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Building Structural Integrity
Whether you are a Shipper or Carrier the four principles described in the QUAD Initiative apply equally to driving Shareholder Value: that of structuring trading relationships set on expectations created by the parties. In the case of a Shipper, it is the perceived value of the Carrier’s ability to deliver service in line with the SLA, at the lowest possible price, while the Carrier is concerned with the Shipper adhering to the terms and conditions upon which the freight rates are set in order to achieve the desired margin.Most prices are accepted through negotiation and what the buyer is prepared to pay, so one can conclude that prices are set by a value decision, based on supply and demand. However while no one Shipper or Carrier is large enough to control rates, competition plays a dominant role in setting “Market” rates. Later in the series, we will go into detail about how Shipper SLAs influence the cost of doing business but for now let’s focus on the fundamentals of Driving Shareholder Value in Freight Haulage. The “QUAD” Initiative encompasses the concept of Triangulation used in designing integrity of structures, and we are using it here to illustrate the importance of ensuring that every component in a structure must perform in unison with all the other components to contribute equally to the strength of the entire structure. There are 10 components in a triangulated structure (4 nodal points and 6 interconnected links). In this analogy, the four nodal points are those representing: Profit, Price, Performance and Sustainability. The six links are those components that connect the nodal points equally; three links support the “primary” node and three connect the secondary “foundation” nodes. See Fig 1
Building Structural Integrity into your Trading Strategy
Author: Hugh Sutherland2014/08/05
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The frequent question arises: what does it costs to run a certain vehicle configuration? Also, what is the “going rate” to haul on a certain route? And, many SA road transport Operators are still to grasp that this is like asking, how long should a piece of string be? There is no one answer to this critical question until all the variables used to calculate the answer are known.
Reduced Docking and Detention delays offer the best opportunities to reduce freight rates
Most prices are negotiated on supply and demand and what the buyer is prepared to pay, so one can conclude that prices are set by a value decision, based on supply and demand.
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