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Fourth-party logistics operations are growing in popularity. TDG manages one
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such operation, but those hauliers involved are not always satisfied with the way things are organised, as CM found out...
Words: Roger Brown THE CONSTRUCTION industry is currently experiencing one of its deepest-ever troughs.
According to figures from the Construction Products Association (CPA), the amount of new offices being built in 2009 is set to fall by 38% compared with last year, and by 2010, this is expected to have dropped by more than 50% compared with 2008.
To make things worse, the sector is also expected to contract by 16% in 2009 as the total of new-build homes falls to its lowest level for more than 80 years (excluding the Second World War).
Last November, with the credit crunch in full swing, TDG began its eight-year contract to manage the road transport needs of Aggregate Industries (AI) Building Materials Divisions — including companies such as Charcon, Bradstone, Fyfestone and Masterblock.
Under the fourth-party logistics (4PL) arrangement, TDG manages about 42 sites and 100 existing hauliers from its location in Linby, Notts. The logistics firm predicts that the deal will save Al more than three million road miles per year and cut its annual CO, emissions by 12%.
Fewer jobs However, a selection of long-standing subcontractors for Al have told CM that the flow of jobs since the new 4PL operation started has dried up, and that they are struggling to keep afloat.
Paul Hayes, head of TDG 4PL, believes while some hauliers may be experiencing fewer jobs, others have experienced more, and new hauliers have been introduced to Al work. His view is that "volumes will dictate the required resource levels': "Wc plan and allocate work based on haulier performance criteria of safety, service and casts," he reveals. "Our objective is to drive efficiencies through effective planning.
"As a result, in some instances, revenue will be less, but, equally, hauliers' operating costs will be much less.
"We aim to agree pricing on a medium to long-term basis where this is possible. Some hauliers have probably only survived over the past year's trading situation as a result of their 4PL involvement," he stresses.
Andy Cocks, director at AJ Cocks Transport, based in Westbury, Wiltshire, worked for Al from 1992, carrying loads five days a week.
Since TDG took over the operation at the end of last year, Cocks says, his firm has undertaken a total of two jobs on the contract, and nothing in 2009: "I would say that TDG has reduced the number of hauliers used for its Al work by between a half and two-thirds," he says. Hayes responds: "While it wouldn't be fair for us to comment on individual cases, it is true to say we are working hard to minimise the effect of the current significant downturn on all of our haulier partners.
"To that effect, some of our hauliers now have longer-term contracts with opportunities for growth. At the same time, we're also achieving our objectives for Al, and we'll be in a position to increase capacity when the current economic climate lifts."
Transport capacity
Mark Cottam, director at Denby Anon `Transport, in Ripley, Derbyshire, was an Al haulier for 20 years, built up 15 vehicles and, at its peak, the business accounted for about 60% to 70% of its work.
He says in 2007, when Al was providing transport directly, turnover on the contract ran into the millions. However, he claims, since he signed the contract to work for TDG, his company has only transported a handful of loads.
"Effectively, we've lost our biggest client overnight," he says.
TDG's Hayes points out that haulage firms never had volume guarantees or contracts when they were working directly for Al.
"Hauliers now have a contract with us, but at no time have we guaranteed volume unless we have specifically agreed contractually': he adds.
"The reality is that there is less work for the same amount of resources because of the global downturn."
But how does TDG react to worries that when the construction industry recovers, there will be no transport capacity left because smaller subcontractors will have had to sell their spare trucks to survive?
Track record
Hayes replies: "We have a track record with our Corus 4PL business, and a benefit of our 4PL approach means we can be flexible to downturns or upturns in the economic climate to deliver the highest-quality service," Hayes adds.
"Every haulier has been given the chance to contract with us, and while most have embraced the change, some have not, and they have excluded themselves on either a safety, serviceperformance or cost-perspective (basis] at a time when there are more resources than volumes demand.