Park Logisitics - Creating Supply Chain Solutions

Park Logistics - Creating supply Chain Solutions

Creating Supply Chain Solutions
Warehousing - Distribution - Fulfilment - Co-Pack

Phone: 0115 940 3332

Email : sales@parklog.co.uk


Trucking Britain round table: Recession

  • 28 January 2010
  • By Justin Stanton

When we created the Trucking Britain Out Of Recession (TBOOR) initiative, we wanted it to be backed by some of the industry’s biggest suppliers and stakeholders. Once they were on board, we got a representative from each organisation around a table to talk about the state of the industry, the relationship between operators and suppliers, what operators can do to help themselves and what the government should do to help the industry.

The eight representatives are:

  • Nigel Butler, commercial director, Renault Trucks
  • Martin Covington, head of truck marketing, Michelin Tyre
  • Geoff Dunning, chief executive, Road Haulage Association(RHA)
  • Des Evans, chief executive, MAN Truck Bus UK
  • Martin Hay, truck sales director, Scania
  • Ian Mitchell, commercial truck director, Volvo
  • Tony Pain, marketing director, DAF
  • Sam Whittaker, director, truck sales and marketing, Mercedes-Benz

With more than 200 years of transport experience between them, these eight have seen just about everything the world can throw at the transport industry. We tapped them for their knowledge and passion.

Here and now

We looked at the first set of TBOOR data, and all parties were heartened by the high levels of confidence in the short and medium term expressed by the respondents.

Covington notes: “Operators have become more optimistic in the past month. If the survey had been done in July/August, the results would have been different.”

“British stoicism shows through,” says Butler. “[But] the mood is so fragile at the moment.”

Evans worries that there may still be worse to come: “I’m in my 37th year in this game, and [the current climate] is unprecedented. I think we’re at the start of the downturn. It’s like a tsunami, you get a first wave and then a second that is sometimes stronger than the first.”

The economy’s impact on transport operators has had well-documented effects on equipment suppliers, with truck registrations down nearly 40%.

Whittaker adds: “A lot of smaller operators went into [truck purchasing] paralysis – and you can’t blame them: they were in survival mode.”

The stall in truck sales had a knock-on effect for Michelin, as Covington explains: “Usually when the original equipment tyre market is down, the replacement tyre market is up. [However] the UK replacement truck tyre market is 19.7% down.”

With so many vehicles parked up, operators have been switching fresher rubber from those vehicles to their operational fleet rather than buying new.

However, Dunning notes: “We do talk ourselves into a depression. Someone said to me: ‘People talk about the market being down 6% or 7%; doesn’t that mean 93% or 94% of the market is left?’”

Looking to the future, Covington adds: “There’s no doubt that the survivors have survived because they have become more efficient. They won’t simply go back to old habits.”

Partnership

All agree that the nature of the relationship between supplier and operator is constantly evolving.

Pain sets the context, explaining that there’s an acknowledgment among operators that they should look to the medium term returns on operating costs rather than focusing on getting up-front discounts on capital expenditure, “but the mood is one of ‘I’d love to be efficient, but I’ve got to survive first’”.

Evans chips in with an example of this: MAN helped a tipper operator running six-year-old trucks to see the light and buy three-year-old trucks as they’re 20% more fuel efficient. “We convinced him that he couldn’t afford not to buy the trucks. If he’d gone on like he was, he’d have gone out of business within six months.”

Warming to his theme, he declares: “We [suppliers and operators] have got to switch from competition to co-operation; and from co-operation to collaboration in true partnership. The hardware will always be important, but not as important as our relationship over the five-year term of ownership.”

Whittaker agrees: “The age of simply selling a truck has gone. The age of providing a consultative service has been with us for a number of years, certainly with larger fleets, but that needs to be distilled down to every operator in the country. And it’s up to us to ensure that.”

Hay adds: “It might be better at the moment to contract hire for three years [and then return to ownership once the recession is over].”

He expects an improvement in truck registrations next year, but not until after the election. He and Pain observe that a great number of major fleet operators will have to refleet next year as many of their vehicles will be getting too old. Mitchell agrees, but emphasises “the biggest change in mindset will be how frequently people will change vehicles. You’ll have the same vehicle parc, but the churn is [over a] longer period.”

Rates

Future partnerships are one thing, but RHA members are still in survival mode, says Dunning. “The issue of what happens next year and beyond is not in their minds. The big issue is over-capacity and the consequential impact on rates; members that are getting enquiries for extra work are struggling to get sensible rates from the market.”

This is a concern that everyone round the table is fully aware of. Butler adds: “What’s keeping rates depressed is over-supply. You’ve got restrictions on credit, you’ve got restrictions on profitability; that will drive some of the smaller operators out of the business; the bigger, cleaner, greener fleets will take over some of the smaller ones – and then we’ll see the rates start to creep up.”

Evans notes: “We [UK plc] pay too little for our transport.”

“As consumers, we don’t pay enough for transport. It’s too cheap. That has to end or at least diminish,” adds Pain.

Counting the cost

Many around the table were concerned about hauliers’ ability to manage their finances effectively, but also note the recession is forcing changes.

Whittaker reveals: “We’re seeing more and more family firms getting in strong finance directors.”

Dunning adds: “The strong FD maintains the relationship with the bank. Keeping your bank onside in the next 12 months is going to be critical.”

An awful lot of businesses rely on working capital, mostly via overdrafts, he says. Given that banks are clamping down on those, now is the time to consider restructuring.

“A lot of businesses have substantial property assets; they’re seen as assets, not security for funding. If you borrow cash in long-term funds, you get lower interest rates, you get more control and you reduce your overdraft. I don’t think many consider that,” Dunning states.

Missed opportunities for cost control and cost cutting abound in transport, says Evans. “There’s loads of waste. You’ve got to get better utilisation of the fleet through better fleet management information. How many operators are really managing their fuel consumption? The average driver performance on our rental fleet is an E on our A-to-G measurement. From B to E, there’s a 20% to 25% differential in fuel use. What sort of waste is going on out there?”

Whittaker notes: “Once fuel got to £1.15/£1.20 [per litre] plus VAT [last year], we were absolutely inundated with inquiries on Fleetboard and driver training; then it all got quiet. Then the recession started to bite, and then the level of interest came up again.”

Pain adds: “What will become easier in the not too-distant future is active driver management. So, not a report that says last week your fuel consumption was poor, but [a system that gives feedback] as the driver is driving.”

Another missed opportunity is simple aerodynamics. “How many tractors do you see on the motorway with a huge difference between the air deflector and the height of the trailer?” asks Whittaker.

Dunning agrees, and then asks: “How many savings are out there for the taking if operators took a step back. The question is: ‘why don’t people do it if it’s that obvious?’ It’s common sense, but it isn’t common practice.”

In conclusion, Butler asks: “What can you do today to make yourself more efficient?”

The currency question

The exchange rate between the pound and the euro is a cause of great concern for the truck-makers. Sam Whittaker of Mercedes-Benz says it “is the biggest issue for every manufacturer”.

And it is and will be an issue for any operator refleeting; MAN’s Des Evans warns: “This market is going to [have to] stomach a 35% to 40% increase in the cost of new equipment.”

DAF’s Tony Pain highlights the inevitable impact: “Trucks will become more expensive, [which] will stall the market. But that means used prices will come back.”

Scania’s Martin Hay is concerned there is still worse to come: “I believe there’s more price increases for new vehicles to come because we still haven’t seen the full effect of the devaluation of the pound.”

And that’s not the only worry: Volvo’s Ian Mitchell highlights the threat of longer lead times. “Lead times could depend on which country comes out of recession first. If the Eastern European truck market recovers first, then a subsequent recovery in UK demand [for trucks] could face longer lead times as a result.”

Yes, minister

Geoff Dunning of the RHA describes next year’s election as “the buggeration factor”; it both destabilises industry and provides an opportunity for improvement.

“There’s always a period of instability in the run-up to an election; and then always the return of confidence no matter who’s elected,” reflects Scania’s Martin Hay. “It’ll be interesting to see if the confidence comes back at the end of Q2 – assuming the government will run to its full term.

“The government needs to get a really clear understanding of the transport industry,” he adds.

MAN’s Des Evans says: “There has to be a more effective, joined-up transport policy in this country. The transport community – operators, drivers, suppliers – needs a little more incentive to continue playing in this industry. There’s got to be some more diversion of the taxes raised from our industry back into the industry, for the benefit of the industry and for the benefit of wider community. Re-introduce 100% capital allowances for new or newer equipment. And there is still room for an essential user rebate.”

Hay agrees: “If the government is serious about reducing CO2 emissions, it’s got to make it easier for businesses to invest in greener technology. Some sort of grant would certainly help.”

Dunning thinks the most significant issue for a new government will be interest rates, “because as soon as rates go up, all that money that’s been sloshing around disappears” – and we’re pitched back into recession.

‘);
}
//]]


Article source: http://www.commercialmotor.com:80/latest-news/Trucking-Britain-round-table-Recession