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F EATURE
Transport innovations
slaying
hidden costs
M
any small to medium operators are
failing to take advantage of innovations
in fleet management and transport,
incurring a range of hidden costs.
For all of the innovations in supply chain
over the last few decades, the transport component, usually a top five cost for small and
medium enterprises, continues to lag other
areas in terms of innovation, cost-effectiveness
and efficiency.
Walter Scremin, general manager of national
transport company OnTime Group has worked
in the industry for over 20 years and says that
many firms’ transport systems are yet to be
brought into the 21st century. “Particularly
among small to medium enterprises, there are
plenty who just run their fleets the way they
have always run them, and are doing things the
same way they did 15 or 20 years ago.”
For example, many SME don’t use GPS
systems and many that do struggle to get the
most out of them. “GPS systems are fairly
well established among the bigger players in
logistical fleet management, but many small
to medium fleet operators run
without GPS monitoring due to
a misconception that it is costprohibitive”
Mr Scremin said they may
not realise that affordable GPS
systems are available for any
sized business. “A common
mistake is paying for systems
with unnecessary bells and
whistles when a simpler,
cheaper system will do.”
When used properly, GPS
will highlight flaws in transport
strategy and lead business
to operate driver fleets more
efficiently. “The greatest inefficiency that GPS will highlight is
time wastage. But it is impor60
MHD Supply Chain Solutions —
tant that this information is conveyed visually
on maps, with a user-friendly interface that can
be accessed online.”
Jason Saxon, parts manager for Perth car
dealership Giant Nissan, says GPS has made
a big difference in terms of transparency and
convenience for the company’s busy spare
parts business.
Giant Nissan has a fleet of five vehicles in the
Perth metro area, making around 350 deliveries per week and moving approximately $10-11
million worth of automotive parts each year.
Until January 2011, when Giant Nissan’s parts
business installed GPS system OnTimeEarth,
the company relied on contact with drivers and
customers by phone.
“Previously, if a customer enquired about a
part they needed we would have to chase the
drivers up by phone and then get back to the
customer, which could take 10 to 15 minutes
each time.
“Now everybody can see where our drivers
are at all times, so when a customer calls about
a part, we can give them an answer right away.”
May / June 2012
He said deploying the GPS across all areas
of the parts business had delivered greater
transparency and improved communications by
clearing up uncertainties. Staff, including the
warehouse staff, phone staff, sales staff and
service team all use the system. The result is
more efficient operations. “The efficiencies are
the big thing. It has saved on manpower hours
and improved our ability to service customers.
“It’s all about customer service now and if
our competitors aren’t using a similar system
then that puts us in front,” Mr Saxon said.
The tracking system has also been more
efficient for drivers because there are now
fewer phone calls from base enquiring on their
whereabouts. “Before, when a driver left at
one o’clock and was due back at four o’clock,
we wouldn’t know exactly where they were
in-between.”
OnTime Group’s Walter Scremin says tracking
is also important for identifying off-route
deviations and non-company approved stops.
Sometimes a company unwittingly inflicts deviations on itself. Mr Scremin described a case
where a client, learning to use
GPS system OnTimeEarth, had
noticed his driver had turned
around and come back to
the warehouse – a total of 30
kilometres plus 40 minutes
extra time on the route. The
manager’s staff had instructed
the driver to return due to
their picking error but the
manager was unaware this had
happened, resulting in late
deliveries for the day.
“The GPS information
enabled him to put contingency plans in place for similar
errors in future. This transparency is the key and promotes
better management.”
L o g i s t i cs I n n o v a t i o n a n d T e ch n o l o g y
Giant Nissan’s Jason Saxon says that the
technology has helped identify when drivers
have made unplanned stops. “Our drivers have
been very good about the GPS making them
more accountable, because it helps them to do
their jobs better and means they are no longer
being called every 20 minutes and being asked
their whereabouts.
“But if a driver drops into home or takes a
longer than usual break enroute, we will know
about it,” Mr Saxon said.
George Stavris, group parts manager for
BMW Melbourne, which has three drivers
covering the Melbourne Metropolitan area, says
OnTimeEarth’s GPS system has enabled BMW
to handle an increased workload since being
installed 12 months ago. Its parts business now
does around 70-80 deliveries a day all over
Melbourne – up approximately 20% over the
last year.
“GPS enables you to do more deliveries
and has eliminated some extra costs such as
bringing in suppliers such as couriers to take up
the slack and run last-minute deliveries.
“Our workload has increased significantly but
the same drivers and warehouse staff have been
able to handle it.”
GPS has also been important for providing
proof of delivery for attendance and time taken
on site, important if there are client disputes.
“We can go back weeks or even months to
prove a delivery took place,” Mr Stavris said.
BMW is implementing live scanning which
will verify deliveries by GPS via location, date
and time stamp to eliminate any errors. “In
the auto parts business it’s common for a part
to be delivered and signed but if it isn’t in the
hands of the right person, the customer may
come back to us saying it hasn’t been delivered yet. This will provide instant proof,” Mr
Stavris said.
Walter Scremin said that customers may
make sweeping statements about a ‘driver
always running late’ etc., but GPS provides
measurable evidence of punctuality along with
solutions to improve any identified problems.
For example, GPS may reveal the driver is
always dispatched late and trying to make up
time, or typically held up at one location every
day (due to parking issues, delays in getting
POD sign-off, etc.). This allows the driver’s
manager the opportunity to resolve the onsite
issue with the customer.
Company vehicle/equipment management
and security can also be improved with GPS.
It is not unheard of for company equipment to
be used by enterprising staff ‘under the table’
on weekends and so on; the staff member may
be under the impression that using a truck or
item of machinery is relatively harmless but, as
business owners know, there are risks involved
in unofficial equipment use.
The same technology may also be used
to increase security by giving business the
ability to track and locate any stolen vehicles
or equipment.
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Mr Scremin’s top five hidden cost
blowouts are:
Hidden cost one: delivery inefficiencies.
Inefficient delivery systems result in higher fuel
costs, higher maintenance costs, wasted time
and therefore money, and can also negatively
impact service levels. “The tools exist for any
business to efficiently optimise and track their
delivery systems but it may require some experience in logistics.”
“Countless businesses would struggle to adequately
explain the full cost of running a single vehicle.”
A GPS device can also assist with driver
security if the person is working in lonely
destinations or at night. Mr Scremin said that
GPS can be invaluable for complying with
chain of responsibility legislation. “It assists
with driver security, especially if drivers are
working alone out in the country and also
allows the monitoring for drivers’ speed and
fatigue management issues.”
Hidden costs still plaguing fleets
Fleets are subject to variables that are difficult
to plan for, meaning hidden costs often occur
and can go undetected for years. Yet it is
possible, by using technology such as GPS and
cost analysis, to generate savings every week
by concentrating on fleet management.
Walter Scremin says that most businesses
don’t have the full picture of what transport
costs to run. “Countless businesses would
struggle to adequately explain the full cost of
running a single vehicle.”
To provide a constructive reality check to
businesses that were unaware, or in denial,
of actual fleet costs, OnTime developed a cost
analysis tool that processes various inputs for
vehicle costs such as vehicle type, kilometres
travelled, overtime worked and so on.
While an important first step, ironing out
hidden costs altogether is difficult because
many businesses with transport don’t have
the logistical skills to manage the fleet.
“Often these businesses have grown gradually, starting out with a couple of vans or light
trucks and eventually adding to their vehicle
fleet yet doing so inefficiently.
“Considering other options at the outset,
such as outsourcing the fleet to specialists who
can provide the vehicles, drivers, management,
technology and experience could have saved a
lot of headaches and money.”
Hidden cost two: wasted management time.
Things go wrong in logistics, guaranteed Mr
Scremin said. “Too many organisations have
management waste valuable time fighting logistical spot-fires when they could be working on
core business issues.”
Hidden cost three: over/under capacity. “The
hardest logistical issue is to know exactly how
many vehicles and drivers you need at any
time,” Mr Scremin says.
Running under capacity, with too few
vehicles for need, becomes a hidden cost
because it puts strain on your responsiveness,
places clients at risk due to poor service
and often leads to costly band-aid solutions
such as temporarily hiring couriers. Over
capacity, or having too many vehicles, can
be equally bad. “One of the greatest costs to
a business is having vehicles sit idle, yet is
extremely common.”
Hidden cost four: cost variations. This can be
difficult to pin down, and a good reason why
many SME outsource their logistics. “Fleets
are at the mercy of fluctuations in the price
of fuel, along with other non-fixed items including maintenance.
“Vehicle break-downs or accidents will occur
without warning, interest on loans will fluctuate, wage increases and the ongoing issues
relative to the costs associated with personnel
injuries or accidents such as WorkCover and
insurance – your premiums are only fixed until
you have an accident or injury, which will lead
to increases.”
Hidden cost five: driver absenteeism and
turnover. Replacing drivers when absent is
one of the greatest disruptions and costs to
any business. Absenteeism often means poor
service, disgruntled staff and the cost of additional resources being employed just in case
they’re required if people are absent.
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May / June 2012
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