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SAVINGS ON PAPER MONEY
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By using contract hire from the start, Southern Counties Paper has been able to predict its transport costs in detail.
• For Southern Counties Paper, contract hire is an essential time saver.
It was not a spur-of-the-moment decision which led the Camberley-based company to contract hire when choosing how to finance its distribution fleet. Director Martin Foddergill had previously worked for a competitor which followed a policy of buying all its own vehicles. "When a vehicle went wrong, everybody got dragged into the problem, even those who had nothing to do with the vehicle side of the business. It proved to be a real headache sometimes," he says.
So when Southern Counties Paper was set up by transport group Bunzl more than three years ago, it seemed obvious to Foddergill that an alternative to fleet financing was needed. Contract hire provided the answer: "We could leave the vehicle side of our business to those whose business was vehicles. After all,
we are in paper merchanting, not vehicle maintenance," he says.
Since the company's foundation, Southern Counties Paper has grown dramatically. It started off with just three vehicles and now has 10 — eight of which are all on contract hire with Vehicle Contract Hire and Leasing of New Haw in Surrey.
The fleet comprises three MercedesBenz 814s, four 1114s and one 1314. The two smaller vehicles owned by SCP are Mercedes-Benz 305s. Foddergill says the company bought the small trucks instead of hiring them as it believed these would not need the same back-up as larger vehicles.
When SCP first struck a deal with VCHL, it was allowed to pick what sort of vehicles it would like to take under contract hire. SCP specified Mercedes-Benz "because of its reliability record," says Foddergill. Because of the heavy weight placed geographically to out depots, although obviously they must be relatively competitive. There are slight differences in price but it is not all about cost." Trimoco at Luton is slightly cheaper, but this is reflected in the service, he admits.
Quaife — formed as Alfred Quaife Wholesale Paper Contractors 52 years ago and now owned by Silverdale Group — is growing fast. With a turnover of 242 million (projected to reach 248 million by next year) it has taken over three paper merchants in as many years. It has 40 drivers and has appointed a distribution manager, Michael Weatherly, who will advise warehouse managers. Its newest truck — a Leyland Daf 16.17 Freighter from Transfleet — is dedicated to the National Westminster Bank. A City of London branch will open soon.
Both BRS and Transfleet offered Quaife computer systems with the contract hire package, but Coath says they would be pointless. "Our customers dictate so much to us. In the early 1980s the Government did away with tax incentives of stocking, so our customers rely on us as a warehouse. We must be flexible enough to make two or three deliveries a day."
Each delivery is made from the depot of paper SCP wanted lightweight vehicles and VCHL arranged for tail lifts to be fitted to most of the trucks to aid loading. All the vehicles are also reinforced with plyboard inside, courtesy of VCHL.
Under the contract hire agreement, VCHL looks after the regular servicing and maintenance of the vehicles. Every seven weeks, or 10,000km, every vehicle is serviced at a local Mercedes Benz dealer in Wokingham. All SCP has to do is drop the vehicle off and pick it up when it is ready for collection. By special arrangement, VCHL also looks after the two 305s owned by SCP. For minor problems, the contract hire company sends out its mobile van workshop.
Foddergill says that by choosing contract hire, much of the headache of starting a new business has been avoided.
"It is important when starting a new business to know the costs of running your vehicles," he says. "Contract hire lets you plan your expenses in detail. If you have a vehicle off the road you will have a replacement within hours, so you are not burdened with the warranty costs of a vehicle breaking down."
• Flexibility
SCP chose to do business with VCHL after a recommendation from another firm. VCHL may be a small contract hire company when compared to the market's giants, but it offers flexibility, says Foddergill. The paper mechanting company has also developed a personal relationship with VCHL. "It has also given us the where it can reach the customer in a day. "If they demand something they must get it there and then. We don't have the opportunity of scheduling," he explains.
Coath plans to maximise the use of his fleet before expanding. At the moment there is some overlap, but Coath insists that any rationalisation will not involve cutting depots, staff or trucks.
support we require at the right price and if you are in trouble, they will help you straight away," he says.
The back-up provided by VCHL is essential to Foddergill's business. It is in a fast-moving market. All deliveries to printers and stationers are made in a 50Iun radius and there are two delivery rounds a day. Heavy bulk deliveries are handled by the paper mills, so SC? concentrates on small deliveries of two to three pallets.
It is vital that the fleet is 100% reliable. "With VCHL we know a vehicle will be Quaife's competitors — and there are 200 paper merchants with a turnover of over 2150 million — are moving to contract hire, he says. It did drag its feet in choosing to turn completely to contract hire. "We were convincing ourselves of the advantages. We were expanding and spending our resources on buying companies rather than on vehicles."
replaced in the same day if something should go wrong," says Foddergill, who readily admits that there is little financial benefit to be gained through contract hire but is convinced that its convenience is of the essence.
"People ring up demanding paper there and then — it is a fast market with a lot of competitors," he says. "If you don't have the back-up to ensure your vehicles can keep up with the fast pace of deliveries, then you are on your way out of business."