In December last year, Geoff Crouch made the decision that he had no other choice but to place his transport business, Ron Crouch Transport, into voluntary administration.
Although the enterprise and its assets were later salvaged by Freight Specialists via acquisition, the unfortunate development was another example of what is becoming a serious issue within the industry.
The transport and logistics sector has been faced with an unfortunate series of events over the last year, with countless businesses being forced to cease operations. Norton Transport, Don Watson Transport, Francis Transport, XL Express Group, Tailored Freight, Transfer Linehaul and DJK Transport are just some of the many players that have all suffered the same fate.
For Ron Crouch Transport, operating in a competitive and ever-expanding market was a challenge of its own. But it was the culmination of two main factors in particular which led to the eventual administration of the business according to Geoff.
The first was the failed integration of a company-wide management system which Geoff reveals ended up costing nearly 400 per cent more than what external experts had advised.
“We introduced a new Enterprise Resource Planning program across the entire company three years prior to its collapse,” Geoff tells Trailer. “Despite us taking all the necessary actions to ensure a smooth implementation, it was a complete disaster.
“It was difficult for us to tell if we were making money and if we were in the right margins because the software wasn’t always operating efficiently. This was in addition to the fact that our original investment for it simply wasn’t enough. We had a budget of $1.2 million but it ended up costing $4.3 million.”
The second part was the result of Covid-19. Ron Crouch Transport was operating its six national warehouses at full capacity during the pandemic due to customers having large volumes of product onshore and uncertainty on international shipping lanes.
The business faced the aftermath when customers returned to ordering – a “tsunami” of outbound product.
“We went from running at 95 per cent capacity down to 45,” Geoff recalls. “It took us a long time to build that capacity back up.”
Challenging economic conditions, sustained pressure on freight rates and ongoing driver shortages are just some of the other widespread issues that have continued to affect a long list of family-owned businesses across the entire industry.
This is where Geoff says sham contracting comes into play and has made matters worse for those like himself.
“There’s an increasing amount of competition within the industry, and not every competitor is playing on a level playing field,” he says. “There are companies out there using sham contracting through ABNs for employees to reduce their costs, and there are businesses submitting tender contracts at rates that companies who do follow the rules can’t compete with.
“This is why longstanding reputable companies like Don Watson Transport start falling. Business owners are deciding that it’s too hard to compete with the competition that is out there, so they’re closing down after 75 years.
“I think that’s a blight on the industry, and a true indication of just how challenging the market conditions are at the moment.”
In Geoff’s view, government over-regulation is becoming just as equal of a concern. Although parameters and requirements are a necessity, he sees it becoming extraordinarily difficult to keep up.
“Operators are running through different laws across different states in one 24-hour period,” he says. “Contrasting interpretations by each jurisdiction can make life very difficult for them.”
While diesel remains the predominant energy source for transport, the current fuel supply situation also poses the question of whether it will be able to keep up. Action needs to be taken sooner rather than later for the sake of the transport industry as well as national economic and domestic security.
Taking all of these challenges into consideration, Geoff believes the survival of the transport industry is in danger. He foresees “industry-changing” consolidation over the next 10 years being the ramification.
“It’s going to be a case of survival of the fittest over the next 12 months,” he says. “We certainly weren’t the first business to fail in recent times, and the undeniable fact is that there’s going to be many more.
“I think the vast majority of small businesses are going to find it challenging to survive during the continued focus on compliance and will therefore be combined into a much smaller number of significantly larger operators.
“Compliance wasn’t anywhere near what it is now 30 years ago. There are extraordinarily large costs involved for a business to be compliant.
“There’s nothing wrong with compliance and there’s nothing wrong with safety, but there is a cost of doing that. This is where the larger players are going to have the advantage because they’ve got the scale to be able to do so.”
So, the question remaining is what needs to change? Geoff says the answer may be found in better support and proper law enforcement from the Federal Government.
“The best thing the Australian Government can do is listen to what the industry is telling them,” he says. “Once you’re out of a minister’s office, they forget that you were there. They need to actually listen to what the industry is saying – hear what the associations made up of grassroots trucking companies are saying and put solutions in place.
“I love this industry, but it’s a brutal one that takes no prisoners. It’s a real shame when you consider the amount of small- to medium-sized family-owned companies that were the heart and soul of the industry but ceased operations because it got too difficult for them.”
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