7 initiatives Welch's Transport employs in order to stay lean
Given that fuel prices are climbing steadily, it’s important to consider what increases in fuel can do to the level of service and charges you receive from your logistics provider.
For instance, there are things that can be done to mitigate cost creep, poor driving, duty of care etc.
At Welch’s Transport, not only do we buy fuel as cheaply as possible, we provide a fair mechanism to accommodate rising fuel prices, as well as incentivising our drivers to drive as economically as possible.
How Increases in Fuel Can Affect Service Levels & Cost
If we look at the top 20 UK transport companies with annual turnover of between £10m and £30m, listed in ‘Motor Transport’, the average pre-tax profit margin is 3.2%. When fuel typically accounts for 30% of a transport company’s cost base, it needs only an 11% rise (for example; bulk diesel rate of 90p per litre rising to £1.00 per litre) to wipe out such companies’ pre-tax profits.
If this isn’t addressed, what this means for customers over the medium-to-long term is more pressure on resource, which can quickly impact on service levels. With reduced access to investment, both future growth and service enhancements are limited as a result. Ultimately, this leads to fewer healthy transport companies, meaning less competition, which could potentially result in an overall increase in customers’ distribution prices.
For this reason, it’s essential for the sustainable health of both supplier and customer that fluctuations in fuel prices are:
Is There a Fair Way to Introduce a Fuel Surcharge?
The most reasonable way is to introduce a timely fuel surcharge which tracks the price of fuel when it rises above an established and published base rate and then adjust the level of fuel surcharge each month, notifying customers of the following month’s change so that customers have the opportunity to notify their customers if they wish.
The drawback of this however is; how do customers know that they’re getting value for money when they themselves are not shopping around for the best buying price and, more importantly, once their chosen provider has bought the fuel, how can customers be satisfied that their provider is taking the best possible care of what is effectively now a customer asset?
How Logistics Providers Can Mitigate Cost Creep
Given that fuel prices are climbing steadily, at Welch’s Transport, we’re pleased to offer transparency and fairness with our fuel surcharge mechanism and, unlike some competitors, our fuel surcharge is only ever a fuel surcharge rather than a way to increase rates.
To support this, we have listed the 7 initiatives we employ to remain a lean logistics provider, and to ensure the best value to our customers’ asset (fuel) and freight…
7 Initiatives Welch’s Transport Employ to Stay Lean
1. Buy in Bulk
We buy fuel as cheaply as possible…Each year Welch’s Transport’s three depots at Duxford, Henlow and St Ives are trusted by its growing customer base to be prudent with this assumed asset by typically buying 1.6m litres of diesel in bulk at the most competitive rate on the market
2. Shop Around for the Best Supplier
When the time comes to buy, normally on a weekly or bi-weekly basis, each individual depot approaches at least four suppliers (from a total of twelve) and buys from the supplier which can offer timely delivery at the cheapest rate.
3. Remain Transparent with No Hidden Agenda
The supplier quotes are all entered onto a centrally shared document which is visible to the MD and the rest of the board, so the relationship between suppliers and Welch’s Transport remains neutral and fair.
4. Tank Filling At Low Temperature Times
At Welch’s Transport, all of our bulk diesel tanks are filled as early as possible in the morning when ambient temperature is lower, so that the natural expansion of diesel does not compromise the number of litres delivered.
The difference in measured volume, from an 08:00 delivery when it’s 15C to a 15:00 delivery when its 24C, can have as much as a 1% effect, which equates to 16,000 litres over the course of a typical year (source: National Engineering Labs, Project No. NWM006 Report no. 184/99)
5. Lean Driving Techniques & Black Box Technology
Lean driving techniques can reduce overall diesel consumption by as much as 10%. At Welch’s Transport, we understand that it’s when the diesel is in our trucks that we have the biggest possible influence. For this reason, we:
- Train our drivers to implement lean driving techniques, such as more gentle acceleration, deceleration, braking and smoother driving through forward planning
- Have our own in-house assessor to monitor the driving techniques of our 80-strong driver workforce
- Equip each of our vehicles with black box technology and forward-facing cameras to record and monitor drivers’ lean driving techniques and behaviour
- Brief, de-brief, coach and incentivise drivers on a daily basis to keep lean driving techniques “alive” and thereby ensure they drive as economically as possible at all times.
By completing each of these steps, we can ensure we’re getting the best miles per gallon possible. This not only helps to protect your asset, but is also great for minimising the impact of fuel increases and keeps your customers’ goods safer whilst in transit.
6. Communicate Effectively
In the event of fuel prices rising above the base rate for longer than one month, we publish our average buying price (per litre) across all three depots, show the calculation and result on the homepage of our customer portal (e-Transport), and publish the forthcoming month’s fuel surcharge under Latest News on our website.
7. Don’t “Mask” Rate Increases
We provide a fair mechanism to accommodate rising fuel prices. If fuel prices remain above the original base rate until our annual rate review, the current base rate is communicated and the fuel surcharge reset to 0%. This way, we always strive to keep a clear divide between the rates we charge for distribution services and the surcharge we may have to apply, thereby avoiding the practice of “masking” rate increases under the guise of a fuel surcharge.
For more information on Welch’s Transport and the services we offer, Contact Us today.