While volumes may be off the highs we enjoyed during the fastgrowing 2005
to 2007 period, demand for perishables and fresh produce remains robust,
particularly so when it comes to local and imported chicken as well as
deciduous fruit and citrus exports. However, the time has now come for
shippers, consignors, consignees, producers and manufacturers to step up
to the plate and accept their share of the responsibilities to keep
transport costs to a minimum writes
While volumes may be off the highs we enjoyed during the fastgrowing 2005 to 2007 period, demand for perishables and fresh produce remains robust, particularly so when it comes to local and imported chicken as well as deciduous fruit and citrus exports. However, the time has now come for shippers, consignors, consignees, producers and manufacturers to step up to the plate and accept their share of the responsibilities to keep transport costs to a minimum writesMax Braun.
Transportation of refrigerated products and produce is intensively competitive and ever more challenging as shippers and consignors dig their heels in when confronted with the harsh realities of the ongoing increases in transport costs.
Somehow the focus on road transport costs by the majority of shippers, manufacturers and producers seems to remain fixed on the rise and fall of the fuel price. Yes, the rapid decline in the crude oil and fuel prices that commenced in the last months of 2008 and carried on well into 2009 was indeed most welcome - and indeed, was the salvation for any number of transporters. However, interest rates began a slow rate of decline only from February this year while drivers’ wages went up on average around 11% and tyres and fridge units by approximately 20%.These are just some elements that continue to rise in spite of the bleak economic outlook that dominates the entire business framework at the time of writing.
Some shippers have difficulty in accepting that lower volumes cannot be transported for the same rates that were agreed when contracting for optimum rates based on agreed volumes determined on tons, pallets, cases, litres or whatever measurement was applied.
It did not come as a surprise when a major, successful and reputable transporter said in the process of getting to grips with current market conditions: “One of the biggest problems we face is the lack of knowledge and understanding of transport costs because so many do not have proper control over their transport costs.”
He went on to say that experience suggests 70% of transporters and 90% of in-house fleet owners (shippers, consignors and consignees) do not know their transport costs. From my own experience, I have no problem in agreeing with these sentiments and see it as a major obstacle in achieving fair compensation for transporters and sustainable levels of world class customer service.
Some of the daily challenges transporters and fleet managers need to cope with are ubiquitous and easy to observe:
The common problems include insufficient loading bays, inadequate dock levellers or none at all, a lack of loading/unloading equipment in the form of hysters, trolley jacks and related equipment, insufficient staff, often not trained or competent to handle incoming logistics and documentation. The average duration of delays based on meaningful research is close to four hours. This equates to at least 40% of a normal working day and has forced numerous transporters and fleet owners to acquire more vehicles than they need in order to meet their respective delivery times. As succinctly noted by Gavin Wilson, managing director of Fast ‘n Fresh, in an article published in FleetWatch in May 2009, not enough has been done to improve warehousing, distribution centres - and cold storage in particular - to handle the increase in the volume of trucks now in daily use loading and delivering goods.
Unlike other countries, the US in particular, local transporters are not paid demurrage when their vehicles are kept standing for unacceptably long periods. Recouping standing costs even under normal operating conditions is not always easy to achieve. So what then are successful transporters and fleet managers doing to cope with these challenges?
Willingness to improve
Discussion with one of the large supermarket groups confirms there is a growing willingness to improve the problems mentioned above. There is recognition that many of the stores are not designed or upgraded to cope with the larger volumes and that store design is lagging.
It is apparent that management still do not show much interest in these matters which gives a measure of support to the general belief that supermarket management is more about good intentions rather than taking meaningful steps to collaborate with the other roleplayers. It was nonetheless encouraging to hear that night deliveries are progressively being accepted as an essential factor in overcoming many of the current problem areas.
Step up to the plate
To summarise the state of play, shippers, consignors, consignees, producers and manufacturers must now step up to the plate and accept their share of the responsibilities to keep transport costs to a minimum.
The steps that need to be taken include gaining a proper understanding of transport costs and the significant positive impact which ongoing improvements to transport productivity and efficiency can achieve. If transport rates are to be reduced trucks must work longer and harder. This can be achieved by once again addressing the basics:
Transporters and fleet managers need to take a leaf out of the books of the successful operators and be more innovative, creative and determined to achieve more transport with fewer vehicles. We preach this at the FleetWatch Training & Development Academy. Control costs, eliminate all sources of waste down to the last cent but do not forget to seek ways and means to improve transport efficiency. Seek out the truly professional fleet managers and watch what they do.
Big business for SA
Transporting export perishables is big business for South Africa. Currently 25 million tons of perishables are exported to more than 70 countries. Transnet Freight Rail (TFR) has two fruit trains that transport about 10% of our deciduous fruit and citrus exports to the coast. The plan is to increase this to 35% by 2014. Given the large cash injection from government to upgrade TFR, there is no reason at this time to think they cannot achieve their objective. However, that is not the point. Road transport will be needed to transport 65% or more of a growing business. Based on the increasing demand for South African fruit and citrus, the country is assured of a strong ongoing export business.
There is, however, a complicated aspect to this. The overseas markets are increasingly demanding our exports be transported in hi-cube containers. In fact, the move to containers has been growing rapidly and by next year, 2010, it is anticipated that 68% of the combined deciduous fruit and citrus exports will be in containers.
The hi-cube container has, from its inception in 1998, been in regular use with SA Marine and Maersk. All of these containers conform to ISO specification 8’x8’x9’6”. The height in metric terms is 2,9 metres. Given the average fifth-wheel height of various truck-tractors widely used in South Africa of between 1 420 mm and 1 590 mm, there is usually a problem in meeting the maximum height regulation of 4,3 metres, this especially when the trailer floor height is likely to be at least 1500 mm from the ground.
Transporters will need to find a solution to this dilemma especially once AARTO is implemented. One possible factor is to use a smaller wheel and tyre rather than the popular 315.80. Some transporters are using the 285 70R19.5 with great success. When fitted to a correctly built trailer, a height of 2.960 metres is possible within the 4,3 metres maximum height. Casing life is said to be comparable with the 315.80 tyre.
Shippers confirm that the majority of export perishables will continue to be transported by on-road six-axle Reefers. The cost of dead-heading the empty container to the production area, whether by road or rail, remains a problem to be resolved.
In conclusion, the shortage of drivers and their poor attitudes needs to be addressed as soon as possible. The question of fair compensation also needs to be jointly addressed between shippers, producers and transporters. Negotiations need to be more open with all the cards face-up on the table. This is the best way for all parties to understand the dynamics of truck operating costs.
The big Reefer operating cost benchmark for a 28-pallet insulated loadbox mounted on a six-axle rig covering just 160 000 kilometres a year is now R1,9 million a year after taking into account the latest reductions in the fuel price and interest rate. The benchmark does not include toll fees or overhead and administration costs. This equates to virtually R12 a kilometre when the vehicle carries a full load both ways.
Any reduction in the number of kilometres to be travelled or reduction in the load will escalate the operating costs, leaving the operator with no chance of recovering all of their costs. Refrigerated transport is expensive and needs ongoing investment in the best and most reliable equipment and technology. For reasons well known to all of us, consumers, no matter where they are, demand the highest quality in fresh foods and maximum assurance that the food they buy is covered by state of the art food safety practices.
Acknowledgements: It is a sad fact that many transporters and fleet managers are reluctant to reveal the successes they achieve in reducing operating costs or improving transport productivity and efficiencies so as to ward off pressure from various principals and would-be clients to reduce their rates. The lack of knowledge when it comes to transport rates inhibits realistic appraisal of the facts. It is ongoing cost and efficiency improvements that prevent road transport costs from rocketing out of proportion. This is particularly so when you consider the aspects beyond the control of road transport operators. As a result, those who contributed their knowledge, experience and successes to this article remain anonymous. They know who they are and I thank them most sincerely for sharing their experience and expertise.
2009 FleetWatch magazine and FleetWatch On-Line.
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