Smoke and mirrors in transport – hidden costs in metro PUD
Recently I was working with a potential client, looking into cost savings for their business. We reviewed his current transport costs versus comparable jobs through the Bustle platform. I nearly fell off my chair when I was told what his cost were for specific movements!
I went away from this meeting thinking either:
- Some business will be going broke servicing the industry below market rates
- compliance and safety is being skipped
- that there is disconnect between customers expected and final charges
- or worse, should I just give up?
Instead of leaving it to assumptions I decided to test the market myself.
Move a 250 kilogram 1.2m x 1.2m pallet a total distance of 17 kilometres, during a normal business day within normal business hours, from an industrial estate to another industrial estate.
Here is what I learnt from requesting a quote from three industry recognised providers:
- The average time to open and establish an account ranged from 2 days to no email/call back.
- The companies I did talk with to set up my accounts were pleasant to deal with in what is a very competitive landscape, so that was great to see.
- The process to establish an account was archaic and outdated (I had to meet up to sign a carbon copy form).
- I was quoted prices ranging from $18 to $24
- I was told it could be done in a 4 hour window on any given day I require (Mon-Fri)
I will be fully open and honest and say that the comparable jobs in the Bustle platform ranged from $36 to $50 all-inclusive of fuel and GST. As a reader you are starting to think, this guy’s got no chance….
Here’s where I might surprise you:
What I was failed to be told upon my quote was;
- This quote was based on a 10-minute pick-up and delivery window
- Once outside this timeframe, there is a charge that rises in increments of 5 minutes
- This price was exclusive of fuel
- This price was exclusive of GST
What I did next was drove back to the pick-up and delivery points, sat outside the gates and timed a sample of five vehicles carrying similar sized consignments either in or out.
The average time at either end was 17 minutes. Restraints have to be removed or applied, paperwork has to be found, forklift operators have to be available and it depends on what number in the queue you are when you arrive. This is what happens in transport and things can only go so fast, pending the business processes or lack thereof.
Back to the customer
Transport companies give drivers jobs, routes and runs either via handheld scanner or paper (if they are still using paper account applications with carbon backing I doubt they are fully online) where the time stamps for a job are applied for arrived and departed at each end. Upon the drivers run being completed their administrators then work through a customer’s rate card and apply the below:
Base charge + (Total time – 20 minutes) + Fuel + GST
I drove the route, added up my times and came to;
Customer A) $24 + $14.40 + $3.46 + $4.20 = $46 all inclusive
Customer B) $18 + can’t tell me until after job is done + Fuel + GST = ??
Customer C) I will let you know when they get back to me re: an account.
One movement is hardly a large sample size, however what I am wanting to highlight is that this method IS applied industry-wide. Not only can we represent a 13% transport cost saving on this particular job we helped them identify the disconnect between operations and accounts payable where the person booking off a rate card, doesn’t necessarily see or pay the final charge. Nor can they remember what happened 2 weeks ago to challenge additional wait times on jobs that come back higher than the rate card.
I have witnessed countless end of month management reviews where forecasts on 3PL blew out and we spend the next 2 weeks running around trying to work out why. You are already 2 weeks in to the next month and “forecasting” next month’s costs. Knowing and managing your 3PL activity in real time has a direct transport cost saving benefit for businesses if you care to look.