biggest and most variable expenses for a transport business is fuel.
Reports provided by a fleet management solution can help you monitor frequency of purchases and kilometres per litre, and to understand your fuel costs and identify any areas of concern, such as driver behaviour. Training drivers to understand their role in fuel consumption offers a great opportunity for cost control.
In addition, because the cost of fuel is linked to inflation, bear in mind that you may not be able to pass the increases directly onto your own client.
What legal aspects should transporters be aware of when signing new contracts with clients?
As you secure new and bigger contracts, there’s a greater need for further vehicle assets to meet contract requirements. Before signing a new contract:
- Seek legal opinion on the contract, and make sure that you understand it thoroughly
- Make sure you understand the terms, and specifically what the costs per unit of delivery will be
- Consider whether the contract is supportive of these costs, or you may find yourself in financial difficulty later on
- Make sure that you understand how your cash flow is going to be impacted, how your payloads work and if there are any risks that you will be exposed to
- Escalation clauses are important as they make provision for escalation of fuel prices and other cost increases
- Without this type of clause in the contract, your business will have to absorb these costs, which will not only eat into your margins, but might even make the contract prohibitively expensive for your business
Managing transport risks
What unique responsibilities are faced by owner-drivers and how can they manage these?
A recent trend is the outsourcing of a large companies’ fleet to individual owners who purchase the vehicles and operate them.
It’s important for owner-drivers to understand the risks and considerations when contracting to transport goods for a large company.
To be able to run and manage your own transport company, adequate driver training and education, as well as in-depth knowledge of road safety are essential.
It is also vital to make sure that you have the right insurance cover in place to protect you in case of theft or accidents.
What are some of the risks associated with transport and warehousing, and how can Standard Bank help transport business owners minimise them?
Whether your business is transporting goods from a central warehouse to distributors or directly to retailers, you need to make sure you minimise risk and have the right insurance in place.
For high-value goods, like alcohol or tobacco for example, unmarked vehicles are advisable and are preferable to a branded vehicle that openly advertises what you’re transporting.
Pay attention to what product you are transporting. Can you take the risk of insuring the loss of those goods by way of theft, spillage, contamination or overturning of the vehicle?
A coal spillage, for example, is easy to clean up. However, if you’re transporting hazardous cargo, like chemicals, you’ll need cover to protect against risks associated with spills and the release of toxic gases.
How do I avoid warehousing risks?
Warehouses are very important in storing manufactured, imported or any other goods in bulk.
When it comes to warehousing, you should carefully consider your obligations in terms of the storage of goods, such as the following:
- Are the goods on consignment and is there legal ownership of the goods?
- Are the facilities adequate to store those goods?
- Are the goods separated by type?
- Are all regulations being adhered to?
You should know, for example, if dangerous goods are being handled as they should be, and whether employees have information and instructions concerning the handling and storage of dangerous goods.
Poor housekeeping can frequently contribute to accidents by hiding hazards that cause injuries or even fire.
From an underwriting point of view, the following are considered hazardous:
- Areas that are not clearly defined
- Cluttered corridors
- Sprinklers and fire extinguishers that are inadequately serviced.
It’s important that you adhere to all safety rules and regulations when it comes to warehousing as non-compliance can damage your business.
Speak to one of our business bankers to find out more about how we can assist you with your business requirements.