There is always room at the top: it was a phrase that was repeated throughout the Truck & Fleet Conference in December. It was the Fleet transporters panel, however, where the message that: if operators strive for excellence then than they can avoid the trap of being dragged into a race to the bottom and be optimistic for a better future.
Gathered together was a panel of companies that represent the best of local expertise, enlightened thinkers, experience and, most importantly, they all eloquently passed on their ideas for how fleets should be preparing for 2020 and beyond.
Momentum Logistics transportation manager Martin Roberts opened the discussion revealing how the company has grown from being a support service for owner Gulftainer to become a fully fledged operator that is now active in a number of markets in the GCC and beyond.
He explained why the company has made the strategic decision to invest in 76 Scania New Generation Trucks as it grows. He said the move is a response to scaling maintenance costs for its ageing fleet.
“You can put it down in a business case and go to the directors and you say, OK, this is what we’re paying now; this is the maintenance cost, this is the cost per kilometre,” he began. “And then we can say, right, we can buy a brand new truck, we can have a guaranteed buy-back, we can have it fully maintained by the manufacturer or by the dealer. This is what it’s going to cost us per kilometre and it’s actually cheaper. It really is the way to go.”
He added that the company is realsing that it needs to go beyond the short-term when it comes to fleet renewal.
“The guaranteed buyback from our dealer doesn’t mean we’ve got to sell back to the dealer but we know that we’ve got a figure there to work on for our calculations.
He added: “What happens with enforcement of legislation and how things change could actually drive demand in the second hand truck market within the UAE which means we can actually realise better value from the used trucks after five years. They’re going to be relatively low mileage vehicles that have been fully maintained by the dealer for their lifetime. So they should be a good buy for people looking through the second hand market.”
The major threat to fleet operators are the small owner/drivers that hover on the fringes of the established market and described by the panel as typically taking more risks with the care of their vehicles and more likely to take on jobs that may not have the capability to deliver. The panel said that while they can sympathise with the owner/drivers’ sometimes desperate hand-to-mouth existence, the consequence is a fall in contract prices that is squeezing every fleet in the market.
“People are living in a truck; they’ve got no way to maintain it correctly; they’re buying stolen fuel. Their costs are very, very low. They’re passing this on to the customer. A customer may not care. He wants a cheap, rate and we can’t compete with that,” said Roberts. “The owner/drivers are killing the market.”
Dubai-based SLK Logistics operates a fleet of over 100 trucks and trailers, including containers, curtain side loaders, flat and low beds. The company has built a reputation in the GCC based on treating client shipments with extreme care. Managing director David Walters said that he echoes the concerns raised on the owner/operators effect on the market. Like others on the panel, he said that his company has chosen to focus on clients that will value the service his company provides.
“I play in the same space that Martin does. We are running a compliant logistics company that focuses on providing a superior customer service level and a consistent, repeatable manner versus the owner operator,” he commented. “These guys play so many different games, so we tend to gravitate towards clients that value our service and recognise that they’re not going to be able to acquire said service at the base price. You know, the good news is there is a significant space out there; some of the larger freight forwarders out there – 70% of our transportation tends to be event logistics or high value time-sensitive cargo. We do a lot of media embargo moves for vehicles and such. For us it is about sustainability and providing that consistent level of experience and compliance. And there’s a cost to that.”
Walker reserved praise for Dubai’s RTA and its work in ensuring that whatever the size of the transporter they are compliant with vehicle rules and attempts to ensure that the trucks on the road are safe. The challenge for legislators, law enforcement and compliant fleets is the scale of those that may be less willing to follow the rules that are in place.
“It’s a well-known secret that there’s 50 drivers that share one pair of tyres that are then rotated for registration. We welcome some of the compliance (steps) that the RTA and the government has taken and we see more police stops open,” he noted, adding that the owner/drivers could make up more than half of the market.
“I liken this market to the United States where I’m from. In the US, 85% of class four trucks and above are from ‘mom and pops’ who own and operate less than five trucks. Here, if I would have to guess, it would be 80%. This is not agriculture or mining: this is over the road land transportation.”
Walker expanded on how these companies muddy the water of the broker network that fleets must swim in.
“We have leverage that we can pull because we can at least control the customer experience. But if you need some of these screens,” he points to the two large screen bookending the stage, “moved around and you call a broker; he’s going to call another broker and he’s going to call another broker; and so all of a sudden you have ten different trucks from ten different guys who have never talked to each other. And this is a problem.”
The subcontracting of work through brokers and then within the owner/driver network is not only a challenge for transportation firms but also for clients who can soon find themselves entrusting their valuable cargo with transporters they have no direct contact with nor the ability to judge whether they can be trusted.
“If you’re going to these owner/drivers in the market, one guy will WhatsApp 50 guys and they will WhatsApp another 50 guys and then you don’t know what you’re getting. You don’t know what insurance coverage there is. And it’s all great until something goes wrong,” said Roberts.
An agreeing Sohraab Hasnain, senior manager – operations, Orient Motors emphasised that many clients in the market are currently jeopardising themselves if they opt for the lowest priced hauler. He says that they could be unknowingly opting for a transporter whose vehicle is not fit for purpose.
“Many transporters don’t even service their trucks properly, because the current excuse is the market is down so they don’t want to spend money,” he said.
Orient Motors as a group is involved in a number of different sectors including transportation and tourism and its Bus, Truck and Trailer division runs a large workshop in Sharjah. It also owns a parts sales and distribution division. Hasnain warned that road safety in the industry is being affected by the use of fake parts.
“We are based in Sajaa Industrial Freezone (in Sharjah) and a lot of new workshops have mushroomed around us here. They’re offering ridiculous prices to maintain truck or trailer. The customer just wants to compare the price at this moment even if you try to explain the kind of things that we putting into the truck or the kind of a service we are providing. Fortunately for us we have a robust CRM department in place so whatever key accounts we have, we make sure that we are in constant touch with them and keep them updated on the things we are doing at our service centre.”
Orient Motors has partnered with major players Schmitz Cargobull and WABCO to ensure its technicians receive up to date training as it continues a relentless strategy of aiming for the optimum possible quality and service for its clients: “With all of these things, you have to constantly be doing.”
Likewise, Shivananda Baikady, general manager – RT & W, Tristar, said that his company targets its drivers to ensure that it is reaching the highest levels of service for its clients:
“When you have to train a driver it takes a lot of time and effort. The driver plays a major role in your transportation system and keeping TCO are as minimal as possible. I think I would say it is about 60% of the cost whether that is through maintenance costs or downtime costs some portion is related to driver training and skills.”
With drivers expected to take over a month (35 days, said Baikady) to be fully trained for the road, Tristar places a large emphasis on the use of simulators to minimise costly and dangerous accidents.
“We can simulate various traffic hazards and we can simulate our previous incidents and ask him to drive so that he knows what actions he needs to take on that point in time,” he explained. “We know 1.3 million people are being killed on the road annually around the globe, and today accidents are a major cost for the transporter.”
The discussion on technology leads to a broader debate on the driver-aids features and services being offer by OEMS in the market. Most of these are being ignored by transporters currently the panel agreed as firms continue, as Roberts noted, to focus on the basics.
“We don’t buy a manual truck and we don’t want lots of switches and on the dash,” said Roberts. “The drivers don’t know how to use them. So, we go simple. Give them an automatic vehicle that lets them watch what they are doing and concentrate on that. We monitor what they’re doing. Accidents, when they do happen, we ensure they are investigated correctly and engage the drivers.”
Roberts added that engagement means asking the drivers what they could have done differently and targeting weaknesses with training: “In 2014, our average kilometres travelled per accident was around 48,000km per accident. This year, year to date, we’re up to nearly 200000km per accident. Now, the monetary value of that is that back then our insurance premiums were at 4.85 percent of the truck value. I’m now paying 2.5 percent. And bearing in mind that I’ve got 76 brand new Scanias in the fleet, that 26 percent saving is absolutely astronomical, you know. And that’s the real value of training your staff.”
Like Orient Motors, Momentum Logistics is also drawing on the additional training help offered by its suppliers.
“We’ve had our tyre supplier come in and do presentations to our drivers about the tyres; what they should be looking out for on the pre-use checks. What’s acceptable? What’s not acceptable?”
In the face of the challenges in the market, the panel talked about the importance of client relationships in a challenging environment. More than ever, fleets need to work hard to keep clients on their books. David Walker suggested that his company is even prepared to turn down some work it may deem as risky with the belief that clients will return in the long term.
“There’s always room at the top for top service providers. And so that’s kind of the space that we are playing in. There is a balance that we try to attain related to the cost to keeping a customer and there’s a cost to losing a customer,” he said. “And we have a conversation nearly almost every day on how to handle that balance. And very often we make the strategic decision to let a customer walk because we know one day – and it won’t be tomorrow or the next – that they will eventually come back to us. Once they go off the reservation and have a terrible experience of regulation they’ll come back.”
“The retention of your customers very, very important because you to lose a good customer is very easy but bring him back again is very difficult,” added Baikady. “That’s why we have our CRM system. Plus, the other thing, we have introduced about a year back in our service facility, is that we take care of the drivers, whoever is bringing in the vehicle.”
He further explained: “We have a service marketing executive that speaks to the drivers, make sure they’re comfortable to gain some kind of a confidence and trust. At the end of the day, the decision makers are being influence by the drivers. You have to have a parallel relationship with the drivers.”
Looking forwards, the panel discussed ways to raise standards across the industry.
“It’s a difficult question to answer. We on the transporter side, feel that legislation has a major role to play for example the way that tyre condition is being fined,” said Tristar’s Baikady, adding that the industry should also focus on improving the state of vehicles run by owner/drivers, “as they’re total cost of operations is currently much lower than ours.”
“What I’d like to see is similar to in the U.K., where you get an operator’s licence by proving that you’ve got sufficient funds to maintain a vehicle, et cetera,” said Roberts. “If that was brought in here, so people know that they’ve got the money to maintain vehicles correctly, that would be a step in the right direction.”
Ultimately the industry will need help from law-makers and rigorous enforcement but also needs to self-regulate and continue to educated clients on the risks of going to the transporter – inevitably an owner/driver – offering the lowest price.
“The group up here, we play the long game. I can have a bad quarter or a bad year, but a lot of the decisions that these independent owner operators exercise is based on the fact that they maybe have a two to four week financial life-span,” said SLK Logistics’ Walker.
“They’ve got to pay their fee to the broker that allows them to register a truck and potentially they’re paying for a loan.
“This is their decision matrix. How would you make this decision if you had two weeks to get this money back home or two weeks to this guy? I think until that common denominator is changed in some capacity and maybe there’s a shaking out of some of the suppliers in this marketplace that don’t belong here – until that core issue is addressed – I just don’t see anything changing.”
Roberts echoed his peers thoughts when it comes to finding a balance between safety and prices in the market.
“We are investing now for the future. We’re doing the right thing, we’re doing the trainings, we’re doing the right maintenance, we’re buying the right vehicles,” he said looking at the others on the panel, “but we can’r change the rest of the market. We can self-regulate within our own companies and fortunately there’s plenty of other companies out there that are doing the right thing. But it is this large portion of the individual truck owners that are causing the problem.”