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Building Structural Integrity cont

Performance is not to be confused with efficiency. In this instance, performance is the Carrier’s ability to perform the service delivery expectations created in negotiating the SLA terms and conditions, at the agreed pricing structure.

Profit NodeThe purpose of any business is to create Shareholder Value (ROI), so it is reasonable to use the Primary node as the “Profit” node, representing Shareholder Value. Price NodePrice is the next important node as it is essentially set by market forces. There are many variables affecting Price that have a major influence on Profit and are a limiting factor in creating new business or maintaining margins within existing customers. The relationship between Profit and Price is referred to as the Operating Ratio (Total Costs divided by Total Revenue).Performance NodeThis brings us to Performance. Performance is not to be confused with efficiency though. In this instance, performance is the Carrier’s ability to perform the service delivery expectations created in negotiating the SLA terms and conditions, at the agreed pricing structure.Sustainability NodeFinally, we come to the fourth node: Sustainability. Sustainability is probably one of the most neglected considerations in concluding road freight agreements. Often sustainability is sacrificed on the pretext that keeping the wheels turning will take care of everything. Losses created by low performance, relative to extremely thin margins resulting from meeting the price to get the business, have marked the end of many otherwise thriving Carrier businesses and therefore KPIs should closely monitor the price/performance/profit ratios created at the time of negotiating the agreements. Having thus explained the rationale behind the QUAD Initiative, we will move on to address the critical importance of building your company strategies around this concept as the entire business is only as sustainable as the weakest component in the 10-element triangulated structure.

Building Structural Integrity into your Trading Strategy (continued)

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A balanced structural integrity is essential for driving Shareholder Value

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