controlling transport operation
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by David Lowe Mlnst A
Staffordshire Farmers Ltd
THE PROSPECT of annual net profits of only one per cent of turnover would horrify many business people and leave them wondering what, it' anything, was the cause of such meagre results. However, many trades or industries in this country although efficiently managed and administered do return figures of this order. The reason can be attributed to intensive competition in fields 'where the difference between the manufactured price and the retail price is very small: Food is one example that comes easily to mind and farm requisites—feed, gram, fertilizers and seed—is another.
Staffordshire Farmers Ltd (an agricultural trading society) is faced. with this problem of low net profits; its 1968 balance sheet shows little over Li per cent. The general manager and secretary of the society, Mr W. Wilkinson. told me that it was up against fierce competition (farmers will soon go elsewhere to save a couple of bob) and as a result needed to keep a very tight control on costs and overheads. Its transport fleet, 100 commercial vehicles and approximately 100 other vehicles—cars and service vans— constituted a major expense in the society's budget and therefore was an operation demanding efficiency and costs kept to a minimum.
Unfortunately despite careful planning by Mr J. Birch, the society's transport manager, the effect of the new legislation— testing and plating and the reduced drivers' hours particularly—on the transport operation is, I was told, "dramatic".
Standardization aim The 100 commercial vehicles are of a wide variety of types and makes, this is
mainly as a result of taking over small firms, and a standardized fleet has not yet been achieved although current planning is aiming for this. Many of the vehicles, especially those acquired in the takeovers, are in the autumn of their days, but Mr Wilkinson told me the society has -never run vehicles dangerously. This has meant spending more money and time than would otherwise have been necessary on preparing these vehicles for the test, which incidentally they have all passed easily; only to find, not unexpectedly, that most have been down-plated, resulting in a substantially reduced total fleet payload.
New vehicles, of much larger carrying capacity, arc being purchased to replace older models but the need for efficiency and more economic operation demands a much , more sophisticated piece of machinery. The latest additions to the fleet are Leyland Lynx tractive units with Murfitt bulk tipping semi-trailers fitted with pneumatically controlled discharge equipment; vehicles which operate at 24 tons gross weight.
From a purely economic viewpoint, of course, maximum legal gross weight vehicles would be ideal but farm access in most cases prohibits this for the present. A gradual increase in vehicle sizes has been made as farmers become aware of the desirability of having larger bulk deliveries and have made suitable provisions but in
some cases much larger vehicles could be used now. These, however, would then create planning problems for the traffic staff and could result in sortie restrictions in operation of the larger types.
The reduction in drivers' hours, although not effective at the time of my visit, will cause some problems. Bulk orders for feedingstuffs, fertilizers and grain are collected from the mills and delivered direct to farms. The mills are mostly located at the port areas, the Mersey, Avonmouth and Humberside, for example. Trips to these places are at present accomplished within the permitted hours of work, but only just, and the reduction in hours will mean that many deliveries cannot be made until the following morning if the driver is delayed.
Waiting to see ...
The economics of the transport operation are geared at present to vehicles being empty in the mornings. Drivers and other staff affected by the new hours have been advised of the serious effect which this will have on the society and now it is very much a case of waiting to see what happens. Better planning and reluctance by drivers to endure unnecessary delays without complaint or alternative action may reduce the problem.
I asked Mr Wilkinson what other problems the new legislation had posed. Operators' licensing would have little effect, he told me, except, of course, for the increased cost of the licences.
The hgv drivers' licensing system will mean more driver training. Many of the society's existing vehicles are rigids but the policy of changing to articulated types like those already mentioned will mean training many drivers to handle them and obtain an appropriate class of hgv drivers' licence because they will not automatically qualify for exemption from the test.
Although the transport manager's licence system is still a long way from implementation, thought, has already been given to its effect on the society. Vehicles are operated at present from most of the society's 12 branches which are spread throughout the four counties covered, Staffordshire, Shropshire, Derbyshire and Leicestershire, but transport operation is becoming so specialized that the thinking of the society fs towards a grouping of the fleet into five sections. An experiment on these lines is at present being carried on at the Cannock depot where 12 vehicles are based. Mr Birch felt that this worked successfully and it was most likely that the plan would be carried out; a transport manager for each of the five branches would then be appointed.
Responsibility for day-to-day operation of the vehicles at present rests with branch managers who have freedom to use the vehicles as they. choose. They do, however, work to a budget and to a costing framework calculated by the society's accountant. Branch managers are free to hire vehicles from outside sources if required; peaks in the trade make this necessary from time to time particularly with grain and fertilizer traffic and one branch manager in particular chases to use hired vehicles for all his traffic and does it successfully, I was told. Last year the society paid out £120,000 on hired transport. Minimizing mileage Orders from farmers are either brought in by salesmen or obtained by telephone. Each salesman has a large area which is divided into 10 sub-areas so that he canvasses a sub-area each day, making a two-weekly call cycle. As a result of this vehicles follow a similar pattern in delivering orders consequently minimizing mileage by not roaming over a large area. The, number of deliveries per vehicle is usually small. The bulk blowertippers seldom have more than two drops although the tanks have three compartments and fe&lingstuffs deliveries are generally of four or six tons. Vehicles delivering bagged orders often have a number of drops because these are usually to small farms and smallholdings. It is interesting to note the trend for bags to weigh only 561b now instead of lcwt —this is because of the amount of female and youth labour employed on pig and chicken farming.
The society contracts with the farms for winter feed at a fixed price at the beginning of the season (and, incidentally, if the price to the society falls below the contracted price the difference is refunded) and it contracts with the mills for a bulk tonnage so that the price becomes fixed for the season. Orders which are received from farms and passed to the mills are then in effect only extracts from a total already ordered.
All the buying is carried out from the society's head office and this is usually done for six months or more forward so that branches can sell forward. The ordering pattern of farmers has an effect on collection and delivery delays. They order for delivery on the first day of the month with the intention of paying on the last day of the following month, so obtaining eight weeks' credit. Because of this there are large queues at the mills on the first of the month and in many instances the society finds that it has a number of its own vehicles holding each other up, creating their own waiting time.
The only way round this problem was to alter the month and payment days. These were charged by split months into three periods ending on the .7th, 21st and 31st. The 14th was omitted because this is the week before the farmers receive their monthly milk cheques, consequently they are short of money at that period of the month. This monthly spread-over system makes extra work for the accounts department especially at the year end but saves considerably on vehicle waiting time because the peak collection periods occur three times per month instead of once. The change of payment days has improved the cash flow, too, by spreading it over the month instead of thererbeing a big influx at the end of the month, and the overdraft position has been stabilized from its previous peak and drop pattern.
The vehicle costing system is one in which the accountant establishes for each vehicle at each branch the overhead costs, average maintenance costs for the fleet and drivers' basic wages. These standing costs are then given to branch managers who add the fuel costs and drivers' overtime and bonus payments, This provides a fairly accurate costing for each vehicle and shows managers the earnings needed to break even. Simplicity is the essence of the system and its accuracy is sufficient for practical purposes.
Drivers are treated with importance. They meet the principal of the business with which the society is trading: the farmer. Mr Wilkinson told me that a great deal of the reputation of the society depends on courtesy and efficiency and a vital link is provided with the farmer.
Tonnage bonus Drivers are paid a tonnage bonus in addition to their basic wage; the bonus varies between branches depending on the traffic carried, vehicle sizes and distance from collection points. The scheme was introduced voluntarily by the society and discussed with and accepted by the drivers. It is an incentive for them to usc their initiative but is not a "licence" to break the law. Improved productivity has been achieved since its introduction.
The society has 10,000 farmer members in the four counties and is a kind of supermarket supplying them with all their needs including feedingstuffs, grain, fertilizer, fuel-oil, agricultural chemicals and agricul
tural tractors and equipment. All the branches are fuel-oil agents and three are distributors for David Brown tractors.
A self-appraisal three years ago resulted in greater economies —the number of branches was reduced by seven and a Lim increase in turnover each year since culminated in last year's figure of £8÷m.
"Economies have never mattered to us as much as they do today," Mr Wilkinson said. "The viability of the whole business revolves round the economical way in which we operate the fleet."
With these thoughts in mind the society faces the future with greater emphasis on the efficiency of its transport operation.