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German electronic freight exchange is in full swing

by CM reporter

HAULIERS, FORWARDERS and customers in West Germany are now using a computerized system of matching the freight on offer to the vehicle availability, using TV-style displays at offices in main industrial centres, including West Berlin.

Details of the system which began operating on January 1 this year — were given last week by Dr Heimes, general manager of the Federal Association for German Long-distance Haulage (SD F).

Dr Heimes was speaking at a twollay international transport seminar organized by Daimler-Benz AG at La Baule, Brittany, attended by 170 operators from the whole of Western Europe, plus South Africa. There were 25 own-account and haulage fleet operators and engineers from Britain.

Speakers from Britain, France, Germany, Hungary and the USA represented fleets varying from a 65-tanker business in Brittany to the 40,000-vehicle Ryder rental network in the USA.

There were some stimulating differences of view. Mr Harold Berry revealed that United Transport had abandoned the costing of individual vehicle maintenance as being irrelevant to practical replacement decisions, while Mr Tom Mannix, of Ryder, detailed ever more elaborate electronic costing and control for each vehicle's repair and maintenance.

Points from the papers included:— • An assertion from the NFC chairman Mr Dan Pettit that the transport world was "crying out" for scientific and professional management. (See also news story on page 12.) • A confirmation by Mr Tom Mannix that Ryder may use a satellite to gather worldwide vehicle operating data.

• A warning by Mr Harold Berry of UTO that lack of cash flow planning is the most vulnerable area of haulage businesses.

• A revelation that Hungarocamion, Budapest, analyses rail tariffs as one basis for fixing its rates; and that its advanced driver training involves a six month course.

• An indication by a French operator of how small hauliers need to reorganize their business at certain stages of growth.

Cost control without frills More transport companies get into financial difficulties because they do not forecast their cash position than through any other reason that was the warning given by Mr Harold Berry, executive director, United Transport Overseas Services Ltd, in his paper entitled "Costing techniques as an aid to management in transport".

His company, he said, had a most disciplined form of cash budgeting which was revised each month for each business in the group. Also, each company in UTO had to control its own captial expenditure, and this had a profound disciplinary effect.

In the operating companies the cash budgets were on a rolling 12-monthly basis, updated monthly, and these, collated from subsidiaries all over the world, formed the basis for UTO's long-term financial planning.

Mr Berry opened his paper by stressing that only people with transport experience could really diagnose the best operating and control methods for road transport; and, as an accountant himself, that accounting and costing were no substitute for management but an aid for such management.

Experienced professional transport managers did not need sophisticated costing systems, but simple ones. Particularly in an era of computers it was important not to become too scientific and detailed in costing methods. To be of managerial help, most costing and statistical information had to be available quickly — for example, UTO had daily returns of revenue, accurate to within about +5 per cent, which was good enough for management purposes so long as true figures appeared later. UTO expected to receive in London, by the third week of the month, a full set of monthly accounts and statistics from over 130 companies around the world, relating to the previous month's trading.

Accounting information also needed to be Presented against a yardstick to be useful — e.g. with equivalent figures for a previous comparable period. In UTO comparison with the previous year, monthly and cumulatively, was found most useful. But they had found little value in detailed long-term budgeting because of rapid changes. Their budgeting was flexible, updated every three months.

Experience showed that a straightforward costing system could fit both large and small fleets.

"Unquestionably today, utilization of the human and physical assets of a transport company is the most important factor in profitability," said Mr. Berry.

Labour, vehicles, fuel and tyres accounting together for about 75, per cent of total cost, merited particular costing attention. Tight weekly control of these four items automatically brought operating efficiency. The best method of achieving this control was to measure vehicles' work by the mileage per week or month. With improving roads everywhere, mileage potential could be stepped up and fleet size could be cut while increasing vehicle output. UK trunking tractors using motorways were now running up to 12,000 miles a month; in Australia's open-road conditions they were getting 20,000 miles a month. In Europe the Brussels vehicles running to Italy or Scandinavia were averaging 12,000 kilometres a month.

This sort of utilization could only be maintained with first-class equipment, and United Transport had therefore decided to shorten drastically the economic life planned for tractive units — to ' three or four years in big fleets. This had brought the expected drop in downtime, which was the most expensive item in freight operating today more costly than traffic delays or poor scheduling.

Costing systems therefore had to provide regular information about reasons for, and amount of, vehicle off-road time. In United Transport this was considered so important that it formed part of the regular statistics in each depot and company and was reported monthly to London from all over the world.

Fuel usage needed to be monitored so that engineers immediately detected rising consumption, and tyre maintenance was treated like vehicle maintenance in TJTO. In all fleets of over 50 vehicles there was a full-time tyre supervisor to check condition, pressure, alignment, rotations and make sample checks on mileage life.

Although the number of drivers who had to be employed was determined by

outside regulations, their productivity was not, said Mr Berry. The following cost factors had been found valuable:—

(a) Number of drivers per tractive unit per month; (b) Number of miles per linehaul driver per month; (c) Number of days lost through breakdown, sickness, etc; (d) Number of tons or consignments per driver, on local or collection and delivery vehicles, per day.

But whatever the system, nothing bettered daily personal supervision as a means of staff control.

Managers needed cost information to be classified by operating function — eg the trunk work, local work, storage, customs clearance, tanker operation figures shown separately. Some people asked for the profitability of each depot to be shown, which was possible when depots worked like small autonomous businesses; but where a depot formed part of a network of services it was so difficult to allocate costs and revenue fairly that the result could be merely misleading. United Transport no longer had depot profit and loss accounts unless the depot was autonomous.

Although transport costs could be analysed into variable, semi-variable and fixed, UTO companies found it more helpful to analyse costs into groupings which corresponded with spheres of responsibility — for instance:— Vihiele Running: Fuel and oil; crews; vehicle depreciation; vehicle insurance; vehicle maintenance; tyres; licence and registration.

Depot Costs: Labour; stationery; power and electricity; building rents; property depreciation; property insurance; telex and telephone.

Mr Berry caused quite a stir among the delegates when he said that, after many years' thought and experience, his company had decided there was little or no value in maintaining individual vehicle maintenance costs as a means of indicating vehicle replacement times. In practice, engineers took little notice of the information provided, and they knew the condition of vehicles from their own technical records. More important, they knew what a vehicle's mechanical condition was likely to be in the next 12 to 24 months.

So now all that was recorded by UTO in the way of records for each unit was the monthly mileage, fuel and oil usage, consumption of fuel and oil, and a brief note of the mechanical work done.

The most important cost control record in respect of vehicles was that which showed how many "working" days a vehicle was revenue earning; idle for lack of traffic; idle through breakdown; through accident; in workshops.

UTO expected nothing less than 90 per cent for the first two items, and hopefully looked for 90 per cent for the first item. This information was so important that it formed a monthly return to London for each company. As well as analysing revenue by function, said Mr Berry, it was helpful to have route revenue in both directions, eg London to Glasgow and Glasgow to London — and this could usefully be shown as revenue per mile, per ton or per trip. It was essential 'that earnings were known by management every day for each depot and function. Revenue per customer was another useful check.

For Continental traffic, United Transport had in the past two years introduced "trip costing" — to account in detail for variations caused frequently by border delays and sea transit holdups. This had not only revealed the reasons for profit variations but, by making drivers and managers acutely aware of the effect of delays, had produced a "quite amazing" discipline. Mr Berry foresaw the wider use of tachographs replacing the need for trip costings.

Replying later to a French operator's question, Mr Berry confirmed that in calculating financial results his company allowed for the amounts owed by outstanding debtors. At any one time, 40 per cent of a freight company's capital was in outstanding accounts.

Transport operators in Europe, including the UK, were being satisfied with far too low a return, considering the risk and effort involved. He added, to loud applause: "None of us should be satisfied with less than 20 per cent on our capital employed."

Monitoring road transport by satellite From Mr Tom Mannix, delegates heard confirmation of earlier reports that Ryder System Inc, USA (parent company of Ryder Truck Rental) was investigating the use of a satellite to gather vehicle operating and maintenance information from Europe, Africa and Asia for immediate transmission to its master computer in Miami, USA.

The Ryder managing director confirmed the satellite investigation when he presented a paper entitled "Problem solving with operating facts and figures" (which included some information given in other recent Ryder presentations, and summarized in CM).

Ryder was still in the process of switching to many new computerized approaches in operating its 40,000-vehicle US rental fleet, he said, but already the daily operating information was put on a small computer at each Ryder field location and the tapes were relayed to Miami each night to update the master computer.

Ryder had adopted the American Trucking Associations' Vehicle Maintenance Reporting Standards, laying down standard codes and methods for the gathering and identification of vehicle maintenance data and he urged operators to seek more information from him about this. "Just think what we could do if all of us throughout the world — user, vehicle maker and component supplier — could exchange vehicle operating knowledge by having a uniform coding system."

His company managed by exception, its computerized fact-gathering being designed to spotlight problems for daily assessment and action. It was also a basis for correct vehicle specifications — which eliminated many problems in advance. They were working towards each of the 400 company-owned rental locations applying through their computers to the central computer for exact specifications for trucks to do specific jobs on individual routes.

Ryder was, he said, working on a long life, "no maintenance" 12-ton-gvw petrol-engined truck that would run for 50,000 miles without so much as an oil change. This project vehicle with enthusiastic support from manufacturers — would have long-life air cleaners, oil filters, bearings and wet wheel seals, automatic lubrication and automatic clutch adjustment. They might even go for automatic transmission.

Million miles a year There were cries of disbelief from delegates when, answering a question from Mr W. J. M. Rutges, a Rotterdam tanker operator, Mr Mannix said that his company's vehicles had to be able to survive often-rough driving practices for a life of 500,000 miles, and that some vehicles covered this mileage in a year; or even a million miles a year.

Europe would move towards this kind of utilization, as the USA had done since the interstate highway network was built. As an example, he described road trains running three-shifted at 70 mph on motorways in the States, operating for 20 hours in each 24.

Since road transport was running out of good drivers and mechanics, drivers had to be better utilized and vehicle designers had to out-engineer the need for fitters.

Mr W. J. Edbrooke (Associated British Foods) asked whether the computer showed that Ryder was having to employ more "educated idiots" to do the same work as a few years ago, and whether electronic workshop aids were used.

Mr Mannix confirmed that staffing was a problem, but said Ryder had 17 schools and a mechanic certification system; mechanics who qualified for a specialized task (eg refrigeration equipment) were paid a premium rate. Ryder had also gone a long way along the road to using electronic aids in the workshop, but was opposed to automatic engine shut-down devices on vehicles because of fears that they could put drivers in dangerous situations on motorways.

Swopping traffic by computer Computers were also the theme for another paper. In a presentation entitled "The use of electronic data processing as a means of rationalization in road haulage", Dr Heimes, general manager of BDF, explained the benefits which the computer could bring to all sizes of haulage business, even the very smallest. He said that in Germany, where only 3.2 per cent of hauliers had licences for more than 10 vehicles, EDP centres undertook administrative, technical and commercial computer work for all types of haulier, providing an information service that was becoming indispensable for efficient operation.

Hauliers affiliated to BDF (the long-distance haulage association) had their own figures processed and also benefited from a monthly interfirm comparison of results. This computer service was provided through the SVG Zentralbuchstelle, a concentration of transport accounting facilities. The SVG also sent out invoices to hauliers' customers automatically, and continued to bill the customer at intervals until the account was paid.

Firms using the centre had turnovers varying from 50,000 DM to 50m DM; with lm DM annual turnover the full SVG accounting and invoicing service cost only 240 DM a month, which included detailed departmental costing analysis (7 DM = £1). SVG's computer stored all the contract rates and customer-address data for each client, so the haulier did not need to turn up this information for each consignment or invoice. Bills were all on standard forms, but with the haulier's letterhead superimposed.

SVG charged 50 pf (half a mark) per invoice, or 50 pf per sheet for large invoices, plus 25 pf per complete transaction.

Dr Heimes said that on January 1 this year the SVG Datafreight system was introduced, based on an IBM computer in Frankfurt. Local offices in main industrial centres throughout West Germany had displayed units and print-out facilities and were linked to the Frankfurt computer. Almost all long-distance hauliers were taking part. Freight to be moved was notified to the local centre by telephone, the details being immediately transmitted to Frankfurt. The computer at once produced (and displayed locally) the location of available capacity on an appropriate route, and this was read off to the original enquirer while he was still on the phone. If no obvious capacity was shown to be available the computer automatically opened up its search over a wider area.

This attempt to increase economic working by freight matching had had mixed results over the early months, but the system was now technically fully operational. There was more freight notified than capacity to move it, perhaps because some hauliers were slow to see the benefits, but operators' early difficulties in organizing so as to comply with the strict data input requirements had now been overcome.

Hauliers paid 1 DM per tonne of freight obtained through the system; the consigner paid no fee. Total system operating cost was 2.4 DM a year. There was a possibility of the railways being brought in to the scheme but in any event it had international potential for road haulage. The BDF would, however, expect reciprocal facilities from any other nation wishing to use the SVG scheme.

What customers demand The German customer's view of road transport was provided very controversially by Dr Albert Schmitz, from the central planning headquarters of Rudolf A. Oetken, Bielefeld, a big producer of foodstuffs, beer and ice.

While agreeing that computers would become widespread in road transport, especially in scheduling loads in the consumer goods market — as his company already did — he was critical of the fragmented services offered by forwarders and hauliers.

Echoing a theme from Mr Pettit's par, ,

Dr Schmitz said transport now had a new status that was not always recognized.

Most manufacturers would happily get rid of their own transport if only they could get equivalent service from 'hauliers. In Europe, consignors were increasingly thinking in terms of total logistics and the need for specialized transport services to meet their own level of distribution.

His own company had taken a total-distribution-costing approach, and the comparative costs of storage, regional warehousing and transport had been used as the basis for a computer program. The computer now scheduled loads for specific destinations in the most efficient way for the weights and timings required.

Customers' main demands from consumer-goods haulage were safety; careful handling; network availability; frequency and accurate timekeeping; flexibility in accepting changes of plan; and, of course, low price.

No divine right to traffic The need for a broader view of distribution requirements, and a recognition of transport's important new status, were themes pursued by Mr D. E. A. Pettit, chairman of the National Freight Corporation, in a paper entitled "The marketing of transport and distribution". In this Mr Pettit re-emphasized some of the points made in his CIT Presidential Address in London just over a year ago, notably the revolution in distribution which had followed from the great wave of affluence in which "the consumer has become king".

Marketing had, he said, gained a powerful ally in transport and distribution. And modern businesses required a wide range of sophisticated contributions from transport operators today. Transport men were becoming involved in central decision making in industry, and had to offer greater versatility.

Transport and distribution mattered in a way they never had before, and "transportation", based on an intermodel approach, was what had to be marketed.

As large-scale enterprises vied with one another for consumer markets, transport came under sharper competitive pressure and needed all the available modern aids to remain successful.

The changes in the market place had been so great that their effects were still little understood. Old notions of traffic flow and availability had to be replaced by an awareness of the need for marketing transport services tailored to each customer's requirements. Road transport had not only to be dynamic and flexible but must regard its investments as expendable and continuously at risk.

Transport was a world crying out for scientific and professional management, and one where co-operation between user, provider and the manufacturer of equipment and facilities could provide far more than the old arm's-length relationship where each sought to maximize its own separate profitability without regard for the others.

The Seventies, said Mr Pettit, would be the decade of the distribution man, but many providers of transport were unaware of the greatness being thrust upon them and remained ill-equipped to meet the challenge.

He used the National Freight Corporation as an example of transport marketing. NFC's media advertising was designed to inform and remind the customers of the corporation's name and services, with the objective of projecting the image of reliability, efficiency and honesty of purpose. The means included not only press and TV but literature, films, slides and marketing kits.

Pricing was a local management task, within a broad company policy, but NFC refused to accept a passive selling approach based on a divine right to traffic. Positive selling was used, and the motivation, training and remuneration of salesmen was a major management task.

In the discussion period which followed, Mr Pettit spoke of the NFC's European plans— as reported on page 12.

Haulier's growing pains When a haulier's business has grown to the point where he needs a personal assistant to help manage it, does he promote from within or engage an outsider — and what sort of person does he look for?

This was one of the fundamental problems in the growth of a road freight business which was dealt with by M Paul Gouverneur, president and director-general of Transports Paul Gouverneur, of Brittany, in a paper describing his firm's expansion from a one-man, one-vehicle agricultural offshoot to the present 100-employee, 65-tanker fleet.

Faced with the need for an assistant to help run a firm which had then just become a joint stock company and was running about 50 vehicles, M Gouverneur decided in 1971 to ask his departmental traffic, administration and workshop chiefs whether they would find it easier to accept an outsider or the promotion of someone from within the firm — perhaps one of themselves. They voted for an outsider.

He made a point of discovering his managers' attitudes to the new appointment and found that the future structure of the company would have to be such as to reassure them about their position, their promotion prospects and their prerogatives, while at the same time creating an atmosphere in which changes could take place.

His young recruit had proved capable of running the company, and was keen to improve efficiency, but was still not able to manage the business long-term without the experienced support of the boss.

As well as remaining the entrepreneur — the traffic-getting role which he had retained from the earliest days — M Gouverneur also regarded it as his own essential task to look after the future development of the company. The most important task for the chief executive was to motivate his colleagues and employees, and one big problem for the future of a company which had grown from very small beginnings would be to recruit enough of the right sort of people to maintain the character of the business.

Looking back, especially to the time when the business had expanded rapidly from eight vehicles to 17, and then to 25 and 55, M. Gouverneur felt that the biggest problem had been resistance to change, while his own failure had been a slowness to delegate authority to his departmental heads. The rate of expansion of the fleet had over-run the control system and the maintenance facilities and he found that, far from managing the business, the business had been managing him.

One vital feature of the business that had been maintained through all the changes in size and structure was the ability to respond quickly to a customer enquiry — to give an immediate quotation in response to a phone call.

Intensive training for fast-growing fleet The freight carried throughout Europe and the Near East by the 700 vehicles operated by the State-owned Hungarocamion fleet, based at Budapest, was expanding at 20 to 30 per cent a year, said the general manager, Dr. Gabor Mezei, in a paper on the management of international road haulage.

The company employed 1700 drivers, who covered a total of 60m kilometres a year; total employees numbered 3000. This large and expanding enterprise required a dynamic organization, said Dr. Mezei, and Hungarocamion was switching its accounting, commercial and technical operations on to computer systems. One eventual aim was to have analysis of costs and revenue for each individual trip; already trip costing was being carried out and the results showed such large differences that standardized costing and rating was unrealistic; he felt that a published rates system was not very meaningful.

Hungarocamion's rates were set according to rail and competitive road rates as well as the market situation. Rail freight rates should always be considered in rate calculations, and his accounting team included experts on railway freight tariffs.

The company had a network of offices located at freight concentration points throughout Europe and also worked through 150 forwarding agents. Dr. Mezei told a questioner that Hungarian trade agreements did not demand the use of Hungarocamion for the transport, but he declined to say how much government support his organization received. Asked whether it was Hungarocamion's job to earn profits or Western foreign exchange, Dr. Mezei replied: "Both". The company had been capitalized by loans from the Hungarian export bank, which had had to be repaid by 1971, and now had to be profitable to survive. Current profits were 7 per cent (presumably on turnover).

Now that East-West road traffic was growing fast, would Hungarocamion co-operate with West European hauliers on return loads, sharing of facilities and giving breakdown assistance? The questioner was told that Hungarocamion would certainly enter into such agreements and that the company was the sponsor for AMI points in every Hungarian town which could provide not only assistance and spares but also refrigeration parts.

Staff training was given great emphasis by the company at all levels and although Hungary had a driver shortage the selection system was rigorous; applicants had to have four or five years experience on buses or heavy trucks, were subjected to medical and psychological tests in the company's own centre and had to provide references for past conduct. Age limits were 25 to 45 and all candidates had to go before a selection board and, when accepted, through an extensive course at a local college.

Advanced driver training, over a period of six months, covered commercial and engineering subjects as well as driving. All this was very costly but should be looked upon like any other company investment — and Hungarocamion's seven-year experience was that this training paid off in drivers who were not only skilful but were good business contacts for the company.

Fewer accidents, better vehicles

Two other papers were presented at the seminar. In one, by M G. Trochery, director-general of Etx. Generale de Traction, Bordeaux, details were given of the way in which this contract hire and rental company with over 250 vehicles had experienced a reduction in accidents (on vehicles hired out with its own drivers) since the introduction of an in-company two-week training course. The training cost 2.5 per cent of the wage bill — or twice the official French training tax.

M Trochery said that in France there was a need for 30,000 drivers annually but the Association for Training in Transport would be able to produce only 7500 annually by 1975; hauliers also trained many, but some of these were then taken on by own-account transport firms.

His own company not only paid high wages and good expenses but also bonuses for safety and courtesy and while it might have lost some business to more aggressive rivals, the demand for its services was growing steadily. He argued that 8bhp /ton power-to-weight in vehicle specification, and the use of tachographs to set performance standards, were necessary to ensure profitable operation.

The remaining paper was by Dipl-Ing Arthur Mischke, head of the commercial vehicle testing division of Daimler-Benz AG, and was entitled "Development trends in the Daimler-Benz range of commercial vehicles with particular reference to their greater economy and operational variability".

There were also demonstrations of the Daimler-Benz fleet information system (FIS), using direct links to the company's computer in Stuttgart. FIS is designed to provide operational and cost analyses rapidly and accurately for any' size of fleet.