Feature Logistics The logic behind cost efficiency


Tim Fawkes of transport management company 3t Logistics has some tips to help manufacturers cut transport costs and improve efficiency


he Road Haulage Association esti- mates that the expected 3p fuel rise in January would would increase the cost of running a truck by £1,200 per annum. As the price of energy, transport, labour and raw materials has climbed, profit margins have contracted - and many companies are at a loss to know how to reduce costs any further. Furthermore, businesses are unwilling to compromise on customer service, believing that reducing transport costs will inevitably impact on service. However, by implementing specialised technology and applying efficiency improvement principles, streamlining processes can improve service levels.


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The cost of inefficiency Tim Fawkes says: “In my experience within the transport industry, few


companies have strategies in place to accurately measure waste in their transport operations. But, if they are unable to measure inefficiency, how can they expect to identify effective strategies for its reduction?


“Key areas to tackle are reducing empty running and maximising vehi- cle load fill. Statistics from the Department of Transport estimate that empty running accounts for over a quarter of all kilometres travelled, whilst the average empty running is one third. Addressing these problems not only enables a company to reduce energy consumption, but as a result cut carbon emissions.


“Organisations should know how full their vehicles are when they leave their site and be able to calculate pro- portions of empty running in their transport network. However, a spread


Tim Fawkes, 3T Logistics


3T Logistics T: 01162 824 111 www.3t-europe.com Enter 359


£100,000 efficiency savings for logistics firm T


he Russell Group, a logistics and warehousing firm, is achieving efficiency savings of over £100,000 a year after automating its purchase-to-pay process using m-hance’s electronic invoice solution, Invoice Approvals and Accruals. Before implementing IA & A, the Russell Group’s purchase-to-pay processes were extremely time-consuming and costly as a result of handling paper. Purchase invoices would arrive into its head office in Glasgow and then have to be circulated to its 15 different sites across the UK where they would require signatory approval. Invoices would often get lost or mislaid, resulting in further delays to the approval process. Ronnie Johnstone, Group ICT Manager, from the Russell Group, explains: “Previously it took approximately four weeks


from distributing an invoice to the relevant person to manually authorise it and then return the approved invoice to the finance department to process.This became inefficient as we used to spend inordinate amounts of time chasing people for approval.” Johnstone continues, “The lack of visibility as to where invoices were in the approval chain also impacted the control we had over our finances and our supplier relationships who are very important to us.” Using m-hance’s IA & A solution tightly integrated into its finance system, the 75,000 invoices that the Russell Group


receives each year are now electronically scanned or emailed directly to its head office. IA & A accurately tracks the status and location of all unapproved invoices using its finance system’s query tool, speeding-up its entire approval process and significantly reducing the amount of wasted time associated with lost or missing documents. Johnstone comments: “By automating a range of paper-based processes m-hance’s solution is saving us in excess of £100,000 each year and has given us much greater financial control. IA & A has given us remarkable time savings by reducing our invoice approval times from four weeks to just ten minutes, transforming staff productivity levels..” To further streamline its accounts payable processes, the Russell Group is considering implementing eInvoicing, m- hance’s new cloud-based invoice processing solution. Johnstone adds, “As a supply chain and logistics company we take our responsibilities to the environment seriously. By cutting paper consumption we anticipate that eInvoicing will support our green agenda and reduce our processing costs by up to 80 per cent.” m-hance


T: 0844 264 0932 S16 www.m-hance.com Enter 360


sheet is unlikely to offer the facility to apportion costs accurately - or to pro- vide the flexibility to interrogate infor- mation at shipment level. Companies really need more sophisticated soft- ware developed specifically for the purpose, such as the system we use known as Solo which can administer a whole range of transport processes.”


Ways of reducing transport costs • Multiple carriers - using one carrier rarely makes economic sense and is unlikely to reduce empty running. Using a network of quality haulage com- panies offers more flexibility to fulfil requirements as and when you need it. • Pricing - does the tariff structure encourage efficiency from your haulier? The wrong tariff may offer few incentives to your haulier to reduce the cost. If you have multiple carriers are you utilising the best option? • Customer demand - good customer service is important, but if your cus- tomers are inflexible, demanding when goods should be delivered and in what quantity, you may need to compro- mise. Why not offer your client a share in the transport saving achieved by taking a delivery on a set day? Before the fuel duty rise businesses should maximise the opportunity by using this period to assess their trans- port costs. The fact is that most compa- nies will be able to find some areas of inefficiency in their supply chain. With a little help from the experts, those companies should be able to put measures in place which will both improve logistics processes and save costs – long term.


NOVEMBER/DECEMBER 2012 Materials Handling & Logistics


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