The Situation
A logistics company operates approximately 120 trucks, two warehouses and a growing network of subcontractors. Revenue has increased around 35% while delivery volume has risen nearly 50%.
Despite higher volumes, profitability has weakened. Fuel, overtime and maintenance costs are rising; warehouses experience congestion; some vehicles leave partially loaded and others return empty.
Sales believes more trucks are required. Operations believes the existing fleet is already stretched. Finance is reluctant to approve another RM12 million investment when margins are falling.
Buying additional vehicles could be correct — or it could lock the company into years of additional fixed cost without addressing the true source of declining margins.