As the courier and freight services industries adapt to more complex and sophisticated environments, and after several years of growth, outsourcing fleet management services will become increasingly attractive, says fleet administrator Imperial Fleet Management (IFM) CEO Nicholas De Canha.
“Courier and freight companies aim to focus on the core of their businesses, including client relationships and route planning, to support efficient delivery. In light of this, they require more vehicle uptime and consequent flexibility provided by the fleet management and leasing industry. As they need more services, our industry grows, therefore, the industry is expected to increase slightly more than the current local economic growth rate of about 6% a year,” De Canha tells Engineering News.
He stresses that, while a key focus area for the courier and freight industry is enhanced, which includes cost efficiency, effective fleet management can assist in increasing the industry’s efficiency.
Similarly, the Council for Scientific and Industrial Research’s (CSIR’s) tenth State of Logistics Survey for South Africa, released in May, notes that “the private sector appreciates the role supply chain management (of which logistics is a major constituent) plays as a creator of competitive advantage”, highlighting that South African supply chains have migrated from ‘survival’ to ‘optimised’ mode, enabling organisations to harness efficiencies and improve service levels in the past decade.
“Partnering with an outsourced fleet management specialist can assist a business owner in correctly tracking driver behaviour and vehicle performance, as well as in managing e-toll accounts,” De Canha says, noting that IFM can deliver significant efficiency and uptime to the courier and freight industry – an industry that demands an uptime of 95% and higher.
While De Canha estimates that about 60% of a courier or freight company’s cost base is vehicle-related expenses, he emphasises IFM’s focus on efficient fleet management.
“IFM advises on vehicle life cycle and choice, procures vehicle finance and operating leasing management and ensures correct maintenance. In turn, higher uptime allows our clients to reduce their fleet and we stabilise invoicing to provide an invoice in line with the company’s fluctuating revenue.”
He further highlights the importance of the courier and freight companies recognising the indirect cost savings achieved.
“A well-managed fleet can result in a 6% to 7% improvement in uptime, and maintenance cost reductions of between 10% and 15%. In addition, with the use of professional and updated telematics, fuel use can decrease by about 10%,” De Canha says, noting that overall, this can amount to a reduction of about 5% to 6% for each kilometre travelled.
Considering that courier and freight companies need to process large volumes at low prices in a significantly competitive market, they continuously face several challenges, particularly route planning, in which they need to improve amid fluctuating fuel prices, De Canha says, reiterating that fuel forms a significant part of vehicle-related expenses for courier companies.
Transport costs – comprising about 61% in 2012 and 2013 – form the largest component of logistics costs, and fuel is the largest component of transport costs, according to the CSIR’s logistics survey.
Other key challenges include vehicle-price increases; credit-approval-rate reductions; complex regulatory environments, such as changes to the National Road Traffic Act; licensing and permit fee increases; carbon taxes that are expected to be implemented in 2016, which will lead to the requirement to offset carbon emissions; and e-tolling in Gauteng, De Canha notes.
He told Engineering News in January that e-tolls, implemented in December 2013, could significantly increase the costs of operating a fleet in Gauteng, noting that, for example, the operating cost of a Gauteng fleet of about 30 trucks could increase by about R30 000 a month.
Managing e-tolling is also exacerbated by account confusion as a result of cloned licence plates and faulty registrations.
“Owing to the current complexities of achieving the best e-toll discounts, IFM, as a South African National Roads Agency e-toll account holder, assists courier and freight companies with their e-toll administration management, having developed an e-toll management payment software product at the beginning of the year to assist passenger and commercial vehicle accounts,” he adds.
Despite local market pressures, such as high consumer debt levels and inflation, constrained interest rates and volatile exchange rates, De Canha notes an increase in activity from the courier and freight industry, owing to the festive season.
“This is compounded by the South African Post Office’s unprotected three-month-long strike, resulting in new demand for small-goods couriers he says, adding that the increase is further supported by last month’s fuel price decrease.
However, the number of courier and freight fleet vehicles sent for maintenance has decreased, owing to the significant demand for enhanced and continuous uptime during the festive season, De Canha points out.
“In light of this, IFM offers short-term rental vehicles, as well as 24-hour breakdown services, to several courier and freight companies to ensure continuous uptime of near 100% and reliable delivery, even when their fleet vehicles are sent for maintenance,” De Canha concludes.