BUSINESSES that withhold fair fuel surcharges, whether due to inertia, confusion, or deliberate pressure, are contributing to conditions that can push transport operators out of the market, an industry expert has warned.
With diesel prices reported to be around twice their mid-February level and the Fair Work Commission's Road Transport Contractual Chain Order in effect, Australian businesses are facing cost increases and new legal obligations to pass fair surcharges down the chain.
Prological Consulting managing director Peter Jones said the correct surcharge position was far harder to calculate than most businesses realised, and underpaying put supply chain partners at risk of failure.
According to Prological, line-haul operators running freight between capital cities, fuel accounted for between 30% and 40% of their total operating cost.
Mr Jones said the fuel crisis had meant almost half of what a business paid a long-haul transport provider had effectively doubled.
“The federal government's decision to halve the fuel excise and remove the road user charge provides some relief, but when those measures are factored in, the net cost of diesel is still extremely steep for operators,” he said.
“Many businesses already had a surcharge arrangement in place before mid-February, set against a baseline from some earlier point.”
Mr Jones said working out the correct position now (accounting for the excise changes, the road user charge removal, and the specific freight task) was complicated.
Fuel's contribution to freight cost is not necessarily uniform and made up around 10% to 15% of the cost for metropolitan deliveries, 20% to 25% for intrastate work, and 30% to 40% for long-haul interstate.
Transport companies can fail from cash flow problems driven by extended payment terms paid late, or the inability to recover fuel cost increases in time.
The Fair Work Commission's order which came into effect in April makes cost recovery an enforceable legal requirement.
“For larger businesses with national distribution networks, the fuel crisis makes a strong case for holding inventory closer to the point of consumption in each state, rather than running long-haul distribution from a single central warehouse,” Mr Jones said.
“For smaller businesses, the economics are unlikely to stack up. But businesses of all sizes should be aiming to understand their fuel surcharge position, engage transport partners with transparency, and pay what is owed.”
Mr Jones said “conversations around electric vehicles” inside Australian transport companies were occurring, but current industry conditions failed to support industry wide, mass adoption.
“Many transport operators lack the grid capacity at their depots to support meaningful fleet electrification as just one of many constraints,” he said.
“Australia's right-hand drive market means the country sits well down the queue for electric truck R&D investment, with manufacturers prioritising the larger, more advanced markets of Europe and North America.”
At a global level, the rare earth minerals and battery packs being produced were prioritised to passenger vehicles, not freight, so meaningful change, while having begun, was “still a while away”.