Road Haulage Association

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Tag Archives: haulage

If it doesn’t pay, walk way!

In the November edition of ROADWAY I highlighted the dangers associated with the very low haulage rates currently, and regularly, being offered in the UK.

I recently attended the first Commercial Vehicle Forum. Organised by the CV Show Partnership, much of the debate focussed on unsustainable haulage rates and one statistic stuck in everyone’s minds. Motor Transport’s latest analysis (July 2012) showed that the average ratio of profit to turnover in the top 100 UK haulage companies is down to a frightening 1%. Two panel members – Wincanton and ABE Ledbury – confirmed that getting customers to pay sustainable haulage rates was a real problem for both large and small hauliers.

Long-term RHA member and author of the RHA Cost Tables, Brian Fish of DFF International, says that obtaining higher rates is, without doubt, the most critical issue facing the haulage industry today. One of his, and my, biggest concerns is a culture of ‘one-rate-fits-all’ that has become the accepted norm and is used widely by operators when quoting for work. Brian says: “There is no such thing as a ‘fits all’ rate per mile. Rates should be calculated by determining: the time required (wages and overheads) covered by a standard cost per hour; the distance covered at a standard cost per mile (fuel, tyres, R&M and lubricants); any job-specific costs, such as subsistence and tolls; plus a margin of profit.

“These costs mix together in infinitely varying proportions, leading to rates per mile which depend on miles covered in a given period of time.” (See table)

I am fully aware that the gulf between calculating sustainable rates and actually getting the customer to pay is often massive. In France, following tariff deregulation in 1987, the haulage industry went into meltdown as the drivers’ unions took action over working time and pay. The deregulation led to excessive internal competition, which squeezed haulage rates and pay. So is there a place for a national minimum haulage rate in the UK?

To get rates back up to sustainable levels – and we must do before more haulage businesses go to the wall – something has to change. I believe the industry must adopt a common approach when calculating and agreeing rates. At the Commercial Vehicle Forum, Andy Boyle (AEB Ledbury) said on the subject of rates: “Dare I say, maybe the time has come to adopt the mantra of if it doesn’t pay…walk away!” Now that is a challenge if ever I heard one. But if you all did it, the buyers of haulage would soon get the message.

The motorway and trunk road network provides the haulage industry’s delivery and collection routes and the efficient operation of that network is essential to the industry. However, it is plagued by delays and disruption, as every morning’s traffic news demonstrates. Each morning there is a list of traffic jams caused by accidents, roadworks, adverse weather or simply the number of vehicles that use the road. In fact, there are many locations where congestion is such a fact of life that it doesn’t even merit a mention on the bulletins.

We all know there isn’t enough cash available to build roads which can cope with the peaks we see across the country but there are dozens, probably hundreds, of places where relatively modest investment could bring dividends in the shape of reduced jams and delays. To name a few: the M6/M1/A14 junction has caused massive delays for years and only recently has the government re-issued proposals to improve this junction; the A43/M40 junction is laid out in such a way that delays are inevitable, forcing the northbound and southbound A43 flows generated by the M40 to cross. This is madness, but there are no plans to improve it.

I am sure members have their own ‘hit list’ of locations which are crying out for improvement, so the government’s apparent intention to publish a consultation document soon on what the network should look like and how it will be funded is welcome. But I’m not holding my breath.

Geoff  Dunning
Chief Executive

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Turnover is vanity – profit is sanity…

… I suspect that many people have heard that saying – it’s been around for years. I also suspect that many might think that profit is difficult if not impossible in the current climate, with fuel prices at record levels and customers very reluctant to accept rate increases that pay the higher diesel bills or, for that matter, other cost increases such as wages and insurance.

Having said that, the published accounts for some firms in the industry make interesting reading, with decent levels of profit being reported in quite a few cases. The trade press also publicises success stories as well as the spectacular failure of some high-profile and well-known names. We are now something like 30 months into recession, with no clear and substantial evidence of recovery, so demand for our members’ services is probably at an all-time low, but the number of vehicles available, and the number of businesses competing for the work, have both declined.

We eagerly anticipate the publication of the Traffic Commissioners’ annual reports, as they will show how much of a decline there has been. We know there was a drop of some 3.6% in vehicle numbers from 2009 to 2010, although the drop in restricted licensed vehicles was higher than in standard licences. But how big has the drop been in the past 12 months? In the last six months, my visits to RHA council meetings suggest we are reaching a stage where there are real shortages of certain types of vehicle and, in some markets, bringing supply and demand for haulage into a better balance than has been the case for some years.

Perhaps we are now in the situation where real negotiation can take place rather than customers offering work to operators desperate for business on the basis of ‘that’s the rate, take it or leave it’. Perhaps we are even in the situation where RHA members are able to ‘leave it’, because they know there is enough work out there, and there is no need to accept whatever a customer might be willing to offer.

But, despite being in a stronger position, it is no use getting plenty of work at rates that might seem very attractive if the customers pay when they feel like it. A member once said to me that things were so bad that even the customers that don’t pay had stopped giving him work!

We are not in that position now, but it goes without saying that getting paid is absolutely central to making a profit. It is clear that some members are better at this than others. Get the basics right: agree terms in writing, invoice promptly, chase up overdue payments and check the credit rating of every customer regularly so you get fewer nasty surprises. This is common sense, but is it common practice?

Working with government

It was a real pleasure to see the Secretary of State for Transport visiting our offices in Weybridge. As our local MP, we had already met Philip Hammond at a constituency event, but his acceptance of an invitation to visit the RHA and to be interviewed for ROADWAY gave us an opportunity to question one of the key decision-makers for our industry.

One refreshing aspect of his comments was the way that he readily acknowledged an old-fashioned view of the industry when he took up his post. More important was his recognition, having met hauliers, that ours is an industry which is often cutting edge and sophisticated and plays a key role in the UK economy. Such a change in opinion only comes from exposure to the realities of the modern road haulage industry, and we were delighted when he made the point that getting in touch with local MPs is a very effective way of lobbying.

This is why the RHA is developing Deliver UK, which will encourage members to get involved in a comprehensive programme designed to change the attitude of MPs and government.

The Transport Secretary made it very clear that the industry must embrace the concept of being “green”. Given that the vast majority of CO2 emissions in our sector come from using diesel fuel, there is little doubt that the “greening” of road haulage can be a win-win situation: burning less diesel means cost savings as well as producing less CO2.

We have seen some of the big players in the industry claiming to be green, and their contracts often impose similar obligations further down the supply chain. But how much of this is window dressing? How many times do so-called green companies force hauliers into inefficient operations for their own convenience? How many loads are shipped when the vehicle is well below capacity for spurious health and safety reasons? How many times is the transfer of freight from road to rail a glorified publicity stunt, which actually produces more CO2, not less?

We know there is a need to produce less CO2, but please can we have a degree of common sense? Can we have less box-ticking and more real action that genuinely does see the win-win situations that benefit hauliers as well as their customers?

Finally, it was also reassuring to hear that Mr Hammond is progressing with plans to level the playing field when it comes to foreign trucks. We hope that such a scheme does not affect the huge sections of our industry that do not face foreign competition. We also hope that the government does not overlook the fact that the compliance standards of foreign firms often falls way behind the UK operator. That is just as important to the level playing field as a road-user charge.

DECEMBER 2010

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