Transport contracting practices in consumer goods companies in Brazil

A recent survey carried out by ILOS with large manufacturers of consumer goods in Brazil indicates that around 20% of companies no longer work with formal contracts with all transport partners. Among the other 80%, contracts are being closed with an average horizon of 20 months. It is important to emphasize that this time has been falling in recent years, indicating that companies are increasingly looking for short-term results, wanting to be free to quote prices almost annually. Questioned whether the type of contract was the same for all carriers, most said yes, that is, there are no simpler contracts for operations with less risk.

Figure 1 – In recent years, companies have reduced the formality in contracting road transport

Source: Mercedes-Benz Disclosure

Although they are getting smaller and smaller, most contracts have readjustment clauses that allow for a pass-through of cost inflation for the period. In general, these readjustments are based on a mix between economic indicators, collective bargaining and diesel variation.

It was also identified that the average payment period for the consumer goods industries to carriers is 41 days, higher than the average for all suppliers, which is around 34 days. This period varies greatly between companies: while some require more than 60 to 90 days for payment, others pay between 20 and 30 days. It is important to note that longer payment terms may impact the fees charged. Incidentally, there are carriers that need cash that refuse to participate in the BID of companies that have payment terms in excess of 90 days. With fewer carriers, less competition.

Another interesting point in the survey was the daily rates of the vehicles used. With the change in the Driver's Law, the base salary dropped on average, but the costs of per diem and overtime went up. Currently, the daily rate of a trailer varies between R$ 250 and R$ 700, with an average of R$ 400.

Finally, the current challenge cited by companies is how to make direct hiring of self-employed workers possible. In times of pressure to reduce costs and proliferation of applications that bring the self-employed closer to companies, the possibility of direct hiring may indicate a possible drop in the value of the route by up to 15%.