While some small operators believe 'small is beautiful', many see progress as having more wheels on the road carrying more payload. For these operators, the corporate transport operation could hold many key lessons regarding management approaches and systems. Following our recent special interest report on tyres,
FleetWatch's Paul Collings spoke to Jim Campbell, technical advisor, Unitrans Freight Division and chairman of the IRTA Technical Committee, to share his thoughts on outsourcing versus in-house tyre management.
Keeping operating costs as low as possible will help boost the bottom line earnings of any operator and tyres are a major source of concern for the bean counters in truck transport operations. A typical 6x4 running a tri-axle semi-trailer is fitted with 22 tyres. On average, those tyres are probably good for around 200 000 kms (about a year for a long hauler). At a typical fleet net price of R3 500 a pop for a new tyre, that's around R77 000 per annum per truck.
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Jim Campbell
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Transport management, as we all know, is a complex subject. Managing and running a profitable haulage operation involves a solid understanding of several business principles as well as the effective implementation of these principles. Many smaller operators conduct their business on pure instinct, relying on 'gut feel' when it comes to the various aspects of running the 'shop', be that charging (setting prices) for services rendered, buying vehicles and spare parts or, most obviously, managing their drivers and yard technicians.
There are seemingly two distinct management styles characterizing the transport industry in South Africa: the 'hands-on' approach of the smaller operator and the 'manage-by-command-chain' of the corporate behemoths. While the former management style may be as successful as the latter, it will invariably be idiosyncratic and less formalised than the corporate set-up. This really is the old 'battleship versus torpedo boat' analogy. Smaller operators can 'turn on a dime' while the big guns take an age to point their sterns in another direction.
While the smaller transporter can outmaneuver the bigger operator in certain instances, the corporate giants can get the big contracts and secure preferential rates from suppliers, be they fuel, tyres, maintenance services etc.
"We focus on our core business, transport. When it comes to truck maintenance, we outsource expertise where is practical and cost effective," says Campbell. Tyre management is one key area where large corporations strive to reduce running costs and personnel.
"Between 60 and 70 percent of our depots use a tyre management company, either Maxiprest or Trentyre because tyre management is not our core business. If we did our own tyre management, we'd have to find the people to do it and with the skills shortage we have in South Africa, this is difficult. As much as we encourage customers to give us their transport because they don't have the skills for it, we outsource certain functions that aren't our specialty."
According to Campbell, Unitrans has both a number of CPK (cents per kilometer) contracts, or
on-site management agreements with its tyre service providers.
"On the one hand, the CPK contract can give us a fixed cost on rubber while a maintenance agreement - including KPIs (Key performance Indicators) - gives us a fixed monthly cost for tyre management and maintenance. In any event the operator must still ensure that tyre costs are benchmarked against other industry players to ensure that he is enjoying the optimum price for his tyre assets.
"If an operator with ten trucks is paying say 35 cents per kilometre based on the 22 wheel truck/tractor tridem trailer combination mentioned above and doesn't compare notes with other transport companies, he's not going to know if that is, in fact, the best rate possible."
Difficult to benchmark
He admits, however, that it is a difficult thing to benchmark because you've got different rates of wear on different axles positions and also in different types of operation. "Unitrans did a tyre test a couple of years ago and the difference in tyre wear between steer and non-steer axles was around 100 000 km. This makes it difficult to set a true CPK," he says.
This illustrates the point that despite removing financial risk from certain aspects of the transport operation (in this case tyres) via outsourced management at a fixed cost, real cost efficiency does not always result. With tyres getting cheaper, CPK contracts may ultimately cost more than in-house tyre management. Corporate operations, however, have more bargaining power than small hauliers and can muscle their way to lower contract prices.
It's not hard to see why the big guns opt for outsourced services on tyre management. Sheer number of wheels makes it a mammoth task. Smaller operations, however, may find they can cut costs by managing their tyres themselves.
They can further lower their CPK by adopting a 'big gun' approach to the actual tyre monitoring process (ala tyre management specialists) in their yards; i.e. checking tyres on trucks regularly, making sure correct pressures are kept and perhaps fitting tyre pressure monitors and on-board tyre inflators to their vehicles to increase tyre life.
Campbell believes that the thing that causes tyres to fail is fatigue or mechanical damage. "A tyre is a pressure vessel that flexes causing tyre casing failure or cord separation a result of under inflation. By the same token, over-inflation causes impact fractures. It's a matter of striking a balance between what the tyre needs (pressure-wise) when it's laden and similarly, unladen. There really is no ideal solution for inflation. It's a matter of compromise."
And this throws out another analogy. Just as tyres need a 'managed middle road' so too do transport operators who need to tread diligently between the temptations of the quick buck (cutting corners on truck roadworthiness/overloading etc) and the bureaucratic quagmire that stifles any swift call to action.
