More about the Block Transport Executive Course
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LAST WEEK I described the bare bones of the flow-line accounting system devised by Mr. R. P. Block with particular reference to the smaller road haulage business. The Charlie Brown and Co. Ltd. professional haulage firm, with which the course members became extremely familiar in the period of more than 12 hours of lecturing, operated six vehicles. As stressed in the first article the skeleton accounting system proposed could be adapted to any type and size of road transport business whether professional haulage or own-account. The principles of cost control are fundamental; the practice can be woven into the fabric of particular businesses.
Outline
In the present article I shall hope to describe in broad outline the range of subject matter covered by the course and to touch in less detail on some of the subjects that particularly interested the executives present. Although the quality of course members was high—some of the keenest business brains from the own-account and professional haulage field were represented—I think it is fair to say that everyone present gained a great deal from this concentrated two-day course. Indeed, so much was crammed in that many fruitful discussions had to be terminated by the lecturer in order to complete the programme. Many lesser men would have given the meeting its head but as befits an expert in management control techniques Mr. Block sternly brought the group back to the agenda. Future courses, I understand, may be extended to three days, allowing time for more group discussions. The case study method used by Mr. Block may also be modified. Instead of illustrating the voluminous material himself, with a period for group discussion after each detailed presentation of a subject, four or five smaller groups may be formed from the class each reporting through an elected chairman after detailed study of particular aspects. This case study method will be familiar to many transport managers. It ensures that everyone present participates at least in the "small-group" discussions and it enables the lecturer in charge to deal with any omissions made by reporting chairmen. (I calculate that in the two-day seminar Mr. Block must have spoken at least 50,000 words—a small book! Those present would agree, I think, that it was a tour de force to hold the attention of the 17 people present for two days.) As a transport consultant, Mr. Block has investigated a considerable number of road transport companies and his experience was illustrated humorously in one of the specimen vehicle record sheets he reproduced on the screen. On six out of 19 days worked in a typical 23 working day month the: vehicle was described as working for "Old! Pals". It does not need a great deal of imagination to see the point of this nomenclature. Virtually all of the work done for Old Pals was at sub-marginal rates. I tottedup the work done for this favoured customer with a 10-ton box van in one month. The revenue for hauling 47 tons over 583 miles with 26 drops totalled L81—and the driver was paid 55 hours for this work. Compare the profitability of a one-drop load carried for 102 miles for 12 hours pay yielding £241 Clearly, there are many hauliers who would profit from a close analysis of their customer revenue on these lines. I would be very surprised indeed if Mr. Block has not seen far too high a proportion of work for Old Pals in his investigations of road hauliers' books.
After each course member had introduced himself to the group with brief details of his company's operations the flow-line accounting system was introduced by the lecturer. The preparation work involved in introducing such a scheme was discussed bringing in such elements as running costs, repairs, depreciation, establishment costs and standing costs.
In the afternoon of the first day there was a simulated vehicle fleet performance exercise. An analysis of results enabled the lecturer to draw many illustrations from his own experience. Individual vehicle performance was related to fleet performance.
Conflict
After a break for tea there was a review of the vehicle performance of private carriers. The conflict between customer service and cost was ventilated. There was much said about maximizing profit through optimum vehicle utilization—surely the nub of the transport manager's job? Repair shop costs were analysed and the relatively small effect of higher road speeds in improving productivity was stressed. Details were given of the much more significant effect of faster pick-ups and turn-round times. There was a preliminary discussion of some alternatives open to own-account operators under the new legislation. As will be apparent later Mr. Block has some interesting views! The afternoon ended with discussion on the compilation of the monthly trading account, the analysis of cumulative results and the discerning of trends.
The second day began with a further look at the flow-line accounting method especially as relating the various documentary sources, followed by a presentation on management by objective through budgetary control, and long-range forecasting. After a break for coffee—at all refreshment and meal breaks there were animated discussions between groups of course members—profit ratios and profit improvement were discussed. The preparation of a rates schedule based on costs was illustrated.
The practicability of instant profit appraisal by use of flow-line accounting was examined. There was a potent discussion on the possibilities of rationalization under the Transport Act 1968 and an outline was given of a driver productivity bonus scheme. The last hour of the course—in many ways the most stimulating of all because of the pressure on time—dealt with specialization under the 1968 Act.
Depreciation
In the discussion on vehicle depreciation the lecturer stressed that in many family businesses the depreciation method chosen is only decided after a review of the profits. "Does the management want to make any profits or just live comfortably?" asked Mr. Block. The depreciation problem is so important that one-day courses on this aspect alone would seem to be a good bet for course organizers.
In his presentation on standing costs Mr. Block said that these could amount—for a six-vehicle fleet—to £.1,400 a month before a vehicle wheel turned. A somewhat alarming thought in the era of longer holidays!
The recording of tyre mileages is a headache to many operators and I was interested to hear Mr. Block say: "What number of tyres replaces what number of tyres—and when" is what really matters. Other systems could be very costly to operate, with the constant problem of tyre iden-, tification for the purist.
Course members were divided in the allocation of tyre costs. Could they be shown in standing costs or included in running costs? With regular operating patterns, say, 50,000 miles in two years, why not include so much a month for tyres in standing costs? Mr. Block never tired of stressing that the more items that could be built into standing costs the less risk of inadequate recovery of cost. Tyre costs per mile, for example, would not be the same with reduced annual mileage.
There was an interesting discussion on the value of smart liveries and clean vehicles. Some of those present operating liveried vehicles would have preferred to operate vehicles in plain clothes! I gather that the slightest peccadillo of drivers is often reported when the operator's name is prominent in the livery. The high-quality furniture store may have no choice in the matter: many customers insist that a liveried vehicle makes the delivery to impress the neighbours! As to the cost of keeping liveried vehicles spic and span Mr. Block thought it was around £2 a week. (One course member said he estimated the cost at lOs a day. He was satisfied it was worth every penny and his company's vehicles delivering to farms were the only vehicles allowed to operate in one county during the foot and mouth epidemic because they looked hygienic!) It is an interesting thought that farmers are impressed with clean-looking vehicles.
Significant
One of the most significant points brought out by Mr. Block in a discussion on the reconciliation of customer service with cost efficiency could well be echoed widely for a number of years. It is a safe bet that the status of transport managers will not count for much until they are able to make the relevant point at board room level.
In a manufacturing business where profit ratio to turnover is 10 per cent, every £1,000 saved in transport costs is equal to an increase in turnover of .C10,000. Hence the need for transport managers to talk firmly to sales managers when asked to undertake absurdly wasteful delivery operations which inflate transport costs out of all proportion to the benefit to the undertaking as a whole. When the transport manager is responsible to the sales manager, frank talking may be difficult but the transport manager who can demonstrate the overall business effect of particularly high standards of customer service deserves to gain in professional stature. Whether he will or not is another matter!
The cost of costing is of vital interest to the smaller operators whose competitive "edge" is so quickly blunted by inflated overheat:3s. Paradoxically, the cost of not costing may be much greater! The business that muddles through with a rate structure bearing no relation to its cost structure is on a suicidal road.
Mr. Block reckons that a good costs analyst could operate the flow-line system of accounting in one hour per vehicle per month. Much depends on the interest and application shown by the costs man (or woman). When the lecturer stressed that keen interest would most likely be manifested by someone who could see the end product I was tempted to suggest that staff motivation would be encouraged by profitsharing or by a realistic bonus scheme. Many firms I know of whose drivers are in the £2,000-£3,000 a year category are belatedly realizing that the office staffs quite naturally look for some comparable rewards.
Challenge Fuel price increases are so regular that no operators can be unaware of higher fuel bills. But it is possible to exaggerate their effects. A 5d a gallon increase, for example, would put up costs by I+ per cent in a business where fuel costs were 15 per cent of total operating costs. If fuel costs were 50 per cent of running costs then costs would rise by 3+ per cent.
Mr. Block probably calculated that any flagging of interest in the last hour of the seminar would be swept away by his challenging assertion: "The RHA should merge with the FTA." He led up to this by stressing that any own-account operator who did not at least carry out a feasibility study on the possible advantages of carrying return loads for hire or reward was failing in his responsibility. There were only operators, now, he suggested.
He posed a challenge to the mixed group of professional hauliers and own-account operators present: get together! Why not devise working arrangements for reciprocal goods movements between own-account men and independent hauliers? What sense is there in long-distance vehicles operated by both parties passing each other en route when one vehicle could make the return journey with greater efficiency and profit to both parties?
Thrown out
One member of the group enjoying membership of the FTA as well as the RHA said that in his area all professional hauliers were being thrown out of the FTA. If this is so it would seem to indicate a directive from headquarters. Is there no possibility of reconciling the interests of the C-licence operator as the customer—always wearing the trousers—and the professional haulier? Must the master /servant relationship be perpetuated in these days when all are purely operators?
Those who believe that the two major organizations must continue on separate paths should ask Mr. Block to demonstrate the cost advantages of close inter-working arrangements between own-account and professional hauliers.
As may be imagined his controversial proposal inspired many questions. (It is significant that no one present attempted to pour cold water on the merger proposal.) Why shouldn't an own-account operator set up an associated clearing house business? If the FTA and RHA area offices knew about the traffic flows of their members, the nature of the goods moved and the other parameters, would this not make infinitely easier the devising of viable reciprocal arrangements? How long before there was a computer analysis of the nation's traffic flows? Where does the NFC stand on this vital matter of traffic flows and their intelligent disposal?
NOTE: I understand that there are still a few vacancies on Transport Executive courses arranged by Mr. Block on June 4/5 and June 18/19. In the autumn a new series of "teach-ins"—transport discussion groups on selected subjects for both own-account and professional operators—will be held. Details available from Mr. R. P. Block, Transport Management Consultant, 7 Brighton Road, Surbiton, Surrey.