Efficiency must bg the Eighties watchworc
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We must grasp the technological nettle, an distribution must play a major role if the Ul is to compete successfully in world market; John Darker reports from the FTA Conference at Wembley
-IE ONE-DAY conference of the .eight Transport Association at rembley Conference Centre last eek brought together some )0 transport and distribution 'onagers to discuss efficiency the Eighties.
Delegates were left in no )ubt of the major role distribu)n must play if Britain is to ap.oach — let alone draw level — ith the production and exportg miracles of Japan. As presimt Len Payne stressed, all our iergies should be directed to .asping technological progress id to operating in an inflationae system. He believed that the ghties would be a decade here the consumer is king, and at companies failing to erode the goods at the requisite ne and at a competitive price )uld not expect to survive.
Mr Payne reminded delegates at distribution was now abirbing around 20 per cent of impany costs and that fuel and bour costs continued to rise
He spelt out the immediate )nefit accruing to the industry the new Transport Secretary )uld secure Government ceptance of heavier lorries, ving industry £140m per year; ,uld rationalise EEC driver's
hours regulations, saving industry at least £100m a year; could save a further £400m a year by ensuring that lorries paid no more than their true track costs; and that the price of dery in Britain was brought down to the average price paid by our European competitors.
Action on fuel price would save £500m a year and yet more benefits would flow from larger investment in transport infrastructure, particularly roads.
When Sir Campbell Fraser chairman, Dunlop Holdings Ltd and the next president of the CBI) addressed the conference on the theme What Industry Needs from Distribution he stressed the natural resilience of transport managers and staffs in coping with day-to-day challenges.
In the dry, humorous tones of a latter day "Dr Cameron," he warned: "The best-loved product sitting at the end of a production line wasn't worth a brass farthing. It's only when the product is available to the customer, at the time and place he wants it that it becomes a saleable item."
Yet, all too frequently, custom ers at home and abroad would complain of delivery shortcomings. All of us, at times, bore some responsibility, and one or our inadequacies was lack of purposeful communication. Distribution people should more actively stress their important role in the scheme of things.
Although he foresaw an end to the depression, Sir Campbell did not believe that the Western World would return to a period of high growth. There would be growth but by the standard since the war it would appear meagre. "If there is an over-abundance of anything it will be of competition."
After spelling out typical careless errors in distribution functions — misdirected consignments, poor documentation, and so on — Sir Campbell said there was a real requirement that all in the distribution process from the distribution director down to the warehouse man should have a sense of joy in his work, "and enough gumption to want to get things done — and done right first time."
The role of distribution in giving positive aid to selling was touched on, as well as the benefits of speed, to retain customer support but also to reduce the high cost of inventory — some £300m in Dunlop's case. Drivers calling three times a week could be better informed than salesmen making less frequent calls. The smart appearance of vehicles and drivers, or the reverse, was a reflection on the employing company.
Dunlop found that in some of its overseas companies, trainee salesmen benefited from delivering tyres to customers, thus learning about customer needs. Drivers were also encouraged to collect money and deliver invoices, technical and advertising material and computer statistics, as well as selling to smaller customers. Sir Campbell urged the greater use of effective company logos on vehicles — possibly the advertising would merit financial support.
The cost of carrying air around the country in 1981 was likely to reach £2bn said Sir Campbell. Something like a third of all goods vehicles on the road were running empty. Hence the value of the Datafreight computer program marketed and run by BRS to identify traffic movements. Dunlop had become the first company outside the BRS organisation to subscribe to this programme, designed to mat up availability of vehicles w consignments, and vice yen Dunlop expected this system, its first year of operation, to sa around £100,000.
Also a valuable cost-saver w the FTA's ferry discount scher offering members a 35 per ce discount on some establish' cross-Channel routes. This w enabling member companies compete on equal terms with ti principal contractors in tl haulage industry.
Improved tyres, providing le rolling resistance, and hen better fuel economy, was oi contribution to industry el ciency, said Sir Campbell. TI new SP311 produces an antil pated three per cent fuel savil against its competitors. 0th aids to fuel economy cou come from driver education. E gine speed limiters and wit deflectors tested by Dunlc
lded significant fuel savings. lir Fraser concluded with a a for the 40-tonner, sup-ted by the CBI, which would ng immediate operating 'ings of £130m a year, while ucing the operating fleet by 000 units, "No matter what rjection of growth is made it ans saving a full decade of :k growth in numbers, which, :urn, saves fuel, and reduces cost to industry of distributits products."
;peaking on Decisions for nsport and Distribution Manenent — the European Dinsion, Job Onderdelinden aribution manager, ICI Hold BV) reminded delegates t the term "lorry" on the -itinent denoted a filthy, ineffiet machine while the term Jck" signified something altoher cleaner, more attractive I efficient, IL long career in transport had winced him that the distribun function and transport )uld be seen as an integral
of business logistics, of the rketing, sales and productive )Fts. He thought it confusing iifferentiate between clistri bu and transport and equally y for a distinction to be made ween Britain and Europe.
lritain was a part of Europe, )ugh the biggest part of Pope was foreign to the EEC. It s more sensible to see the 2 as one large market, someat like the USA, though many ns had yet to realise this.
Ar Onderdelinden described -ne of the approaches to more cient and productive distribui. On "trade-offs" he believed as the total cost (not the odd nsport rate) that mattered, in )port of the necessary cus-ner service which would lintain and expand profitable 3iness. Today, it was in
creasingly necessary to exploit communications aids with marketing, sales, production, supply and customers, making use of electronic data processing.
There were tremendous developments in road transport technology, though less in rail and water transport. He instanced road movements of liquids, gas, powder and multiproducts; combined road/rail; automatic warehouses, and developments in packaging and packages. Economies were possible in manpower used in warehouses, in routeing arid handling systems and in administrative methods.
Vehicle utilisation could sometimes be improved by better order picking with good backloading, aiding economy. All distribution elements need to be costed by function and this costing was crucial to help marketing make reliable business decisions.
Mr Onderdelinden said transport, the last link in the chain, was often unfairly blamed for shortcomings. He ended with some sage advice: "Lack of follow-up and monitoring or carefully testing, trying and verifying something not done before, often creates a gap between achievements and intended targets."
Asked why ICI in Europe operated no vehicles of its own, Mr Onderdelinden said ICI's share of the chemical market amounted to between 500,000 and 750,000 tons, very mixed traffic for a variety of customers. It would be hard to build up a fleet to undertake all the distribution and it made better use of capital to invest money in plants rather than vehicles. The efficient services of haulage companies enabled satisfactory customer services to be maintained.
Dennis Hutchins (Thorn EMI) inquired about backloading. Who controlled this and who took the profit?
Mr Onderdelinden replied that ICI did not always control the backloading, but it knew the value of the return loads and would negotiate total charges with the haulier concerned.
Asked by Cyril Bleasdale (Freightliner Ltd) what factors obtained in a decision to use containers, the speaker said it was usually a question of cost. Containers were used on the North Sea along with ro/ro. It was really a question of cost, speed and competition related to the product carried.
Stan Thomas (Allied Breweries UK Ltd) queried the significance of the Channel Tunnel. Said Mr Onderdelinden: "This, to me, is a prestige pro
duct; if it were truly commercial it would have been built long ago."
Giving the parallel talk on The British Dimension, Alan West
(commercial director, UB Distri
bution Services Ltd) noted recent estimates of the vast annual sum, possibly more than £30,000m, spent on distribution. The evidence suggested that costs would increase at a faster rate than general inflation because distribution was labour intensive and technology offered little promise of an early impact on labour costs. • Oil was likely to get more costly; reductions in drivers' hours limited scope for increased productivity; while the UK network continued to fall behind the standards needed for efficient operation.
Hence the pressures for greater efficiency. "More money in the economy will not increase by one iota the preparedness of our customers to pay higher distribution costs." Mr West noted estimates that 2,000 haulage companies had gone out of business with the loss of up to 12,000 drivers' jobs. Rates had been reduced to the 1978/79 level, despite cost increases.
But he agreed with Ken Rogers of the RHA that the industry would "bounce back". The industry offered great scope to owner-drivers, true entrepreneurs. He thought there would be no shortage of facilities when trade picked up; as a last resort we could look to the Continent for help.
The comparative industrial calm, with very few disputes, was a tribute to the trade unions' understanding of company difficulties but "we must guard against any thought that the trade unions, deprived of a buoyant economy, have become weak, and can therefore be defeated!"
If employers abused their power there could be a deep and justifiable resentment which would lead to backlash, he said. The fact was that management and unions were a team whose interests were essentially the same. Neither side could achieve their objectives unless the particular business flourished. Management must create an atmosphere of trust by adopting a frank and sensible approach to problems. There was then a good chance that worker attitudes would change. The contribution of won processors, costing from £3,00( upwards — "roughly the cost o employing a temporary secre tary for six months" — wa! typical of modern aids whicl could be usefully deploye( within transport. Mr West alsc hoped that the FTA would con sider analysing tachograpl charts using a computer print out as a new feature of it services to members.
Another development wouli see computer-controlled bul stores with automatic move ment of pallet loads from pro duction to stores and thence ti the loading bay. Vehicle summa ries could be keyed into auto matic picking machines whicl would disgorge onto a convey° the precise quantities requirei by the load, in any desired sequ once. Robot devices to remov; cases from the conveyor am stack them into vehicles, or on ti a pallet, would be the next step.
On the matter of servic levels, Mr West insisted tha distribution managemen should not be responsible fo what was a sales responsibilit ;ales staff should agree details rith customers with prices re)ted to quality, and service level eeded.
Should distribution be a profit entre? Mr West described the reation of a profit centre within le United Biscuits group for the istribution function. User corm anies were now charged cheduled rates often expressed s pallet cost moved between ny two locations within the ystem. Storage was charged by le pallet, and for delivery to the ustomer, in relation to product roup and order size.
The effect of the new system 'as beneficial, said Mr West. lients now understood the cost f distribution and the effect of pedal demands upon it.
Mr West ended with a plea for lore consultative managerial ttitudes to the employees not nly to generate ideas but to am n commitment to a course of
Asked about prospects for out I hours deliveries, Mr West said a was involved in the 1966 exariments in London. There was Dt enough volume to keep lops going for a full work shift. Dday, there were other probms arising from the proximity
flats near main shopping mtres.
Discussing The Human Diension, the FTA was fortunate having one of the most lowledgeable professionals in e country to make the final idress. Bob Ramsey, former rector of industrial relations at )rd Motor Company, and soon be president of the Institute of )rsonnel Management, urged ose wishing to improve effiancy to take an analytic look at irrent organisation to deterine the ideal pattern of opera)ns. This review shoud exclude I industrial relations diffiilties.
If this was done, with a good :countant to help, it would be )ssible to decide the correct le for the company fleet, the !st size of depots and explo3n points, the road/rail issue, e optimum use of contractors, id so on. Then the whole packle could be looked at by the dustrial relations specialist io could spell out the implicams to employees in terms of bs, cherished long-distance ns, overnight stays, guar:teed overtime and many other iming human issues.
Mr Ramsecf thought it vital to establish the way the transport and distribution operations ought to be run, irrespective of the difficulties because it was the only way to define the problem and approach the ideal solution. It was essential to set ambitious objectives, looking at what the rest of the world is doing in case that calls for the objectives to be changed even more.
As a good example of efficiency, Mr Ramsey noted that in Japan, when a new car assembly plant is built, there is no need to go to the expense of building a receiving bay or having vast storage areas behind the assembly lines, or large fleets of mechanical handling equipment, with its manpower. In Japan they have a "just in time" system of component supply. The supplier vehicle will drive straight to the assembly line, and the driver of the vehicle will unload it. The driver also operates the so-called Kanban system which in receiving the material automatically orders the next consignment.
Hence, really minimal stocks are held with several daily deliveries. No buffer stocks are needed in case things go wrong. With that degree of reliability, vast cost savings are achievable. Without a similar approach in Britain, any approach to competitiveness will be impossible to achieve.
A less-ambitious approach would be to isolate all transport and distribution costs as a profit centre, revealing sharply all the uneconomic factors. Pertinent questions on backloading, tractor/trailer ratios, overnight stays, avoidance of queueing, computerised tachograph information, shiftwork and many more follow. At the end of the review the rate of return to be aimed at is calculated.
Mr Ramsey said that in a vast range of public and private organisations the workforce had more muscle-power than management because of the ability to disrupt which could in the short term inflict great damage to profitability, and loss of a company's reputation. It was the integrated nature of modern business and modern society, along with continuous technological developments, that gave the workforce such power, not politicians or trades union leaders.
Quite small sections of workers, in transport fleets, possessed immense power, which could be exploited for sectional ends.
The factor of employee power was allied with great lack of und ersta n di n g on the part of workers and shop stewards on the economic facts of life, that is of the limitations of what they can expect to obtain from the business and the severe constraints within which it operates.
Economic ignorance went with great independence of mind and free-enterprising spirit, sectional interests setting their own aspirations and their own methods of pursuing them with little regard for the authority of management, government, political parties, and, increasingly, shop stewards.
Mr Ramsey saw little benefit to employers from industrial relations legislation because recourse to law could not restore relationships or make people commence work during a shutdown. He believed that customer power in the Eighties would be far stronger than either management or employee power and that people woild insist on free choice of purchasing.
The answer to these problems lay in management credibility. Employees would respect a management that knew its job, kept the business healthy and made plans for the future. It was vital to be absolutely truthful and honest in dealing with employees. Determination could win through.
Asked whether trades unions would agree to take some burden of management responsibility, Mr Ramsey said he thought not. In devolving power to the grass roots some years ago the movement destroyed the power of paid officials. The power ot trade union officials today could come from management strength and determination.
N. T. Butcher (GKN Chep) asked how Fords told th workforce about the strength Japanese competition. Said Ramsey: "We went to 70,( employees and explained Then we spelt out changes respond to it. There was a ci tinuous process of negotiaii with a clear spelling out of alt natives. We talked to work' with brutal frankness. \I involved them in the choices a gave them a lead."
B. E. Mellow (G. Wedel a Son Ltd) wondered whett white collar union power w management and compul staffs would be a problem. Si Mr Ramsey: "The short ansv is, yes. But it is only one mc problem. The chaps on comr ters will get you on your backs