Stretching a point

As order books fill up, the profiles of these orders have, in many cases, changed dramatically. Stockholding has decreased across many sectors, meaning suppliers have to cope with more frequent orders for smaller quantities. Squeezed lead times are one thing, but squeezing more from a transport and distribution operation is quite another. One way is to use a logistics services provider to top up in-house capacity. For some, however, mixing internal and external services can be a difficult combination, according to Rob Riddleston, head of transport and logistics for Barclays. "There are two issues: the efficiency and, inevitably from where I sit, the financial implications," he explains. In a mixed operation, he says, it can be harder to allocate costs than if the transport is outsourced entirely, especially as happened recently when there have been several bank holidays – dead time for an in-house fleet. "If transport is outsourced, then you only use it when you need it instead of having lorries, personnel and all the associated costs attached to your P&L." Riddleston agrees that, for some, using a 3PL to pick up the slack may be a good option, but points out: "If the process just acts as a shock absorber to the in-house capability, can you really provide the 3PL?with enough volume to make it worthwhile?" Other issues to consider, he urges, include the regulations that come with operating or employing vehicles, people and distribution centres – bread and butter to a 3PL. And he points out that backhauling is the ultimate way to improve supply chain efficiency – "fill your vehicles with product for the return journey, rather than transporting fresh air" – though for most manufacturers, it remains the holy grail. Worse still, empty runs cost more as fuel prices continue to rise. "We cannot and will not expect our customers to pay for hauling fresh air," says Steve Rogers, director of Cheshire-based HST Feeds. The business has a duty, he says, to ensure costs are controlled and haulage is a big part of this. The company makes 1,500 deliveries each month to sites within 100 miles of its Crewe base. It has a six-strong mixed fleet of eight-wheel and articulated compartmented trucks. Until recently, deliveries were planned manually – a process that could take two hours or more each day. But HST Feeds is now using a vehicle optimisation/scheduling product from Paragon Software which, says Rogers, is producing fast, reliable information in seconds. The company enters information for vehicle sizes and compartments and the system automatically optimises load sizes and routes. (See box, below, for more on the benefits of this technology.) Vehicle reliability is vital to gain more flexibility from a fleet. Petersfield-based security fence manufacturer J B Corrie has used transport specialist Ryder for many years. "In the mid 1990s, we switched the supply of trucks to Ryder as its national breakdown and service coverage is exceptional," says Peter Gladstone, operations director. Drivers have details of all Ryder depots so they can handle breakdowns directly, eliminating the traditional transport manager role, according to Gladstone. Ryder also upgrades vehicles to suit changing demand. "Ryder studied our operations to specify trucks with increased efficiency and driver comfort. For example, our previous 7.5 tonne truck had to be unloaded by hand, so its replacement has a hydraulic crane which has dramatically increased efficiency," says Gladstone. A new 26-tonne truck has a 3-tonne capacity crane, along with a comfortable sleeper cab complete with mod-cons for long distance runs. "Ryder has helped us to streamline the efficiency of our transport operation by providing a high-tech, high quality and extremely reliable solution," he adds. Ryder's contract hire director Bruce Howard recommends checking the small print – if leased or hired trucks need to be returned early, this may not be as simple as it seems, he cautions. "Many truck finance deals have an undisclosed agent. This means that although the vehicle operator has signed a lease deal with, say, a dealer, the risk is carried by another undisclosed party, the details of which may not have been apparent on any paperwork." In practice, this means an attempt to return vehicles could result in referral to the previously undisclosed finance house, which may be less inclined to agree to early termination. Unusually in this market, Ryder finances all truck acquisitions, which allows it to more easily alter lease term lengths when clients require. So, rather than acquire additional trucks, let's look again at the possibility of using logistics service providers to take the strain. One such operator is Norbert Dentressangle Transport Services (NDTS), which is fielding many enquiries for partial outsourcing of transport operations, according to commercial director Duncan Eyre. This can be large fleets right down to one or two vehicles, he says: "We've recently been into firms which have, say, two or three trucks that are coming to end of their life. The business recognises that trying to cover the whole country from its regional base is no longer possible and the lead times will become unacceptable. With our network solution, we can reach the whole country next day – except highlands and islands – for anything from a quarter pallet up to full trailer loads." He also cites the example where a business may have a larger fleet, most of which is used productively, but two or three trucks are poorly utilised because of distances travelled, so driver hours take priority over vehicle fill rates – "timing out rather than cubing out", is Eyre's neat description. His answer is a partial network solution: "It's the ultimate in flexibility, because it's pay as you go." Panel radiator manufacturer Rettig UK is benefiting from this flexibility and now has, says Eyre, a "hybrid solution" which saw its fleet halved but delivery schedules improved. Rettig's warehouse is in Birtley, close to its Gateshead factory. From here, it delivers product across the UK and, until recently, did so via a local haulier with a dedicated fleet of 30 trucks. From its north east base, however, this meant long journeys to reach some customers and return to site. "We went in with a hybrid solution of 15 site vehicles to service Scotland, the North West and North East," explains Eyre, "then at night those vehicles become a trunking fleet and take product into our network. Lead times are reduced, all customers have deliveries within three days – even those far afield – and Rettig's capital commitment is zero." It's impressive stuff. And not only that, Rettig's orders go straight into NDTS's system and it produces the delivery paperwork. Delivery profiles, too, have been smoothed: commitments to customers were based on frequency, not days, so NDTS suggested fixed delivery days which, in turn, helped Rettig's warehouse with fewer peaks and troughs. Rettig saw the benefit of getting to customers a day or two ahead of the competition with more frequent orders, but knew it had to balance order value and transport cost. NDTS helped Rettig to strike the right balance, so the cost of smaller, more frequent deliveries did not outweigh product margin. location, location, location Telematics – vehicle tracking technology – is one way to gain visibility of transport fleets. Andrew Yeoman, MD of GPS technology firm Trimble MRM, says business unpredictability makes fleet capacity difficult to plan, but says telematics can have "profound benefits" for flexibility, giving real-time data, not just on vehicle location but also on driver performance and fuel efficiency. "This level of insight can help fleet managers plan the best way to utilise their fleet of vehicles, keeping orders flowing smoothly and ultimately keeping customers happy," he says. It's certainly helped United Biscuits. The Jaffa Cake and Hula Hoop manufacturer is using Masternaut's web-based satellite tracking for its truck and trailer fleet. United Biscuits reckons to have saved £200,000 a year – from, among others, reduced fuel consumption, fewer trailers and better planning – and has cut out three million unnecessary road miles. National logistics controller Rob Wright says: "We know exactly where our vehicles are – and where they should be. We have improved efficiency, decreased working capital and dramatically increased green benefits."