The haulage operator
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by Steve Abel
IT WILL BE no surprise to anyone that crystal-ball gazing is a popular subject for road transport gatherings. Few other industries face such frequent changes or greater degrees of uncertainty, with an almost nonstop conveyor-belt of new or altered legislation.
And although we have recently had some of the uncertainties resolved by the decisions on gross vehicle weights, it would still be a bold man who would care to forecast the future of road freight, and specifically professional road haulage, for even as little as five years ahead, as I have been asked to do.
In asking me to present a fiveyear view from the viewpoint of the haulage operator, CM posed four particular questions: How will haulage develop during the next five years?
Will there be general traffic decline while contract work increases?
How will road transport meet the changing demands of industry?
Should own-account operators pass their traffic over haulage operators?
I could answer by giving an emphatic "Yes" to the last question and say "come and see me at the end of the conference", but instead I shall try to answer those questions by looking at likely developments in specific areas — such as legislation, employment practices and techno I ogy, and drawing some conclusions.
The market place
Resisting the temptation to go for the easy one — legislation — first, let us take a look at the market place where we earn our living and where the main opportunities lie.
At the macro level, I am convinced that the overall growth in total freight traffic will be slow over the next five years. This is certainly the view of the economists and I do not see any cause to challenge it.
Some of the reasons are obvious — not only will manufacturing industry take time to climb back out of the depths of the recession, but some cornpanies and, indeed some whole areas of industry, appear to have gone under for good.
Less obvious, but now generally accepted I think, is the accelerating change in the nature of industrial traffic. Less and less of the heavy engineering products, more and more of the lightweight, high-technology durables — and increasingly these will be consumer durables even in the high-tech field. One only has to look at the boom in videos and home computers to see what I mean.
Linked in with these developments, though not directly, will be the effects of technology such as viewdata systems, on people's shopping habits — for example, the effect which services like Prestel will have on home deliveries.
Within the slow overall growth of freight traffic there will, of course, be some sectors moving ahead faster than others. I believe parcels operation will be one of these. The changes in traffic characteristics already outlined and the developments in shopping and home deliveries will put national parcels networks in a specially favourable position to meet manufacturers' importers' and distributors' needs.
Indeed, we are already seeing the "bottom end" of general haulage moving towards the parcels carrier again. The general freight market appears to be polarising increasingly into bulk movement of full-load commodities using specialist vehicles and the small freight network handling part-loads as well as individual small packages.
We have seen the impact of this on handling requirements and driver skills, where "parcels" collection and delivery increasingly comprises palletised goods for the High Street.
Will this further decline in traditional general haulage be given another big push by the increase in contract work? That depends ...
If Britain's economic upturn, which seems a long time coming, starts to arrive with a rush of business confidence, manufacturers and traders will be willing to enter into long-term commitments. The contract hire, contract distribution and allied sectors will grow fast but general haulage may suffer as a result.
However, if the economy continues to grow as slowly as at present, then we know from experience that transport customers will shop around for lowcost, short-term (dare I say, short-sighted?) service. Consequently the large professional operator's competitiveness will be depressed and the small haulier and owner-driver will get good pickings.
Even without such a boost, owner-driver activity is likely to grow. Availability of credit at reasonable rates will encourage them into the industry and I cannot believe that the cheap new technology of mini and micro computers will fail to be adapted to the cottage-industry end of haulage.
I think we shall see small groups springing up, or coming together — not perhaps jointly as co-operatives which many small hauliers have regarded with suspicion in the past despite the efforts of the RHA. More probably there will be a shared "management agency" facility, using a computer to provide basic accounting, invoicing and traffic control for a fee.
Not that the big battalions will be at a disadvantage when it comes to computers. We large operators already regard computerisation as a necessary weapon in our sales armoury. The customer-dedicated distribution specialist these days has links into his client's computer. But these are developments I would like to examine under the "Technology" heading.
Perhaps this is the point to examine why own-account operators should very carefully evaluate the benefits of passing their traffic to the haulier— and then take a pragmatic business decision uninfluenced by habit, tradition or myth (the myth, in my experience, being that they can do it cheaper themselves).
Certainly there are some large, specialist own-account operators whose analysis would show that they are fully, or even marginally, justified in keeping the bulk of their freight move ments in their own hands. The integation with their own production activities, or the need for specialist operatives, and the fact that their intensity of operation makes it economic, are all arguments that a haulier would be inclined to accept — given the However, for the majorit manufacturing and comme concerns it simply canna economic to run their own tr port. I believe that a pr financial evaluation wc demonstrate this to be so i but a handful of cases.
Also, the old fears of not ing control of their own or tions have been rendered lw groundless by the increased fessionalism, improved ec ment and systems, and vanced communications IA the good haulier can providE There are so many fle transport and distribution ages around now on offer • experienced professic operators, with high se levels. There is something can be tailored to suit any nE Also, the big bonus that often overlooked — especia companies where transpo separate from the storage other aspects of distributior the reduction of capital tied stocks. The flexibility of haulier enables him to offer high service levels in gE product from stocking poin retail outlets. It is a service can be turned on or off to demand, provides fast direc livery, and relieves the cuse of the high built-in overhea own-account operation.
The recession enforced stocking on an unprecedE scale, and has presented producers and retailers w golden opportunity to rer permanently much of t stockholding requirement. I also created the need f faster, more responsive disi tion industry.
Another factor is that ow count operators often ha\ match in their transport bill the high rates of pay fringe benefits of their sl production staffs.
One of the built-in advani of the haulage operator ability to consolidate con ments — while appreciating observing the product conr bility of different custor
I the number of retail outlets ining by some 30 per cent in Dast decade (and by around er cent in the grocery trade) concentration of delivery ts is a ready-made source of lestion and cost. Warehouse pers and retailers insingly want timed deliveries ull vehicles not a queue of ; with small, one-brand conmerits.
us has reinforced the trend, only to the haulage operator is able to consolidate but to nominated carriers who take goods from consolidapoints to retail outlets. They also collect from all main )liers, sort and trans-ship. these things, I suggest, will slop strongly over the next years, but to list them is to inly half my job today. How' st the haulage industry Ige, and how must it set out ;tall in order to meet the Kling demands of industry? by revolutionary de)pments, I suggest, but iy by putting its weight beI the changes rather than ming its feet.
)r instance, the haulier will d to take even greater initia3 than hitherto in getting er to his customers and ing closer.
lere are good examples to )w in cases where the inteti on of operations and ems has brought the haulier the heart of the producer's iness and both have beneI. The haulier has to be the ible partner, in adapting his :ems to meet the customers' ds.
he haulier will have to be ly to provide a choice of ch more comprehensive ckages". This means a range lifferent service levels at dif
int costs, plus all the distribu1 "add-onssuch as stockItrol, order picking and )icing.
here will also be rewards for operator who is prepared to ose the gap", to reduce .;kholding by flexibility in ry respect. This could mean rking round the 24-hour clock; accepting the strait-jacket of timed collections as well as booked-in deliveries; and covering holiday periods and weekends.
He must also get into the world of offering samples. This would take the form of trial runs and demonstration services to show a potential customer what can be done without obligation.
Many more British hauliers must also raise their sights to take in the Continent. The next five years will demand more courage in researching, resourcing and providing services to Europe and selling them really hard. Customers who have not themselves taken the plunge because they are not confident about the unknown distribution arrangements "out there" are the target.
Speakers at conferences over the years have identified marketing as the Achilles' heel of road haulage. I have to agree that it has been a poorly exploited area for much of the industry.
Nothing will ever replace the value of face-to-face contact with a potential customer. We all know that freight transport cannot be sold like soap powder, but it is a dynamic, varied and in many ways fascinating activity which lends itself to imaginative marketing and selling.
There really is scope for a more self-confident and innovative approach to the many market places it serves.
Perhaps there's a leaf to be taken out of our competitor's book in this respect. The railways, for example. While I believe that rail freight will continue to have only a limited impact on the freight market, and will possibly see its network further reduced, its recent marketing activities suggest thorough research and a confident professional approach to the customer.
Another competitor whose marketing has made an impact is the Post Office, where it seems that no expense has been spared.
In moving into palletised loads and developing its parcel business, it is becoming a threat to the haulage industry. Allegations of unfair competition have been aired in the press and taken up by the RHA with the Department of Transport.
One of the fundamentals of good marketing is research to discover the specific demands and to establish the characteristics and size of the market and the strength of the competition. But research is an area in which the haulage industry is dreadfully weak.
It needs to put professional resources to work to establish as quickly as possible just how customers' needs will change; new ways of meeting them; how new technology can be introduced to benefit the industry; and how existing technology can be more fully exploited. Maybe this is an area in which the trade associations should be more active.
With this sort of input, road haulage can safeguard its position and improve its customers' competitiveness in their mainstream activities.
Vehicles and equipment The long-running disagreements in the Councils of the EEC; the Armitage Report and the struggle to get revised vehicle weights on to he Statute Book in Britain have concentrated a disproportionate amount of attention on the maximum-capacity vehicle in the past five years.
I hope and believe that we shall not see this repeated over the next five especially as the results fall short of what the haulage industry (though not all of it) was seeking, and have brought new confusions and problems in the vehicle weight scene.
That said, I suppose we must accept that vehicle weights are going to remain dominated by political and bureaucratic considerations over the next half decade, and not governed by sensible, economic operating requirements.
So operators and manufacturers need to get their heads to gether, and keep in close step, if they are to get the best vehicles for the jobs that have to be done. Fortunately, most manufacturers have been concentrating their attention on fuel economy since the Opec crisis sent oil prices through the roof, and we are seeing less thirsty vehicles at almost every step in the weight range, from light vans to maxcaps.
The real prizes, however, are to be had in the most meticulous matching of vehicle specifications to operating requirements.
hope that it will not take five years to persuade the Department of Transport that downlicensing is one of the tools we need to achieve this.
In many sectors of the business where there is no scope for max-cap vehicles, the best results are not obtained by rather crude down-rating of the 32 or 38-ton net. Or, for that matter, by simply up-rating a low-range vehicle.
We need more focus on the right gross weight from the start, and no longer the excess capacity and power that manufacturers have been so keen to press on operators. In my own experience, the parcels operator, the car transporters and the interfactory component carriers need something designed and built to suit their specific needs at around the 28-ton gross mark.
This is already happening but in the next five years, let the vehicle manufacturer note, operators will be more ready customers for the tailor-made than the hand-me-down vehicle.
This philosophy will extend well beyond the bare chassis. We have seen a steady increase in specialised vehicles which usually means specialised bodywork and the next five years should see the trend strongly reinforced, to the relief of the bodybuilders who have survived the lean years.
Hauliers offering flexibility of service cannot all afford to be specialists in the exclusive sense but they cannot afford to be anything but specific and professional in the way they order and use equipment.
While on the subject of vehicles, a word about fuel. Over the next five years the relative price of dery simply cannot be allowed to go on increasing in the way it has over the past five.
B )th producers and Governmet it seem peculiarly insensitive to he immediate and lasting effects of dery price increases on the price of goods, and hence the RPI. The price increases visa-vs petrol seem nonsensical.
IE it too much to hope that OVE r the next five years we shall see real progress at last in the deNelopment and application of altE rnative fuels? Perhaps the exr erts in today's audience will tell us. We have been shown visions of an electrical Utopia an a liquefied petroleum gas paradise but they have become mil ages, and the operator is still left thirsting in a dery desert.
Tel :hnology
New technology, however, ho ds out more real promise of he p for the haulier. I have alre E dy mentioned the application of computers to operational taEks. In our own large and dive :se business in NEC, we now tale it for granted that parcels wi I be tracked by computer; that ca .s in transit or storage can sinilarly be located by a few touches on a vdu keyboard; that co d stores can do their own stick control, accounting and irrfoicing on their own minis; th it computer programs will be allied to personal skills in routepl inning and distribution consLItancy; and that the day's resilts of individual haulage branches will be consolidated CE nt ra I ly overnight by a wholly at tomatic system of computerised interrogation.
We have also seen the introduction of Datafreight facilities fo r more efficient matching of loads and vehicles, and its adaptation to a cheaper and more readily available viewdata svstem. And we have seen the e:;pansion of analogue commun cations — as in the BRS Rescue Freefone service — and two ay radio.
Most of these have come to the fore in the past five years.
ith the current pace of nicrochip, laser and associated
tvelopments it does not take a p trticularly bold man to forecast ft at the next five years will see a tE chnology explosion, particuIE rly in communications.
Of all the industries in our s )ciety, transport is surely one that stands to benefit from this ttchnological advance. The hardware is comparatively cieap, and easy to use — though the haulier should not
overlook the possible effects of new technology on staff selection and training.
I believe that new technology will give the haulage industry tools to provide customers with astonishingly high levels of service. Nothing that I have said will fundamentally alter the old equation of price and service. But it should dramatically increase the range of choice.
In the vehicle world, too, the new technology will make its mark. Already we have computer analysis of component reliability and detailed comparative operating costs. Now, the vehicle-mounted "black-box" is offering not only a record of engine performance but constant monitoring of individual vehicle characteristics such as oil pressure, fluid levels and brake lining wear.
Yet are we really making the most of the management information that can be obtained from the tachograph? How many operators examine in detail the information which is available? I hope that we can afford the resources to make sensible use of all this information.
Which brings me to the crucial question of finance.
Finacing trends Over the next five years, there is one prediction I can make which I am confident will be realised. Vehicles will not become any cheaper.
When you consider that 10 32.5-tonne tractive units can swallow up the best part of £250,000, it can be seen that the method of financing these vehicles is going to be of utmost importance. Whichever method is used, the impact in the trading and profit and loss account will continue to be severe.
Few organisations can afford to purchase vehicles outright nowadays, and will almost certainly resort to borrowing from a bank on either overdraft (not to be recommended) or Medium Term Loan, or more likely taking out a hire purchase or leasing contract with one of the finance companies.
These methods of finance are well established and will continue to be developed over the next five years, possibly allowing for more flexible repayment structures to match the working life and income of vehicles.
Whether HP will develop faster than leasing or vice versa is difficult to assess since the choice of either method of fin ance depends upon the tax position of the company acquiring the equipment. If you are likely to pay tax, take hire purchase and use the 100 per cent allowances yourself; or if you are not likely to pay tax, then lease.
As vehicles become more expensive, I see much greater involvement of dealers, and to some extent manufacturers, in financing the sale of their vehicles. Indeed, they will have to get involved if they wish to increase, yet alone maintain, their market share.
I therefore see the greater development of various forms of joint venture schemes between financiers and dealers and manufacturers where dealers will take some risk on the residual value of vehicles, thus giving some warranty of the quality of the product. This will make the product attractive by giving the user more operational and financial flexibility.
Transport legislation My reference to transport legislation will be short, for the following reasons: — I believe we shall need five years to absorb the extra dose — in vehicle weights, taxation changes and so on — that we have just been given; and — I hope we are due for a breather; though with the EEC's legislators superimposed on the domestic variety, that is perhaps a vain hope.
— Perhaps the next legislation will be of benefit to the operator — higher running speeds on motorways and dual carriageways for example.
Certainly, I expect to see a static licensing situation over the next five years, but hopefully with Licensing Authorities becoming tougher in their scrutiny of new entrants. Some say entry to the industry is too easy, and as a result we gain a bad image.
Even without any new national legislation on the subject, we can certainly expect to see a further proliferation of traffic controls, parking bans and hgv restrictions. And we shall lean ever more heavily on the services of our trade associations in resisting the more lunatic proposals.
Parking bans will lead to an increase in lorry parks, though operators of secure parks will probably find it just as difficult to make an honest penny. Employment attitudes practices I have left one of the mot portant and difficult aspec last: the changes we may E employment practices, ar management and trade roles and attitudes, over thE five years.
One of the most impc considerations for haulie whether the productivity provements of recent partly resulting from the fa in the recession, have milk( productivity barrel dry.
The question is partic important because shi working hours are certainh the horizon. They will have paid for if total output is maintained.
We may get a little more productivity and technolog improved operational effic but in the end I think thE tomer will have to pay. 1 may, of course, encourag to turn more to ownerschemes using small hE willing to work long hours.
In another way, this it something the trade unior have to face over the ne; years — as general haulat comes ever less attractive operators it will become more the preserve of the c driver, where there is little for wage negotiation.
Already there is pressL a move to individual co negotiations, so the wholE bargaining scene will, I b become much more merited. A repeat of the ft strike for higher wages i becomes less likely.
Will there perhaps be a towards salaried stat wage-earning operativE ready BRS has initiated E discussions with the unions on such a move.
From the trade union s can certainly expect press shorter hours while pro gross earnings; and if genuinely want more leis may see a reduction in ov though we all know that r ductions in working hour ssulted in similar reducn hours worked.
3tever happens, the haulier ant to see value for hours I believe that "job and 'will lose its attractions for employers.
ie union power has waned rtically in the past five and there are few prosof its revival over the next lut it would be foolish to le that successful, resfle hauliers will wish to rn their relationships with Jnions.
3ad, I see the unions hayess dominant role but bertners in a joint approach sting the problems which yers and the industry face Filling customers' needs securing employment for le staffs.
.:essful companies will still to consult and commuwith their employees at all and work within a particie framework — both ih trade unions and more channels.
may also expect to see orms of transport enterand in that context you expect me to say somethout the National Freight rtium.
NEC buy-out, in which employees, pensioners heir families bought a turnover business from
the Government and hold 821/2 per cent of the shares, is unique. And there were certainly circumstances, apart from sheer size, which have led people to the view that the NEC experience is a one-off phenomenon rather than a pattern. But I am not so sure.
After all, one of the examples which NFC's management had seen long before they thought of buying the company was that United Parcels in the USA, which is a large, successful national operator, is owned and controlled by its management.
From a personal viewpoint, it was a great thrill to buy back a stake in the family business which was nationalised some 33 years ago. It certainly sharpens one's approach and application when you know you have "a piece of the action."
If the NFC has employment lessons for the haulage industry perhaps they are mainly in the need to get employees more actively committed to the business, and in encouraging people to be prepared to seek entirely new patterns of industrial democracy and participation.
We are all going to need to be open-minded and enterprising in the next five years if the haulage industry is to make the most of its considerable opportunities.