Transport & Logistics Insights Report

Unlocking the power of data-driven decision makingNOT ALL BUSINESS IS GOOD BUSINESS

F o r e w o r d

Transport and logistics companies must negotiate a complex cocktail of market risks to achieve stability, prosperity and growth. In an industry where margins are being squeezed, and many SMEs face tough competition from their larger counterparts, harnessing the power of data and technology is essential in facilitating intelligent decision making.

Crucially, firms must realise that not all business is good business – identifying the most profitable opportunities and driving efficiencies within their fleet often holds the key to longevity and success.

Mark PerrinHead of Transport & Logistics

B i g p i c t u r e A shortage of HGV drivers is an ongoing problem for transport and logistics businesses. At present, there are around half the number of HGV licence applications each year than there are people leaving the industry, while the rising cost of licence acquisition and associated lifestyle choices are impeding the attraction of young talent. With skilled workers highly sought after, smaller logistics firms often struggle to retain employees, many of whom are lured away by the higher wages and attractive employee benefits packages offered by larger, global providers.

For most, a rising cost base is squeezing already tight margins and if unchecked could significantly dent profitability. Growing congestion in the UK’s sea ports, airports and on the road is increasing lead times and a shortage of suitable, affordable warehouse space is forcing some companies to purchase smaller spaces in non-prime locations away from their key infrastructure network. Finally, the weakening of the Pound post Brexit-vote has also led to an increase in fuel costs (oil is traded in dollars).

However, despite these factors, it’s not all doom and gloom. After extensive lobbying by the Road Haulage Association (RHA) the Government has backed a ‘trailblazer’ 12 month apprentice scheme for budding HGV drivers, which includes the cost of licence acquisition and attracts £2 of Government investment for every £1 invested by the business, with grants totalling up to £4,900 per recruit.

The UK logistics industry is thought to be worth in excess of £55bn per year, and driven by an increase in

online retail, demand is rising. This appetite for services, coupled with a shortage of capacity presents a huge

opportunity.

Andrew Galliers

Furthermore, UK hauliers who feel they are being undercut by non-compliant competitors will be able to apply for Earned Recognition Status, which the DVSA (Driver and Vehicle Standards Authority) plans to launch in early 2017. This will reward operators with fewer due diligence checks in exchange for

51%: Over 507%: Under 301%: Under 25

An ageing workforce

HGVDRIVERS

the submission of telematics and compliance data. Increased pick-up of such schemes has the potential to reduce administration time and free up DVSA resources to track businesses flouting regulations.

The UK logistics industry is thought to be worth in excess of £55bn per year, and driven by an increase in online retail, demand is rising. This appetite for services, coupled with a shortage of capacity presents a huge opportunity. Businesses must evolve and work to maximise their delivery efficiency, access insightful data, and identify and target profitable clients. For those who manage to utilise the latest technology and drive operational change, prosperity and growth await.

T h e p o w e r o f d a t a

The collection and analysis of data is essential in minimising potential risks and identifying areas where efficiencies can be achieved to maximise profits. Business leaders should aim to implement a dashboard of specific Key Performance Indicators (KPIs) which span four business critical areas:

Accessing real-time data is crucial, as it allows for intelligent and timely decision making, empowering business owners to address inefficiencies before they negatively affect the firm’s bottom line. While there are a wide range of systems available that can improve business’ access to data, exploring the application of digital accounting software, telematics and Customer Relationship Management (CRM) tools is a good place to start.

From an operational perspective, businesses should aim to gain sight of their own performance and delivery efficiency, as well as utilising live traffic information which can then be fed back to drivers, allowing them to circumvent traffic and avoid congestion. If certain clients are not receiving the highest standard of service, this issue can be addressed by a member of the customer care team and a solution (whether this be new route or delivery schedule) proposed to the client before it negatively affects the working relationship.

Although its use is on the rise, the gathering and analysis of telematics data can prove extremely useful in improving resource management. Knowing exactly how many vehicles are on the road, where, and the manner in which employees are driving (speed, fuel use, braking) allows businesses to calculate truck utilisation, load efficiency and driver safety. Technology can also be adopted to reduce the likelihood of accidents; new innovations include the use of in-cab cameras which monitor face and eye movements, generating a jarring audio alert and sending a vibration to the driver’s seat if they are in danger of

OperationsSales &

MarketingResource

Management Finance

falling asleep at the wheel – information which is then passed through to HQ. This is also likely to reduce firms’ insurance premiums and minimise business interruption.

Accessing real-time data is crucial, as it allows for intelligent and timely decision making, empowering

business owners to address inefficiencies before they negatively affect the firm’s bottom line.

Mark Perrin

As well as having an up to date record of new business meetings, current client contact levels and the sales pipeline, information on load and delivery efficiency can also inform the compiling of a list of target clients. If vehicles need backfilling within a certain geographical area, or load efficiency is down on certain routes, new customers can be sought by cargo type and location to increase profitability.

Finally, it is vital that businesses have sight of key financial data, including profitability by route, truck and region, as well as client debtor days and cash flow. This information allows reliable forecasting and means that investment activity and new business development can be focused to address or capitalise on fluctuations in working capital. If projected funds are low, new revenue streams can be sought for that period, whereas if a surplus is predicted, the business can explore the purchase of new capital, stock or hiring of staff.

However, it is important to remember that gathering data alone is not enough, this information must be collated and analysed, with meaningful reports circulated to key members of the management team. In order to achieve this, employees must be provided with the training and guidance required to make sense of raw data.

KPIs

• Delivery efficiency

• Compliance statistics

• Driver/truck performance

• New business meetings

• Client contact• Sales pipeline• Target clients

• Cash flow• Debtor days• Profitability by

route, region, vehicle

• Vehicle utilisation

• Driver utilisation/safety

• Load efficiency

Operations Sales & Marketing

Resource Management Finance

R e d e f i n i n g y o u r c u s t o m e r b a s eWith this access to quality data in hand, businesses must now go about examining their client base. Industry margins are slim, so identifying which customers have the potential to maximise profitability is vital. In short, firms must focus on building relationships with the most suitable partners in order to succeed.

This process should begin by asking one simple question...

For my business, what does an ideal client look like?

From a practical perspective, an ideal client profile will most likely include information about the timing, location and nature of delivery activities. For example, a firm might calculate that a target customer would require collection from within 50 miles of the depot, involve the delivery of full loads, its products would be stackable, they would provide backloads for collection (so that freight is carried both ways), the delivery point would be within 200 miles and the sales value per route would be in excess of £50,000 per annum. A key factor to consider is which potential clients might require a wider range of services offered by the business; spanning haulage, warehousing and logistics and air and sea freight services.

As well as logistical qualities, other characteristics should also be examined. The nature of the client relationship is key, so businesses should be sought that provide accurate information, communicate their needs well and have scope for future growth. In addition, credit checks should be completed, and preference given to customers who pay on time – failure to do so could dent cash flow and significantly impair financial performance.

Target client checklist

? ??? ?

? ?

What is the delivery location?

What is the nature of the cargo?

Is the client open to advice/keen partnership?

Is the client credit worthy?

Are the loads backfilled?

How profitable is the business?

Is there scope for growth?

Once the target client blueprint has been completed, businesses should rank their current customer base using these pre-agreed criteria, and collate this information with current profitability levels. Profitable client relationships which offer scope for future growth should be nurtured, while those that are not turning a profit should be examined – either the delivery schedule or fee structure should be amended, or if this is not possible, a replacement customer sought. It is important that business leaders detach turnover and profit, seeking business opportunities on suitability rather than size.

P r o v i d e v a l u e a d d e d s e r v i c e sIn the quest for profitability, it is essential that smaller firms look to differentiate themselves and provide value added services to compete with their larger counterparts, most of whom will be able to undercut them on price alone.

There are a number of measures that firms can take to appeal to customers, and to justify a premium price tag. For example, a high-end client may be willing to pay more for a haulier whose vehicles arrive on site in exceptional condition and whose drivers are articulate, knowledgeable and well presented. Similarly, for companies looking to procure delivery services for valuable cargo, firms providing superior security provisions, including in-transport tracking and surveillance can often command greater fees. The ability to demonstrate high service levels, quality storage facilities and logistics management provisions to clients with valuable goods is often crucial in the winning and retention of such accounts.

Nurturing a strong working relationship with clients and providing high-level strategic expertise is an excellent

way to capture and retain their commerce.

Andrew Cook

Businesses looking to carve a niche for themselves should explore the delivery of specialist goods such as hazardous chemicals, live cargo, or medicines, which also could provide them with the opportunity to demonstrate value. These operations are likely to require the use of custom transports such as refrigerated trucks and will be subject to regular temperature checks or health and safety measures during transit. Smaller firms able to demonstrate that they can provide this level of compliance and assurance have the potential to go after and capture higher-value business opportunities.

In addition, nurturing a strong working relationship with clients and providing high-level strategic expertise is an excellent way to capture and retain their commerce. Rather than simply providing a quote for the specific brief the company has provided, taking the time to assess the company’s needs and suggesting new ways of packing goods or adapted delivery schedules in order to drive cost savings can differentiate the firm from competitors and provide assurance that your business is the best long term strategic partner.

A f t e r w o r dSMEs operating within the transport and logistics sector must make intelligent business decisions to seize upon emerging market opportunities. With demand outstripping supply, businesses should move to harness data and technology to drive internal efficiencies and increase margins. While investment in new systems may initially be viewed with caution, knowing which clients to target and which accounts are positively contributing to the firm’s bottom line is vital.

Not all business is good business. Chasing profit rather than turnover, demonstrating value, and forging relationships with a targeted client base is essential in securing financial stability, prosperity and growth.

C o n t a c tFor more information about how your business can harness the power of technology to make intelligent, strategic decisions, speak to a member of the Menzies transport and logistics team.

Mark PerrinHead of Transport & Logistics Sector GroupMPerrin@menzies.co.uk01489 566702

Andrew CookPartner, Transport & Logistics Sector GroupACook@menzies.co.uk01784 497156

Andrew GalliersSenior Manager, Transport & Logistics Sector GroupAGalliers@menzies.co.uk01489 566745

M E N Z I E S . C O . U K