Food distribution in road transport

doi:10.22167/2675-6528-20230015E

Article

Strategy

Logistics

Swot

March 23, 2023

Food distribution in road transport

_{DOI: 10.22167/2675-6528-20230015}
^{E&S 2023,4: e202300015}

Ana Carolina da Angela Guastali

The circulation of products in Brazil depends on more than 60% on road freight transport, including essential items, such as food and fuels. Only cargo trucks can deliver products to the final consumer’s door, making this type of transport indispensable^[1].

The importance of trucks is even greater in countries that invest little in railway networks, as is the case in Brazil. Practically all rail transport is basically used for ore and grain cargo, the route is slower and the high cost and maintenance diminish its competitive advantage^[^2] compared to road transport. In this way, consumers depend on truck transport to receive all indispensable items in their locations^[^3].

In 2018, truck drivers staged a 10-day strike on highways across the entire Brazilian national territory, as a form of protest, due to an increase in the price of diesel oil, hindering the flow of products and causing shortages of goods, especially perishable ones, reaffirming how much the Brazilian economy depends on road transport for the outflow of products and food^[^4].

The recent coronavirus outbreak, which began in 2020, caused a significant increase in the demand for road transport vehicles to maintain food supply, due to fears of food shortages and rationing^[^5]. At the same time, drivers feared exposure in crowded places, where the risk of contamination is still high. Small transport companies had to adopt greater safety and hygiene measures to protect drivers from the risk of the disease, implementing the use of tags at toll booths, meal cards, and fuel cards, so that employees would have minimal contact with other people and with cash^[^6].

Due to the high cost of investment in equipment and software for logistics, it is almost unfeasible for small and medium-sized enterprises to install such systems for all their vehicles and employees. Small and medium-sized enterprises define their business operations as those that exceed the standards of a microenterprise and are still short of being a large company^[^7]. On interstate borders, the use of technologies is also archaic, forcing drivers to have contact with agents, a situation that often, due to the lack of an integrated system, generates delays in trips, and thus generates more expenses for transport companies^[^8]. Given the above, it is fundamental for companies to analyze ways to reduce costs without losing service quality.

The company studied, for the purpose of identity preservation, will be referred to in this study as EggEgg. Founded in 1996, it is a medium-sized organization operating in the road freight transport sector. The carrier has a fleet of 20 cargo vehicles, with 30 direct employees and 15 indirect service providers. The company is classified as a small business, located in the city of Iacri in the interior of the State of São Paulo, near the city of Bastos, where the companies served by EggEgg are located.

The city of Bastos is a major poultry hub, a national reference, known as the national capital of eggs. The Bastos region has one of the largest laying hen flocks in Brazil, accounting for about 20% of Brazilian production since 2017 and currently producing 20 million eggs per day, a scenario in which this analysis was conducted. For the distribution of this production throughout Brazil, road transport is used. Considering all companies installed in the city, there are over 1000 trucks, including trucks, bitrucks, and semi-trailers, which leads to high competition for opportunities^[^9].

EggEgg serves the South and Southeast regions of Brazil, where it provides services to a large number of clients. It holds a strong market position in its operating region, with direct influence on pricing, and due to its fleet of 20 semi-new vehicles, it is well-regarded among contracting companies for offering secure and quality services, and constantly seeks to improve processes and customer service.

The study was based on qualitative direct observation, documentary research conducted on the company’s websites and documents, aiming to record and systematize a methodological approach for implementing a strategic tool, the SWOT matrix (“Strengths, Weaknesses, Opportunities and Threats”). The analyzed period was from October 2021 to March 2022. The research had the collaboration of a professional who has been following the company’s routine for over 7 years and has expertise in the subject.

The SWOT analysis tool was chosen because it allows the organization to have an action plan to reduce risks, increase productivity and revenue, being useful to the entrepreneur, as they will feel encouraged to analyze their company from a variety of perspectives in an easy, objective, and constructive way^[^10][11].

Sectors such as agriculture use road transport to move their products, fruits, vegetables, perishables, and dairy products for supply chain, even though it is one of the most expensive means of transport^[^12]. The price of diesel fluctuating since 2018 has increased market competition, with this, the supply chain pushes for higher prices and purchase orders with shorter payment terms. Consumers are increasingly demanding, making it important to consider the demand for price, quality, and availability. The most strained sector in the entire operation ends up being transportation, which has its profitability reduced and an overload of work for drivers and operators^[^13].

Rail transport is still underutilized in the country, despite costing five times less, accounting for less than 20% of the freight sector. According to the report by the National Confederation of Transport (CNT), the Brazilian railway network was only 29,165 kilometers long in 2016^[14]. This makes the road transport segment an attractive market, where the flow leaves the interior of the country, supplying large centers. Companies have been seeking management technologies that improve customer service regarding their needs and ensure the construction of a path that builds loyalty in this partnership in the future, driven by market evolution and competitiveness. Given that today’s decisions can affect tomorrow’s performance, it is essential to be prepared for an unknown commercial situation^[^15].

Today in Brazil, one of the highest tax burdens in the world prevails^[16], despite the adversities, and being a sector that suffers from a lack of adequate infrastructure, they continue to work throughout the quarantine period. Nevertheless, among the sectors with the lowest tax burden is transportation^[17]. The highest concentration of road freight transport among the world’s major economies is found in Brazil; the numbers are the greatest confirmation of this fact: 60% of goods in the country are transported by road^[18][19]. Despite the existence of other types of transport in the country, this still ends up being the most used option^[19]. According to the CNT [20], road transport is the country’s main logistics system. Brazil is the fourth largest in road networks, with about 1.7 million kilometers of roads. Despite the positive numbers, only 12.4% of the roads are paved, while 87.6% are not: an alarming statistic that requires greater attention from the authorities^[20]. The supply management of the perishable food chain is complex because the difficulties increase in the distribution phase to maintain product quality, especially in a continental country with such varied geoeconomic and infrastructural conditions^[21]. This study used the SWOT matrix as a relevant tool to assist in strategy development, emphasizing the need to adequately diagnose internal and external environments to build a path guided by strategic thinking and congruent with future needs (Figure 1).

Figure 1. SWOT matrix with information from the case study carried out at EggEgg
Source: Prepared by the author.

Based on the analysis of documentary data, and with the objective of improving the company’s problems through the use of the SWOT matrix, it was found that certain points can present a complex nature, requiring constant debate within the organization through strategic planning. Two relationships were established during the period studied, whose research focus was primarily on the internal environment, one of them called strengths and the other for weaknesses. In the case of EggEgg, the strengths that were highlighted demonstrate the concern in serving with quality, safety, and agility, valuing the long-term partnership with customers.

At EggEgg, weaknesses are being addressed with training and process creation, in the case of high employee turnover. As this is a sector that cannot stop, shift rotation has also been adopted to reduce the working hours of administrative staff. The company sought partnerships with large companies, setting a minimum quantity of loads per week. This decision helped to provide more breathing room in cash flow, due to the regularity of loads, moving idle vehicles and preventing them from being parked in the yard. To reduce maintenance costs, 3 vehicles over ten years old were sold to invest in fleet renewal.

Regarding the influences of external environments, we highlight the good relationship with partners, which helps with word-of-mouth referrals, good route planning, to avoid time loss, increasing the agility of services provided. Another important factor is the performance of the driver team, who enjoy what they do and perform an excellent job on the roads, being a source of great pride for the company, as behavior on the roads can sometimes greatly damage a lifelong job. However, threats exist; despite the company EggEgg belonging to a sector of extreme importance in the Brazilian economy, it can suffer significant losses due to charges, high input costs, uncontrolled diesel prices, driver working hour legislation, and poor weighing equipment on the roads can be highly detrimental to the company. A small company suffers greatly from labor laws, as it needs to have reserve drivers to avoid excessive hours, and to travel with a load below the vehicle’s capacity to avoid weight fines on the vehicle’s axles.

All these details burden the small entrepreneur, making the cost of the service more expensive, and these amounts cannot always be passed on to the client. So, even though it is the sector that drives Brazilian commerce, it is the most affected by the lack of public policy to help the transporter. For EggEgg, the research was important, it made strategic planning act with small adjustments, for significant improvements in the company’s financial health. It was also clarifying for management, showing the points to be improved, and those that require greater care, to avoid future problems.

Based on the analysis conducted in this research, the objective was achieved to highlight that for the company to have better gains, it needs to reduce its fleet by selling old vehicles, which generate high maintenance costs, and thereby reduce the payroll, as the current scenario with high diesel prices makes growth unfeasible at this moment. Follow-up actions will be carried out so that at the opportune moment, the acquisition of new vehicles can be made. With this work, we visualize the importance of applying strategic tools to define goals and develop financial planning to remain active in the market.

References

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Como citar

Guastali A.C.A. Distribuição de alimentos no transporte rodoviário. Revista E&S. 2023; 4: e20230015.