Reducing supply chain costs is the holy grail of the transport and distribution industry and has been for many years. However, the current fragility of the economy is making this an increasingly important area of concern, particularly in the FMCG industry. Below is an précis of a paper written by Fast ‘n Fresh MD Gavin Wilson and marketing director Andrew Crafford who believe that a different mindset is required to prevail in both the transport and FMCG industry.
When Woolworths established one of the most demanding service level agreements in the retail industry, it required a change in mindset by Fast ‘n Fresh to meet and exceed their requirements and expectations. The result has been a true working partnership achieving, what Wilson and Crafford say is the most competitive supply chain costs in this industry.
Despite the current market downturn, consumer expenditure has increased exponentially over the past ten years. Volumes of FMCG product deliveries have gone up but little has gone into improving warehousing, distribution centres (DCs) and specifically cold storage to handle the increase in the volume of trucks loading and delivering goods.
The impact of this is more trucks on the road collecting and delivering to the same number of receiving bays with the same handling capabilities resulting in bottlenecks and increased truck standing-times.
The typical industry response is to take on more trucks and hire more drivers to fit in with warehouses and DCs that are still working the same hours, (07h00 to 17h00 Monday to Thursday and 07h00 to 15h00 Fridays.)
Increased volumes with more picking and packing have put warehouses and DCs under severe pressure which, in turn, impacts on the number of available loading and offloading hours.
Wilson and Crafford say the problem has been shifted to the transporters with trucks effectively becoming mobile warehouses.
As transport operators try to maintain good service levels, they are forced to drive longer hours to make up for the delays caused at loading and offloading points.
Congestion at loading bays is a serious issue with the standard in the industry for off-loading being not less than 4,5 hours - excluding waiting time in queues. Adding to the conundrum is the fact transporters are not compensated for standing time.
The time utilisation of trucks is thus becoming unacceptable which, in turn, puts pressure on the kind of rates that can be sustained. The result is diminishing standards of customer service which major retailers say is not their problem.
Wilson and Crafford say the biggest hurdle is the existing mindset that prevails in the industry where deliveries take place only during working hours and only on week days. This is, however, a South African mindset in a world where, for example, Tesco’s in the United Kingdom have enabled their customers to shop 24/7. This requires them to keep their stores fully stocked in a very crowded country, where the only really quiet time on the road is late at night.
Wilson and Crafford believe this should be the mindset in South Africa as well. “By thinking 24/7 you can use the same number of loading bays and the same overall infrastructure but you can more than double the capacity,” they say.
They reiterate that this requires a strong working partnership between the retailer and the transporter. Both sides need operations staff that can complement each other to run a 24/7 operation.
There are challenges, aspects like security, safety, driver availability, transport of staff, meals, adequate lighting for night time pick ups and drop offs and of course, having management available on a 24/7 basis. Ideally, both the retailer and the transporter need to recognise that it is a joint situation and both parties need to fix glitches that may crop up.
Get it right with a 24/7 mindset and trucks will be on the road at quieter times, not just improving safety or reducing congestion, but increasing the level of asset utilisation.
By taking the pressure off the existing loading bays, not only is standing time being reduced but transport becomes predictable which will directly correlate to the ability to quote sustainable transport tariffs.
With less pressure to load and off load, transport operators will now get more trips per truck and deliver better customer service. This is not happening at the moment. South Africa does not have a 24/7 mentality in the FMCG and many other industries.
How do you execute the transition from weekday operations to a 24/7 operation? Wilson and Crafford say the catalyst for Fast ‘n Fresh to execute this was Woolworths.
In their original service level agreement, Woolworths called for 96% on time deliveries. Woolworths recognised that they needed to start with a 24/7 mindset and Fast ‘n Fresh simply restructured its operations to fit in with their client’s expectations.
When establishing the number of trucks required to do the job, Fast ‘n Fresh found it needed less half the amount of vehicles for the 24/7 operation compared to the 12/5.
A big challenge was increasing the number of drivers. They now needed to work shifts but with a 24/7 operation, the focus had to be on maintaining and improving safety standards with the kind of times that the company’s drivers would be on the road.
The biggest challenge wasn’t finding drivers but getting them to show up for work because they were now being asked to come in at unusual times. It wasn’t that they didn’t want to come to work. For most it was the difficulty of getting to work at these times. The solution was to cost in a taxi service to pick up and drop off drivers at their homes.
Fast ‘n Fresh got positive response from their support staff and soon realised that some people preferred to work night shifts all the time. The key was to make sure that whatever scheme was put in place had to be flexible.
Fast ‘n Fresh found it is crucial to measure the utilisation of each asset to identify where the bottlenecks were still happening, particularly focusing on loading and off loading times.
The company has a fifteen-minute window to deliver at any specific DC or store. If they miss this slot, they are not allowed to deliver. This invokes a very strict discipline but with 24/7 operations, it makes for easier planning and creates a different mindset in the entire chain.
The dispatch staff and drivers no longer have a “sit and wait” mindset. Instead, they know that despite driving from Cape Town to Johannesburg, the trucks have to arrive within a fifteen-minute window - and there will be no waiting. And it’s worked. Fast ‘n Fresh has moved its 96% on-time service delivery agreement with Woolworths to 99% on a voluntary basis. It’s been achievable because both parties have agreed to and adhered to the rules of the game.
Wilson and Crafford say it’s about asset utilisation. This is where the big costs are – it’s all about the standing time. In the current daytime operations model, there are just 45 to 50 hours available to recover the costs of your assets. On a continuous operations model there are 168 hours.
The biggest challenge is getting the client to play ball. Fast ‘n Fresh were fortunate in that Woolworths made the decision and they restructured to fit in with it.
But to bring clients into the fold who are geared for daytime operations may not be as easy. It’s usually an executive decision on the client’s side and the executive may not be close enough to operations to fully appreciate the value.
With the rate volumes increasing and the lack of investment in infrastructure, coupled with potential legislation to ban trucks from driving during peak hours, Wilson and Crafford say sooner or later everyone is going to have to move to this model if they are going to survive.
An up-side of having trucks on the road through the night is less congestion on the road, less chance of accidents and improved vehicle utilisation.
Wilson and Crafford conclude saying: “Weighing up the costs of staying open 24/7 by adding extra staff, electricity, security but no extra forklifts, no extra bays, no extra space in the DC or cold store with a reduction in a transport charge of up to 50% has got to be music to supply chain managers.”
2009 FleetWatch magazine and FleetWatch On-Line.
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