ou won't find many hauliers prepared to admit that they
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wouldn't like a bit more work. But ask if they'd also like to increase their fuel bills by 40% and you're liable to elicit a short, sharp reply.
On the face of it more work is good news: extra vehicles, higher turnover and increased profits. However, a quick look through back copies of CM will reveal a long list of hauliers who have gone bust after trying to expand too quickly. And not just small firms, either: many large, well run haulage companies have been forced into liquidation after failing to meet repayments that rose as the result of expansion. Talk to the owners afterwards and they always put the company's demise down to one thing—a failure to manage cash flow.
So what should your first reaction be when a customer dangles that tempting contract in front of your eyes? According to Simon Chapman, the man who manages the operating costs service at the Freight Transport I Association, the first question hauliers in this situation have to ask themselves is whether they can make greater use of their existing fleet.
"Operators have got to look at how much, if any, of the new work can be dovetailed into their existing operation," he says. "They may be able to share some loads, re-schedule many of the journeys to include an extra delivery or look at double manning the vehicles. In short, they've got to make sure they're sweating their
existing assets before they start adding vehicles. It could be as simple as using some scheduling software—it could make all the difference,"
Chapman also suggests a bit of lateral thinking. He points out that rather than buying in a vehicle to mu on a new contract only to find that it's fully utilised for only half the week, it might make more sense to subcon. tract out part of the new work, relying on existing vehicles the rest of the time.
Pitfalls
Assuming you've looked at all these options, and expansion of the fleet offers the only route to growth, what are the pitfalls?
A look at the cost tables on our web site (www.roadtransport.net) gives a rough idea of what increasing your fleet size will do to your costs. Our figures are averages—each type of operation will throw up its own results—but some of the jumps in costs are startling. Take a fleet of io artics and five rigids and bring in five more artics and the fuel bill immediately rises by 40%, to ,(624,000. Maintenance costs jump by £40,000 to fr43,000, and you're suddenly losing L'30,000 a year more in depreciation.
And all this is before you've considered some of the hidden costs. You are going to need more drivers (assuming you can actually find some} and this will push up your National Insurance contributions. The vehicles will have to be insured, they'll need phones, breakdown recovery cover, more tyres, straps and ties...the list is a long one.
However, many of these costs pale into insignificance when you consider how you will finance and maintain the vehicles.
"Adding one extra vehicle to a o-truck fleet is a significant burden, never mind adding five," says independent transport consultant Ray Sartiel.
Sartiel, who is based in Llanelli, South Wales, specialises in helping operators get their maintenance in order and advises on all `71 aspects of running fleets. "The first thing to consider is whether you've got the space,' he says.
"If you do your own maintenance, are the workshops big enough to handle the extra work? Is the yard big enough? The Traffic Commissioner will want to know that you have room to park the extra vehicles when you apply to increase the number of trucks on the Operator's Licence."
He adds that you'll need to take a very serious look at the finance: "If you go down the contract-hire route you'll have to pay the first 13 weeks up front. Not only is this a huge amount of money to come up with, you've also got to cover the time it takes your customers to pay you.
"If they pay you after Go days, that's another two months of operating costs you have to have before you start. "Diesel bills will have to be paid before you've seen a penny from your customers—I've seen a few go down because they didn't factor that in."
Standards
If you still haven't been put off, remember to check that your existing staff can cope with the extra business while maintaining the high standards that brought in the extra work in the first place.
Most hauliers you speak to are already working all the available hours, and you have to be realistic about how much more you can take on—particularly with the Working Titne Directive threatening to force up your wage bill.
Sal'tiel says keeping an eye on the ball is imperative as it's very easy to let your grasp on maintenance or hours suffer: "These days it's got to be your top priority—there's no point in ending up at a public inquiry just becauseyou took on too much work and didn't keep on top of everything." He reckons that most hauliers can run up to around 20 vehicles without extra admin staff. Above that number and you'll need two people watching what's going on just to stay ahead of what the business will throw at you.