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matters by John Darker, AMBIM
Transport and distribution consultants
No 6. Associated Industrial Consultants Ltd
Giving employees the right incentives can lead to big improvements in output. In the psv industry even marginally better schedules can bring large savings.
AIC is one of the best-known consultancy firms in the transport field, having worked for many passenger transport undertakings and for well-known road haulage contractors. It is one of 16 companies controlled by Inbucon Ltd, an international set-up comprising specialist firms offering advice on operational research techniques, sales training methods, lay-out of premises, etc. One of the subordinate companies, John Evans and Associates Ltd, hires out work study practitioners for use by sizeable firms with their own management services department. It also runs a work study training school. In many cases a John Evans man—whose services are less costly—is supervised by an AIC Ltd consultant.
Psv field In passenger transport, AIC's 'work for City transport undertakings in the UK and overseas covers a very wide field. In the case of a number of assignments these have referred to the organization of vehicle maintenance departments and the introduction of incentive schemes. (The MTM-2 work study technique, introduced by AIC at Bristol Omnibus Co. Ltd, was described in CM, April 10 1970.) Management accounting systems, labour control on maintenance of buildings and equipment, new office layouts, new patterns of management structure are typical AIC assignments. Training courses for management and staff are undertaken; some detailed studies designed to sharpen up management's control of raw materials and work-in-progress have been undertaken in the transport field; some firms have been helped to make the best use of training grants.
The content of AIC reports to bus managements is extremely detailed. It is vital in any productivity scheme for management to be satisfied that the data used to measure output, and hence determine wage levels, is accurate. Reports dealing with the introduction of the MTM (Method-Time-Measurement) system. which is increasingly popular with managements determined to bring maintenance costs under control, contain the statistical formulae for proving the validity of the data used. Transport managers with no knowledge of elementary statistical data would be much helped by this supporting data. The installation of incentive schemes based on the recorded performance of staff is speeded up if management thinking—and their mathematical ability—is attuned to that of the resident consultant, but consultancy firms reckon to stay long enough to train the staff of client firms to run a new system efficiently.
Research teams
AIC operational teams have undertaken a number of major studies of bus scheduling problems. Marginal improvements in scheduling are well worth while since they make the most of the staff and equipment available and improve the service—and hence marketability and public relations —of the undertaking. At the most negative, a detailed O.R. study shows the management the calibre of its own schedulers and justifies or criticizes the traditional scheduling techniques. At best, improved scheduling for a large bus undertaking could show benefits in the order of £25.000 to £50,000 a year.
One AIC bus undertaking study stressed that there should be greater co-operation between departments with management concerning themselves more actively with scheduling policy changes. Running cards, it was. suggested, should be prepared at the same time as crew schedules, to ensure minimum "dead mileage" and labour costs. Rota length and scheduled turn lengths should be based on expected crew availability over a reasonable time ahead and not by desirable crew availability or the decision of a particular garage union committee. It was felt that a stock of schedules to meet varying operating conditions should be maintained, with an "ideal" schedule based on a relatively short working week for recruitment purposes. It was found that the average performance in terms of crew utilization was lower than might be expected from the existing schedules. More seriously, average performance declined markedly when the staff situation improved.
AIC's proposals marginally increased scheduled utilization efficiency with an economy of nine fewer crews. The consultants suggested that immediate talks should be arranged with the trade union garage committee, that a personnel officer should be trained to handle labour relations aspects of revised scheduling and that timetable rationalization balancing out peak loadings at other depots in the network would all contribute to money savings.
Substantial improvements in the profitability of road transport fleets have been achieved following AIC studies. A labour cost control and incentive scheme for a tipping vehicle fleet was designed to cut down the fleet size from 42 to 34—or even fewer if above-standard performance by drivers was achieved—yielding a direct labour saving of nearly /5000 per annum.
This made possible an increase in fleet profitability of ,E14,000 per annum.
Alternatively, if the 42 vehicles continued to be operated and sales turnover was boosted to support the original vehicle strength an increased profitability of /23,000 a year was achievable.
In this example a close analysis of the existing productivity of drivers and of the--largely avoidable--delays ,they encountered in their normal day's work through poor handling methods and inadequate supervision at sites, revealed very poor overall productivity. This was not entirely the fault of the drivers though their performance improved greatly under the influence of the incentive payment scheme introduced. It was clear that driver morale had been sapped by indifferent management.
Saturday working ...
Another investigation was made into that hoary old transport institution, Saturday morning working. The management of the client firm suspected that time and money was being wasted by over-manning. It was found that instead of a team of six greasers and one washer being employed on greasing, check of levels and tyres, and washing 20 vehicles, up to 13 men were "working". Clearly, the traditional bait of Saturday morning work to boost earnings had adversely affected the performance of those employed.
The resident consultant met with much resistance from the garage foreman when he tried to persuade him that a seven-man gang was sufficient for the work involved. Before productivity recovered it was necessary to re-define the duties of the foreman mechanic and garage manager. Duties called for on Saturday were clearly allocated on Friday and it was laid down that the vehicles to be greased and washed should be designated in advance; previously there had been squabbles between the traffic controller and the foreman mechanic, resulting in some vehicles missing their necessary service.
There must be many road transport firms where driver motivation goes hand in hand with the company's profits. In the absence of adequate motivation, poor performance can easily lead to bankruptcy.
The standard performance of 100 per cent, based on the British Standards Institute scale, is defined as the rate of. output which qualified workers will naturally achieve without over-exertion as an average over the working day or shift, provided they know the method of working and provided they are motivated to apply themselves to their work. Labour output at this rate is denoted by 100 on the BSI scale, corresponding to the output of 1 standard hour per 60 minutes, the standard hour being a unit of work.
AIC consultants have found many firms with output as low as 28 SMs (standard• minutes)/hour. If the average performance is higher, perhaps 65 to 70 per cent, there is often room for improvement. All too often one sees a comment such as: "There is little or no effective control over drivers. Time is spent in cafes and lay-bys and log-sheet information is not a true reflection of work done. Hours of work are extended, wherever possible, to the maximum permissible by law, in order to maximize earnings."
Driver productivity An improvement in the standard performance of drivers from 70 per cent to 90 per cent can yield a productivity improvement of 281 per cent. In one fleet studied this higher productivity improvement saved more than £22,000 per annum. The drivers concerned were motivated to work at standard performance by an hourly bonus rate some 53 per cent in excess of the hourly basic rates, increasing their weekly earnings by roughly 7 per cent, on average. It was shown that improved driver performance would, in fact, yield a gross saving of 12 per cent in the drivers' wage bill.
Budgetary control procedures are commonly recommended by AIC consultants to road haulage operators. Successful management calls for the identification of the commercial results stemming from each part of a business. It is not sufficient that a firm should know its total profit; it needs to know where the profits have arisen, how they compare with budget estimates, and—if there are differences—why results have not matched budget forecasts.
Control of liquid resources is inseparable from a good budgetary forecasting technique and routine information needs to be prepared so that top management know the amount of overdraft and other loans outstanding—including credit provided to customers; projected cash flow over the following months in the short term, and over the year in the long term; and a regular comparison of actual cash flow with forecast, with an explanation of any difference.
It is easy to see that profits and efficiency are much increased from successful control of sales, fleet running costs and administrative and general overheads. Very few road transport businesses analyse their traffic operations, in terms of profitability. Consultants, who are used to the higher standards of management control in outside industry, can be expected to pin-point deficiencies in road transport firms very quickly.
In one very well known road transport firm, AIC consultants found there was no measure of the individual profitability types of haulage work; job costs were not systematically recorded in a way which would permit comparisons with estimated costs and revenue to be made; there was no systematic record of vehicle utilization allowing vehicle costs to be allocated to different types of business; apart from schedules and contract haulage work there was little standard data for estimating job costs or prices; and there was inordinate delay in preparing invoices, with consequential delay in the production of the revenue and expenditure account. Credit control was almost non-existent, so that the firm were, in effect, financing many of the operations of their customers.
'Paper discipline' In one AIC study the progress of a particular "load" from the original customer inquiry to the time he paid his account was analysed. The inquiry revealed that customer service was first class but that the "paper discipline" of operating staff left much to be desired. This led to natural caution on the part of administrative staff in providing guidelines to management. By revamping the paper work, cutting down the quantity of documentation to be processed, and by re-arrangement of staff duties, a much smoother flow of information was secured.
This searching analysis led to the introduction of a combined work sheet and, log sheet; meetings were held with drivers, who were encouraged to understand their vital function in feeding accurate information promptly back to the traffic department.
Looking down a list of AIC's work in road transport for companies of all sizes brings out the diversity of problems in the industry. If a common theme is work study and labour cost control, many studies relate to employee selection and training and advising management on human relations problems. Office layouts and procedures, organization and methods and vehicle replacement policies reflect common deficiencies in these areas.
AIC is one of the few companies large enough to undertake major studies in physical planning and environmental control—expected to be very important in the 70s. The approach to these problems, both in the UK and overseas, is changing radically from a creative, intuitive approach to one based upon a systematic quantified review and appraisal of all feasible alternatives. AIC stresses the need for financial and economic considerations to be given more prominence; a commercial appreciation needs to be joined to a sensitive regard for those aspects of the environment which must be preserved or enhanced.
AIC is well known for its surveys of executive salaries and fringe benefits in the UK and internationally. Its classification of job descriptions covers accounting, production, sales and marketing, research and development, general management and administration and data processing. Sadly, I note that distribution or transport management does not rank for separate mention, despite its growing importance.