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CENTRAL TRANSPORT THE NO-PROFIT, NO-LOSS CENTRE
Page 43
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The John Lewis Central Transport operation is responsible for cradleto-grave provision of vehicles to John Lewis and Waitrose.
Sheppard says: "We have just over 2,000 pieces of equipment we own and manage, and lease to the two trading divisions."
In effect, Central Transport is an in-house contract-hire operation. However, unlike many other own-account operations where the true cost of }n-house transport is lost within the overall company budget, Sheppard insists that at JLP: "They're absolutely grasped! My overall objective is to make no money and lose no money."
That's a new one on CM. However, Sheppard explains the unique set-up. If I'm making money, I've set the rentals at the wrong level. I have to set the vehicle rentals so I just recover our operating costs," It's the weirdest contract hire operation we've ever come across — one with no prof ft margin! "Absolutely, we don't make a profit," asserts Sheppard. "If at the end of the financial year we make a profit, we hand it back to the two divisions. If we make a loss, then we have to charge them on a pro-rata basis of how much we've lost.
"And they don't want any shocks at the end of the year. I could make a profit now just by putting the vehicle rentals up, but then I'd only hand it back to them at the end of the year, so there's not a lot of point, "I always keep rental costs below inflation. My team think I'm bonkers and they say we'll never do it, but there's nothing like a challenge is there?"
So how well did Sheppard do last year? "In 2009 we actually lost £11,000 on £19.2m turnover. Against our KPI, it's 0.06% on the negative side. I'm allowed to be 1% either side of zero, so I did alright."
Not bad going. Says Sheppard: "It's the closest result that I can remember in my memories of the Central Transport's accounts.'