Those operating in the transportation and logistics sector are no strangers to fluctuations in operating costs. Fuel surcharges mean that companies walk a difficult tightrope, and risk either under-charging their customers and losing out on revenues or over-charging and compromising the client relationship. Complications caused by Brexit could mean more red tape, more costs and less operational agility. These are just two of a whole host of disruptive forces that have placed a real squeeze on the operating cash flow of transportation services.
The increase in inflation results in a number of significant hurdles for businesses operating in the transportation sector.
On top of that, operators also need to deal with the impact of soaring inflation on their delicate profit margins. The EU inflation print was recently published at an eye-watering 10.9%. This means that transport and logistics providers face further belt-tightening in an already difficult economic climate. But how can they do this without cutting corners and compromising the quality that their clients have come to expect?
Here we’ll take a look at the challenges caused by rising inflation, and how they can be mitigated in your operations.
🚛 The challenges caused by high inflation
This increase in inflation results in a number of significant hurdles for businesses operating in the transportation sector. Now is the time to strategise accordingly. In order to mitigate the impact of rising inflation on your cash flow, your operations, and the quality of service you offer your customers you need to first understand how rising inflation will affect your business.
Three key areas in which inflation is likely to affect your operations include:
This is a no-brainer, but it bears mentioning. An increase in inflation inevitably means a rise in costs across your supply chain. While the impact on individual bills and charges is negligible, the cumulative effect across dozens or even hundreds of transactions per day may start to take a toll on your cash flow.
Rising labour costs are also likely to have a substantial impact on operations, especially in Belgium with the fixed indexation on wages. A problem that is compounded by the widespread shortage of drivers.
A rise in operational spending will likely deplete cash reserves and potentially stymie your business cash flow. This may mean that you are unable to take advantage of capital investments that could make your operations more efficient.
Worse still, without healthy cash flow, you may have to resort to borrowing to cover operational expenses. And borrowing means interest. Resorting to the use of credit to pay operating costs can lead to a spiral of debt that imperils future cash flows. Especially now that rising interest has driven up the cost of borrowing.
The EU has previously enjoyed 0% interest rates for the better part of a decade. In today’s financial climate, however, higher interest rates mean that debts last for longer and place a greater squeeze on your company’s liquidity.
Reduced operational efficiency
Perhaps a less obvious effect of rising interest rates is a reduction in operational efficiency. In a bid to cut costs quickly, management teams are at risk of making reactive decisions based on incomplete data sets. As such, spending cuts may be made that reduce overheads initially, but actually cost more than they save in the long run.
Without the right tools to guide decision-making, it’s easy to fall into the trap of making indiscriminate spending cuts that lead to a reduction in operational efficiency, a potential drop in quality and more opportunities to be outperformed by competitors.
Qargo has been precisely engineered to improve operational and cost efficiency within the transportation and logistics sector.
🚛 Reducing the impact of inflation on your operations
The good news is that your business does not have to let inflation compromise the efficacy of its operations. Empowered with the right digital solutions, transportation and logistics providers can ameliorate the impact of rising inflation on their operations.
Identify areas of wasteful spending
Transportation providers can fall into bad habits that lead to wasteful expenditure. Without regular and rigorous training mistakes can be made like incorrectly reported mileage, or improper fuel charges.
Making their operations more efficient can reduce employee workloads, meaning fewer FTEs are needed. So companies can reduce their HR spending without compromising on the quality and reliability of their service.
Improve cash flow
The right digital tools can help transportation providers to improve cash flow by getting paid faster, making invoicing more efficient, and processing orders more quickly. This means that companies can improve their operating cash flow, and reduce their reliance on credit.
Moreover, they can reduce or eliminate the impact of human error (such as mis-billing) on operating cash flows.
Increase financial visibility
Do you know which orders are the most profitable, and which are likely to result in short-term losses? Are you able to see the revenues and costs at both the order and execution levels? Without the tools to improve your financial visibility, it can be hard to identify areas where spending is a drain on your cash flow and differentiate them from areas of spending with strong and timely fiscal multipliers.
🚛 How Qargo can help
Qargo is precision engineered to improve operational and cost efficiency within the transportation and logistics sector. It features a robust range of capabilities to improve financial visibility and aid cash flow. So managers can make faster, better-informed decisions, allocate spending to areas that yield the fastest and strongest returns, and get paid more quickly.
With Qargo, businesses can:
Process orders up to 10 times faster
Auto-generate invoices for greater efficiently and faster payments
Get the right price every time with our flexible pricing engine
Optimise shipment planning to reduce costs and CO2 emissions
Make workflows more efficient with easy task management
Increase accuracy and visibility, reducing the risk of costly errors while keeping everyone on the same page
Qargo helps you to optimise your operations and offset the impact of rising inflation on your business.