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174 | 365 - Coal Wagons

Back in the New Zealand Rail days, the Railways thought they were in the railway business. They thought they had no competition and they were wrong. They were actually in the transportation business and their competitors were trucking companies. For passengers the competition was bus companies and then airlines.
 
In business, knowing what business you are actually in is critically important.
 
Finally though, with new management, Kiwirail have sorted this out. They are not in the transport business or the railway business. Now their competition is static walls as they compete for taggers.
 
Not really true, but maybe a good idea for Jim is to run a competition for taggers to ‘beautify’ the Huntly coal wagons and them arrest them all afterwards.

Another day. Another trip to Auckland.

Judge gives stern warning to transport operators

This from the NBR last week;

Road transport haulage operators have been given a clear message by a High Court Judge: Overload your vehicles at your peril.

In a reserved judgment handed down at the High Court in Hamilton, Justice Lyn Stevens said the country loses $100 million a year in unpaid or under paid road user charges.

...

The judgment entirely debunked a widely held transport industry belief that enforcement officers allow a five percent weight tolerance over and above the licence purchased.

Justice Stevens made his comments in the case of Mt Maunganui transport operator TD Haulage which was appealing a District Court assessment that the company owed $1.215 million in short paid road user charges.

...

In the end, it is not known what TD Haulage was required to pay to settle the matter because a confidential settlement was reached been the parties during the appeal. But Justice Stevens closed the case by delivering a judgment anyway, using it to sternly warn the industry of its shortcomings.

Log Book & Work Time Changes

Below is a brief video that Agoge Training has made to summarise the changes in Logbook and Work time rules effective 1 October 2007. If you would like a free high quality copy please contact Jim on 0800 42 46 43.

Work time and logbooks

As of 1st of October some of the rules around work time and logbooks are changing considerably.  These changes will affect most transport companies at some level.  Below is a summary of the changes and when they take affect.

Key Changes

Work time and logbooks

• From 1st October 2007, instead of recording ‘on-duty’ time and ‘driving hours’ separately, all time spent working must be recorded as ‘work time’.
• Drivers must take a break of at least 30 minutes after 5.5 hours of ‘work time’, regardless of what kind of work they were doing.
• In any 24 hour period drivers can work a maximum of 13 hours then have to take a break of at least 10 hours.
• Drivers can still work up to 70 hours before they must take a break of at least 24 hours.
• Failure to produce a logbook can result in a fine of up to $2,000/individual, $10,000/company, and 35 demerit points.

Chain of Responsibility

Employers or those that control drivers can face fines of up to $25,000 if they knew, or should have known, that a driver under their control did, or was likely to, breach work time provisions.

Key Dates

• 1st October 2007 - 2 new logbook formats released (general and taxi), and all work time provisions become law.
• 1st April 2008 - All existing logbook exemptions expire.
• 1st July 2008 - Only new format logbooks may be used.

Transport and Logistics is boring.

Last week I attended a presentation by the Road Transport Association about the changes in log books.

IT WAS BORING!

Now an important disclaimer: This is not a criticism of the RTAs intent. They genuinely desire to have a positive impact on the industry and the logbook rule change is really important.

But…

The presentation was boring. The power point presentations were too long. They read straight from the slides, didn’t paint pictures, tell stories or sell the changes well.

And to top it off there were the grumpy old truck drivers there who thought it was a good time to relitigate the law. Not the RTAs fault but they should have shut them down.

Fortunately, with the exception of a couple of people I was with, there were no Gen-Y there. They would have been bored silly. They would have thought that the transport and logistics industry was boring, stayed and unchallenging.

Based on what they saw last week. They would be right!

If we are really to compete for talented, energetic, young people, we need to start being a heap more upbeat and edgy and passionate.

Not slowly, but now!

   

CourierPost buys Roadstar

Express Couriers which is the joint venture between DHL and New Zealand Post, has completed the acquisition of Roadstar on the 1st July.

There overall goal in the acquisition seems to be to increase their service offer into multi-package and
palletised product.

“Customers are demanding we offer a full range of services including their multi-package and palletised product” says Jim Quinn, CEO of Express Couriers Limited. “We are delighted to have secured the Roadstar business to achieve our growth aspirations, and meet those needs” he added.

As a signal of the desire to ensure this new ownership is a success, Grant Robertson and the management team of Roadstar have agreed to remain with the business. Both Grant and his team continue to be passionate about the business and the industry, and are delighted to be part of a new ownership that shares this passion.

It is self evident that they will be seeking some synergies, and Roadstars branding is already changing. Even within the last week small changes have taken place in the CourierPost business to take up some of these synergies. I suspect you will see ECL move quickly to gain any synergies as I know they learnt a lot from the purchase of Ansett Couriers and XP couriers of old.

Freightways acquires MSS

Freightways has purchased MSS Records in Christchurch for $1 million dollars. It intends to merge the operation into its Online Security Services business.

“Inclusive of synergies gained by merging MSS into Freightways’ established Archive Security business, incremental EBITDA of NZ$0.3 million is expected to be achieved in the 2008 financial year from MSS.” [Freightways Media Release]

My read on this is that incremental means once the synergies are achieved. Synergies generally save money, so it is safe to assume that the EBITDA (operating cashflow) was lower.

This causes me to wonder what sort of multiplier Freightways paid for MSS against its existing EBITDA.

If the MSS EBITDA was
250k it would have been 4
200k it would have been 5 (my random blink would be this one)

Once they get the synergies (which Freightways will) it becomes a 3. Not a bad buy, one less competitor and 3 years to repay the investment.

Freightways said it is looking for more acquisition opportunities.

Toll to be 100% Aussie owned.

Well NZ Rail, come Tranz Rail, come Toll NZ will finally disappear off the NZ Stock exchange.

Toll purchased 10% of the shares from a New York based fund and can now undertake a compulsory takeover of the remaining 6% of shares in the company for $3 per share.

Toll originally tried to gain compulsory acquisition when it took over at $1.10 per share and has withheld dividend payments over the last 2 years.

The parent company Toll Holdings in Australia has indicated it may duel list its shares from Aussie on the NZX.

It is another lose to the New Zealand Stock exchange who appear to be having more delistings than listings this year. It is also a loss to New Zealand as yet another huge company will see its dividends sent off-shore.

Toll is the operator of the largest rail, road and ferry business in NZ.

Supply Chain Index

I have been following 11 different companies that are in, or fringe the supply chain and agoge's business. This is a basic index of the average share value (Total Capital / Total Shares).

I will try and up date it every few weeks. We will see what happens.

Turnover is highest in the Jun Quarter

Statistics NZ released there latest employer-employee data last week. He are some interesting numbers I have discovered:

Staff Turnover
The transport industry had a 14.4% turnover for the year to March. This is down slightly on the same time last year which is 15.5%. For the wholesale trade (which includes many distribution centres) turnover is 13.3%

Looking at the stats it is interesting to see that the June Quarter is actually the highest turnover period for the supply chain industry and historically rises to around 17% for transport and 15% for wholesale. Time to keep a close eye on the your staff.

Number of workers
The other fact I found interesting was that since Mar 2002 (when agoge launched) work numbers in this transport category have increased by 15% from 61,000 to 71,000 people.

Workers in the wholesale industry have increased 14% from 96,000 to 110,000.

All in all a growth industry! While it would be nice to reduce the staff turnover I suspect that this will continue to rise. People are no longer committed to long term employment and will move jobs more frequently than ever.

Linfox and PFL

Finally a small article appears in the NZ Herald.

Provincial Freightlines (PFL) was a successful privately owned logistics business with blue-chip customers, Linfox chief executive Michael Byrne said.

PFL served industries including logging, timber, packaging, chemicals, refined fuels and fast-moving consumer goods.

The acquisition would double the revenue base of the New Zealand arm of the Linfox business, Mr Byrne said.

It will be intresting to see if they are rebranded, merged or left alone in the medium term.

Linfox buys Provincials

Linfox as purchased Provincial Freightlines Ltd effective today. It hasn’t hit the general media as such.

While the sale of privately held companies to Aussie companies is inevitable I must admit I think it is a loss to New Zealand. It is further evidence that the Transport market is maturing in NZ, as the medium size companies either grow or are acquired.

Provincials had some really rocky years back in the 80’s and I remember well their merger with Heatons. In the last 10 years however they have developed a really strong brand.

Their silver trucks with simply the word “Provincial” on the curtains is a crisp, clean and very well recognised brand.  They have developed a strong customer focused niche business.

What will become of “Provincial”? Time will tell. They were the first customer of agóge and I appreciate their loyalty and continued support. I wish them all well in this transition.

Transport companies get a 3% increase in costs

Some significant cost increases to the Trucking Industry in the last few days.

Firstly the long awaited increase in the Holidays Act from 3 weeks to 4 weeks. I was thinking about the implication of this to the industry. We currently have around 25,000 ‘Heavy’ Truck drivers. Each of them is now entitled to an additional 1 weeks leave. For an industry that it already short of drivers, it now needs around another 500 drivers just to cover the additional 125,000 days annual leave to be taken this year.

Don’t worry about finding an additional 500 drivers, it will be easy – Yeah Right

The second issue is the increase in Road User Charges with 48 hours notice. It is estimated that the 11% increase in RUC will increase operators costs by 1%. This is a significant amount of money that can not be recouped from customers instantly.

A 3% increase to transport companies costs from 1 April. Welcome to the new financial year guys. Sorry I don’t have any solutions apart from getting a new government.

Bracewell - MD of Freightways talks Technology

A few weeks ago I posted on Technology in the Courier industry. It is fair to say, from the verbal feedback I received, that it was one of the more provocative posts I have written.

Shortly after wards I saw that the NZ Herald was interviewing Dean Bracewell, MD of Freightways, so I thought I would post a question. Below is my question and his response:

A question from a Herald reader. They are interested to know how technology fits into the future of Freightways. They say that Freightways seems to have lagged behind their largest competitor - CourierPost - in this area, but they have maintained market share and profitability. Do you see any major disadvantages in not having had the technology?

Not at all, but that question's probably got three or four parts to it.

Just stepping through them, technology is a part obviously of running a transport business such as Freightways and it always has been a key part of what we're about.

We've actually three quarters of the way through a $10 million upgrade to our IT system, so there's a fair bit of money and investment attached with IT

It's played a pivotal role in the business for 20 plus years and the information systems that we have are geared around delivering scalability because our business has grown very strongly so you've got to have information systems that can cope with that significant growth.

It's a very robust system but it has also got to be flexible to meet the varying customer needs. So we've got a very powerful, core information management system.

The part about lagging a competitor and still maintaining market share, well I think we've actually done more than that. We've grown our market share and we've grown our profitability over a number of years, so it's not just about maintaining it.

I think we've done this by keeping in touch with our customer needs and developing our services to suit those needs rather than getting caught up in a side-game that technology can distract from what you're really here to do.

We think it's most important not to lag customer demand rather than try and keep up with a competitor whose strategies we might disagree with.

Are we disadvantaged by not having some of the technology? Well, we made a decision to roll out in-van data capture technology this year and that's as a result of our customer demand but a time when we've assessed the network that transmits that data as being ready for us and the scanners that will go into our courier vans as being ready for us.

So, a few things have needed to come together but we believe the time is right.

And whilst we've been lining up to make that decision about the technology in the vans we've been focussing very heavily on ensuring we deliver our core service, which is getting packages to the right place at the right time.

What we believe we now have is a very compelling customer offer - premium service, competitive price and the latest technology to over-lay it all.

You talked about the scanners - how are the trials for those going?

They're going fine. We're rolling them out into the Auckland marketplace which is the most rigorous, high volume market to test the scanners and we'll get any glitches that are involved with new technology out of the way in this market prior to rolling them out around the rest of the country.

What developments - technology or otherwise - can we expect to see from Freightways in 2007?

I think you're going to see more of the same and whilst that might sound a bit ho hum, it's kind of what our customers like.

They want consistency, they want reliability, they want innovation when they're ready to innovate and when there is demand for it.

So what you're going to see from us is really more of the same and hopefully that will continue to deliver the sort of performance to all our stakeholders - our people, our employees, our contractors, our customers and our shareholders.

The article serves as a timely reminder, well to me at least, that technology matters very little if you are not delivering your core service. In NZC's case that is providing consistency and reliability,

You can read the full Herald article [here].

Is customer facing technology worth it?

Freightways Group announced their six monthly result yesterday and had 11% growth, reaching $144.3 million in trading revenue. It would seem that the growth of their core express/couriers business is neutral at best, which is what a few of us suspected.

One of the comments in the NZ Herald article was "A key initiative had been the initial implementation of a data service providing customers with access to real time service information."  Only in the last 12 months have Freightways started to truly provide this technology. Express Couriers, who own CourierPost, have had Track & Trace since 1991.

Track & Trace was always going to be the key to CourierPost's success. It was to be their competitive advantage and reduce their costs to make them more profitable. For 15 years they held this advantage. 15 years is a long time for any competitor in any market to be behind in IT, let alone a time sensitive market. The interesting thing is it never really seemed to make a dent in Freightways.

An insiders view
So, as an ex-insider to both groups, here is I think the key. In the initial years CourierPost focused all of it's energy on building customer facing systems, track & trace, real time scanners etc. All the while they had really poor back end systems, couldn't drive profitability (and therefore ownership) to branch level, had bad stock systems and worst of all couldn't manage their customer inquiries well.

Freightways on the other hand, had very established back office systems, albeit very archaic. But the up side is they have always had profitability to branch level, great stock management, and manual but effective processes for customer inquiries.

Freightways were clearly the market leader 15 years ago and Express Couriers have grown to be the largest, but they never took out Freightways, rather they absorbed many of the smaller players.

So, was CourierPost's 15 years of technology and millions upon millions of dollars worth it?

My conclusion
At the time I was passionate about the advantage that scanners would bring to CourierPost. But given time to reflect I would take strong robust back office systems, any day, over a customer facing system.

Back office systems allow you to manage the business easily and free up people to focus on providing real human service to customers. It also gives you a better platform to build customer facing systems.

I want (& need) both. I now know back office is the most important!

Being 'Green' can pay dividends

The size and scale of Wal-Mart continues to blow my mind. Check out this news snippet as they seek to cut packaging costs.

Wal-Mart plans to cut packaging 5%. The initiative is projected to reduce carbon dioxide emissions by 667,000 tonnes, equal to taking 213,000 trucks off the road annually and save 67m US gallons of diesel. The 5% packaging cuts will also generate US$ 3.4 billion in savings for Wal-Mart.

Think about it, they will take a fleet of trucks larger than size of NZ's entire transport industry off the road. Given however that a huge proportion of these trucks will be in places like China. I am sure they will be deployed somewhere else.

Being green can save significant dollars, particularly if you are the size of Wal-Mart!