Input costs put pressure on transportation business

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The top five costs for transportation businesses are fuel, tolls, informal costs, interest expenses and driver salaries. Photo: ST.

Need to build a floor price framework

According to experts, there are many causes for the increasing freight rates of businesses. These include objective factors such as high gasoline prices (accounting for 45 percent of transportation costs) and some accompanying surcharges such as 10-20 percent for tolls, port service costs such as CFS fee (LCL), warehousing fee, container storage, container handling fee, terminal operation fee, container cleaning fee, and agency fee.Besides, the weak situation in transportation infrastructure happens in some areas, there are many overloaded and congested sections, which make vehicle traffic slower, and also wastes fuel, degrades vehiclesquickly.

Mr. Pham Dinh Thang, Director of Decam Transport and Services Co., Ltd, said that the principle of freight charge calculation is that if petrol price increases or decreases by 10 percent, then freight charge will increase by 3%-4%, respectively. Currently for each order, businesses often offer the overall price which includes all additional costs such as gasoline and tolls. Because the price of transportation service includes the price of gasoline, it is very easy to be passive, so businesses can not adjust the freight charges immediately when petrol price increases, Many units fall into the "dilemma" when increasing prices, it is easy to lose customers.If prices do not increase, they will suffer losses due to the pressure from petrol prices on input costs.

Many businesses have chosen overloading to reduce costs, but this also comes with endangering vehicles and affecting the safety of goods. This is an action to show the spirit of unfair competition in enterprises, unintentionally creating an unfair "war" in the the crowded transport market.

In order to reduce costs for transport businesses while ensuring healthy competition, transportation expert Bui Danh Lien said that for well-invested transport enterprises with a large number of vehicles, there is investment in personnel and management to improve service quality. Besides, it is necessary to put the floor price to apply the transport of goods into operation, to develop the price bracket of each mode of transport and to set criteria to ensure the connection between transport modes, avoiding the situation of massive investment and movement,so the new transport business has increased competition and initiative in prices.

Cooperation to connect

Another current situation makes the high cost of transport business, because most small-scale freight enterprises carry out intermediary transactions, causing many costs. The World Bank (WB) survey on strengthening Vietnam's road freight industry conducted a survey with 150 road transport companies and more than 1,400 drivers showing that the top five costs for transport businesses are fuel costs, tolls, informal costs, interest expenses and driver salaries.

A series of rising inputs has caused freight rates to increase, while the size of enterprises is still small and fragmented. The average number of trucks of each company is about five, and nearly 80 percent of the total truck volume nationwide is from five to 10 tons, which is also the cause of traffic congestion and increasing costs. By this calculation, small trucks are 75 percent less efficient than heavy trucks in terms of operating costs and greenhouse gas emissions.

In addition, the lack of a brokerage market in the country effectively connects existing transport services to the needs of potential customers. Therefore, the rate of non-truck trucks is up to 50 percent. This situation known as "unladen carriage", which has a direct impact on transportation costs. Moreover, the current use of technology to connect supply and demand is limited.

The volatility of the market results in transportation companies facing cost reductions to develop more comprehensively, it is the reduction that small transportation enterprises havelow investment costs. It is often considered to link routes to take full advantage of the costs.

Specifically, Mr. Nguyen Van Truong, Deputy Director of Anh Duc Transport and Service Company, said that the advantage will be in favor of transport enterprises with good service quality and reasonable prices. Therefore, usually we will arrange the transport orders connecting to each other to avoid the situation of "empty cars" when returning especially for some long routes such as Hanoi - Tay Nguyen or Hanoi - Dien Bien.Thanks to that price of transport service onthese routes will be significantly reduced.