Philippine logistics firms brace for double-whammy

Although cargo volumes have not been affected, logistics firms have to brace for a double-whammy impact on its operation: Increasing cost of fuel and at the same time excess truck capacity, reported Manila Bulletin.


Bert Lina, chairman of Air21 under its flagship Airfreight 2100 Inc, the exclusive licensee of Federal Express Corp in the Philippines, said that although cargo volumes have not been affected they have to endure this double whammy-impact of high cost of fuel and under-utilised trucks.


On the increasing cost of fuel, Lina said they were forced to implement another round of increase in cargo rates of five to 10 percent to factor new adjustments in fuel cost. Air21 is the dominant player in the country's freight forwarding industry.


“The logistics business is okay but we are affected by the fuel cost because that is one single biggest component of our operation,’’ Lina said.


He said that its revenue sales even improved by five to 10 percent in the first quarter because the scarcity in some supplies following the Japan disaster is being filled up by China or Korea.


“We are not affected because when there is scarcity there is demand and the slack in supply is being taken up by China or Korea,’’ he said.


According to Lina, fuel, transport and all related aspects related to fuel account for 20 percent of the logistics industry operation.


“High fuel cost has a huge impact so we have to pass on the cost. In the airline industry they have this dynamic fuel surcharge to cover for the volatility of fuel cost,’’ he said.


Lina, however, said they just cannot arbitrarily raise prices because they have contracts with their clients.


“'It depends on the contract provision, but we can only do that much,’’ he added.


Lina further said that government could help the logistics sector by assisting in making the industry become more efficient.


One way, he said, is through the lifting of the number coding scheme and the anti-truck overloading programme of the Department of Public Works and Highways.


For companies, Lina said the number coding scheme is making them inefficient because their trucks cannot be fully utilised.
“As a result, we are suffering from excess capacity of vehicles,’’ he said.


“The colour coding should be lifted because it does not work,’’ he added.


Lina also called the number coding scheme anti-poor.


“The rich people have no problem with the number coding because they can always buy another car, but what about those who cannot afford another unit,’’ Lina said.


He also noted that the number coding scheme has not been effective in reducing the number of cars on the road because the rich people have already bought their replacement vehicles.


“It defeats the purpose because there are an estimated US$115.5 million worth of excess cars as evidenced by the high auto sales,’’ said Lina.
(Source:http://www.cargonewsasia.com)