Davies has been a non-executive director for 14 years and brings a lifetime of experience in the logistics industry having started his first business Russell Davies in 1974. He has set up and sold three more successful companies since, the last being truck dealer Hanbury Riverside which he sold to Asset Alliance Group in 2018.

Stobart joined the family firm at the age of 15 in 1976 and has spent most of his working life with Eddie Stobart through its changes in ownership that eventually saw it back in private hands when it was bought in 2021 by Culina Group, which is still 100% owned by the Müller family.

Set up by van Mourik in 1994 in Market Drayton as Müller Dairies’ UK distribution arm, Culina Group has grown steadily through a series of strategic takeovers and now includes Culina Logistics, Fowler Welch, CML, MMiD, Stobart, Stobart Europe, Great Bear, Warrens, The Pallet Network, International Road Ferry, iForce, IPS, The Logistics People.

While each subsidiary continues to operate as an autonomous unit, van Mourik is shaping the business into national ambient and chilled networks and the group’s 4,000 trucks and over 9,000 trailers are all operated under the umbrella of Culina Asset Management, with overall responsibility sitting with William Stobart. A third division, Industrial Support Services, pulls together the group’s e-commerce fulfilment, contract packing and labour resource provision while CML, a supplier consolidation operation, provides services specifically for discount retailers and MMiD runs the milk operation for Müller Dairies with a separate fleet of 1,000 trucks.

Van Mourik, pictured, is also focusing more of Culina Group’s 20m sq ft of warehousing into the Great Bear ambient business and more of the transport operation into Stobart. But his argument for avoiding other groups’ error of absorbing acquisitions completely into the parent is clear. “Customers will still deal with Great Bear, Stobart or any of the other businesses in the group which have retained their identities” he says.

“Probably one of the biggest mistakes I could make is turning it all into Culina.”

There have been a couple of exceptions to this rule in that AIM and Robbie Burns have gone into Fowler Welch, though the management of both businesses have stayed on.

Enabling the operating companies to share resources has enabled Culina Group to reduce its overall fleet and headcount through efficiency gains, but customer service remains king.

“Ultimately we will end up with a control tower that will recommend how a particular flow is handled,” says van Mourik. “But service levels come first and the rest will follow. We also try to keep cost within the business as much as possible.

“We will always use subcontractors but we can use a few less if we get ourselves organised better.”

Coping with peaks in demand is made easier by the large number of trampers that Stobart still operates, contrary to trends elsewhere in the haulage sector.

“We find it easy to get trampers as so many drivers want to tramp, especially at night and weekends,” says Stobart, pictured. “They are getting a good wage and are flooding back into the industry. Give them a good truck with a microwave and a shower and they will stay.”

The trampers are allocated brand new trucks and the majority of the time they are the only driver of the vehicle – still 50% Scania R-series – for their first year before they go on to be double-shifted elsewhere in the business.

To streamline the group further the management is rolling out a group-wide SAP enterprise resource planning system that will centralise 18 existing separate finance and HR functions.

The different businesses also still operate a variety of inherited transport management systems and the company is planning to standardise the chilled network on one platform and the ambient network on another.

“We have all sorts of transport systems at the moment and that is unsustainable long term,” van Mourik says. “Equally we have a variety of warehouse management systems, some of which are bespoke, and do we want to carry on rolling them out or go for the system that has been a great success within the businesses?”

“In the long term it would be great to have SAP - responsible for finance and HR, one or two warehouse and transport management systems and one vehicle management system.

“We will then carry on growing organically and by acquisition. Certain deals we have talked about haven’t come off yet largely as a result of the economy and I want to see where we are going in 2024.”

Through iForce, Culina Group is a major player in e-fulfilment and has benefited from the boom in online retail. One area van Mourik had looked at was home delivery and while he says the prices of companies in this space have “come down a lot” he wants to wait and see how the UK economy performs before committing.

“If I compare the FMCG volumes we shifted against where we should have been we are 10% down across the business,” he says. “We haven’t lost any customers, it is just because we are all buying less as everything is so expensive.

“I want to see the dust settle.”

Van Mourik does not see any natural limit on the size of Culina Group, which doubled in size in 2021 with the acquisition of Stobart parent GreenWhiteStar Acquisitions (GWSA).

“You can never say it is big enough because when you stop growing you go backwards,” he says. “We have aspirations to grow but it has to be profitable. Nobody is holding a gun to our head saying we must achieve XYZ in the next couple of years. If the opportunity is there we will grow but if the market isn’t ready for a new move we don’t need to do it.

“It is a relatively relaxed position to be in. We are not a PLC.”

Culina only buys strong companies with good management.

“We have no time to start rebuilding businesses, we just want plug and play,” says van Mourik. “When we bought GWSA all the so-called bad things had already been dealt with and all the plans about how we were going to take it forward strategically had already been agreed up front as part of the due diligence process.

“Two years on, nothing has changed to our plan.”

Davies, pictured, has plenty of experience of buying and selling businesses and agrees 100% with van Mourik.

“If you buy a basket case it will have poor management,” he says. “So it’s not a bargain unless you can just bolt the revenue onto your existing network which is rare.

“This downturn in the market is helping us in a way. It is giving us the opportunity to look at the business and consolidate across the group.”

But van Mourik is quick to point out that this does not mean a pause in the growth strategy. “It won’t stop us picking up one or two things,” he says. “If we see an opportunity we will certainly engage.”

Culina Group’s chilled network is however now very nearly complete and van Mourik says there isn’t much left in that market worth buying. Stobart pulled out of chilled transport 10 years ago because stiff competition had driven rates down below costs and van Mourik says it is still a tough market.

“The entry barrier is not cheap and even for the players left to go out and make a major investment in a new warehouse is not easy,” he says. “The levels of automation required are also increasing. It works where you have one long term customer and the pallets are all the same size and weight, like we have with Müller at Market Drayton, for example, but is more difficult to automate warehouses for multiple customers.”

More automation is however inevitable as the tight labour market exacerbated by Brexit is making it more expensive to employ warehouse staff.

“The driver problem has more or less gone away because of the pay adjustment we have all made,” says van Mourik. “But in the warehouse the labour shortage is still there and turnover is high, especially in a cold environment.

“We are seriously looking at automation in both ambient and chill.”

As well as higher labour and warehousing costs, prices of new trucks and trailers have rocketed, and Culina Group is having to pass some of these increases onto customers.

“They have had to take quite a bit as there is only so much we can absorb,” says van Mourik. “Lead times on new trucks have come down but prices are a lot higher.

“Electric trucks will be even more expensive and we can’t afford that. I think everyone is in denial at the moment.”

While a large majority of Culina Group’s activity is in the UK it is growing its continental European business. Stobart Europe’s general cargo division is run from Bulgaria and Belgium and provides pan-European transport plus warehousing in Belgium and Germany. International Road Ferry (IRF), acquired in January 2023, specialises in short sea mainly unaccompanied trailer movements between the Netherlands, Germany, Switzerland and the UK. IRF is now shipping around 70 trailers a day in and out of the UK.

“Culina Group never really got involved in collecting or organising trailers from the continent for our customers,” says van Mourik. “It was the next opportunity as we can only go so far here in the UK. I wouldn’t say we are at the end of the journey but we have to be careful with the Competition Commission so are looking more towards Europe - in a controlled manner.

“We are looking at other acquisitions that can support that.”

Brexit is still causing friction on the UK’s borders with the EU and the island of Ireland, and avid free trader van Mourik still finds it hard to accept.

“Tell me one good thing that has come out of Brexit,” he says. “It was all about emotion. The EU is our biggest trading partner and it is a real problem. But we are where we are and have to get on with it.”

While some European hauliers are avoiding the UK because of border delays, the imbalance in our physical trade remains and finding profitable loads from the UK to the continent is a growing problem.

“The imbalance will probably get worse,” predicts van Mourik. “Manufacturing is shrinking further and further as the UK becomes a service economy.”

Delivering sustainable solutions

Culina Group’s strapline is ‘Delivering Sustainable Solutions’ and while it is experimenting with alternative fuels including electric vehicles its immediate priority is to run the existing fleet as efficiently as possible by sharing capacity and reducing empty miles. As a result the group fleet achieves an impressive 86% load fill, well above the industry average of 72%.

Stobart is testing two electric refrigeration units partially powered by solar panels on the trailer roof, but is finding them operationally more restrictive than conventional diesel engine-powered versions.

“They only work on a hot, sunny day when the fridges are working harder and we have to plug them in as soon as they arrive at the DC to maintain the temperature,” he says. “They are not as versatile. It works on a straight A to B journey but I can’t put them in the network.”

Culina Group was among the pioneers of electric fridges back in 1994 but van Mourik says they did not perform.

“I had to give them up on them,” he says. “When they came into our yard I could plug them in but everywhere else it was a disaster.”

Van Mourik is however well aware of the increasingly pressing need to find alternatives to diesel trucks and fridges.

“The industry has to find a solution,” he says. “The truck manufacturers are committed to going electric and trailers will be the same.

“Sooner or later the industry will have to bite the apple. What is for sure is that distribution costs will be affected by the change needed.”

Squaring the circle of decarbonisation and affordable transport remains a challenge however.

“Customers are coming to us saying we have to deliver sustainable solutions and we are asking our suppliers to help us with this,” says Davies. “We are all looking at each other and no one wants to pay.

“We can’t be the innovators here. We are reacting to market pressures whether that is customers or government – and that is what we have always done.”

Trains still on track at Stobart

Stobart operates the UK’s largest domestic rail freight service carrying just-in-time products for the retail sector and has designed its own 44ft curtain sided rail container for multimodal operations. Stobart Ports handles cargoes imported through Felixstowe and Southampton and uses rail terminals around the UK to forward freight to its DCs for onward delivery.

“Stobart Ports has always been multimodal,” says William Stobart. “We have developed it and revenues have increased 38% year on year.

“Our curtainsided trailer is the only one running in the UK. It is carrying plasterboard and cola up and down to Scotland from Daventry.

“It works for shared users, but we have to have control at both ends. The biggest challenge for rail is the height.”

A doubledeck road trailer can be up to 4.9m high in the UK whereas the maximum height on the railway is 2.9m.

Stobart started running daily trains from Daventry to Grangemouth for Tesco back in 2006, adding a weekly service from Valencia in southern Spain to Dagenham three years later, and almost 20 years on rail has a growing future with the Stobart business.

“Everybody is now looking at trains,” says Davies. “Rail isn’t top of our list but we see it as our responsibility to develop more sustainable solutions.”

Busting the myth of a Culina Group listing.

Before our interview, MT had been contacted by a number of people who had seen a prospectus for a sale of shares in Culina Group valuing the business at £1.5bn. But van Mourik was keen to quash rumours of any impending listing.

“The Müller family received an unsolicited approach by an international broker who said, ‘if you ever want to sell Culina Group or Muller now is the time’,” he says. “Theo Muller is now 83 so he asked what value the broker would put on them. An enquiry was made in the marketplace and certain big shipping lines would have seen it, and that is how this rumour came about.

“Will anything be done with it – no. It is a bit like getting your house valued even if you are not selling. The only thing Theo has ever sold was a restaurant chain and it took years to convince him it wasn’t core and should be sold. He’s happy now because that was just before Covid!

“Culina Group is not for sale.”

The post With 150 years’ collective experience, Culina Group directors know a few secrets to success appeared first on Motor Transport.

Ian Maudsley, pictured, took over as MD from current chairman Peter Allen in May this year after joining from RT Keedwell as business development and commercial manager in August 2014. Before his two years with Keedwell, Maudsley spent 23 years with East Lancashire Warehousing (EWL) and it is perhaps not surprising that in the last decade FDC has grown its warehousing capacity to almost 1 million sq ft across three sites in Lancashire, including its 330,000sq ft HQ in Walton Summit which it acquired in February 2015.

FDC’s origins were in 1983 when Steve Allen bought a van and began distributing parcels, joined later by brother Peter when they purchased an ANC Franchise. They realised that pallet distribution was a more stable and profitable business and so began FDC in 1997. The letters originally stood for Freight Distribution Consultants when it was founded in Rough Hey Road, Preston with two trucks, two vans and 15 employees.

When Maudsley joined the company it was based at a 14-acre site at Moorland Gate Business Park in Chorley, turned over £6m a year and employed 40. By 2022 turnover had grown to almost £23m – probably putting it into the MT Top 100 this year - and staff numbers increased to 150 including 90 drivers.

As well as Walton Summit which FDC owns outright it now rents a 120,000sq ft site in Strand Road, Preston and a 500,000sq ft site in Blackpool.

“We are not a typical haulier and we never set out to be an A to B haulier,” says Maudsley. “We are much more a contractual haulier and will invest in trucks, trailers, people and IT on the back of the right contract.

“We work in three main sectors, beverages, pharmaceutical products and ecommerce, so we have a nice spread. We look for organisations which operate 24/7 as that improves our margins. We don’t run all the fleet seven days a week but a good percentage does run at nights and weekends, particularly into the big beverage filling halls.

“We also like customers who use all our facilities – warehousing, transport, pallet network and groupage. That’s our class A customer as we are in control of the products from loading in to loading out.”

Maudsley says that Christmas is not FDC’s biggest peak and it is busiest on bank holidays, especially when they are back to back like they were in April and May this year.

“In six weeks we had four bank holidays,” he says. “But like everybody the biggest impact is without doubt the weather and big sporting events. Get those two together and sales can be amazing.”

Brexit in 2020 caused a spike in demand for UK warehousing as importers sought to head off supply chain disruption, and the legacy is a continuing boom of spec development sheds especially in the Midlands.

“Before Brexit people were unsure, and new builds slowed down five years ago,” says Maudsley. “Then people wanted more B grade space so that increased the capacity requirement for warehousing like ours. Then Brexit came and customers who were storing 500 pallets wanted to store 1,000 and that led to the big increase in demand.

“Then PPE came along and while that is easing down the warehousing market is still strong. It is peaking a little now; everyone wants to be near a motorway but you pay heavily for that.

“Our warehouses have been operating at full capacity for the last few years but we have some capacity appearing at our Blackpool site.”

As a North West-based national haulier would FDC benefit from having a base further south?

“Yes and no,” answers Maudsley. “We have looked at a few options and if there was an FDC somewhere else in the country we would buy it. Our operating model would lend itself to another depot but we haven’t come across one yet.”

FDC covers the PR (Preston) and FY (Blackpool) postcodes for TPN and is one of the biggest inputters into the network, which claims to be the UK’s largest with throughput of over 100,000 pallets a week and a network of 130 depots.

“TPN tells us it is the UK’s biggest network and it certainly has the best service levels,” says Maudsley. “We are only as strong as our weakest partner and TPN’s great success is that it supports the weaker partners.

“As a big inputter we understand that if we put in say 1,000 pallets, at the other end there are other partners who have to deliver them. If they suddenly get double the number of pallets there will be deliveries not made.”

The company sends 10 trunks a night to the TPN central hub, some of which run back only partly loaded, and the network represents around a quarter of FDC’s total volumes, with 70% of its transport business being full trailer loads.

“We are probably 60/40 input/output at the moment,” says FDC sales manager Joe Wood. “If it wasn’t for our groupage division where we group TPN freight and take it direct on our own vehicles we would be sending 12 or 13 trunks a night which would lead to an even greater imbalance.

“We also put five trunks worth of freight into our northern hub.”

FDC’s Walton Summit site has been serving as TPN’s northern hub for the last six years. It has four drive-through bays for doubledecks under cover and handles up to 2,500 pallets a night from 35 members who deliver and collect their northern pallets there rather than trunking them to the central hub in Minworth, Sutton Coldfield.

“It was created to relieve pressure on the central hub and to provide a better service to Scotland,” explains Maudsley. “The trunks leave here at 1am to go back to Scotland and we are two hours less driving time than Minworth to places like Aberdeen and Inverness, so that has improved our next-day service levels.

“TPN is very strong in the north of the UK in terms of members and volumes.”

There is no set policy on what size of shipment FDC would put through TPN or carry on its own groupage service.

“It is more about the configuration of where the truck is going,” says Maudsley. “There is also an element of which customer it is. If it is bags of powder for example it is so easy to damage a bag and then the load gets rejected. Taking it direct avoids five movements of the pallet in the network which can be a problem if the pallet isn’t wrapped very well.

“If TPN is having a problem in a certain area we also try to be proactive and offer a service with our own truck to ensure continuity of service. In Covid they had a member having difficulties in south Manchester so we put a truck on there permanently until the situation was resolved.

“In the end it is our customers’ expectations that drives us and all they want is their pallet delivered on time, in full. We are very proud of our service level and that of TPN, a and that is why our pallet/groupage sector has grown.”

TPN has outgrown its Minworth hub near Sutton Coldfield and later this year is moving to a new £75m, 600,000sq ft site on the former Bison Concrete factory in Swadlincote, south Derbyshire, 20 miles north of its current location.

The relocation has reignited the debate about hub fees and delivery rates, a topic on which big inputters like FDC sometimes have different views from smaller firms which rely more on delivery revenue.

“I would say some smaller members and members in certain challenging areas need to be paid the correct revenue to ensure they can offer the service,” says Maudsley diplomatically. “It also depends on the area - take London, for example. In our area our drivers can go out and do eight or 10 drops easily and then do a similar number of collections. In London if they get through four or five drops that is all they will do.

“They do get paid a bit more but making it pay is difficult.”

Wood accepts that some of the hauliers who went under in Covid were not necessarily badly run businesses and below-cost delivery rates could have been a factor.

“When we are trying to recruit new members some will say ‘I’m not leaving this network as they pay me £20 a pallet and you are only offering £15’,” he says. “Now our service levels are back up to where they were before Covid we can go to customers and say ‘we need to pay our partners more so the rates have to increase’.”

Making money from pallet network deliveries also depends heavily on drop density and Maudsley says FDC is lucky in that its furthest delivery point is Fleetwood, just 50 miles from Preston.

“Some people covering the South West or Norwich or Cumbria could be doing 80 or 90 miles to deliver one pallet,” he says. “How do you price that? If you pay them £100 it is arguably still not enough. You have to subsidise it somewhere else and whether that is within our own business or within TPN is the big debate.

“Customers have been winning hands down from the competition between the networks and rates haven’t really moved in 10 years.”

TPN was acquired by Eddie Stobart Logistics in 2018 and in 2021 became part of the Culina Group when it acquired Stobart parent GreenWhiteStar.

The network has never gone for high volume, low value central accounts, though some members were worried that they would start seeing this type of business in the network after it was sold.

“Culina must have many trucks running around with five or 10 pallets – one option would be to divert these deliveries through the network which strengthens all partners’ volumes,” argues Maudsley. “It didn’t really work when Stobart owned TPN but I think Culina will make it work.

“There will be one or two different operations in the new hub which will help everybody.”

Covid also saw a boom in B2C home deliveries through pallet networks, often involving heavy, tall pallets of building materials, turf etc as home owners kept busy renovating their properties.

TPN accepts pallets up to 1,000kg and 2m high without surcharges and FDC has invested in electric pump trucks for every delivery vehicle. It also instructs drivers to deliver only to the kerbside and not attempt to negotiate driveways or garden paths.

“Unfortunately some people have unrealistic expectations,” says Maudsley. “They tell drivers ‘well, you can’t leave it there’ in which case the only option is to take it back.

“I take my hat off to all delivery drivers because it is a tough job. People really do maximise what they can get on a pallet.”

The FDC fleet currently consists of 70 trucks and 100 trailers and is predominantly Scania R-series on its 44-tonne artics and DAF CFs for its 26- and 18-tonne rigid pick up and drop off vehicles. It uses a mix of purchase and contract hire depending on vehicle type and duty.

“All of the rigid trucks below 26 tonnes we buy,” says Maudsley. “Artics over the years we contract hired but in the last 18 months we have started to purchase. So we will have a mix to give us flexibility because you never know what is around the corner.

“We pride ourselves on running a newish fleet, with most vehicles no more than five or six years old.”
Lead times on new trucks have come down in recent months as hauliers begin to delay or cancel orders due to the uncertain economic outlook.

“It depends if you want a specific model and a specific spec,” says Maudsley. “Then you can still be waiting 40 or 50 weeks. If you’re not as choosy, which generally we’re not, you get a better price and shorter lead times.

“Forklift trucks are still on 40 week lead times however.”

All FDC’s trailers come from two suppliers, SDC and Montracon. A certain percentage have to be in the new TPN livery which Wood says looks “very smart”.

“When they rebranded, Culina said that whatever vehicles we wanted in the new livery they would supply and install new curtains,” he says.

Sticking to the knitting means no inhouse R&M

FDC does not do any inhouse R&M, using nearby dealers Preston Scania for its artics and Lancashire DAF for its rigids. Its trailers are maintained by NWES, a local trailer rental and maintenance firm.

“We know our strengths and we have a model which works for us,” says Maudsley. “It is all about the relationship with our suppliers. Preston Scania who manage our Scania fleet don’t offer seven-day servicing but they do five and a half days which has always been a gripe of mine. However, we do get a fantastic service.

“To be fair they will move things around and because all our trucks are connected remotely, they can see when the trucks are here. So they will ring us and say ‘we see truck XYZ is in, can we have that tonight if you’re not using it?’”

FDC runs on eight-weekly PMIs for most of its vehicles, with only a few older vehicles on six-weekly inspections.

The company operates on two IT systems, the TPN IT-Connect pallet tracking system and a Mandata transport management system. “We are an IT-orientated business and integrate the two systems with our Sage accounting software,” says Maudsley.

FDC’s drivers working nights or weekends all have the numbers to call if they have a breakdown or tyre problem, so they do not need to contact a traffic planner to get back on the road.

Driver training key to getting top performance

FDC uses Scania’s Fleet Management telematics system to monitor the performance of its drivers.

Maudsley recognises that each driver’s MPG results can vary enormously depending on the vehicle and route but says most drivers respond well to training on how to get the best from the latest truck technology.

“The conscientious ones will buy into it and that can rub off on to the others so they understand that, when they sit in front of an operation manager asking for a pay review, they will have a better chance,” he says. “We get weekly reports from the Scania system and if you put the effort in with them it pays off.”

FDC does not reward drivers directly for driving efficiently but it is something the company takes into account in the overall picture regarding efficiency of the operation.

“The costs increase immensely going from a good to even an average driver,” says Maudsley. “Agency drivers’ efficiencies can be more challenging due to the fact they are driving different trucks all the time.”

FDC reduced the percentage of shifts filled with agency drivers to 30% after the significant increase in driver wages in 2021. “We are lucky to have an agency in our building and we work well together,” says Maudsley. “Our agency drivers are treated very much like our own drivers.”

FDC does not bring in and train up new drivers as yet but has successfully taken a number of Class 2 drivers to Class 1.

Wood is however keen to start a training scheme for new drivers.

“We lost so many drivers when the Driver CPC came in,” he says. “We have to try and get the younger generation into the industry. The problem is insurance – too many companies won’t employ drivers under 25 or until they have two years’ experience. By that age many people have already decided on their career and won’t suddenly say ‘let’s go into trucking’.

“Our insurance now allows us to have drivers with one year’s experience and it is something we are looking at.”

Electric Scania on trial

At the time of MT’s visit in August, FDC was about to dip its toe in the zero emissions world with a trial of its first battery electric truck – an 18-tonne Scania.

“We need to see if it can do 10 drops and a similar number of collections in our TPN territory,” says Maudsley. “We know electric vans work well on short trips but the problem we have is charging.

“We are quite fortunate here at Walton Summit as this used to be Bosal Exhaust’s factory so we have quite a large electrical supply. But until we get a charger installed it will be going to the local Scania dealer who can fast charge it for us in two hours.”

While FDC still has 10 trampers out on the road all week, the majority of the trucks return to base and when the fleet begins to switch to electric they will need both overnight and fast charging on site.

“A lot of the trucks are double-shifted,” says Maudsley. “They go out during the day then at night they go down to the TPN hub. Hopefully the new hub will have charging facilities so we could run down on a charge and recharge while they are being unloaded and reloaded. We will need to provide something similar here at the northern hub so they can tip, charge and go back.”

FDC is also considering a switch to hydrotreated vegetable oil (HVO), a low carbon emissions drop-in replacement fuel. It has its own fuel bunkering station at Walton Summit and is looking at a couple of possible suppliers.

“It costs 30% more but there is an 80% saving on CO2 emissions which is key to some of our major customers,” says Maudsley. “A great number of customers would engage in this project to gain the emissions savings but it does come at a cost!

“We will endeavour to implement changes to reduce our emissions going forward through various routes. As a medium size business in a very competitive sector we have to be doing something slightly different to ensure we stay ahead in this fast moving industry.”

Family owners still in it for the long haul

FDC is still owned by one of the founders Stephen Allen and his younger brother Peter, and they have no plans to sell what is a successful and growing business.

Wood is the grandson of co-founder Stephen Allen and he says the family is in “no mood to slow down”.

Aged just 30, when he finished college he wanted to earn some money in the family firm before deciding what to do with his life. “That was 12 years ago,” he says. “I managed to get to Australia for a few months then I was straight back here!

“Since we left Chorley we have just grown and grown. When I started we did two trunks a night to the hub.”

Maudsley is confident that the new blood the company has brought in in recent years will ensure the business continues to thrive.

“We have a young team below the senior management who are learning and bringing in different skills which is very important,” he says. “We are very positive that we will keep going with the model we have got and there might be some new doors opening as competitors ease off.”

The post FDC still in Lancashire premier league 25 years on appeared first on Motor Transport.

As in year one, when the DfT invested £345,000, this public funding will represent under a third of income, with the majority coming in sponsorship from logistics companies and trade associations.
Launched in August 2022, Generation Logistics is a ground-breaking collaboration managed by the CILT (UK) and Logistics UK supported by the DfT, more than 30 leading companies and 17 trade associations including the RHA and UKWA.

An Ambassadors Network has also been established, with now over 290 logistics professionals working to inform and inspire new talent through events and engagements.

To date, the campaign has:
• Reached an audience of over 460m people
• Generated over 650,000 visits to the Generation Logistics Hub to see information about logistics and opportunities within the sector
• Resulted in over 3 million engagements with interested individuals on social media alone

Phil Roe, executive sponsor of Generation Logistics, pictured, welcomed the DfT backing.

“It is fantastic news that the DfT has committed to supporting Generation Logistics for a further year and is recognition of the results we have achieved so far,” he says. “This support lays the foundations for the campaign to push into its second year at what is a critical time for the industry.”

Roe, who is also president of Logistics UK and a board member of the CILT, has over 25 years’ experience in the logistics sector, including 18 years with DHL Supply Chain. He tells MT how Generation Logistics came into being.

“The original idea for a campaign to raise awareness of logistics as a great place to work came from a discussion that David Wells [CEO of Logistics UK] had with Grant Shapps MP, [then transport secretary] in early 2022,” he says. “That was partly because we'd seen the success other sectors have had doing similar things.

“Also, I think it was a general feeling that the sector had been hiding its colours for too long. As a critical sector underpinning the rest of the UK economy, we need to get out there.”

The transport and logistics sector has long been bedevilled by a silo mentality, with each trade association ploughing its own furrow, but a new spirit of cooperation – especially since Richard Smith took over as MD of the RHA in January 2022 – meant that the CILT and Logistics UK could go to the DfT and speak on behalf of the whole industry.

“We took a decision fairly early on to do this in a very collaborative manner,” says Roe. “The approach to setting up the campaign with the DfT was that the CILT, which is a charity operating a ring-fenced financial arrangement, would work with Logistics UK to create collaboration across all different areas of logistics, from private operators to public sector bodies and trade associations.

“Fundamentally, Generation Logistics is an awareness campaign supported by the government, but overwhelmingly financed by the private sector, to raise awareness of the great careers and opportunities that exist within the industry.”

Piecemeal attempts have been made to promote careers in logistics to young people – remember Love Logistics? – but achieving the scale needed to reach millions of potential recruits required everyone to pull together to secure government cash.

“It uses the collateral that's gained by working with the sponsors and the trade associations to promote the industry to people who are not working in logistics,” explains Roe. “That is really critical because sometimes it goes under the radar. The social media campaigns that we've put together are absolutely aimed at people who don't work in logistics rather than the people who already do.”

Roe says Generation Logistics is an “umbrella project”, pulling together people from Logistics UK and CILT into a team, rather than a company and the money raised by Generation Logistics is held in a restricted fund by the CILT.

In its first year Generation Logistics raised just under £900,000 from industry sponsors, and it is looking to raise a slightly smaller sum in year two, as the setup costs were all in the first year.

“The project has a steering team made up of a number of the gold sponsors,” he goes on. “Ultimately, it has a reporting line into the DfT as well, because they've put quite a bit of money into it. We haven't set it up as a separate company or anything like that, mainly because there was no need to.

“It's a project using the best of abilities across the sector.”

The programme is managed by Bethany Windsor, pictured, who has been at CILT (UK) for six years and for nine years was a committee member at Women in Logistics UK, a forum of CILT (UK) that works to connect, engage and inspire those working in the logistics sector.

Windsor also oversees the management of the NOVUS programme, which brings together 10 leading UK universities with students wanting to study for logistics and supply chain degrees and 19 sector-based sponsoring companies.. She was also briefly the liaison between social mobility charity Career Ready and Think Logistics, the forerunner to Generation Logistics founded by Abbey Logistics chairman Steve Granite in 2013. Two full time members of staff have been appointed to handle PR and marketing, supported by a digital marketing and PR agency, ilk, focusing on direct communication to consumers of all ages.

But a major element in the programme remains giving logistics professionals the tools to go out to schools and colleges to evangelise about the careers available in the industry, part of the programme which will be expanded in year two of the campaign to include the creation of educational materials for a range of core subjects.

“In December we invited people to come and be an ambassador for the programme,” says Roe. “We have about 290 of them at the moment. Where we get requests to work with schools on careers days we send those volunteer ambassadors to attend or run events.”

A key aim of Generation Logistics is to coordinate and standardise the efforts that many operators already make to work with their local schools and colleges.

“We’ve seen a huge amount of endeavor across all different regions, and a lot of that reflects the characters of the leaders,” says Roe. “But if you go into schools and if you look at lessons, for example, there's nothing around logistics.

“We're not going to be a separate part of the curriculum but we are creating logistics-themed lessons that can be used in maths, in business studies and in geography. The feedback that we've picked up is nobody really knows what logistics is; we've got to do something about that.”

Teachers often welcome outside assistance in creating lessons that address parts of the National Curriculum in subject areas they are not always familiar with.

“Those lessons can be used across the whole of the UK. They will be free and available for teachers to be able to download into their subject areas,” says Roe. “We're aiming at the years coming into GCSEs to create more understanding and insight into logistics in the first instance.

“The second thing is that there is a really big gap in careers advice in schools. There's nothing for the educators and the teachers that explains the great roles that exist within logistics. We created a careers guide for logistics using case studies from the sponsors. These are real people, most of them young people, talking about their jobs.”

As many transport company MDs will testify, gaining access to teachers can still be a challenge as many people within a school may be involved in the decision-making process.

“Those two things combined are great, but how do we get them into the schools?” asks Roe. “Getting into schools consistently has been a massive problem. What we're in the final stages of concluding at the moment are arrangements with two really powerful organisations that have presence, effectively, between them, across all schools in the UK.

“That means that we will be able to get to teachers with a consistent message backed up with resources that they can use to promote logistics to young people in a way that we've never been able to do across all schools.

“We might have done it really well in some schools, but then there are a lot of schools where there is nothing. I know that from my own personal experience, going into the schools in my locality."

Roe’s personal experience has been helped by the fact his wife is a primary school teacher and the science, technology, engineering and maths (STEM) ambassador for her school.

“The approach that they use in schools with STEM is very much what we want to follow,” he says. “We give teachers the capability, the resources, the lesson plans, the exercises to encourage more understanding of logistics. We can also back that up with the ambassadors in all different areas to go into schools and reinforce that message.

“We're not trying to boil the ocean here because I think we need to resist the urge. We're not aiming at primary schools this year, we're really focusing on the GCSE years and older, so age 13 through to 24.”

Generation Logistics needs more logistics professionals to devote time to becoming ambassadors and going into their local schools to provide careers advice – even if their employer is not a sponsor.

“About 50% of our ambassadors come from our sponsor organisations,” says Roe. “What's been really interesting is the other 50% don't, they're people who wanted to get involved. We set up a LinkedIn page to do that, also coordinated through the CILT, to pair up opportunities with ambassadors.”

While there seems to be a day, week or month these days for everything from hedgehog awareness to donkey rescue, Generation Logistics is launching a logistics week, which could involve logistics sites throwing open their doors to host visits from local students.

“We'll run that in the summer next year to try and get more local engagement,” says Roe. “We've not pinpointed the actual week yet but we're looking to do it immediately after the different exams are finished.”

As well as in-person visits, the project has had a lot of success with online sessions, which can involve parents as well as students and teachers.

“Going into schools and getting schools to come into logistics facilities is important, but we've had some really good attendance on logistics-themed online events already,” says Roe. “We know that parents are one of the big three influences on young people's career choices, the other two being social media and careers advice from schools and teachers.”

Squeezes on education budgets over the years means that careers advice in schools is now somewhat patchy.

“From what we've seen, it's quite variable,” says Roe. “In bigger schools, there definitely are careers advisors, in the smaller schools maybe not. So much of it now is online. One of the organizations that we are working with deals with all of those people around the UK

“That's one of the areas that Bethany's been working on. It builds solidly on the work that she and the CILT have been doing in education for many years.”

As Roe says, the third big influence over young people’s career choices is now social media. This is a notoriously difficult space for corporates to work in, so how will Generation Logistics make it work?

“By not being corporate!” laughs Roe. “The reason why we selected ilk when we first started the programme is because they're a young, quite small agency that really challenged us to not be corporate.

“They work closely with the team. Then take input, a lot of video case studies - over 100 now - from the sponsors, so that we can get real people talking in real language rather than it looking corporate.

“The tailoring of the campaigns, the posts and the video content is all put together for us by ilk and is specifically designed to attract that target audience. It's done in ways that create curiosity, and create a reaction.”

While the number of views isn’t quite in Beyonce territory they are impressive for a logistics awareness campaign.

“The numbers just go up and up and up,” says Roe. “We've had over 3.3 million engagements with our social media campaign. That's people actually doing something, either liking or sharing or following through. That's only happened because we have made an effort and deliberately focused on the voices and faces of young people, and the messages of real people talking about real jobs with a bit of passion. That's what works really.

“We've got young drivers on there, people who work in warehouses, project managers, and people who work in sustainability. We’ve got people who work for logistics operators and also people who work for retailers. There’s a real variety in there and that’s what captures people's imagination and creates curiosity.”

While a lot of attention was focused last year on the HGV driver shortage, logistics needs people at all levels.

“One of the key messages is that there is something for everybody here,” says Roe. “It doesn't matter really about educational attainment. There are roles in logistics for different personalities and different interests. We're not trying to campaign or recruit. What we are trying to do is to show the variety of roles that exist within the industry.

“We agreed with the sponsors quite early on to use a number of job families to simplify things for people coming to it fresh, so they didn't have to already know logistics to understand the job adverts.

“We have 14 different job families. The core operational job families are around transportation, warehousing and infrastructure. Because we have Network Rail and National Highways among our sponsors. Underneath that, we give them examples of roles within a job family and of the starting salaries for those as well.

“Then around those core operational roles, we then have all the support functions, including finance, HR and sustainability plus engineering and technical skills which is one of the areas that we are seeing shortages.”

There is however still a missing link between raising awareness of logistics among young people and actually finding the right employer and training scheme for them. The industry has paid in over £1bn in Apprenticeship Levy but claimed back less than a third of that sum to fund apprenticeships. While there are 37 approved logistics apprenticeships there is no single industry-wide career structure guiding new entrants through the opportunities and how to grasp them.

“Individual organisations of all shapes and sizes have had to get better at recruitment over the last two years,” says Roe. “I've seen this first-hand in my old job [at DHL] but I also see it when I go around and talk to members now.

“There is a lot more focus on people and recruitment and thinking about what the opening offer is. When we set up Generation Logistics, we were very clear that what we wanted to do was to create the awareness, to give the attraction for people to come to companies in the first place.

“Ultimately, recruitment is a competitive process for organisations. We're never going to standardise that across 250,000 companies. What we want to be able to do is to get that out there to show what there is.”

So with getting on for £2m to be spent by August 2024, what will success look like?

“The main measures are through our social media,” he says. “We've also got KPIs on engagements in terms of our website visits and how many ambassador events we will have done as well. The big new question will be how many times will the lessons that we've created been downloaded by schools.

“They're slightly different measures of the same thing, which is all about raising awareness.”

Opening up Generation Logistics to smaller operators

In its second year, Generation Logistics wants to attract more smaller operators as sponsors and to get more involved in the project.

“We've deliberately made a move to offer a much lower cost sponsorship route for smaller companies,” says Roe. “Most of the sponsors in the first year - not all of them, but a lot of them - were larger companies. We want to see that broaden and many more smaller companies coming in which is why we’ve said that companies with turnovers of less than £20m will be able to sign up for the year as Silver sponsors for £2,000.”

Becoming part of Generation Logistics enables smaller operators to get their ambassadors into local schools and allows them to create social media content such as videos of younger members of staff extolling the benefits of working for the firm.

“You get the opportunity to get your people talking about what it's like working for a smaller company in the industry as well as the guys working for a larger company,” says Roe. “Those case studies and that material then become public.

“For many of the smaller companies, they're never going to have the opportunity to do that. We provide the ways of being able to capture that, of recording it, and then publicising it in a way that a small company is very unlikely to be able to do for themselves.”

Logistics can be tough but is still 'a great place to work'

It is well documented that one reason for the recent driver shortage wasn’t a lack of people with HGV licences – it was a lack of people wanting to work in an industry with a notoriously poor track record of managing and retaining skilled people. But Roe insists that logistics is getting its house in order.

“My experience over 35 years is that it is a great place to work,” he says. “I'd regard logistics as the ultimate team game. If you work well with people, if you want to make things happen, if you want to have an impact on a daily basis, if you want to see the fruits of your labour in terms of the service that you offer to customers and consumers, then there's a very real rush you can get from that.

“Ultimately, every business sector in the economy has to be able to attract the right talent in order to be successful. I think the industry is very different now than it was 30 years ago when I joined.

“The layers and layers of management don't exist anymore and health and safety is a huge amount better.

“It can be a tough job, but it can be also a hugely rewarding job.”

The post Generation Logistics builds on success with more DfT funding for year two appeared first on Motor Transport.

Q: What’s your strategy to cut emissions? And are many operators only paying lip service to zero carbon fleets?

A: We started 15 years ago so we’re ahead of the curve. But within the UK we realise we’re not going to be able to substitute 6,000 diesel vehicles for electric overnight. There’s not enough capacity, there’s not enough charging facilities and then there’s the cost.

So it’s a transition process using different fuels and different methodologies. HVO is a tool we’re using, because it allows us to use existing diesel vehicles and reduces your emissions by 80%. But we’re also investing in biofuels, both CNG and LNG vehicles. From a circularity point of view it’s a strong message. We’ve also recently bought our first electric trucks from Volvo.

Q: Are the government's net zero targets realistic?

A: A lot of things need to change. No operator can have trucks sat idle for hours on end. You need charging facilities. And ultimately hydrogen will come on board which will help. All of these things will happen but they won’t happen in isolation, it will be in conjunction, and that’s our approach. And likewise with warehousing we’ll do more with solar power and converting energy back to the grid to fuel our supply.

Q: Who’s going to pay for the transition? Roads minister Richard Holden has stressed the need for commercial partnerships, not government incentives. Where does that leave DHL?

A: There’s an opportunity for all parties to play a role. The government has an opportunity in creating an infrastructure which will future proof our country. Big commercial organisations have a role to play but it can’t all land on their shoulders.

In time I don’t believe it will be cost prohibitive for operators to switch to electric. Right now you have a scarcity of supply, but in time you won’t. And as with any economic model, supply and demand will match and costs will come down over a period of time. As things stand fuel is more expensive.

Q: And electric trucks are a lot more expensive…

A: Yes but we’re seeing that softening as well because more manufacturers are switching from traditional combustion to electric and others. We can’t expect to get there without some pain but hopefully if all parties work to the same objective we’ll get there a lot quicker. DHL may be the biggest player and we want to set the right example but we want to get there collectively.

Q: What do you make of HGV operators who say they’ll refresh their diesel fleets just before the 2035 phase-out date and run them for another generation? Will the government’s net zero targets have to be pushed back?

A: Each company will make their own commercial decisions.  I suspect that might be quite short sighted because at what point do you devalue or reduce the capital value of these diesel assets? They’re not going to be worth what they were last year in 10 years’ time. Demand will eventually slide. Whether it’s in five or 10 years’ time, demand will reduce and continue to reduce for these vehicles. What you‘ll see then is the cost will depreciate quicker, there’ll be less residual value for them. I wouldn’t want to be the last person standing with a whole fleet of diesel trucks.

Q: Evri fleet boss David Landy told us operators may be forced into buying trucks they don’t want in the next buying round. Do you agree?

A: The narrative has to change. If people look at this as being compelled, it’s the wrong argument. The argument has to be that this is the right thing to do. Our customers - the multinationals, the large retailers - expect us to work with them. The younger generations are also demanding this kind of behaviour. They won’t tolerate heavy carbon emissions to be associated with their products. We can’t wait for the world to line up neatly. Sometimes you have to be leaders. DHL and other large organisations have to lead the way, not the SMEs, they can’t afford to.

Q: What’s your best guess on how the transition for HGV fleets will ultimately pan out?

A: Truth is I don’t know and that’s why we’re taking a multi-faceted approach. We’re working with HVO and with LNG and CNG which have benefits and limitations. Electric also absolutely has a part to play. Technology will get better, hydrogen fuel cells will come in and who knows what else. And that’s exciting because it creates big opportunities.

Q: Is the government taking the right approach? Operators see no action plan or incentives…

A: It’s a real challenge and clearly we would like the government to be supporting us more in terms of infrastructure. It’s also about getting power to those charging facilities.

Q: You increased turnover to £3.1bn last year with pre-tax profit increasing by 86.5% to £63.3m. How satisfied are you with those figures?

A: In a difficult market we continue to perform strongly. We're seeing top line growth, we’re seeing profitable growth. We’re happy with the results and want continue to grow and deliver high end profitability. In a tough and testing market we can be proud of what we’ve achieved.

We’re fortunate that we play in a number of sectors. We’re well represented in retail, consumer, airline services and healthcare. The diversity of our portfolio has helped. We’ve seen uplift in the airline travel space since Covid which has been a big boost. We’ve also seen more availability of microchips so an uplift in motor manufacturing.

But on the flip side the retail sector is really struggling. Higher inflation in the low teens in grocery is impacting spend. We’re clearly a massive part of that because we move all the product into these stores.

Healthcare is always relatively recession proof and consistent, so that business is stable. Consumer business in parts has slowed down but what we do on the forecourt has uplifted. Shoppers are buying products more frequently but there’s less volume. High interest rates are impacting people’s disposable income. Mortgage payments are higher and rentals are increasing. E-commerce has also come off a lot from the highs of Covid. So that will continue to be a challenge as will grocery prices until we see inflation pressure brought to a more normalised level.

Q: Any room for optimism over the economy?

A: Yes, there’s light at the end of the tunnel. Inflation rates are coming down, the reserve bank is pausing interest rate increases. So hopefully we’re at the top of that and in due course we’ll see a softening. That will also speed up development in the market.

Q: Where do you see the market in a year’s time?

A: I’m optimistic by nature. Things are never as bad or as good as you think they are. We’ve got a strong economy, we’ve got a strong business and we’re still seeing very low levels of unemployment. That all bodes well for a strong bounce back. All the indicators seem to suggest a bounce back, with lower interest rates, lower inflation, lower levels of unemployment and fuel prices set to drop. Hopefully that will lead to greater consumer confidence and spend and translate into positive growth, which we’ve seen slow down over the last 12 months.

Q: What would be your advice to SMEs struggling on thin margins?

A: It isn’t that different to what we’re doing ourselves. Stay true to your core business. The focus has to be on your customers. Make sure you do what the customer wants you to do, not what you think the customer wants you to do. We look after them in tough times as well as good times. Whether you’re an SME or a large operation that doesn’t change.

This isn’t the time to be lavishly expanding on your costs and head counts unnecessarily. Do the things that make the most benefit to the business short term and medium term as well as to your customers. Then when an opportunity comes to open the purse strings that’s what we’ll do accordingly, and that’s what SMEs should be doing too.

Q: How much growth are you seeing in the business?

A: It’s within the budgeted forecast numbers but not growing organically. Fortunately, we have access to capital and we’re making long-term investments on automation, technology etc. So we’re certainly not parking up trucks or standing down shifts, we’re full steam ahead. But clearly our customers aren’t all growing at the same rate. In some cases we’re at 110% growth, especially travel and automotive, but elsewhere it’s a lot lower.

Q: What are the big growth areas?

A: Our transport business really excites me enormously. What we’re doing in terms of bio fuels and bio gases, HVO, electric... All of these ahead-of-the curve investments enable us to position ourselves at the forefront of the industry. We’re leading the way in setting the right tone on what firms should be doing from an environmental and sustainability point of view, but we’re also giving our customers the opportunity to partner with us, perhaps even ahead of their own requirements. Because it’s not a case of if but when companies will be compelled, at some level, to convert diesel to more environmentally friendly fuel. It will be a growth sector for us in due course.

I’m also excited about what we’re doing in the e-commerce space where we’ve invested a lot in technology. Most companies have some form of omni presence now, not just B2B but B2C and we have some great solutions.

Our consumer space also continues to grow. We’ve invested in high density solutions, carbon neutral buildings etc. Those sectors are ripe for growth, as is healthcare which is another massive growth opportunity. We’re doing clinical trials of high grade facilities for the distribution of pharmaceuticals and biologicals.

Q: Where else is DHL focusing its attention?

A: A lot of it revolves around data and technology and how to better manage risks that impact supply chains. We also give customers advice on where they can near-source their facilities or insure them to give them a better risk managment strategy.

We're also using automation, not because we want to substitute labour but to complement the labour we have so our staff are better utilised. Finally we are fixated on looking after our people. But we have to balance wages against what’s affordable and doesn't compromise our position in the market.

Q: Will multimodal become a bigger trend?

A: There’s a lot of arguments for rail but you have to be able to be responsive to customer requirements and have a reliable solution. It has got to be about more than just the envirmoment. There's cost, access, reliabilty and speed of service. There’s a space for rail movement but it won't be the panacea for all transport movements. We could see greater use of rail from dock to DC.

Q: Any M&A activity in the pipeline?

A: If we see something that will add value yes. It's not scale we're after but if there's a niche service that adds specific value that we don’t have and can develop we’d be interested. But it’s hard to identify something where somebody in the world isn’t doing it already.

Q: You've been in the UK for 18 months now. What’s the best part of your job?

A: I truly enjoy walking our sites and talking to our people. The more time I can spend away from my computer and engage with people the better. I’m inspired by them and take a lot from it.

Overall it’s been a great transition. l loved working in Australia. I was there for 17 years and I’m loving working in the UK as well, weather not withstanding. I want to drive positive change and growth and create opportunities for my colleagues. If I can do that what's not to love about my job?

For more stories tracking the industry journey to decarbonisation see our new Freight Carbon Zero website.

The post “I wouldn’t want to be the last person standing with a whole fleet of diesel trucks…” appeared first on Motor Transport.

The A465 Heads of the Valleys road is currently undergoing major reconstruction to make it dual carriageway – when no doubt a camera-enforced average speed limit of 50mph will be introduced – and the dusty landscape is dominated by earthmovers and cement mixers. The construction work is also for a new windfarm which is set to be one of the biggest onshore installations in Europe.

Our host, JPT MD Clive Davies, pictured, explains that the A465 improvement project was begun before Brexit with EU funding and so will be completed in 2025. “It will probably be the last new road to be built in Wales,” he says. “It will open up this valley to the Midlands and bring more business to the industrial estates along this road.”

Davies is the son-in-law of the haulier’s founders John – also known as Jack – and Joyce Pearce, who are now both retired. They still live next door to the company’s headquarters - and their daughter and son-in-law Hayley and Clive Davies, whose house overlooks the depot. Before starting in haulage Jack worked in a local open cast coal mine while Joyce was a nurse.

“He had a cousin who owned a factory and he said to Jack ‘if you get a truck you can do our transport’,” says Davies. “That got him started and then he started to pick up other customers.”

The firm is celebrating its 50th anniversary in 2023 after being founded in September 1973 with a single truck in nearby Rhigos. In 1978 it moved to its present site which was then just had a one bay workshop; since then the site has been expanded to its present-day scale, with 16,000sq ft of warehousing and a two-bay workshop where the firm still does most of its R&M.

“In 1991 Jack and Joyce built the warehouse,” says Davies. “At the time was I was working with JPT’s biggest customer, TRW. In 1993 I came to work here and then we developed the rest of the site with a bigger yard and bought a second warehouse in 1995.”

Some of the work for car parts distributor TRW involved exports to the continent, but in common with most UK hauliers JPT pulled out of international haulage due to the stiff competition from the Eastern Europeans for whom the export leg was just a backload.

Before then, however, the haulier brought in bulk ammonium nitrate from France which it stored in the depot in Glynneath before it was mixed with water to make liquid explosive for the mining industry.

“We used to have 40 1-tonne bags in the yard,” Davies recalls. “It couldn’t come through Calais so we had to go to Zeebrugge and bring it in from there. The truck was on the front of the boat so if anything happened they could push it off.

“Then they started packing it in 1kg bags, still a 24-tonne load, but it was then alright to come through Calais.”

In 2003 JPT joined The Pallet Network, and today the network makes up around 30% of its volumes, with seven or eight trunks a night running to the TPN hub in Sutton Coldfield.

“We were balanced for years but we are putting a little more in than we get back now,” says Davies. “We put in around 1,700 pallets a week and bring back 1,400. The problem in recent years has been that the networks grew so quickly, at 10% or 15% every year, and we have to try and stick with it otherwise we become unbalanced and then it isn’t worth doing.

“At the moment we have grown slightly ahead of the network but they are moving to a new hub next year and they wouldn’t spending £75m if the volumes were staying the same. So they will push the members to sell more. Hopefully the hub will perform better and get the trunks back to us earlier - and get our volumes back in line.”

Like many pallet network members Davies says delivery rates need to increase, especially for hauliers like JPT with large areas to cover.

“We have a huge area but we need it to balance ourselves,” says Davies. “The networks want members to have a smaller area so we aren’t sending trucks 40 miles from base. But look at where we are. There are no factories in these mountains.

“Last year, when the fuel price was going up, we could put a surcharge on our own customers but there was no surcharge on the network delivery rates. So if you were a net deliverer you were really in trouble.”

Davies expects more consolidation among the UK’s eight pallet networks which, apart from the acquisition of Fortec by Pall-Ex two years ago, have continued to grow strongly as independent and fiercely competitive rivals.

While it has some full truckload business, JPT has always had a strong groupage business.

“We have always been a multidrop haulier and looked to build loads with proper traffic sheets,” says Davies. “Back in the 1990s we would be charging £80 a pallet – now we are selling them for £40 anywhere in the country. The networks have driven the cost of transport down and obviously it works. But you have to have a mix of business and I don’t know how hauliers manage if they are just doing pallet network deliveries.”

The issue of weight limits on tail-lift pallet deliveries has calmed down since the RHA and HSE published guidelines advising hauliers to require their drivers to carry out ‘dynamic risk assessments’ of the safety of every delivery, rather than set an arbitrary weight limit.

Palletline voluntarily limited standard tail-lift deliveries to 750kg but TPN still allows a maximum of 1,000kgs with an electric pump truck.

“All the networks want to reduce the limit,” says Davies. “Some of the roads we deliver to in the Rhondda Valley are very steep and with a tonne on the pump truck running down the tail-lift you have to be really careful. We do a lot of training with the drivers on safe pallet deliveries, including our new immersive training scheme.”

JPT’s customer base is very varied, with clients in the water industry, medical supplies, mobility aids, lead for the building industry, food stuffs and automotive.

Davies hasn’t seen much effect of Brexit, though he says the months immediately after withdrawal saw many local companies asking for help with exports.

“It hasn’t made a huge difference,” he says. “I haven’t seen a lot of industry come back to Wales.”

The company, whose motto is ‘Being on time is our business’, saw its fleet grow rapidly after Davies’ arrival in 1993. “We had 15 trucks then and now we run 60 trucks and 90 trailers,” he says. “We streamlined after 2008 but got through it OK and we have grown again over the last seven or eight years.

“We offer a really good service and support our customers. We try to form partnerships and show them where they can save money on their transport. That has been reasonably successful over the years.”

The fleet is mainly DAF though Davies still buys some Mercedes-Benz.

In February 2022 it became one of the first UK operators to take delivery of two New Generation DAF XF 480 FTG tractors, and in November last year it purchased three more new DAF XF artics and two new Mercedes-Benz Actros rigids.

“We bought them with the window in the passenger door to be ready for the London DVS,” says Davies.

“We also specified the DAFs with their Digital Vision cameras instead of mirrors – we already had some of the Mercs with them. Some drivers love them but others don’t.

"The last two Mercs we bought, they couldn’t supply them with MirrorCam so they have standard mirrors. It doesn’t matter so much on a rigid but with an artic the cameras are more of a benefit. But some drivers won’t drive them.”

The artics clock up around 130,000kms a year while the rigids do less than half that. There is no fixed replacement schedule. “We run them as long as we can,” says Davies. “We run them up the road until they get too tired and then we put them on more local runs. We have a couple of 10-year-old DAFs still running but they need to be moved on now. They have done a good job for us and have done 1.4m kms so you can’t knock the value for money.”

While Davies is seeing parts availability improve he is shocked by the increase in prices.

“So far in 2023 [by June] we have spent over £80,000 on replacement parts,” he says. “That compares with £38,000 in the whole of 2020. That is on top of the rise in fuel prices, a 20% pay rise for drivers and higher pallet network charges. We have to manage our margins really carefully.”

Unusually these days JPT does as much R&M work inhouse as possible, but finding skilled technicians is a struggle for it as well as its local dealers.

“The dealers can’t get fitters and neither can I,” says Davies. “Getting trucks in to the dealers for the jobs we can’t do is always a problem. To be fair to both dealers, Euro Commercials [Mercedes-Benz] and Watts Truck & Bus [DAF], they look after us and do everything they can to support us.”

JPT has installed an R2C workshop management system to help manage costs and help it move towards Earned Recognition at some point in the future. It is using Tachomaster to check compliance with drivers’ hours rules and is installing in-cab card readers which will automatically download tacho data after every shift rather than the current weekly read of the drivers’ cards.

While Davies knows electric trucks are coming he cannot see how or where they will be able to recharge.

“When I talk to people round here I tell them ‘when the electric trucks come, you will have to turn your TVs and kettles off’,” he says. “How are we going to do it? We run eight trunks to the hub every night and normally do 10 run outs on top of that. So let’s say we have 18 trucks out on the road overnight.

“If they go electric we can’t send them out as they will be charging after working all day, so there will be another 18 lorries that we would have to run while the others are charging. Where is the environmental benefit in that?

“We have 20 rigids mainly on TPN work, and they are out and back, so it is possible to make them electric.

“Unless you can run an electric truck the same as we do today, we will have to manufacture many more trucks. I look at the yard and wonder where we are going to put all these lorries and chargers.”

Getting drivers and warehouse staff engaged with training

While in some ways JPT is still a traditional family haulier, Davies believes in adopting new technology. He has recently created an innovative online “immersive” training programme that he is keen to sell to other operators after proving its success with his own staff.

“If you don’t move with the times you get left behind,” he says. “When vehicle tracking and mobile phones came in we all said ‘the drivers will never have it’ but if you don’t go with it, you will be stuffed.”

Custom-made video of JPT’s vehicles and warehouse keeps the training relevant to real-life operations and interactive tests at the end of each module keep the trainee engaged. The ‘extended reality (XR)’ video is shot in 360 degrees so the trainee can move the camera angle around. Modules include safe movement around the warehouse, safe loading, unloading and coupling of trailers, daily vehicle walkaround checks, driving licence checks and any health issues the company should be aware of.

The training is compulsory for all new starters as part of their induction. But the plan is to refresh the content every six months and by tracking each employee with a unique user name and PIN the company can ensure everyone gets regular, up to date training.

Changing the image of transport remains a huge challenge

Davies is happy to put his customers’ branding on the curtains of his trailers to give them some free publicity, and was surprised when one soft drinks bottler turned him down. “They said ‘we don’t think trucks are environmentally friendly’,” he says. “I said ‘how do your customers think your products get to them?’ But that is the way some people think about road transport, as a dirty, stinking industry. It is our job to change that but it is very difficult.”

It isn’t just customers’ perceptions that need to change – if the industry is to recruit the skilled young people it needs attitudes everywhere to be more closely aligned with reality.

“About six years ago we were recruiting a new office manager so we went to Neath and Talbot College to look for someone finishing A-levels, not wanting to go to university and looking for a good job locally,” Davies says. “We did a presentation to some of the students and told them about the transport industry. Then we handed out the application forms – but didn’t get a single application.

“The college didn’t see road transport as a good industry to work in. All the kids seemed to want to work in call centres after that documentary [BBC Three’s ‘The Call Centre’]. In the end we found a great girl at a jobs fair and she stayed with us for five years before going to the steel works. Maybe she will be back.”

JPT has had more success bringing in van and Class 2 drivers and training them up to Class 1.

“We have trained up six or seven people that way,” says Davies. “We had already started before the driver shortage really hit because we were having problems recruiting. People really appreciated it and we have kept a lot of those great guys who weren’t in the industry before.”

One of those new recruits was female – a Polish lady who is currently driving a 7.5 tonner. “She is loving it,” says Davies. “But not many ladies come looking for those jobs. Multi drop tailift deliveries are not easy and can be physically demanding. It’s a tough job.”

Succession planning

The Pearce family including Davies and his wife Hayley hold all the shares in JPT and have no plans to sell up.

Davies has three boys, aged 30, 28 and 11, and none have so far shown any interest in joining the family firm.

“I’ve always told them ‘go and do whatever you want to do and don’t think you have to come here’,” Davies says. “Both the older boys have worked here so they know the score. They need to go and learn other things and maybe bring them back.”

Davies himself only got his transport manager CPC in 1991 while working for JPT’s customer TRW and came to the family haulage firm in 1993 when his parents-in-law still ran the business.

“I took over the planning, workshop and staffing side of the business,” he says. “I’ve been here 30 years and it has developed over the years. It is still a family and we all help each other. We live next door to each other so we have to get on!”

The post South Wales haulier moves with the times but struggles to see an electric future appeared first on Motor Transport.

Q: For the moment, how much sense is there in any operator going electric?

A: If whatever we’re changing to isn’t affordable, and you'll lose your competitive edge, you’re probably going to hang on and step off at the last point. Then you’ve got manufacturers being penalised for not building the right balance of ICE trucks and electric trucks. When it comes to your buying round you’re pretty much going to be forced into this alternative. It may not be what you want but it might be as good as you’re going to get. With the technology changing at such a pace you might think I don’t want to buy something now when, in two years’ time, something comes out that’s superior. It’s hard.

Q: So what’s the best tactic for operators?

A: Take a breath and see. It feels like there’s been a huge amount of momentum in the last two years but it’s got to a point and it’s stayed there. It feels like it needs another push. Our clients want to know what we’re doing. We can showcase that and show the results in our journeys. But there’s only so long we can do that. We move parcels, we don’t make trucks. So we're dependant on the manufacturers coming out with a solid offer but they're being penalised because they make a truck that we can buy but we’ve got no way of charging it. Truck makers are being penalised for there being no charging infrastructure. So you’ll see manufacturers having more involvement in the charging.

Q: So truck manufacturers need to provide more funding?

A: That’s the way it’s feeling. We had DAF give us a 19-tonne electric truck to trial but we couldn’t charge it. That’s just one truck in the depot where we run 40. At the moment it’s not their problem, it’s our problem. But ultimately it’s DAF’s problem because they won’t be selling any trucks.

Q: Any plans to trial electrification on certain routes?

A: Yes, we’re working closely with a major international client and a manufacturer about how we can do a trial of electrifying a route from one of our hubs to their DC and then constantly running that route with electric trucks.

We’re having site surveys done now to charge that one truck. But then you think we’re running 200-plus trucks, nearly 300 in peak periods. This is just one. Even that manufacturer is saying if you come to us wanting 30 or 40 of these, we’ll put you off doing it because we don’t think you know enough about it to put your foot in the water that much. Even the manufacturers are nervous about what to sell you or how you would use it. They want to get close to us and see what the usage profiles would be like, what the distances are, and what the charging opportunities would be. So they’ve got an international relationship with their clients and want to work with someone.

Q: How far have you got with other ways of decarbonising your HGV fleet?

A: For a good five years we’ve been running on biomethane gas. We’ve been build, build, build on that fleet so we’ve made a big start. But it was affordable to do it. If you look at electrification there’s a big price premium both in the vehicle and the charging infrastructure. That’s a big move.

Q: But CNG isnt a good long-term solution?

A: No, but it’s a very good interim solution for us. We’re pushing that all the time. Availability is good. We have a network so we don’t need to deviate to fill up our vehicles and drivers are also used to it. So we’re used to thinking differently and that’s a good trait with what's coming down on us.

Q: How much of a problem is the limited range of long-haul electric HGVs?

A: Look at duty cycles. What we're used to doing is filling up with diesel or gas on site. Drivers have to get to the depot non-stop. So for us, with diesel you just do that. With gas, we can do a 400km journey and get back on one tank. With electric, you have to stop every four-and-a-half hours and charge every 45 mintues. We’re going to have put something in our depot or very close by as a shared user facility. At the moment, that’s a hard part to visualise.

Q: Operators sometimes tell us we're focusing too much on decarbonisation. Have they got more to worry about in such challenging times?

A: It’s a fair point. Especially the smaller operators who are putting it off. I don’t know what the impact wlll be. Can they afford a new generation truck?

Q: Are manufuactuers ignoring the SMEs, meaning they're being left behind?

A: I can imagine that happening but I’ve not seen it. I don’t know any smaller operators. They’re going to the bigger operators who may have the funding to put one of the trucks on the road and see how they get on with it.

Q: Roads minister Richard Holden rejects the idea that the government should be offering more incentives to switch and claims commercial partnerships are the answer?

A: That seems to be what’s happening. They’re looking for people to put their own charging infrastructure into their own networks. So for our depots we would need to invest and make that happen, and that is a massive challenge in terms of the amount of power required from the grid. Look at one of our hub operations. We’ve got say 200-plus tractor units running up to a quarter of a million kilometres a year. The charging for the electric version of the vehicle is massive.

Q: Are the goverment being realistic with their plans?

A: We need help is the best way of putting it. Funding and help. There’s a massive cliff face coming at us as operators. At the moment a lot of people have done a lot of things early on. But there’s a lot of trying things rather than actually taking that deep dive and saying, 'I’m going to completely do all my fleet in the next couple of years.' I don’t think it’s affordable yet. Given the capital prices of the investment of the truck and the infrastucture I don’t think early adoption is truly affordable.

Q: What do you make of Holden's claims that prices in the car and bus sector are coming down and will be for trucks?

A: A truck is a very different proposition to a car. With vans and cars I absolutely get it. But for a heavy truck, a 4x2 tractor unit, imagine the amount of batteries to give you a decent range. For anything that’s remotely usable you’re talking 12 tonnes by comparison to less than eight now.

Q: Does the government understand the concerns of operators?

A: Yes I think they do get it. They’re all very straightforward to understand. It’s translating that into an action plan to help us. They would rather bat it back into our court. But the danger of them not doing anything is that people will hang on to older technology for longer. Euro-6 is very clean so why change?

The price of new equipment and resources has gone up hugely in the last couple of years. Already you could argue that some operators are thinking, why would I buy a new truck when I can just run my old one for a couple of years longer? If you extrapolate that as we get through to 2035, it will be interesting to see how it pans out with residual values on equipment.

Q: What’s your best guess on where we'll ultimately end up with decarbonising HGV fleets?

A: For the long distance we’ve got a really keen eye on hydrogen. Forget the costs for a minute - operationally it works just like diesel. Going away from diesel operationally is really, really hard. We’re quite efficient in running diesel for long duty cycles, big mileages. Anything that you try to do that impacts on that is a real pain for those guys. So if you put an electric vehicle into the mix, how many more of those would you need to replicate that efficiency? Whereas with hydrogen if you run out you put some more in it and off you go again.

Q: But for a higher price?

A: Yes, it’s a lot more expensive than battery electric. But when the volume comes along, that could make the technology more accessible. There’s also the efficiency of powering the vehicle along. Hydrogen is not as efficient as battery electric. So operationally it’s a trade off between how much does that matter against something that actually works? There’s no silver bullet and it’s not a case of one size fits all.

Q: What’s the hardest part of your job?

A: The hard part is managing the fleet in and out and how you manage damage. It’s an issue and one we manage closely.

There weren’t enough assets in the market during Covid. We had to invest heavily in getting cross trailers in. We’ve done that with the big manufacturers. We have to be creative in how we hold those assets. We’ve got trailers now that are on flexible arrangements, we can turn them on and off and it works well. The downside is we’ve got to park them. But the trailers are effectively our warehouses, we don’t store anything so we need them.

Q: How’s business more generally for Evri?

A: Our business pretty much doubled in size during Covid. Recently retail spend and volumes are down but in our market we’re bucking the trend a bit.  Our parcel volumes haven’t declined in the way retail spend has. We’re the more affordable end of the market but people are tightening their belts.

We’re seeing different clients come aboard. It’s more C2C, it’s a new marketplace. We invariably do the collection as well as delivery so that’s more transactions for us. We do more with Vinted and e-bay. Someone drops something off, we collect it, process it and deliver it.

The business has new strands to it now – we’re building international work, also e-fulfilment and targeting the SMEs. We’re going after markets that aren’t necessarily new but there’s more focus on building business up.

Q: But you're reducing fleet size?

A: Like-for-like yes but underneath it there’s growth. What makes it hard is we have more truck downtime than we would like. We’re short of technicians, parts supply and availability. That’s quite a drain. Dealers are under pressure in their own areas.

We pick our core fleet and flex up and use spot hire. We give rental providers work all year round and they support us when we need them. So we’re not carrying excess fleet when we don’t need it. We do track our fleet size very closely.

For more stories tracking the industry journey to decarbonisation see our new Freight Carbon Zero website.

The post ‘Next you’ll be forced into buying new trucks that you might not want…’ appeared first on Motor Transport.

Ashville Road is a former SHB Hire depot (see panel) and is the largest in Enterprise Flex-E-Rent’s network. It is located on a large industrial estate and does not offer daily rental – that is handled by a smaller site nearby on Bristol Road. It has become a major repair and maintenance hub for Enterprise Flex-E-Rent in the South West and also carries out third party R&M for a range of clients.  

In contrast with many hire and rental firms, Enterprise Flex-E-Rent still carries out inhouse R&M at almost all of its 28 UK locations. These have 200 fixed bays and employ 270 qualified technicians. The company is a strong supporter of apprenticeships and employs over 40 HGV apprentices on bespoke three-year training programmes.

James Walker is group service maintenance and repair manager at Enterprise Flex-E-Rent. He has been in the role since June 2020 after a long career with Fraikin and Ryder.

“In the last two years we have delivered 16,500 training hours,” he says. “Just about every company in the UK has a shortage of technicians and we have had success moving LCV technicians up to HGV as part of their career path.

“We have found that the training and career path has helped with our recruitment. A lot of technicians also like the variety of work we can offer. Just under 60% of Enterprise Flex-E-Rent maintenance is done inhouse and the only thing we don’t do is re-gassing fridges.”

Danny Glynn, Enterprise Flex-E-Rent vice president and managing director, pictured, explains why the company likes to do R&M inhouse.

“It gives us credibility and an opportunity to differentiate ourselves in that we are not just supplying the finance and managing a third party,” he says. “As the vehicle parc has grown older, and the capacity to maintain that parc hasn’t grown at the same speed as the need, we have the surety that 60% of the time we have priority.

“We value our third-party maintenance providers but we are competing with everybody else to be their priority. We are able to move things around and that flexibility has become more important not less.

“We track how long vehicles are off the road in our own and our third-party networks and there is a benefit. We will never do 100% ourselves and 60% is probably about the right number. But for it to still be 60% in two years’ time we will need to expand our network and we are working on five new sites at the moment.”

Walker says that having its own direct relationships with the vehicle OEMs ensures Enterprise Flex-E-Rent has good access to spares while other VMUs can struggle.

“Because of our buying power we probably have the same or better access to parts than some dealers,” he says.

The company has agreements in place with Ford, Mercedes-Benz and Vauxhall in Scotland to carry out maintenance during the warranty period using technicians trained by the OEMs.

Working on electric vans and trucks with high power DC batteries operating at up to 700V also requires special equipment and training.

Standalone

Enterprise Flex-E-Rent recently opened its first standalone EV workshop bay at Ashville Road, and the first obvious difference from the other repair bays is that it is fully enclosed. This is because if an EV catches fire the safest way to deal with it is to isolate it from the rest of the workshop and let the fire burn out.

“Our fire risk assessment for the site says we have to be able to contain a fire for at least an hour, so all future EV bays will have this structure around them,” says Walker. “All our lifts are already earthed so we then just need to add the insulated floor mats, first aid kits and extra PPE.”

The next EV bay will be in a new site opening soon in Edinburgh, but depots around the M25 will be high priorities as it is expected delivery firms serving the capital will lead the switch to zero emissions vehicles. While TfL has not announced plans to introduce a zero emissions zone (ZEZ), the controversial extension of the ULEZ to cover the whole of Greater London from August 2023 means many in the industry see a ZEZ in central London as inevitable.

“One of our hotspots to open a new site will be south of London near the M25,” says Glynn. “The labour market around Gatwick is however very tight.”

As more EVs come on to the Enterprise Flex-E-Rent fleet, the company is steadily training more of its technicians to work on them.

“We don’t do EV awareness training,” states Walker. “Our technicians are either qualified to work on EVs or they are not. As part of our inhouse warranty programme, all the technicians that went on that training had EV courses added. So whether it is a Mercedes or a Ford EV, our technicians are trained exactly the same as the dealer technicians.

“We don’t do generic training – it is all manufacturer specific. We have 200 technicians on the pathway with Mercedes and Ford and we are putting 15 through the Vauxhall programme.”

The additional training doesn’t just cover the technical side – extra first aid training has to be given covering what to do if a technician gets an electric shock, for example.

The challenge for Enterprise – as with all maintenance providers – is managing the transition from diesel to electric and having enough people with the right skills at the right time in the right places.

“At some point, smaller independent workshops won’t be able to work on both,” says Glynn. “A lot of customers looking to make the switch are coming to us because they know we have the scale.”

While an EV’s electric motors and batteries should need less routine maintenance than an internal combustion engine and gearbox, the vehicle’s running gear will still require regular inspection and maintenance.

There is also a lot of complex electronics and software on an EV that will need ‘servicing’ to keep the vehicle running sweetly and Flex-E-Rent is making a heavy investment in the OE diagnostics equipment required to power down EVs to make them safe to work on and read powertrain fault codes.

“That is why the diagnostics are so important,” says Walker, pictured. “Otherwise you can bring in an EV with a fault code and you can’t fix it. A lot of issues won’t be mechanical but software and sensor related.

“We are working with the OEMs on over-the-air recalls and maintenance that won’t need the customer to bring the vehicle in to us.”

The power-down procedure means that the vehicle batteries will not need to be fully discharged before the vehicle is worked on, so it will leave the workshop with the same level of charge that it arrives with.

This means that the workshops – unlike rental depots – will not need upgrades to the power supply to recharge large numbers of EVs.

“Some car rental customers might expect a full charge when they collect an EV,” says Glynn. “In our world customers at the moment do not want a full tank of diesel because they will have their own fuel cards. But a quarter charge is very different from a quarter tank where you can go and fill up round the corner in 10 minutes.

“As we grow the commercial EV fleet we will need to understand what that looks like, as we are a long way from having 10 electric HGVs fully charged and ready to go. Lots of people will struggle with that.”

Bigger EVs are on the way for Enterprise Flex-E-Rent

Danny Glynn has been with Enterprise since 2002 and in 2010 he established Enterprise Flex-E-Rent, the company’s commercial vehicle rental division. By 2014 this had grown to a fleet of 11,500 vans and in that year Glynn led the acquisition of Burnt Tree, adding its 15,000 vans and 1,500 trucks to the fleet.

In 2019 Enterprise acquired Romsey-based SHB Hire, adding a further 18,500 commercial vehicles to make a combined fleet of over 45,000 vehicles. The fleet is now over 70,000.

In July 2021 Enterprise Flex-E-Rent acquired 100 new plug-in electric vans available for rent in 14 depots in the South of England and the Midlands. These included Mercedes-Benz 55/44kWh eSprinter vans, 35kWh Mercedes-Benz eVito panel vans and Renault Kangoo E-Tech car-derived vans. Enterprise now has around 500 electric vans and Glynn expects to “more than double that” by the middle of 2024.

“For anything smaller than a CF, supply of most electric vehicles is no longer a huge challenge,” he says. “Whether they have the range and you can operate them is a separate question, and people are becoming very aware of the lack of charging infrastructure.”

At present the largest EV a customer can hire from Flex-E-Rent is a 3.5 tonne van – but Glynn says larger EVs will be on the fleet “imminently”.

“We are working with manufacturers on demos of different types of alternatively fuelled HGVs,” he says. “We are speaking to some of the non-traditional manufacturers as well to understand their products. They will be quite specialised in what they are able to do but for the people who want that type of kit they will get some traction.

“We will buy what we think the market needs rather than just for a specific customer. We are comfortable with our understanding of the market and if things change we will adapt. At the moment that speed of need is quite important.

“Waiting times for HGVs for example have gone from four to six months to 14 to 16 months and that is never going to work for customers.”

The price differential on an EV started out at two or three times the cost of a diesel vehicle but Glynn says this is now starting to reduce – partly as a result of the rising price of diesels.

“The gap has closed significantly because of all the issues with vehicle supplies since Covid,” he says. “The cost difference is nowhere as significant as it was and on LCVs it is no longer double. That makes conversations with customers a lot easier and the potential savings from lower running costs are realised a lot earlier than before.”

The big unknown when it comes to setting hire rates for EVs is the life of the battery but, as experience with electric cars grows, fears over the longevity of batteries are receding, and OEMs are giving Enterprise warranties of between five and eight years on the batteries. This helps improve confidence in residual values and so reduce the hire cost for customers.

The post Enterprise Flex-E-Rent prepares for rapid expansion of electric vehicle fleet appeared first on Motor Transport.

Hellmann Worldwide was founded over 150 years ago and is now a fast-growing global multimodal logistics provider with revenues of €5bn (£3.4bn) - up from €2.5bn in just three years.

The UK business, which was formed in 1987, continued its turnaround in the year to December 2021, with turnover up 35% on the previous year to £108m, and ended 2022 with revenue of £140m.

“We successfully turned the corner and were able to add to that success in 2022,” says Fellmann. “It is a very difficult business environment especially for road but we also had a very successful first six months of 2023.

“We have such a good diversity in the UK by geography and industries we work with that, together with our strong culture, we did quite well.”

Hellmann remains strong in key vertical markets including pharma, perishables, automotive, consumer goods and fashion.

Fellmann says that since Brexit and the pandemic the volumes and patterns of international road freight movements have changed.

“Whilst we still do groupage trailers every day, part loads or full truck loads are becoming more important as it allows customers to take advantage of one customs clearance on both sides. I don’t think that process is completely closed yet and we are still seeing a lot of customers building warehouses here.

“So these are still exciting times but overall volumes are softer. Definitely there are fewer transactions as there is more consolidation.”

Same footprint

Despite the increase in revenues over the last couple of years Hellmann retains the same footprint of eight sites in the UK. “We have an agile working environment in the UK and we allow for working from home for days a week where possible,” says Fellmann. “At the same time, some teams just love to be together in the office!”

Although the UK left the EU two and a half years ago, Fellmann says there are still a few hangovers remaining from Brexit.

“For the most part our customers, hauliers and other stakeholders are gelling well together,” he says. “The amount of exceptions we have to deal with are really minimal. A lot of business is repeat so we are getting into a rhythm there. With new customers, if we have the luxury to onboard them we can iron out any issues.

“It is a lot easier now than a year ago.”

Brexit has however softened Hellmann’s business between Great Britain and Ireland.

“Since Brexit it is a lot less,” says Fellmann, pictured. “We used to have Irish freight coming across on our trailers, we would cross dock it in the UK and pass it on. We now see a good portion of the volume going straight onto European trailers and direct into Ireland.

“Our offices and partners in central Europe are still involved but it is not necessarily touching us in the UK. It is starting again here and there and we have some local UK to Ireland traffic but a lot less since Brexit.”

But Fellmann says that the company is seeing an “uptick” in other areas since Brexit.

“One German fashion retailer used to do everything through Germany and distribute into the UK,” he says. “Today they have to pay double duties so this is one area where we are losing the road business but gaining it on air and ocean. Rather than flying or shipping into Germany it now comes straight to the UK.”

Warehouse capacity

The warehouse building boom since the pandemic led to a shortfall in capacity is now starting to ease the pressure on space – in some areas.

“It is a mixed bag,” says Fellmann. “At one point many of our customers had a lot of inventory, especially in fashion and consumer goods. Once that high inventory is depleted we will get back into a regular rhythm.

“But quite a few companies who used to distribute out of continental Europe are now coming to the UK to set up their own distribution. We are capturing a good part of that - we have not yet added another facility but we are very close to doing that. We are growing with our customers but we are not opportunistic where we will go into three 200,000sq ft sheds and hope we fill them eventually.

“The price expectations of shed owners are still very high but we are seeing prices softening now. Maybe there will be an overbuild at some point.”

Back in 2021 Fellmann was full of confidence that the high street would make a comeback against the relentless rise on ecommerce. With Office for National Statistics figures showing that in May 2022, seasonally adjusted internet sales accounted for 26.6% of all official retail sales, compared with 19.7% in February 2020, is he still as optimistic?

“I love the high street!” he says. “But it is challenging based on what we hear from our customers who are often the suppliers of the high street. Certain retailers are still streamlining their portfolios and in the last two years the acceptance for consumers to use ecomm has grown.

“By the same token, as the final mile becomes more expensive you might have at some point more consumers will say ‘you know what, I’m going to the high street to pick it up myself’. Maybe there will be an equilibrium and things might even move in the other direction.”

Supply chain

The rise in online shopping and some persistent supply chain issues are however making it harder for retailers to keep their stories fully stocked with the same wide range of products as before the pandemic, which in turn encourages more shoppers to go online.

Costs of both home and store deliveries will be given another upward twist as the need to decarbonise transport gets ever more urgent. Fellmann says Hellmann has always tried to minimise its impact on the environment.

“Sustainability has always been important to Hellmann,” he says. “Even more so today and it is a major strategic topic for us. When it comes to transport there is still a big discussion about is it sustainable on the cost side.

“We work very closely with our customers who are all in the same boat and we are on the sustainability journey together. We have some electric vehicles on the road in Europe already, but are we completely changing over the entire fleet in the near future – probably not.

“When it comes to airfreight, for example, sustainable aviation fuel adds about $1.50 per kg to the cost. So a portion of the industry’s volumes will be moved using SAF.”

As well as legislation, is Hellmann under growing pressure from customers to cut its carbon emissions?

“100% yes,” says Fellmann. “Not so much here in the UK on the road side – yet. In the international arena, 100%. One household electronics brand is saying ‘if you do not have a robust sustainability plan we will not consider you for RFQs’. Also a lot of the fashion brands that we have been close to for many years are going in that direction.

“It is here to stay and if we want to continue to be relevant we have to go on that journey together. But it will be a gradual process as cost will remain a factor.”

And of course recharging infrastructure for electric trucks is nowhere near ready for companies like Hellmann which double shift their vehicles.

“At Heathrow and Lichfield the trucks do the pick ups and deliveries during the day and trunking at night,” says Fellmann. “You need to allow the down time for that.”

IT investment

It isn’t just zero carbon vehicles that require heavy upfront investment- keeping on top of the day job with a new Hellmann Worldwide IT system is also absorbing cash.

“This is the biggest investment in the company history,” says Fellmann. “We have partially rolled out new accounting software and are rolling out an international transportation management system including an upgrade on the road side. We have numerous digitalisation programmes at different stages running until early 2025.”

The new IT systems are giving customers unprecedented visibility of their shipments, although Fellmann admits it is not quite at the levels achieved by some in the parcels sector.

“We on the road side are not yet where the last-mile courier is,” he says. “Their customers get a ping to say the package is on the vehicle, the driver is en route, it will be there in two hours… We are not quite there yet and the discussion is still very much around the last mile.

“Everything else is visible online – has it cleared customs, is it across the border… But that crunch time – is it half an hour or an hour away – is still a touch point.”

Increased automation of shipment booking and tracking is already reducing the routine day-to-day interactions between Hellmann staff and customers, but it is too soon to say what the impact of artificial intelligence will have on logistics.

A company statement on AI says only it “is a topic we are very closely monitoring and that will certainly fundamentally change the logistics industry”.

It goes on: “Within the framework of adequate regulation, the further development of AI offers an incredible number of opportunities to optimise our services.”

Fellmann concludes: “These are still challenging times, but together with our customers and partners we are ready for this challenge. With a can-do attitude and a teamwork approach we are looking forward to the future.”

The post Hellmann UK turns a corner despite difficult business environment appeared first on Motor Transport.

Q&A

Q: What are PML's biggest current headaches?

A: Increased rates. Not for this Kent facility because we own it, but for our Heathrow facility the landlord has increased our rent by 72%. He wanted a 100% rise but we managed to get it down. I think they’re trying to recoup money lost during Covid. But I don’t know how any companies will be able to afford those kind of increases.

And on top of that, where the government are supposed to be helping businesses to recover, what they don’t tell you is that the local authorities have increased rates by 27%, which has an impact on moving produce. The main ground handling agent at Heathrow has also just increased its rates by 24%. Dnata is taking 28p out of every kilo of product that we fly in, it’s just not viable.

Q: How much impact are rising air freight prices having?

A: They’re proving crippling for some businesses. Charges at Heathrow have increased at a rate which is out of kilter with any other UK airport, while the standard of service declines. For example, it costs £880 to offload a four-tonne pallet from the aircraft onto an ambient lorry which then transports the cargo to an ambient transit shed when precisely the same movement for goods being moved from Stansted to its shed is £37.50. Yet the same movement for exported costs at Heathrow is £55!

As a business committed to maintaining the cold chain, PML is concerned that perishable goods can be held in an ambient warehouse for four to six hours after the plane has landed. They are then potentially held a further one to six hours before they are processed and ready for collection in a temperature controlled - not ambient - vehicle for their onward journey to the retailer.

Q: Where does that leave businesses like yours?

A: It’s likely to trigger an enhanced interest in shifting to sea freight, especially as exporters continue to identify new and inventive ways to maintain temperature control whilst the goods are in transit. At PML, we are experiencing an increase of 10-15% in our sea freight offering, compared to the same period last year.

Q: How’s PML's bottom line looking amid these challenges?

A: Last year we’ll make a small loss and this year hopefully we’ll make a small profit. But for the effort that’s put in the profit is tiny and insignificant.

Food prices are rising. Not just fruit and veg but also eggs. It can all be resolved if the powers that be listen, not just to me but the trade itself. But I don’t think the government consultants have ever been involved with lorries. They make us a laughing stock here and around the world. For example, there are two inland border inspection sites which used to be owned by Wincanton. And they gave it to a French company who were selling horse meat. We left the EU and now more and more EU companies are coming to control our borders.

Q: Do you expect delays at UK ports for the foreseeable future?

A: Brexit and the shortage of HGV drivers have played a key part in this issue and unless dramatic changes are forthcoming, it looks likely that these will continue and indeed get worse. Many European drivers are now unwilling to drive in the UK due to the ULEZ charges, poor welfare facilities and anticipated holdups.

In October the new inspection parameters for imported goods coming into the UK will be activated and unless the government takes heed of the feedback from logistics firms working within the fresh produce sector, this will take the delays to a whole new level.

Q: You wanted the Kent facility to be a border inspection post, why has that not happened?

A: Yes, when the actual full EU Brexit comes into effect there will be a percentage of product that will need to be inspected. We challenged customs because their border control post is at Junction 10 of the M20, which is further inland from Dover. Explain that one to me. But it would cost us a fortune to take it to court.

Q: How do you tackle the challenges you’re facing?

A: Reinvent yourself. Something we’re trying to encourage is exports out of the UK. We can make a reasonable profit on those – cherries, strawberries, a lot of lamb, fish from Scotland and the Faroe Islands. The meat is predominantly halal because it’s going to the Middle East via air and sea. We’ve diversified into a lot of sea freight as well.

Q: Why the diversification?

A: To help our customers. At one stage during Covid a lot of hauliers came up with a driver retention fee which varied from £60-100 per container. It wasn’t sustainable; we got our own fleet of vehicles and did deliveries ourselves.

We’re still the strongest on air, we’re making huge inroads into sea freight and we’ve set this facility up for road freight. It seems to be doing well. Things are looking up but it’s still very difficult.

When Brexit was announced, it didn’t really happen. Inspections didn’t happen, the volume of declaration didn’t happen, so we adjusted our staff accordingly. We went through the pain of training staff and then had to release about eight. This was about eight months ago. We hear the full Brexit status won’t come in until 2025. They’re kicking the can down the road until they’re not in power and then someone will have to deal with it.

Q: You’ve also just announced a new deal with Tulpin Group for last mile deliveries…

A: Yes, PML takes responsibility for the last mile delivery of fruit and vegetable consignments that have been shipped by air from Egypt. The agreement comprises Tulpin Group’s own customs agency / haulage company All-Trade/Ostendfresh collecting the freight from Ostend airport and loading into trailers. The trailers are driven to the ports of Dunkirk and Calais and the consignment dropped onto a RoRo ferry destined for the Port of Dover.

Tulpin Group advises PML in advance of any required information to enable a seamless customs clearance and potential inspection. PML collects the trailers from Dover, taking them to the the Kent hub for clearance via the company’s approved Border Control Post. After clearance, PML delivers to the end customer and then returns the trailers to the port for transfer back to Belgium, to enable the process to be repeated. It is anticipated that during the peak season, there are up to 20 trailer movements per day.

 Q: What are the advantages to this arrangement?

A: A faster turnaround of trailers allowing for more freight to be moved; no requirement for down time for EU drivers saving time and money; elimination of the risk of EU drivers being caught up in queues resulting in problems with managing driver schedules / drivers becoming frustrated and addressing the growing reluctance for EU drivers to drive to the UK post Brexit.

PML has already handled 7.5 million kilos worth of Egyptian strawberries through the partnership – that’s around 800 trucks worth. This is alongside its clearance operations in Kent out of Morocco of mixed berries, which amounts to clearing 1,200 trucks, proving both trade routes have been a roaring success.

Q: How far are you on the journey to net zero emissions?

A: It’s something we’re seriously looking at. But I’ll put the question back to you. Who out there can give me an electric truck that can do four or five hundred miles? Nobody. And we recently asked a German manufacturer about the range of their refrigerated vans and they said, ‘don’t bother’.

We’re looking at putting solar panels on the top of trailers but unfortunately they’re twice the price. We’re also looking at hydrogen but where can you refill? And who’s going to pay the additional cost? Some of the government grants could be used better.”

Q: In June 2021 you shifted the PML operation to Kent to avoid what you said were “crippling” LEZ charges. Has the move paid off?

A: Yes, we picked up a lot of business on that and reduced a lot of road miles. The Spanish hauliers now come in and we empty and they make local deliveries. It means less usage of the trucks and less trucks and it’s worked very well.

Q: Do you need to win new business to drive growth?

A: No we’re quite stable with what we’ve got. We get enquiries every day from potential customers. They know it will be a reasonable price and a Rolls Royce service. That’s what happened with our lamb. Unlike our competitors, who went in for the kill, we looked at it on a long-terms basis. We wanted to grow the lamb business in the Middle East because it competes with New Zealand and South Africa. We did deals with the airlines and passed the discounts on and we can now very closely compete with New Zealand. If you put a UK lamb against a New Zealand lamb it’s very meaty, they love it in the Middle East. Some restaurants will only serve Welsh lamb. The difference is incredible.

Q: Do your customers buy into that?

A: Customers don’t know the whole story so they’ll look for a cheaper way or go to a competitor to get it quicker, which is why we spend time sharing information about the supply chain. Being a customer not just the end user is what makes the difference, they’re not just a number. A lot of them are personal friends.

I’d rather look after what we have and increase gradually. But you’ve got to give them the service. When they become a number I won’t be in the busines any longer.

Q: There looks to be a lot of consolidation happening in the industry lately with the likes of Culina etc looking to drive more growth…

A: Yes and they aren’t the only ones. Look at Maersk. I’d be embarrassed with the profits they made last year. It was about £37 billion. They’re claiming things are tight but still making those profits. It’s the same as the energy companies. Same with the fuel. When there was a fuel crisis they were making a fortune. So why shouldn’t they pay additional tax? Then you’ve got P&O sacking people.

Q: Do you fear for the SMEs making thin margins?

A: I do. I think there’s a few that will go by the wayside like some of the freight forwarders. You’ve got the new computer system, you have to train everyone on it

Q: What’s a typical week for you?

A: The last one was Dubai for Gulfoods, which is a good show. I’ve also just been to  Food Logistica in Berlin. I’m only here for a week then the it’s the Gulf, then Barcelona, Madrid, Hong Kong... that’s just the shows, that’s not seeing customers. Not all our customers are based in the UK. It’s an exciting job if you’ve got the stamina. I turn 60 next year and I love it. I couldn’t slow down.

Q: What do you love most about the job?

A: When someone tells me we’ve got a million kilos of something and knowing that when I come in the following morning that it’s all gone. And I do love comparing product that is packed by us to other supermarkets. I want us to be the best. We’ve got the quality. We reduce the time the product has to go through by two days. We can land it today, pack it today and deliver it tomorrow. Whereas others might take it inland and it’s delivered the fourth day. Ours is fresher and has less road miles and extra shelf life.

Q: What’s the make-up of your fleet?

A: We have a lot of DAFs and some IVECO. Scania and Mercedes trucks are very expensive. We’ve also  just taken delivery of three brand new Mercedes Sprinters.

We always get the drivers to trial the trucks. We trialled the Actros. They hated the electric wing mirrors. It’s like a camera that came up on the dashboard and they didn’t like that all. The one they like most is the DAF, it’s a good reliable vehicle.

We change them every three years and get a brand new fleet. We contract hire our vehicles. We use Farnborough Van and Truck Hire, they’re a good company who’ve been around a long time. They maintain everything. We change the tractors every three years and the trailers every five. A lot of them buy them brand new. It’s not our business, we’re not mechanics. We just want something reliable, that’s the key.

The post ‘Rising costs have forced us to diversify and reinvent ourselves…’ appeared first on Motor Transport.

But the launch of the 2023 edition in this issue of MT coincides with inflation in double figures, interest rates at 5% for the first time in more than a decade and the UK economy teetering on the edge of recession. So MT’s first question when we met in March this year was ‘are you still optimistic about 2023?’

“We will continue to develop and thrive and joining Arbuthnot was a really smart decision for both of us,” he says. “Covid-19 accelerated that as we needed to rethink our business model and it put us in a position of undoubted financial security. They have invested heavily in our business and expect us to take full responsibility for managing it.”

Asset Alliance was founded by Paterson in 2010 and merged with ATE Truck and Trailer Sales in 2012 to form AAG. It was acquired by 190-year-old private bank Arbuthnot Latham in 2021; that year the bank made £4.6m pre-tax profit on turnover of £88.7m and had net assets worth £200.9m. Its 2022 results were far more impressive, with a pre-tax profit of £20m on turnover of £137.4m and net assets of £212m.

A former banker himself, Paterson is confident that despite a handful of banking failures around the world UK banks are solid. And, despite strong criticism of the government’s mismanagement of the economy, Paterson says the financial services sector remains a key powerhouse for the UK.

“The financial sector is incredibly strong,” Paterson says. “That is the only thing really propping up the UK economy. We have huge businesses that support the automotive sector – do we manufacture anything? No. Do we assemble things? Yes, lots.

“The thing that galls me as an economist is that we have to be taxing people better. No one wants to be taxed but we have to pay the bills and too many young people think they can have what they want when they want it. All we are doing is passing debt down the line.

“If government thinks all they need to do is take on more debt and inflation will deal with it, that is commercial suicide.”

As a proud Scotsman, Paterson also despairs of the nationalist government in Scotland and worries that Brexit and Scottish independence could ultimately lead to the break up of the UK. The rupture in Anglo-Irish relations since the UK left the EU has already seen AAG’s previously substantial business on the island of Ireland almost disappear.

But its UK business remains in good health and with the help of Arbuthnot’s backing AAG is slowly catching up on its asset replacement programme which was delayed by Covid-19. It currently has 4,200 owned vehicles on the road – plus another 1,000 on fleet management contracts – all managed from five sites and Paterson takes pride in having the youngest contract hire fleet in the market.

“We replaced 1,700 vehicles last year and we are planning to do another 1,700 to 2,000 this year,” he says. “A lot of that will be replacement of existing fleet plus some growth.”

AAG is expanding its presence in the bus and coach market it acquired in 2016 when Forest Asset Finance was merged into the group.

“Our intention was to convert it from a broker into a lender but we never had the capacity to do that because the commercial vehicle business was growing so fast,” says Paterson. “We have had 50% growth year-on-year since we started but we now have the capital and intend to do £100m of lending in that division alone this year. That will help with my plan to get the fleet up to 8,000 vehicles in the next three years."

Supply of bus and coach chassis is just as tight as it is for trucks but AAG has good relationships with its suppliers.

“We managed to get enough chassis supply in 2022 to meet our objectives,” says Paterson. “We have enough already hard-baked in for 2023. That wasn’t an easy job and my plan during Covid was to get the financial stability to give me the confidence to place orders when nobody else was doing it – and that worked.

“The problem was when we entered Covid we couldn’t get the supply we wanted. Nevertheless, we have been buying trucks and getting orders filled when others weren’t and that has served us very well.”

The PSV market is adopting zero emissions technology much faster than HGV operators, helped by public subsidies and local authorities keen to clean up air pollution.

“We have hydrogen, electric, hybrid and gas buses and have had for years,” says Paterson. “We’ve just done our first replacement cycle on electric buses with a battery swap after seven years. So there is learning there.

“The reason it works is that it is a subsidised market sector where the councils have control or own those fleets. TfL has a mandate to meet certain objectives and they will make it happen. I had hoped what was happening in London would spread to other cities with low emissions zones. It hasn’t happened as quickly as I thought but it is starting to happen now. Glasgow has moved the First Bus fleet to electric, Edinburgh have hybrids and Manchester is the next major conurbation to go.”

In the 202 Industry Monitor 61% of truck operators said they expected to be operating alternatively-fuelled vehicles soon and Paterson admits that electrification is already moving faster than he expected.

“We are playing catch up and have had something of a rude awakening,” he says. “I had thought the change was a little further away but in the last year things have been happening quicker than we expected. We speak to all the major manufacturers at European level and are guided by them.

“Some are still in the dark and don’t know how they are going to reach the targets – but they simply have to reach them because the fines will be huge. So some are driving the change and we are very close to that.

“We are actively looking at the supply of green hydrogen as we think it is the only economic substance available. We have a small taxi business in the group with 1,000 taxis in London and looked closely at putting a hydrogen generation system in there. The numbers stacked up but the risk was that we would need to put in around 10 small containerised generation stations that would be plugged straight into the mains. That was the deal breaker for us as the big variable is the cost of electricity.”

Paterson now believes AAG will at some point be able to offer its customers a turnkey green hydrogen solution encompassing vehicles and fuel.

“We think we can potentially move to supplying a vehicle and a fuel supply contract at a fixed price,” he says. “If you have wind turbines and solar panels plus battery storage that can be a solution to the problem as it gives you fixed price hydrogen for a long period of time.”

While some observers believe only government can decide which direction to take the UK energy sector to deliver net zero carbon emissions by 2050 Paterson is not waiting on the politicians.

“I wouldn’t want to trust the government to make that decision,” he says. “I don’t think they are capable of making it. They are capable of incentivising it and acting as a catalyst - regulation is the biggest catalyst and the manufacturers have signed up to it and have to deliver.

“The innovation will then come from the manufacturers, possibly helped by government or university funded research and grants for example. In Glasgow there is a new hydrogen truck business that has had huge grants given to it and that hopefully will lead to something.

“We don’t want to be the first adopter but we definitely want to be an early adopter. I want to be able to go to my customers and say ‘if you want electric, we can give you electric. If your pay load is high and you are not back-to-base, then you are a hydrogen customer’.

“In the space of three months ago I changed my view from thinking I was a year away from having to do anything about this. I am now seeking a senior individual to come into our business to steer us through this period of change.”

AAG needs to be able to offer its customers the right tool for the job and recently placed an order with DAF Trucks for 1,500 vehicles worth more than £160m which will include at least 75 trucks from DAF’s electric range.

While the bulk of the order will be a mix of diesel New Generation DAF XF and XG tractor units there will also be a tranche of XD tractors and rigids with both electric and diesel drivelines.

Deciding what zero emissions vehicle is right for which application won’t just depend on pay load however.

“We have just started a data management project with some consultants looking at how we analyse the data we have in the business to better understand the needs of our customers against the capabilities of the products available,” says Paterson. “Then we can go back to the manufacturers and say ‘we think we are best placed to do this, you need to give us the data on what you can do and keep working with us’.

“The benefit we have is that we own a massive used truck business – probably one of the top three in the UK – so we are agile enough to take more commercial decisions on residual values. We are not a bank which has to have a fixed price at a fixed time. We can steer through that in a way that some of the vendor finance companies just can’t.

“’I previously ran a bank’s commercial lending division and I know how difficult it is for them to be flexible. The model for our business is to deliver that flexibility and agility.”
While Paterson understands the view that banning the sale of all new diesel trucks from 2040 is not feasible, he points to the rapidity of technical developments in recent years.

Holding up his smartphone he says: “We run our lives with these. They’ve only been around for 20 years. We have lived through an incredible 20 years of progression and battery technology is moving dramatically. So I think we will be there in 17 years – we will have to be. It is coming so much faster than we thought it would.”

Paterson also points out that the part of diesel vehicles will continue running for “seven to 10 years” after the 2040 deadline and predicts there will be a surge in internal combustion sales in the run up.

“I am seeing buying patterns slowing down at the moment and I’m convinced it is to do with people pushing that churn back to one or two times,” he says. “If you look at RVs, they normally follow a five-year wave. Depending on what happens in the next year with new vehicle pricing – and they are starting to soften – I think we will see an unusual RV curve in the next five to 10 years.

“RVs are at their peak at the moment. I believe that while they will soften they won’t go back to previous levels and will hold up for the next three to five years. Depending on how efficiently the change is introduced they will then either hold up or even go back up again.”

A lot of operators were spooked into buying Euro-5 trucks ahead of the switch to Euro-6 in 2014 only to see RVs crash, and Paterson believes lessons may have been learned about investing too heavily in out-going technology.

“That has spurred some of the larger businesses to say ‘let’s just adopt this and use it as a USP for our customer base’,” he says. “We are owned by a private bank and people have a choice of where they invest their funds. ESG definitely has a role and I am being asked ‘what part are you playing in our zero-carbon agenda?’ That is why I’m employing someone to steer us there faster and smarter.

“But we have to be pragmatic and understand we can’t fix the problem overnight. There is a balance in there somewhere.”

This new world order will present particular challenges to the contract hire sector as upfront costs of zero-carbon vehicles will be much higher while running costs in theory should be lower. How will this shift be shared between the funder and the operator?
“Over the last 10 years we have seen new truck prices double,” Paterson says. “We are bullish on RVs because we have to be but if I have to pay £300,000 for an electric truck and my customers are in the habit of paying £600 a week for a truck, they are not all of a sudden going to be able to pay £1,000.
“Some of them have an agile model and can, but the majority can’t. So we have to work with the manufacturers and say for the first period we will take a commercial decision on it, try to hedge some of that initial risk with our back book and hope it will all balance out. The change in technology can’t be too rapid – we have to find a safe pace to do it.

“I can’t go out and order 1,000 electric trucks right now but I can order 150 and start placing them through our business.”

Even before quickening its pace of adoption of alternative fuels AAG had been working with more truck manufacturers than before.

“We deal with every manufacturer and one good thing in the last three years is we have had to widen our supply base,” says Paterson. “Four years ago we had three core suppliers which we would speculatively order from and, to make sure we had the resources available and that the economies work for us, we would pre-buy big numbers. The majority of the others we would only buy from to meet specific customer requirements.

“The inability of our core suppliers to meet that supply in recent years meant we had to go and speak to every manufacturer, and that has been a positive turn. We have bought assets from manufacturers we wouldn’t have in the past and been pleasantly surprised. We have a more stable, balanced portfolio and have good relationships with every manufacturer, some better than others, and we are well placed to develop those going into this next stage.”

One of those pleasant surprises was Maxus, the Chinese manufacturer that was early into the electric van market, and whose product AAG bought when there were few alternatives. “We’ve had no problems with them,” says Paterson. “It has been a good experience.”

No Ryder dividend

The shock exit of US-owned Ryder Europe from the UK contract and hire and rental market left several thousands of vehicles looking for new owners, but Paterson took no pleasure in seeing another competitor disappear from the market.

“It is never good to lose any major business,” he says. “It was disappointing to lose Ryder from the UK market as there were a lot of good people there. I never like to see any business fail and it’s not good for our economy.

“We recruited some good people and bought some embedded assets. We won’t make any money on them but we have secured some good customers It’s a long term play”

Is this is the end of inhouse R&M?

While electric vehicles are said to be simpler to maintain than their diesel equivalents it will be a brave workshop manager who wants to mess with high power 400V or 800V battery packs let alone hydrogen fuel tanks pressurised to 300 bar.

The arrival of Euro-6 with its complex electronics had already seen many operators and leasing specialists withdraw from inhouse R&M and AAG was no different. It rented out its 120,000sq ft Wolverhampton workshop five years ago and now relies on dealer R&M packages for its fleet.

“We have moved entirely to buying fully-maintained contracts from the manufacturers,” says Paterson. "We monitor them very closely and gather the data so we can manage the relationship with our suppliers. We think it is the right thing to do and a natural hedge against inflation. It is just one less thing to worry about at the moment.”

This approach helps reinforce the close working relationships AAG needs with its suppliers as the industry enters a period of unprecedented change and maybe instability.

“The major manufacturers we work with understand what we are trying to achieve and it ticks their boxes,” says Paterson. “To get the supplies we need we have tried to understand their needs too and we have had a meeting of minds on this. I can’t use their finance facilities because we are a bank and I’m cheaper than them, but I will buy their maintenance and look at extended warranties. That helps them to help us.”

By and large Paterson is happy with the R&M service he receives from dealers and says the six-week waits for service slots are starting to ease. His key priority remains communication from the dealer.

“If the vehicle can’t be fixed, as long as we have absolute clarity in that communication, that can be dealt with,” he says. “What you can’t do is tell someone who has a £2m load of salmon on the back of his truck that it will be fixed in three hours when it clearly won’t be. The biggest challenge is when they don’t trust what they are hearing and start interfering. Then everything goes wrong and we have tried to use technology to shorten those lines of communication.

“We had a period of having major issues with supplying relief vehicles to customers with vehicles going off the road because we simply didn’t have vehicles to give them. But ordering large numbers of new vehicles and taking a lot of used vehicles back has given us the ability to support those customers and the dealers better.”

UK no longer head of the queue for new vehicle allocations

While availability of vehicles is slowly getting better, shortages of some components are still holding up deliveries.

“The biggest issue for some of the manufacturers is third party supply chains,” says Paterson. “We still have vehicles delayed because we can’t get sensors or some other electronic part. We have a couple of manufacturers who have serious parts supply problems and that causes massive knock-backs. We have vehicles that were due in October and are now coming in April so we have paid for trucks that aren’t going to hit the road any time soon.”

Paterson also believes that the UK is no longer at the front of the queue when the European manufacturers allocate limited quantities of new trucks leaving the production lines to their key markets.

“For a long time the UK was getting more than its fair share because our discount structures were better and we have a shorter life span than the rest of Europe,” he says. “Since Covid manufacturers have said ‘we were sending 40,000 of the 60,000 units we produce to the UK but now it’s only going to be 15,000 units because we get a better price for them in France or Italy’.

“Whether it is Brexit I don’t know, but we are definitely not getting the same supply as before and we are not getting anywhere near the same financial discount.”

The UK could sink further down the queue for allocations of zero-emissions vehicles as our government remains unwilling or unable to provide the direct financial support for the transition as other more interventionist European administrations.

“I’m not convinced we could afford it in the UK,” says Paterson. “I don’t think our governments are as commercially proactive as the French or Germans. That is disappointing and maybe they just accept if they play hard ball we will adapt and pass the price through to the customer.”

Despite new truck price rises starting to ease, the long lead times AAG is still experiencing means that fixing the price of three-year contract hire deals remains a challenge.

“We can’t fix a price until drawdown and then we try to hold on to the price as much as we can because it is all about being a trusted partner and not damaging the relationship with our customer,” says Paterson. “We certainly caveat the price that it will be subject to the vehicle price at drawdown and we never look to take a gain on that. Quite often we lose but we are still offering a fully fixed price for the period of the contract.”

Extend not replace

During Covid-19 when supplies of new vehicles slowed to a trickle as manufacturers closed factories the only option for many customers was to extend their existing contracts.

“Around 80% or 90% extended because we didn’t have any options,” says Paterson. “When we did get to the point last year where we started getting more vehicle supply and we wanted to swap them for new vehicles the customers were saying ‘I’m paying £400 a week for this tractor and you want me to pay £540; I would rather just keep this unit’. If it’s a long-term relationship we will try to support them but we have swapped over 50% of the fleet over the last 18 months and we continue to do that.

“If there’s been one positive from the last three years it is the fact that our industry has woken up to the fact we have to drive change. Operators mustn’t be afraid of it and they must go back to the customer and pass the price on. Most of the industry has learned to do that and some of the slightly more traditional firms that won’t have just decided to shut up shop."

The recent massive cost inflation operators have seen – even before a mass switch to zero-emissions vehicles – will inevitably lead to increasing numbers of hauliers throwing in the towel and looking for buyers.

“Consolidation is going to continue right through 2023 and into 2024,” says Paterson. “It is all about the structure, economies of scale and professional management of businesses. Those that have adapted to deliver the best possible service, made themselves easy to deal with, are efficient and invest in the latest equipment to drive cost down are thriving. The ones that are more sluggish to change will have real challenges ahead.”

Even though modern trucks are mechanically more reliable R&M costs can still rise dramatically after three years. “It’s sensors, fuel filters etc – maybe slightly different things but utilisation has a direct impact on cost,” says Paterson. “We are kicking off a big data project and new computer platform at the moment to allow us to manage this better and have absolute visibility of all the factors we have to deal with. Data is king.”

What future for the secondhand market?

If we know one thing about future zero-emissions vehicles, its that they will cost more and so will probably be run longer than the current generation of diesels.

AAG acquired secondhand truck specialist Hanbury Riverside in 2018 and sold £45m of used trucks in 2022.

“The vast majority of that was in multiple sales of two to 10 vehicles at a time,” says Paterson. “These fleets see that the price of a new truck has gone up 30% in the last 18 to 24 months and that our Truck and Trailer Sales business can supply a two- or three-year-old truck with low mileage and a year’s warranty and maintenance which will do them for the next two years. People are becoming more aware how to use technology to manage and optimise their fleets – these are not owner-drivers, they are established businesses.

“Once everything has stabilised they will then start to negotiate with their customers a suitable price rise so they can start to buy new again and pass on the benefits of zero-carbon vehicles to customers.”

The big danger for operators who rely on used diesels as the deadline to end new sales looms is that the government might start to ramp up fuel duty to encourage the faster adoption of zero-carbon trucks.

“It is down to people like you, the RHA and other bodies to lobby government to say that can’t happen,” says Paterson. “We need to become a little more French and forcing that while we go through that period. We have to be smarter in our lobbying.”

The post Solid backing from parent bank gives Paterson confidence in Asset Alliance’s future appeared first on Motor Transport.