Mr. Dailey's constructive approach
Page 59
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ROAD HAULIERS as a body are all too familiar with the criticism of outsiders about inadequate costing in the industry. Generalizations can be unfair; search hard enough and exceptions will be found. A recent interview with Mr. J. B. Dailey, managing director of Grounds Transport Ltd., Spalding, provided a salutary reminder that some road transport operators have evolved an effective cost control and budgetary control system.
Very few companies in this country can claim to have boosted their turnover by seven times since 1961. That is the enviable record of Grounds Transport Ltd. What is the explanation for this remarkable growth record in less than a decade—a period of tumultuous change in the legal framework of road transport?
Grounds Transport enjoys certain natural advantages in its location at Spalding, a flourishing centre of market gardening and flower growing. Specialist road haulage services for seasonal market produce can be profitable if sufficiently well organized. But it is exacting work calling for collections at awkward hours and guaranteed time deliveries to markets. Many of the drivers have grown up with business and can justly claim to be specialists.
Seasonal work needs to be bolstered up with other traffic to maintain all-the-yearround stability. In this regard Spalding is not ideally situated. The Peterborough area brickyards, which provide bread and butter work for some Grounds Transport vehicles, are 20-odd miles away. The brick traffic operations need to be carefully dovetailed into the general pattern if the relatively low rates are to be profitable.
'Systems' man Mr. Dailey confessed at the outset that he was a "systems" man. He has a logical, fertile mind and likes to devise and implement plans. A business that drifts along on random tides and winds is unlikely to make much progress. If there are many such firms in this industry, Grounds Transport is not to be numbered among them.
We began by talking about cash flow, particularly in relation to credit control. Every road haulage business with a sizeable list of customers is vitally concerned with getting paid promptly for its services. Mr. Dailey is a great believer in personal contact with customers. Some pay their accounts promptly; others stretch credit inordinately.
At Grounds Transport standard reminder letters are sent when customers have not responded to statements but at the end of the day management must decide whether a customer's business is worth having. The judgment of Mr. Dailey in assessing the credit worthiness of many small farming and horticultural customers is clearly an important element in the success of his company.
Variable factors Because of the many variable factors in road haulage it is likely that quotations will become much more detailed and conditional. This will possibly embarrass road hauliers who normally make quotations by phone and record the price on the back of an old envelope!
Mr. Dailey insists on the importance of written quotations clearly specifying that the rate quoted may be uplifted in defined circumstances. By implication, he is critical of operators who absorb higher wage or fuel costs for lengthy periods of time without reference to customers.
Demurrage is a ticklish problem in the market garden trades for although Mr. Dailey accepts that it should be charged "as a deterrent rather than a reimbursement" reciprocal claims may be faced. If the haulier is likely to be penalized by a demurrage charge if he is late making a delivery he will find it difficult to insist on charging for an undue delay when his vehicle off-loads. Arguments centring on "the rough with the smooth" tend to be prolonged.
The profit guidelines necessary vary with the size and nature of a business. There are road hauliers who would say that the bulk of their profit comes from all hours over 10 worked by their drivers! Such crude criteria would be ridiculed by an accountant or consultant but in a particular business such a simple formula may work.
Mr. Dailey's company is reasonably complex and he has developed over the years some standard statistical records which enable him to "sense" very promptly how sections of the business are progressing. The number of trips made by each vehicle, the tonnage carried, the rate per ton, and earnings in pence per mile are built up for each commodity or customer group from the vehicle weekly sheets completed by drivers.
The aim is to work as closely as possible to budgeted figures of operating costs. Letter symbols are employed in analysing results. For example, if the budgeted cost was 27d per mile and the revenue was only 24d per mile the item would bear the endorsement "A"—meaning that revenue was 3d per mile under the budgeted figure. Likewise, "B" and "C" endorsements indicate a shortfall in budgeted revenue of 2d and Id per mile respectively. The "D" endorsement is what is looked for; this indicates a satisfactory earnings level in line with the profit target.
A codified system of this kind has much to commend it for once the staff get used to the system it conveys at once the relative profitability of various operations.
Refinements of the system could facilitate the payment of bonus to drivers. If, for example, the "C" designation denoted that the breakeven point had been reached —earnings equalling expenditure—one could conceive a points system thereafter benefiting the most effective drivers, with related benefits to other grades of staff.
The traffic staff at Grounds Transport maintain a list of drivers who are, apparently, not pulling their weight. The reasons for the inadequate performance are looked for. It may be no fault of the driver—he may have a sluggish vehicle or have been employed on shunt operations for an undue proportion of a week, or be involved with the work of a customer whose rates are tower than average.
Quicker turn–round
Mr. Dailey is the vice-chairman of the RHA's Agricultural Hauliers' Committee and as such is very active in the industry's counsels. He recently addressed a road transport conference arranged by the Home Grown Cereals Authority and his paper exhaustively analysed the possible avenues of cost saving on the road haulier's side. Naturally, he had much to say about the contribution that farmers could make to the quicker turn-round of hauliers' vehicles!
Among the points made by Mr. Dailey were the following: I. Because administrative overheads represented around 10 per cent of total costs, a reduction of 10 per cent would achieve no more than an overall reduction of 1 per cent