A future in forwarding?
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Two European transport operators have very different philosophies, based on Continental experience
AT A TIME when British hauliers are being advised to diversify into freight forwarding as a buttress against the often-poor profitability of haulage itself, it is interesting to hear opposed views on the subject from two Continental hauliers.
In many ways typical of the more influential haulage companies in Austria, where fleet numbers tend to be smaller than in Britain, Spedition Schachinger, of Linz, and Muller-Transporte, of Wiener Neudorf, bring a lot of personal conviction and varied experience to the subject — and arrive at very different conclusions.
The Schachinger company employs 320 people, operates 64 tractive units, 35 semi-trailers and 20 other trailers; has a sophisticated computerized administration system; derives most of its turnover 'from forwarding and associated activities; and, to achieve 38 tons gcw with the Austrian 10-ton axle limit, runs two-axle tractive units and tri-axle semitrailers. In 1973 the fleet covered 5m kilometres, carried 230,000 tons and had a haulage turnover of about £3.6m. But the total turnover was around £12.4m, the difference of £8.8m stemming from the forwarding, warehousing and customs clearance activities. Turnover per head, including all staff, was around £38,800 revenue per ton averaged £15.6; most of the tonnage and revenue related to long-distance international traffic.
By contrast, Muller-Transport runs 29 trucks, 21 drawbar trailers and their articulated outfits; meets the Austrian weight requirements by having threeaxle tractive units and tandem axle semitrailers; employs 38 people; has only recently begun to use the Mercedes-Benz computerized Fleet Information System; and is very firmly wedded to the idea that haulage should be a single-minded activity and not become mixed with freight forwarding or other ancillary activities. In 1973 the fleet travelled 1.5 kilometres and the gross turnover was £425,000. Turnover per head of all staff employed was £11,185 but no annual tonnage figure is available so this comparison cannot be made.
It is interesting, though, that Mr Anton Muller, the proprietor, talks of his fleet in ,'power capacity" terms— he says he has a fleet of 5,920bhp with 500 tons payload; a basis of assessment which could perhaps be developed more generally in a period of rising fuel costs.
Schachinger looks north and west, using over 100 truck-trailer outfits (it hires in 40 to 50 sub-contractors' vehicles most of the time) weekly in the EEC area, with main routes to and from West Germany, Benelux, Britain, Franc and Sweden; and it occupies a spaciou site on the outskirts of town. Muller, o the other hand, looks east, with service to Yugoslavia and the European countrie of the Eastern Bloc as well as to the EE' area. Its premises of only 5000sqm are i the centre of a small Austrian satellit town, surrounded by houses whos residents are unhappy about th company's haulage activities on the doorstep, and now forced to move to 15,000sqm site away from th residential area. (Zoning of land fc industrial, commercial and residentiE use is now well advanced in Austria.)
Young trunkers Spedition Schachinger runs regula cross-border freight services usin5. vehicles of very strictly specified age an( performance. For instance, there are TIF services to Munich once or twice a day Stuttgart once or twice a day, and to thi Ruhr and to Frankfurt 15 to 20 times week. Farther afield, there are runs tt Sweden five times a week and separate!! to France and to Benelux five to lOtimes week. The main dispatch depot in Linz over 20,000sqm, with 3,000sqm ware housing, 1,000sqm workshops an
1,500sqm offices, while a 2,500sgm warehouse is due to go up next year.
The company runs a separate collection and delivery service with 3/5 ton trucks in the Vienna area, operating from a yard within the city limits.
The cross-border tractive units are never allowed to operate for more than three years from new, when they are relegated to a further two years' domestic service. The use of relatively young vehicles and the very high investment in maintenance workshops, paint shops and washbays is regarded by Dr Max Schachinger as resulting in the besi possible advertisement for his services it' other countries.
One particular management objective, inspired only partly by the fuel situation, has been to increase the utilization 01 long-distance vehicles, especially by cutting dead mileage. This is now less than 10 per cent on cross-border traffic and although a large proportion of thE freight is smalls, consigned uncle' groupage, loaded vehicles average 2C tons payload.
In the past few years the company ha made special efforts to get more miles ou of its trailers, semi-trailers and tractito units. By using articulation more fully am flexibly, the average annual mileage wa: raised to 180,000km (about 108,00( miles). The normal truck-trailer outfit: average, by comparison, 140,000 tc 150,000km per year.
However, Dr Schachinger told me tha one of the early results of havim individual vehicle castings (includini trailers) made available on the Flee Information System by computer was tha pushing for very high mileages oi demanding work was seen to be unprofit able; the figures indicated that the extri cost of wear and tear, especially oi trailers, outweighed the extra revenue.
Costs by groups
The company had found it very usefu and revealing to have the fleet costs, a: distinct from individual vehicle costs presented in seven different groups.' The proportion of standing costs and runninf costs differed very markedly from one group to another.
They were now plotting the results ir terms of costs per ton for each vehicle ane for each vehicle group.
Ten of the 17 items which need to bi completed on the monthly input forms fo the FIS system are now provided by thi drivers themselves — whose salar bonus element depends on performanci results derived from these figures. Thesi imput figures are entered by the driver ii a log book which shows the distance driven, tons loaded, fuel and oil used ant so on. All the usual tonnage, distance ant utilization ratios are collected for eacl vehicle as a matter of course.
Dr Schachinger considers that tiutilization, high loading rates and la levels of dead mileage are to a sut stantial degree a reflection of the hig standard of drivers which the compar demands. A really large amount management attention is given recruiting and retaining good drivel 'any with 10 or more years service) and lair work is planned so as to absolve 'lying staff from other duties, especially ading.
One result of this — and also an dication of the labour intensity of an
iternational haulage/forwardg/clearance operation in central 'rope — is that, compared with the indred drivers employed, there are 150 fice workers in the dispatch and lministration departments as well as 50 arehouse personnel and loaders.
livisionalized
The operations are divided into departents with their own structures: traffic id truck scheduling; export; import Istom.s; inland warehousing; and voicing.
Each department head has working ider him either one or two clerks, and ese transport departments have to anage a weekly flow of 80 export artics id over 120 import truck loads of rgoes, many of them groupage.
Quite separate are the commercial partment and the accounts section lich, apart from straightforward freight voicing, has to handle the multiple itries and calculations for import and port freight and customs dues and ties in the accounts of about 3,000 stomers and over 20 haulage mpanies with whom Schachinger has Norking relationship.
The company uses an on-line computer ;ility (IBM) and the major part of voicing, customs bookkeeping, debt. Ilection, payroll and general accounting on EDP.
It is perhaps significant that, although ich the biggest part of the company's -nover comes from freight forwarding d associated activities, and some pansion of warehousing is planned, the 3ater part of its present development )gramme is in International haulage. ecifically, Schachinger aims to put its les force to work on increasing the siness on its existing main intertional trunk routes so that a higher
frequency can be operated through present facilities, while management is intensifying technical co-operation with partner carriers on these main lines, particularly in developing common use of semi-trailers and possibly demountable bodies. The company also believes that there is scope for even more intensive use of articulation — in the fullest sense of that word.
New business opportunities are seen in several parts of the Continent — for example, Dr Schachinger told us that there were still no regular express smalls services between Switzerland and France.
Other areas of company development may be a greater involvement in road/rail transport, and an investigation of the economics of stationing Schachinger tractive units at strategic points abroad.
Business opportunities
Schachinger's intention to expand its co-operative working with other Continental hauliers, and the revelation that there are still unexploited gaps in the international networks, may be encouraging to British operators who, with some reason, might have assumed that years of check-by-jowl development across land frontiers would have taken up all the available "slack" in the international transport network.
That this is obviously not so was confirmed by Mr Anton Muller when we visited him at Wiener Neudorf; he plans to extend his co-operative agreements with Federal German and other West European operators as the next profitable step in expanding his relatively small haulage business — though it is quite big for his area of Austria. As explained in an earlier article, Mr Muller is very warY of increasing the size of his fleet, not only because of the present poor economic situation but also because the FIS results have shown him how misleading turnover can be as an indication of business health.
As he put it to us: "I discovered that services which I had previously considered favourably, hardly covered their costs, and that these profit-eroding costs were being compensated by services which I had previously considered less favourably." The increase in oil prces has hit his operations particularly hard and he is now using tbe computer analysis to build up the profitability of individual vehicles.
Muller Transport carries mainly industrial goods and containers and has no real competition from other comparable firms in the southern Vienna area, since the local hauliers are organized into co-operative agreements of varying degrees of formality.
Mr Muller admits that there is an understandable temptation to enter freight forwarding, which can be usefully profitable, but believes it is bad policy, leading to dilution of management effectiveness, to try to run this integrally with a haulage operation. As a separate, though co-ordinated, enterprise however he sees its possibilities for very real success.
His thinking is on the lines that it is better to go into partnership with an existing forwarding business so that the two parts have their own expertise. Perhaps there is a pointer here to the way in which British hauliers of moderate size might approach the business of profitable diversification which has recently been urged upon them. For bigger operators, though, the integrated Schachinger approach might prove more profitable.