The Vicious Cycle of Road Transporters: Rising Cost-Declining Revenue Phenomenon

Transportation costs, which do not find much place on Turkey’s agenda, make it imperative for those concerned to evaluate the cost-income situation of the companies doing business by road, which is the most important mode of transportation considering the transportation system of our country, taking into account the pandemic process.

Apart from the transportation infrastructure fees incurred for all companies engaged in road transportation; fluctuations in fuel prices, rental vehicle costs, driver wages and personnel salaries, tax-insurance expenses, and other costs can be listed in a snap. While other cost items not listed here may also be included, the main issue is that these costs tend to increase continuously, with exceptions. On the other hand, the only income of logistics companies doing road-based business continues to be freight costs.

In addition to the shortage of income items, freight rates do not increase, except for exceptional companies, and even decrease due to the price-oriented competition strategy, which is constantly intensifying and is the chronic problem of the sector. This mathematical situation means trying to carry out an activity whose revenue ultimately does not cover its costs.

In addition to the aforementioned negative situation, a major problem is the issue of debt collection by sector service providers. With the pandemic process, it is clear that the sector is struggling to find customers to provide services, let alone debt collection. Sector service providers try to provide services with collection periods ranging from eight to twelve months. It is clear that this distorted structure has devastated cash flows and increased firms’ debt stocks. The continuation of this process is likely to create a wave of concordatos/bankruptcies in the sector. When we evaluate how logistics service providers engaged in road transportation can get out of this vicious circle;

Apart from the adoption of cost-reducing managerial approaches for logistics companies, legal and commercial grounds for income diversifying applications (such as banner advertisements, website advertisements) should be prepared.

With the joint decision of sector organizations and under the leadership of sector non-governmental organizations, efforts should be made to end the price-oriented competition strategy that is to the detriment of everyone. The state should continue the support and incentives it offers for the sector. In addition, monopoly/oligopoly structures that increase the costs of sector service providers should not be allowed by the state.

-Companies receiving logistics services should also abandon the strategy of only receiving low service fees. It must be convincingly explained to them that this situation is not sustainable for them and the sector. Work on mainstreaming the supply chain management philosophy. It is necessary to revive foreign investor interest in the sector, which intensified in the early 2000s but has declined in recent years.

-Works to finalize the passage of the New Silk Road Project through Turkey should be carried out rapidly with the support of the state-industry-academia. This is an issue that needs to be adopted at the national strategy level.

  • The concept of Revenue Management should be more widely accepted by sector service providers. Vehicles, equipment, software, etc. used by logistics service providers. The share of domestic production in resources should be increased.

Dr. Lecturer Celil DurdağEsenyurt University

Organizer: Eren TUFAN (Project Development Coordinator)