Aug

Not for the cool hearted

2011-08-01 15:11
Reports from some of the ecoFridge users indicate they are happy with the performance of the units but in general, the cost of going green is costly and questionable.

Are refrigerated transporters properly rewarded when rendering an efficient specialised service? In this annual review of this sector, FleetWatch correspondent Max Braun reckons many are not given that shippers, consignors and consignees show little willingness to accommodate the rising overhead costs incurred by transporters. Add to this the numerous other challenges facing this sector and it all adds up to presenting a poor outlook to newcomers and the under-resourced small fleet owners who are looking to participate in refrigerated transport.

On this point, Freightliner Transport MD and chairman of the Durban Harbour Carriers Association, Kevin Martin, provides us with a more meaningful perspective of this issue when he says: “It is not about money, it is about time’. Whatever “steals’ transporters’ time is responsible for denying them an acceptable commercial margin thereby threatening their ability to survive, says Martin.

Experienced, established refrigerated transporters are coping well with the challenges flowing from the on-going waves of economic uncertainty, the fluctuating fuel price as well as the Rand/US$ (Euro) volatility but, as we might expect in times such as these, the question of transport rates is likely to be very much top of the mind.

Successful refrigerated transporters providing reliable on time specialised cold chain transport services to a variety of FMCG manufacturers, distributors and retailers have made huge investments in modern vehicles, equipment and support services to ensure First World cold chain standards, food safety and traceability.

These developments are evidenced by the number of ultra-light weight 30 pallet insulated semi-trailers that have been commissioned over the past few years consigning the 28-pallet versions to mainly local and short haul transport tasks.

Currently, long distance Reefers must cover at least 180 000 kilometres a year with load factors of at least 85% to 90% (or empty-legs of about 10%) depending on routes and destinations. During the winter months there is usually a shortage of loads out of Cape Town making back hauls seriously competitive.

“Whatever ‘˜steals’ transporters’ time is responsible for denying them an acceptable commercial margin thereby threatening their ability to survive’ , Kevin Martin.

Hauling hi-cube containers on skeletal trailers to Mpumalanga and Limpopo are sealed by the shipping lines and must be hauled empty thus making a realistic rate expensive. There are other destinations such as East London where out-bound loads are scarce. Such transport realities require transporters to be innovative, flexible and confident enough to negotiate with the shippers and consignors they serve.

Equipment costs are under pressure. Suppliers of prime-movers and fridge units continue to face fierce competition and are willing to make concessions even with indications of inventory constraints. A welcomed drop in fridge prices is ascribed to the strong Rand and weak Euro for much of the current year. Trailer manufacturers and body builders confirm good sales to corporates and large fleet owners. However, small fleets and newcomers are struggling to survive the high cost of being in the business of refrigerated transport.

On the down side, there is almost universal dissatisfaction with the level and quality of service transporters are experiencing from commercial vehicle dealers and fridge suppliers. The cause of the unhappiness includes the cost and quality of replacement parts, shoddy workmanship and a serious lack of technicians.

Fridge suppliers come in for the most severe criticism along with the on-going increase in tyre prices. Returning to how and what steals the transporter’s time, we can add another innovative approach, this time perceived by road transport engineer, Hugh Sutherland, when assessing costs related to time. Sutherland, well known for his ability to identify and define the nub of the matter, says “focus on the road, the load and the truck’.

The Road

When we think of the road, our thoughts go to the state of the road infrastructure, the average speed we can achieve, congestion and how it impacts on the available time to cover the distance, unload and turn around time. Rising toll fees and the implementation of additional toll plazas, the standard of routing and scheduling of vehicles and the driving skills and attitudes of drivers all need constant monitoring, review and assessment. These are just a few of the elements.

The Load

Critical mass distribution and load placement aspects to cope with average pallet mass, packaging, pallet stacks, air flow, cold chain standards, health and food safety requirements, load security and drivers that are trained to understand good loading and unloading practices and procedures all come into the picture. The soon to be introduced consignor, transporter and consignee responsibility for overloading will add new challenges in terms of documentation and methods of weighing vehicles and axles.

The Truck

Long distance Reefers must cover at least 180 000 kilometres a year with load factors of at least 85% to 90% (or empty-legs of about 10%) depending on routes and destinations.

Long distance Reefers must cover at least 180 000 kilometres a year with load factors of at least 85% to 90% (or empty-legs of about 10%) depending on routes and destinations.

Choice of vehicle for the purpose is all important. A timely and sustainable replacement policy with consistent adherence to a scheduled maintenance plan and roadworthiness inspections, driver pre-trip and workshop inspection checks are fundamental to the transport task. Driving skills, attitudes and wellness demands reliable, experienced trained drivers. Installation of tracking devices and on-board communications to secure load and driver safety as well as maintenance of the cold chain and monitoring fuel usage and the carbon footprint are mandatory. All of these aspects are vital in order to provide a reliable, on time transport service that meets food safety standards and traceability while achieving a worthwhile cost-effective economic life of the major components.

Yes, of course, almost all of the above mentioned aspects apply to the majority of long distance haulage regardless of the cargo. However, the loss of time resulting from all – or any – of these elements has greater impact on Reefer transport tasks.

The nefarious “back door’ at retail outlets remains a significant challenge for Reefers. The majority of retail outlets and many distribution centres are either ill-equipped or uncommitted to resolving this perennial problem. Apart from the lack of dock-levellers, forklifts or pallet-jacks that result in transporters sacrificing payload to accommodate tail-lifts, there is frequently a lack of personnel to monitor the completion of timely off-loading procedures.

Most fleet owners I speak to and who contribute to this annual update are still singing the “back door blues’ and have little to report to suggest that a resolution to this problem is in sight. Some third-party logistics service providers are finding that major supermarket groups accept mutually agreed timelines and delivery slots and then renege on them within a few weeks of implementation.

Reefer transport to harbours , especially Durban port , is frequently required to wait for long hours, if not a couple of days before the load can be uplifted. Who pays for the driver sitting on his thumb for the duration watching the engine keep the fridge running?

Shippers, consignors and consignees show scant willingness to accommodate the rising overhead costs incurred by transporters. These are the expenses incurred to support the on-road activities such as telephones, tracking, security, office and marketing personnel, route supervision, etc. Depending on the fleet size, these costs can be anything between 5% and 9% of the total cost of owning and operating vehicles.

Some Reefer – and no doubt dry goods transporters – are experiencing a drop in volumes and are asked to transport loads of anything between 10 and 14 pallets on large 30 pallet trailers Needless to say, this is expected to be at a significantly lower rate. In case some are not aware, even transporting air comes at a rate to cover costs and provide a modest margin for the transporter.

Private carrier fleets confirm there is dissatisfaction with suppliers particularly in respect of parts quality, prices and poor workmanship. Once again this is especially so when referring to fridge units.

On a wider front, transporters and fleet owners across the board are disenchanted with government’s on-going delay in implementing AARTO. Once again, as in past years with the failure to implement the RTQS properly, they have spent money on training drivers and personnel and acquiring software to monitor and manage the complexities of AARTO. The NDOT is unable to say when it will implement this overdue Act.

As in the past, fleet owners and transporters, their technical staff, drivers and proxies have lost confidence in the Act and don’t believe it will be introduced anytime soon, if at all. This discredits law enforcement and does not augur well for the future.

The latest feedback on a possible implementation date is November 2011 or February 2012 depending on buy-in from the taxi associations and acceptance by the Unions. An unanswered question is how ready and able are the provinces and local authorities? Do they have the correct documentation? Have their law enforcement officers been trained?

Going Green

Reports from some of the ecoFridge users indicate they are happy with the performance of the units and confirm they are simple to operate and so far, hassle free. Where more than one unit has been commissioned, home-base nitrogen tanks are being installed. Transfrig, the southern African franchise holder, confirms the units that have been acquired are performing well.

Transfrig MD, Peter Solomon, says he accepts it will take time before there will be wide scale acceptance of the concept. He has no doubt though that ecoFridges are improving refrigerated transport. Nitrogen consumption levels are satisfactory, he says. To settle the question as to whether a nitrogen fuelled fridge is suitable for long distance transport, a test trip from Johannesburg to Cape Town is being conducted and properly monitored.

For many Reefer transporters, the cost of going green is costly and questionable. Few shippers and consignors show any willingness to add anything to the rate to cover the additional investments made to acquire Euro 3, 4 or 5 technologies; or fund the added cost of Ad Bleu or a quality biodiesel blend with its tendency to require more frequent service intervals.

ecoTrailers and ecoFridges are also being tested by fleet owners and Reefer transporters with a view to reducing carbon emissions. The treasury made it clear at a recent discussion that impending carbon taxes will be added to the general revenue rather than ring-fenced to further combat green house gases.

What steals your time?

How should we sum up the comments and observations made by the contributors to this update on Reefer transport? I suggest we take a leaf out of Kevin Martin’s book , focus on the elements that steal your time. That is what eats your money and swallows your miniscule margin.

If you are truly efficient and established, you can achieve better margins by being selective in terms of the work you undertake. Do not expect good rates when transporting fruit. Consider the comments made earlier in this update. Fruit is seasonal and there are too many empty legs and under-utilised equipment such as skeletal trailers. Where transport is involved with harbours, they are invariably inefficient and will take a few more years to get notably and consistently better.

Sustainable success resides to a large extent on the transporter’s willingness to making on-going investments in equipment, technology, training and management information. In this way, quality and reliable specialised service can be provided.

Such transport service providers will seek a commensurate rate to justify the cost of covering anything between 180 000 to 210 000 kilometres a year with an average payload factor of at least 85% to 90%. They will have the resources to pay for the fuel they use and the maintenance their vehicles require. They will have the experience, expertise and flexibility to minimise the impact of time stealing elements on their businesses.

Poor outlook for newcomers

The not so good news is the poor outlook for newcomers and the under-resourced small fleet owners seeking to participate in refrigerated transport. A high mortality rate can be expected among Reefer transporters who are unable to fund a fuel cost of around R1-million a year, a further R825 000 a year to cover fixed costs and another R600 000 to cover the remaining running costs.

And that’s before recovering overhead expenses and coughing up cash to pay toll fees that could be between R1,50 and R2,00 a kilometre depending on the route. All this before even thinking about adding a margin to pay for household and family living expenses.

This should be a wake up call for SA Inc. There is a growing tendency for in-house fleet owners to seek competent Reefer transporters (and for dry goods transport) to take over their transport needs. These especially because it is not their core business and has become too complicated to manage without the necessary experienced and expert personnel.

Depending how such outsourcing takes place, it could relegate some established transporters to the role of third-party players or even sub-contractors. Any reduction of rates would not encourage investment in the level of services needed to serve the country’s freight transport needs.

Let’s be aware that a number of South African farmers who started farming in Mozambique a few years ago are now exporting bananas, litchis and other fruit and vegetables back to South Africa. This – and other developments in southern Africa led by China and investments in developing countries by the US and UK – could enhance global competition for road freight logistics.It is time for shippers, consignors and consignees to get to grips with the realities of Reefer transport costs in particular and road freight costs in general by stepping up to the plate and helping to eliminate – or at least reduce – the theft of time that is adding massive cost to Reefer and other freight transport that is threatening the viability of this vital industry.

By working together, the various levels of government can be encouraged and assisted to implement and enforce the law, improve the infrastructure and keep taxes to a minimum.

THANKS

My sincere thanks to the many transporters, fleet managers, suppliers and related role players that contributed to this update. Some took me into their confidence on sensitive issues while others expressed their views unreservedly and openly. I have chosen to consolidate the common views on the many challenges facing this sector so as to get across the salient points and issues , Max Braun.

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