Guide. Performance Management for Efficient Road Freight Operations

Transcription

1 Guide Performance Management for Efficient Road Freight Operations

2 Disclaimer: While the Department for Transport (DfT) has made every effort to ensure the information in this document is accurate, DfT does not guarantee the accuracy, completeness or usefulness of that information; and it cannot accept liability for any loss or damages of any kind resulting from reliance on the information or guidance this document contains.

3 Foreword Freight Best Practice is funded by the Department for Transport and managed by AECOM Ltd to promote operational efficiency within freight operations in England. Freight Best Practice offers FREE essential information for the freight industry, covering topics such as saving fuel, developing skills, equipment and systems, operational efficiency and performance management. All FREE materials are available to download from or can be ordered through the Hotline on

4 Contents Foreword 3 Performance Management for Efficient Road Freight Operations 6 Who Should Use this Guide? 7 How Should this Guide Be Used? 7 Structure of the Guide 7 What Is Performance Management? 8 What Should a Key Performance Indicator Be? 8 Which KPIs Are Right for Me? 9 Measuring Overall Performance 10 Focusing on Key Components of Your Operation 12 Summary 12 How Do You Go about Measuring Performance? 14 A Step-by-step Approach to Measuring Performance 14 Selecting the KPIs 14 Setting and Reviewing Targets 15 Data Collection 15 Reviewing and Evaluation 18 Reporting and Feedback 19 External Benchmarking 21 Results 21 Improving Performance in Your Operation 24 Operational Efficiency 24 4

5 Telematics 26 Efficient Fuel Management 26 Improving Fuel Efficiency at Thorntons plc 27 Refrigerated Vehicles 29 Efficient People through Developing Skills 32 A Checklist for Measuring and Improving Performance 36 KPIs Used in the Freight Best Practice Fleet Performance Management Tool and Information Needed to Calculate them 37 5

6 Performance Management for Efficient Road Freight Operations Your freight transport operation may appear to be running smoothly, but the reality is, if you don t measure it, you can t manage it. Freight transport operations are made up of equipment, systems and people. Understanding and monitoring the performance of each of these can be very challenging. This guide gives you, the decision-maker, an understanding of performance management concepts in freight operations, as well as advice on putting a performance management process in place. Along the way, we ll give you some examples and ideas to try out which will put you in a position to know if you can improve the way in which you are currently measuring the performance of your operation. The main themes covered in this guide are: Key performance indicators (KPIs) - performance is best measured on an on-going basis, and KPIs which use a small number of key measures in important operational areas provide a good way to do this Roles of management - for more senior managers, KPIs can be used to develop strategy, plan and make decisions, while at the operational level they can be a day-to-day or week-to-week management tool Measuring process - the process or system used to measure performance should be clear, accurate and proportionate to the expected benefits Measuring tools - there are a wide range of systems, from simple paper records to comprehensive computerised systems for data collection, that save time and effort Analysis of results - it is important to analyse the data correctly and make best use of the findings, and to look out for the pitfalls that can occur during both data collection and analysis Benchmarking - as well as comparing your own drivers, vehicles and systems, benchmarking your operation against the performance of other similar operations in the same or even a different industry may reveal areas for improvement 6

7 Strategies to increase performance once you have understood your current performance you can then develop a strategy to identify reasons for good and bad performance, introducing good practice methods used by good performers, and focusing training or investment specifically in the worst performing areas Who Should Use this Guide? This guide has been designed primarily for managers and decision-makers operating transport or distribution operations. Other members of staff may also find useful information within the guide to help them better understand their own roles and how they might help to contribute to improving efficiency. How Should this Guide Be Used? This guide should be used as a reference document, providing guidance on concepts relating to performance management in freight operations and introducing the types of key performance indicators that can be measured in an operation. Structure of the Guide Chapter 2 looks at the benefits of measuring performance, demonstrates the use of key performance indicators and shows KPIs relevant to different types of operation Chapter 3 discusses the process you can take for introducing performance measures Chapter 4 identifies the practical steps you can take to improve efficiency once you have measured current performance 7

8 What Is Performance Management? If you want to make well-informed, tactical and strategic decisions about your operation, you will need to be able to accurately measure the resources you use to deliver your services. Only then can you identify areas for improvement and assess how effective any operational changes made have been. The starting point for any performance improvement programme should be to understand the current performance of your operation. This means collecting data on key aspects of your operation, and turning this information into specific measures that can help you to identify areas for improvement - for instance, how much it costs you to deliver products to your customers, how many miles your vehicles run empty or the number of late deliveries you make. These measures are known as key performance indicators, or KPIs. A KPI on its own will not tell you much. Individual measures and data need to be turned into information that can help you make decisions. This means setting a target, and measuring and monitoring KPIs over a period of time to see how you perform against this target. Weekly, monthly and annual reports allow you to monitor progress and see which areas need the greatest improvement. Producing graphs or charts will often be the best way of showing performance progress. Service Costs Measuring performance can allow you to strike the best balance between service and costs What Should a Key Performance Indicator Be? There are many different KPIs that can be used to measure performance in a freight transport operation and it can be difficult to know which ones might be right for you. This section is intended to explain the characteristics of useful KPIs that can be applied in various types of operation and by different people. However, there are a number of things you can consider beforehand in order to decide which ones may be right for you. A KPI should be relevant and it should also be SMART - Specific, Measurable, Achievable, Realistic and Timed. Specific KPIs should be specific, simple to use and easy to understand. Complicated statistics and formulae can lead to confusion and uncertainty about what is actually being measured in the first place. If KPIs are specific and kept simple, they can be easily communicated across the business and there is no need for staff to have an in-depth knowledge of the area being measured. 8

9 Measurable KPIs can show changes in performance over time. For this to happen it is essential to compare like-with-like data. It is easy to fall into the trap of comparing two drivers on different routes for time utilisation or miles per gallon (MPG). If one route is more demanding than the other, this could be misleading. Similarly, comparing drivers when they drive vehicles of substantially different age or vehicle type can also be deceptive. There are ways you can get around these problems however, such as rotating drivers onto different vehicles and different routes and then monitoring both driver and vehicle performance, to spot consistently high and poor performers. Achievable Any targets that are set should be achievable. It may seem beneficial to set high targets in the hope that this leads to greater improvements in performance, but people can become disillusioned when they continually fall short of the targets set for them. Regularly reviewing performance towards targets and then resetting the targets to encourage smaller incremental (but cumulative) improvements may work much better in the long run. Realistic Remember that decisions and management actions will be taken as a result of the data collected and presented, so the data collection method needs to be realistic, reliable and consistent. It is important that the data required to produce the particular KPI can be collected easily and on a regular basis, as comparison over time forms the basis of benchmarking and then improving performance. Timed The frequency of monitoring is an important consideration. Weekly or monthly monitoring is recommended for many KPIs but this can depend on the measure and the needs of a particular business. Some information may have to be collected on a daily basis, such as staff absences in the warehouse, daily delivery drops or nightly trunking volume. If certain measures are not recorded and presented to the agreed timescales, the risk of changes in performance going unnoticed rises. Which KPIs Are Right for Me? The size, type and management structure of a company is likely to influence the range and type of KPIs you might use. KPIs can be used to help managers develop strategy, plan and make decisions, while at the operational level they can show clearly the areas that need improvement, or a change in approach. The inner two rings on Figure 1 show the strategic functions of performance and a number of key business areas that can all be monitored using KPIs. An individual KPI can tell you how well you are performing at an operational level, however, when looked at in combination with other measures, a picture can be provided of how you are performing in terms of revenue and profitability and overall fleet efficiency, and in relation to customer service and legal obligations. The outer ring and white text on Figure 1, opposite, shows a range of different KPI s and the data required to help you monitor performance in a range of important operational areas. Appendix 1, on page 27, shows a list of KPIs commonly used in transport operations and the data required to calculate them. 9

10 Figure 1 Key Performance Wheel The Freight Best Practice Programme offers an easy to use Microsoft Excel spreadsheet tool called the Fleet Performance Management Tool which allows you to measure 22 different KPIs. Measuring Overall Performance A director or senior manager within a company is likely to be most interested in overall performance and bottom-line financial results. For transport or warehouse operations, these could be measured by the following KPIs: Overall cost of deliveries, such as cost per case / pallet Cost of maintenance Total cost of warehouse operation 10

11 See the Freight Best Practice Key Performance Indicators for: - Next Day Parcel Delivery Sector - Builders Merchants - Non-Food Distrubution - The Food Supply Chain - The Pallet Sector A full list of the Free Freight Best Practice publications can be obtained from the Hotline or by visiting the website at freightbestpractice Customer service KPIs are also important because they can give you an idea about how your operation is perceived by the people that ultimately pay you. Important customer service KPIs could include the: Percentage of deliveries on time Number of customer complaints The following case study below illustrates strategic KPIs used by Premdor. Changing service levels can, of course, have a direct impact on sales and ultimately profit as improvements in service levels can result in increased costs. Careful performance monitoring in these areas is therefore crucial to help strike the right balance. Strategic KPIs at Premdor Ltd Customer Service: Number of failed deliveries due to: Not loaded Damaged Driver out of time Product not required Delivery point problem Ryder Plc is a major third-party logistics solutions provider which provides a dedicated distribution operation for Premdor, one of the largest suppliers of joinery products in the world. Each month, Premdor requires Ryder to produce a set of KPIs covering the following areas: Transport Costs: Total cost per trip Total cost per drop Total cost per unit Miles per gallon Sales/Order Process: Premdor measures the effectiveness of its own sales force. The costs per unit and per drop data collected by Ryder link into sales KPIs, and the product not required delivery failure reason is related back to performance measurement, assessing the effectiveness of the order process. Benefits: The benefits to Premdor have been increased service levels and better value for money from the contract. Ryder contract manager, Mark Saville, said the benefits for Ryder were that, KPIs allow us to manage the business and measure our performance and associated costs month on month and year on year. KPIs help us forecast resource due to the semi seasonality of the business. We strive to constantly improve on past performance and when we do we demonstrate this to Premdor. 11

12 Focusing on Key Components of Your Operation At an operational level, KPIs can give you a better idea of how drivers, fleets or depots might be performing. This information can help you compare the effectiveness of the managers at all levels in your business. Where some parts of an operation are consistently performing better than others, it may be possible to use KPIs to understand why this is the case and point to how to improve performance where necessary. KPIs for transport operations can be split into 5 main areas (costs, operational, service, compliance and maintenance), all of which could be presented by vehicle, part of fleet or company wide. Costs It can be useful to understand how overall business revenues or business volumes change but also how revenue from different parts of your business fair relative to one another. Measures under this area could be average cost per unit delivered or average driver costs per kilometre. Operational Fuel represents around 30% of costs in the majority of transport operations. Measuring and monitoring fuel consumption is vital, as well as average miles per gallon, average vehicle fill and average time utilisation may be measured. Planning efficiency could be measured by vehicle fill, driver utilisation, levels of empty running and kilometres per drop. Compliance Achieving high standards of compliance is a prerequisite to operating an efficient vehicle fleet with measures such as number of overloads, vehicle traffic infringements and number of accidents. Maintenance Maintenance performance is also important, and the fleet maintenance manager might want to look at defect report completion and rectification, tyre wear and replacement rates, volume of breakdowns and MOT pass rates. Summary Measuring performance can take time, but is well worth the time spent if it drives efficiency gains and improves operational performance. The starting point for any performance measurement system is to understand your current operational performance, and where the strengths and the weaknesses lie. This can be done by collecting data relating to daily operations and costs. Reports and presentation of weekly and monthly data in the form of graphs can help to highlight areas for improvement. Try to identify relevant KPIs covering different areas of your operation. Use KPIs to measure your overall performance as an organisation as well as the performance of individual parts of your operation. Regardless of which KPIs you choose, they should always be specific, measurable, achievable and realistic, while being monitored on a regular and consistent basis. Service Knowing how operational performance impacts on customer service can dramatically influence your actions, measures can include number of late deliveries, percentage of product damage and the number of customer complaints. 12

13 Operational KPIs at Premdor Ltd Driver Utilisation: Comparing each driver with the scheduled time for the route. Driver Performance: Individual drivers can be compared to show how efficiently they drive the vehicle in terms of mpg and how safe they are by measuring accident and collision rates. In this Premdor example, the management KPIs go to a greater level of detail than the strategic KPIs, which the Ryder team produces for Premdor. At the management level, Ryder is evaluating its driver and vehicle performances in order to improve the overall transport statistics that will form the basis of the strategic KPIs going to Premdor s management each month. Vehicle Utilisation: Evaluating the planning function by monitoring how well vehicles are utilised in terms of time and vehicle fill. Vehicle Performance: At this level, data is collected for each vehicle in terms of MPG and maintenance required. Customer Service: The number of failed and late deliveries can be measured for each route, along with order errors. It is then possible to see whether there is an issue with certain customers, or drivers on particular routes. 13

14 How Do You Go about Measuring Performance? Changing an aspiration to measure performance into a system that works in practice needs a well planned and consistent approach, supported by people across your organisation. Once again, the size and nature of the business and distribution operation will affect the way in which the plans are implemented. A Step-by-step Approach to Measuring Performance Figure 2 opposite shows a basic outline of a step-by-step measuring performance process. Each stage of the process is then further explained in this chapter. Selecting the KPIs Chapter 2 describes the sort of KPIs that you might choose depending on the size and nature of your business or area of responsibility. You may already have to produce a range of performance indicators for your company as a part of established procedures. However, it is useful to review the KPIs you currently use. Are they specific, measurable, achievable and realistic and do they give you the information you need? There may be other KPIs that can better measure what you need to know. Think about what you want to know and then look at ways of measuring it. Take the example of an own-account company that requires a transport manager to account for overall fuel spend. In order to meet the fuel-spend target, the transport manager may decide to monitor fuel price, fleet mileage and fuel consumption by vehicle. Armed with detailed information, effective targets can be set and action taken to improve overall fuel efficiency. Staff who are the subject of your KPIs need to see real value in monitoring performance levels. If they are part of the recording process and the burden of information collection interferes with the activity that is being measured, they are likely to lose sight of the all-important wider operation. 14

15 See the Freight Best Practice publication Fleet Performance Management Tool for a full range of KPI spreadsheets. Figure 2 The Process of Selecting and Measuring KPIs Select KPIs Set and Review Targets Data Collection Review/Evaluation (Including Benchmarking) Reporting & Feedback No No Results Targets met? Targets too high? Identify Strategy for Performance Improvement Take Action Implement Strategy Yes Yes Setting and Reviewing Targets Target setting is perhaps the most important part of measuring performance. You cannot set targets until you have measured current performance, but until you have reviewed performance against targets you cannot know what action is necessary to improve performance. Once you understand your current performance, setting realistic targets for each KPI is the next logical step. KPI targets should be in line with the strategic goals of your business and should aim to move the company towards achieving those goals. Targets do not need to be perfect; the very act of setting a target and monitoring your progress towards achieving it is really the important process. Always remember that monitoring and reviewing is an on-going process and if the target was met very easily, you need to go back and consider raising the bar. If you fall well short of the target, you should try to understand why this might have occurred and adjust your future target levels accordingly. Tip Targets are often discussed and reviewed on a monthly basis. Any longer period than this can mean that targets lose their relevancy. Data Collection Collecting data to determine your KPIs is often the most difficult and expensive part of measuring performance. Few companies will start from scratch so reviewing your existing process provides the first logical step. The data can be collected manually or automatically using some form of system, and they can be analysed within the company or outsourced. A fuel management system is an integral part of gathering data which can be used to measure KPIs 15

16 A simple system with as few recording methods as possible is the safest starting point, as the more complex the methods you use, the higher the possibility that there will be errors. If you are reviewing and improving your performance monitoring, you may well find that information is being collected but is not fully analysed or utilised. It makes sense to view the performance management process in the same way as the fleet efficiency you are trying to measure: try to achieve the greatest output with the minimum of input. Manual Paper-based Data Collection Forms can be created so that data can be collected by drivers through filling in a daily driver sheet, collecting data on kilometres run and the number of cases delivered and whether the delivery was on time. The driver would also note down the amount of fuel put into the vehicle to fill up the tank at the end of the day. When the drivers return to the depot, they hand the sheets to an administration clerk who can capture the information into a computer spreadsheet. Specific Data Collection Systems It is possible that your company does not have any existing systems that could be used for data collection purposes. In this case, you might decide to buy a system with the main purpose of measuring performance. If you decide to do this, then make sure that the system is fit for purpose and offers value for money. Integrating Existing IT Systems A company may already have systems that can provide some of the information, but is not able to get the most benefit because of existing systems not communicating with each other or not reporting in a way that allows comparisons to be made. There are a number of IT suppliers that focus on bespoke systems which can link warehouse management systems to scheduling systems or to order systems, so that a far more effective flow of information can take place. The cheapest approach to improving a current situation is to ensure that you have fully exploited the information available from current systems. You may find that you can collect data and report on many of your selected KPIs. Real-time Data Collection Automated Data Collection Many companies already have systems in place, such as warehouse management and route scheduling systems, that can do the hard work of collecting the data, which can then often be presented in standardised daily, weekly or monthly reports that will already be able to provide useful information on your chosen KPIs. However, it is often the case that the reporting functions of these systems are not utilised. Some operations may have specialised systems that can be used for the purpose of performance management, for instance, parcel carriers or service-orientated businesses such as utilities companies sometimes use hand-held terminals, enabling the driver to key in details of drops completed at the time. These systems can then be used to report detailed and accurate real-time data. See the Freight Best Practice Guides on Telematics and Information Technology for Efficient Road Freight Operations 16

17 Data Collection Errors Whether you already collect KPI information, intend to make better use of existing data collection systems or wish to put in place a new data collection system, there will always be the opportunities for data collection errors to lead to incorrect performance information. Problems can result from human, machine or system error. Often, time pressures can be the cause of data entry errors. A conscious check on data collected is recommended, whereby any unusual figures can be checked for reliability. It is also advisable to periodically monitor the accuracy of the data entry to spot any errors. It is important, therefore, when evaluating the results of data collection, to consider error as one potential reason for recorded changes in performance. Tip Human error at point of delivery can cause problems when invoicing the customer. Good housekeeping, strong procedures and a dedication to precision can help to reduce the problem of errors in data collection. The Perils of Averaging An Example of Errors in Data Processing By averaging MPG rather than using raw data, Company X thought that its performance was better than it actually was. The following example of averaging the performance of six vehicles over a week demonstrates the problem: Vehicle Number Distance Travelled Gallons of Fuel Used Miles Per Gallon Total over the six vehicles over the week = 8,189 miles and 1,001.8 gallons Simply averaging the individual vehicle weekly MPG figures gives a result of 8.74 MPG ( ). However, as each vehicle has run different mileages, the true fleet MPG is revealed by totalling all mileage and dividing by all fuel used. This reveals that the actual fleet performance is 8.17 MPG (8,189 1,001.8) - a difference of 0.57 MPG or 7%. 17

18 Reviewing and Evaluation The performance review period can take the form of weekly, monthly and yearly comparisons. If your business has a number of comparable operations then benchmarking vehicles, shifts or depots can reveal areas where performance could be increased. For example, different vehicle categories within a fleet can be benchmarked against one another to show how they perform on fuel consumption. If two similar vehicles on similar routes undertaking similar activities have noticeably different fuel consumption performance levels, then this should suggest further investigation to review both vehicle maintenance and driver performance. See the Freight Best Practice Fuel Management Guide which looks at vehicle versus vehicle and driver versus driver performance monitoring in more detail In the Parcel Sector Benchmarking survey undertaken in 2005 a number of leading companies submitted data for three depots each representing different geographical regions of the country (North, Midlands and South). One company s Midlands depot was the best at collecting parcels and bringing them into the regional depot, having 36% cubic fill at the end of the journey, whereas the same company s London depot had the poorest performance with only 17% cubic fill. Where there are significant differences in performance, an understanding of the reasons for this can help the business improve efficiency. This might be through looking for opportunities for back-loading, expanding the customer base and improved route scheduling When comparing one part of your operation with another, it is important to avoid the common pitfalls of not matching like for like, leading to misleading conclusions: KPIs measuring the performance of different parts of a delivery fleet by shift should take into account where shifts are not rotated and are constant nightshifts or dayshifts - there may be efficiencies gained by virtue of the time of day when the vehicles run on the road, i.e. encountering less traffic at night When benchmarking vehicle categories for fuel efficiency, it is possible that the results show the larger vehicles to be more fuel efficient. However, it is also likely that these vehicles may have been run on longer distance trunking routes rather than smaller vehicles that may have been used for numerous urban multi-drop deliveries When it comes to benchmarking depots, the type of operation could be significantly different. So, for example, a transport operation could be primarily a trunking or single-drop operation, while another could involve multi-drop deliveries in urban areas. The type of product carried may differ, and in both the warehousing and transport operations it could be that certain products require a much longer loading and unloading time owing to the size or complexity of the product Sometimes when company takeovers or mergers take place there is a difference in the quality and age of equipment and, until the equipment is replaced, there could well be a marked difference between the resources available at each location See the Freight Best Practice Key Performance Indicators for the Next-day Parcel Delivery Sector benchmarking guide. 18

19 In the Parcel Sector Benchmarking survey there was the tendency for all London depots to have poorer fuel consumption figures, perhaps because of congestion and lower inter-drop distance. On average, across all participating fleets, 18 tonne rigids had fuel consumption of 3.92 km per litre in the north and 2.56 km per litre in the south. It would be misleading to compare these performances directly because of geographical and operational differences. For further details see the Freight Best Practice Benchmarking Guides Key Performance Indicators for: The Food Supply Cahin Non-food Retail Distribution Builders Merchants Sector The Next Day Parcel Delivery Sector The Pallet Sector This has the added value of automatically building-in previous months data into the report. The reports can be designed to show actual figures against targets set for each of the KPIs, and from these reports, automated charts can be produced. Often a quick view of a chart can highlight the problem areas within an operation far more clearly than tables of data. The value of KPIs can be converted into efficiency improvements only if they actually lead to changes in the behaviour of the people in your business. As a rule, feedback should be given to people at all levels of the business, from strategic to front-line operations - this ensures that all staff members are aware of progress and can see the benefits of performance measurement. In many cases, automated systems will effectively prescribe the reporting style and it will be up to you to take the available reports and tailor the information, either for your own use, for communicating with those staff whose performance you are trying to influence, i.e. drivers, or reporting to more senior staff. Tip Reporting and Feedback The way you report performance information can make a great difference to the success of a performance management programme. This means choosing an appropriate style and format that interprets the data as well as reports. It will be influenced greatly by the intended audience - more senior managers will usually want to deal with concise summarised information. At operational levels within a business, a more indepth analysis showing a wider number of KPIs may be necessary. The reporting system must reflect this difference. Clarity and comparison are important. Remember that a picture (in the form of a graph) can portray a thousand words. Reports can be set up in spreadsheet databases to read directly from input pages (see figure 3, taken from the Fleet Performance Management Tool), thereby speeding up the time spent producing reports. 19

20 Figure 3 KPI Cumulative Summary List (Actual v Target) Figure 4 Pallet Sector Benchmarking Example External Benchmarking Testing the performance of your own operation against that of others is widely recognised as offering excellent health checks, by comparing operational efficiency with that of the average and indeed best in class. One example of this has been in the pallet sector (see figure 4), where a Pallet Network Benchmarking Survey measured a range of KPIs, including degree of vehicle fill, deviations from schedule and percentage of on-time deliveries. Participation in benchmarking with external organisations can be difficult to arrange and 20

21 time consuming to complete. Depending on the nature of your business there may be a benchmarking opportunity available. This is most likely to be the case within the public sector, for instance, within NHS Logistics or between local authority vehicle fleets. Freight Best Practice has also carried out a number of time limited surveys whose results are available for you to compare your current operational performance. Freight Best Practice would like to hear from any companies that would like to undertake this type of benchmarking. If you are interested, simply info@freightbestpractice.org.uk External Benchmarking External benchmarking typically involves: Judging the relative performance of your operation over time Comparing aspects of performance with other practitioners Identifying areas for improvement in performance Seeking the best approach to bring about improvements in performance to match or exceed best in class Identify Strategy and Take Action Look at reasons for good and bad performance at individual staff member, vehicle, shift or location levels Report back to those underperforming and set clear targets Introduce good practice methods, disseminated from high performers to the lower performers Consider providing appropriate training to fill skills gaps Targets Set too High? It could be that the target has been set too high and that it actually de-motivates individuals, thus people feel they would never be able to meet the target and less effort may be applied than if there were no targets at all. In this case, the target should be reviewed and set at an achievable level. Tip Always try to set achievable targets. See the Freight Best Practice Key Performance Indicators for the Pallet Sector Benchmarking Guide. Results Failure to Meet Targets Where targets are not being met by individuals, depots or by the business as a whole, but it is known that other individuals, groups or businesses have achieved better performance, detailed KPIs can show exactly in which areas performance has fallen below expectations. This information will be vital in determining actions for performance improvement. Targets Achieved It is important that you acknowledge good performance, and that the factors that have come together to produce the higher performance level are recognised. A particular manager or individual can have made a meaningful difference and this should be recognised. Tip Share good practice across other operations in the same company. 21

22 Targets Set too Low If targets have been met easily it may be that they have been set too low, therefore they should be altered. This is where benchmarking against competitors in the marketplace can provide companies with common standards. Internal Multi-contract Benchmarking Example In Ryder plc s Dedicated Contract Carriage division, benchmarking between different contracts takes place. This is a good way of comparing performance and management styles of different operations. It is made possible by having full access to all the data available, unlike comparisons with competitors operations. Concerns felt by companies outsourcing their distribution to Ryder over sharing of operational data are addressed through the non-disclosure of financial information and the contracts being in different industry sectors. Each operation benefits by becoming more efficient through using the best practice from one operation and transferring it to another. Each month a number of areas are benchmarked: Accident damage (average cost per vehicle) Vehicle downtime (average days per vehicle) MPG - comparison of each vehicle type (3.5-tonne, 7.5-tonne, 18-tonne, tractor units) Goods in transit Sickness record Collision frequency rate Key Points to Remember when Introducing Performance Management into Your Organisation Relying on people to provide good information can cause difficulties, so data collection systems need to be easy to understand and staff should be well briefed if you need them to collect data for you Work with staff to decide on what information you need to collect and how it should be collected Getting support from company management is critical - you cannot expect people throughout your business to give you good information if people at the top do not consider it to be important Collecting data can be resource-intensive. While continuous performance monitoring is best, taking regular snapshots over time can work well too. It is worth continually asking the question, How will this data help me measure performance? If no system is available for collecting information, make your own. Simple Microsoft Excel sheets can be useful. The Small Fleet Performance Management Tool shows how, by combining a number of spreadsheets, a comprehensive performance measuring tool can be produced See the Freight Best Practice publication Fleet Performance Management Tool which provides a full range of KPI spreadsheets Understanding the Factors that Influence Performance Many factors affect performance; many may be directly under your control, however, others may not be. Understanding and accounting for the influence of these factors is a necessary part of gauging the success of your actions targeted at improving performance. 22

23 When drivers leave the premises they are largely their own boss. Gaining their buy in to performance management is essential to your success Understand your current costs - you will need to know your current costs to create a benchmark from which you can monitor progress Realistic timescale - the longer the period of measurement, the more informative the results will be Representative sample - always remember to take into account seasonality and other external factors when comparing before and after results Technical issues - if you are measuring the performance of a new piece of equipment during a trial period, make sure you have support from the equipment or system supplier to ensure that you can make the most of the equipment Weather - to understand the effects of weather on fleet performance it is best to carry out your trial over a 12-month period Flexibility for unforeseen circumstances - a degree of flexibility in the trial procedure is essential to incorporate any unforeseen factors Ownership of intervention - from the outset, it is important to nominate a person who has general responsibility for the project Full participation - get everyone on board; if performance comparisons are introduced in the wrong way, without explanation and supportive management, they can alienate the drivers and lead to poor results Operational changes - always build into your performance management system the ability to record changes, such as new vehicles or equipment Individuals behaviour - human behaviour can always affect results, so one-off observations can be misleading 23

24 Improving Performance in Your Operation This section looks at some of the actions you can take to improve efficiency in your own operation. These are broken down into four key areas: operational efficiency, efficient fuel management, efficient equipment and systems and efficient people through developing skills. Operational Efficiency Vehicle Routing & Utilisation Medium-sized and larger fleets often use computerised vehicle route scheduling (CVRS) packages which can collect and provide data to help measure performance levels and, in particular, show where certain routes or depots are more efficient than others in terms of, for example, vehicle fill, kilometres per drop and time utilisation. In general, using CVRS can: Reduce journey times and vehicle mileage Improve the variety of delivery schedules Plan the most effective route Maximise the efficiency of deliveries Reduce the number of journeys and vehicles required For more details, see the Freight Best Practice Guide Computerised Vehicle Routing and Scheduling (CVRS) for Efficient Logistics. 24

25 Alstons Cabinets Alstons Cabinets supplies bedroom furniture from its base in Ipswich to over 2,000 customers across the UK. The vehicle fleet consists of 22 rigid vehicles and trailers, completing between 500 and 600 orders every week. Just a few years ago the whole order process was carried out manually using specific customer orders as the basis for manufacturing planning. The simultaneous introduction of Material Requirement Planning (MRP) and Paragon CVRS software has radically changed the process, and improved the efficiency and effectiveness of manufacturing planning. Orders are now downloaded into Paragon for routing, before being uploaded into the MRP system for production planning. As customer time windows and delivery preferences are held in the CVRS system, successful planning no longer depends on someone s memory when planning routes. Consequently, errors have been reduced and orders are no longer forgotten because of people working under pressure. Other areas have benefited from improved communication. With suitable system interfaces, the information in electronically generated routes can be circulated widely, quickly and accurately. These actions have drastically reduced internal queries and errors, and improved the response to customer queries. There have also been a number of operational benefits. Better routes and more effective use of vehicles have enabled the fleet size to be reduced by 20% (from 25 to 20 vehicles), bringing with it reductions in running costs and revisions to contract hire arrangements, without any negative effect on customer service. If you do not use a vehicle routing and scheduling system you can collect information by other means. Satellite Navigation ensures drivers know their way, helping to prevent wasted time and fuel. Improving Vehicle Utilisation Better vehicle utilisation is a straightforward and direct way of cutting costs by making more efficient use of vehicles and drivers time. One way to increase overall utilisation is through back-loading - making use of spare capacity on the return leg of a delivery. Some companies regularly operate back-loading, while the nature of other operations means that it is not possible. A Good Practice Guide to back-loading specifically for smaller operators is available which highlights operational benefits, ways to find back-loads, issues affecting different types of operation, and potential barriers and constraints to back-loading. 25

26 See the Freight Best Practice Guide Make Back-loading Work For You. Telematics Telematics systems are applications that use computers to control and monitor remote devices or systems. The management software in telematics systems can turn the data collected into information that will help you to manage vehicles, drivers and operations more effectively. Several kinds of management software are available, including pure reporting packages, those with mapping and text facilities, or ordertracking systems linked with ordering and accounting software. The software may operate on a single PC, on a network or via a website. See the Freight Best Practice Guide Working Together to Improve the Operational Efficiency of Regional Distribution Centres (RDCs) for more information on efficiency in warehousing operations. Improving Internal Communication Improving Warehouse Operations In all fleets serviced by warehouse operations, fleet performance can be dramatically affected by the operational efficiency of the warehouse. Performance measures may be put in place to help to monitor the on-going service levels between the fleet and warehouse; this may be internal to your company or a performance agreement between a vehicle fleet collecting or delivering to a third-party warehouse. Depending on the nature and scale of warehousing operations, performance of a range of operational components can be measured, ranging from individual warehouse staff to the performance of the whole combined operation. Measures might include productivity rates, levels of product damage, stock rotation efficiency and order completion i.e. meeting loading deadlines. The actions of the order processing or sales department can have a substantial impact on the operational efficiency of the warehouse and the distribution fleet. There is no substitute for a good working relationship and communication between operations and the sales department but this can be helped by impartial measurements of performance. So as well as more typical sales-driven volume measures, more precise measures that might affect freight fleet efficiency can be used. These might typically include the instances where order-taking error leads to redelivery or the number of late orders processed for delivery outside the agreed lead time. Efficient Fuel Management Driver Training A fuel management programme is a series of actions you can take to better manage fuel throughout its life at your operation - from purchase and acquisition to storage and use. All of these areas are important, however, research has shown that the greatest single influence on fleet fuel efficiency is that of the driver, in terms of their driving style and technique. 26

27 Improving Fuel Efficiency at Thorntons plc Thorntons is a major UK manufacturer and retailer of premium confectionery, with more than 4,200 employees. The company links manufacturing, packing, warehousing and distribution operations in one location. A fuel management programme was originally implemented in 1995 as part of the company s commitment to: Reduce distribution costs Improve operational efficiency Reduce the environmental impact of its distribution operations The encouraging results achieved convinced Thorntons of the need to develop and refine the programme to maintain and increase savings and to achieve further environmental benefits. In recent years, it has invested further in computerised fuel monitoring equipment and introduced a range of key driver performance indicators linked to financial bonuses. The success of this incentive scheme is due primarily to its careful management, which allows individual drivers to raise issues and explain any underperformance on a weekly basis. Phase 1 of the fuel management programme measured fuel consumption data with data collected manually. A 3% improvement on fuel efficiency of the whole fleet was achieved in one year, corresponding to a cost saving of 7,300 per year. Staff running costs were 4,200 per year, giving net annual savings of 3,100. Phase 2 introduced data loggers which could measure the following indicators of fuel consumption: Speed Idling time Harsh braking Rapid acceleration The in-cab unit would warn drivers with a beep every time they moved out of pre-set parameters, and the violation is recorded. Phase 2 achieved a 5.8% improvement in fuel efficiency worth 14,500 per year. Net annual savings are 10,380, taking into account 1,040 for the production of weekly reports and 3,080 for the running costs for staff and data loggers. Each driver s performance is displayed on a notice-board, showing current fuel performance, last year s fuel performance and the driver s individual target. League tables allow drivers to compare performance, which allows for some friendly competition and motivation. Fuel Recording Systems Fuel recording systems can help you to measure and monitor your fuel use. The simplest fuel recording method is to record fuel pump readings manually for each vehicle and, by combining these readings with vehicle distance travelled, it is possible to work out the MPG. Managers should be aware that there are a range of issues with fuelling systems that require close management - users should be aware of the risks from data entry problems, power supply issues, leaks from the tank or pipework and even possible fraud. Early warning of any of these issues can save the business a considerable amount of money. 27

28 Example of an In-vehicle Fuel Recording System At Premdor s depot in Barnsley, MPG figures are measured using the Siemens VDO system. There is a vehicle-mounted control box which measures the fuel going into the engine. The advantage of this system is that it can measure the performance of each driver in terms of MPG. After the system was installed MPG improved by 10% across the fleet. This worked out as a saving of 65,000 per year on a 35-vehicle fleet. Owing to ongoing monitoring using KPIs, the marked improvement in fuel consumption has been maintained. Vehicle MPG can also be measured through pump-based systems where fuel is bunkered on site. A vehicle key or card can be inserted and the amount of fuel dispensed is automatically recorded and submitted to a central system for analysis. Tip When buying a new vehicle, it can be tempting to go for the least expensive option that will do the job. However, running costs add up to far more than initial purchase costs over the life of a vehicle. A vehicle specified to meet your individual needs will cost you less to run and will perform more effectively. Whole-life costing, taking account of likely vehicle residual costs as well as on-going operating costs, is the key to getting vehicle specification right from the outset. Example of an Electronic Fuel Pump System Efficient Equipment and Systems All freight transport operations rely on the performance of a variety of physical equipment, from delivery vehicles to fork-lift trucks and roll cages. It is important to understand how each piece of equipment used in the operation is performing and to understand whether you have the best specification of vehicle or other piece of equipment for the job required. Improving Vehicle Specification It is important to compare the performance of different vehicles by make and model and equipment specification. It may then be possible, over a period of time, to see the difference that vehicle specification makes, thus influencing future purchases. Factors affecting efficiency might include maximum permissible weight, vehicle size, engine power, torque, gearbox, final drive ratios and the aerodynamic styling of the vehicle. Marshalls Construction is a leading UK manufacturer of paving for landscaping gardens, paths and driveways, as well as walling and edging products. The company has installed tanks with Triscan monitoring equipment at a number of its depots. It has a card system operated by Keyfuels which links the fuel data for a vehicle regardless of whether it is refuelling at a depot or at a Keyfuels site. Keyfuels then issues each depot with a weekly report giving fuel figures and MPG for each vehicle. vehicle. The system will benefit Marshalls by giving it more control over the operation through the ability to monitor drivers and vehicles from the report information provided. 28

29 See the Freight Best Practice Guide Truck Specification for Best Operational Efficiency for more information. Refrigerated Vehicles Specialised vehicles such as refrigerated vehicles impose extra purchase and running costs, which means it is all the more important to keep a check on the costs of maintenance, fuel and other operating costs. Fridge units can be powered from a number of sources including: electricity, red diesel, white diesel, cryogenics (liquid nitrogen) or direct drive. By using a continuous performance measurement process, the operating costs of running a unit, which include maintenance and fuel, can be analysed separately to the main motive power unit of the vehicle. Hence, accurate specification of equipment will, over time, result in greater operational efficiencies, which can save significant amounts of money. successful operational benefits, such as enabling a reduction in the size of the fleet See the Freight Best Practice Case Study Focus on Double Decks for more information and the Focus (DIY) Ltd Case Study below. Buyers Guide to Refrigerated Transport Equipment. Focus (DIY) Ltd Focus (DIY) Ltd found that cubing out before weighing out is a particular problem with their range of products being delivered on a fleet of single-deck and fixed double-deck trailers. A nine-month feasibility study with a prototype moving a double-deck semi trailer demonstrated its potential to improve operational efficiency, with the benefits being the potential to reduce the fleet size. Other benefits included reduced overall mileage, lower fuel costs and shorter waiting times at loading docks. Using the double-deck trailer compared to two single-deck trailers gave the following benefits: Mileage reduced by 257 miles (413 km), saving 378 in operating costs (based on an operational cost of 1.17 per mile) Fuel costs reduced by 108 (based on a fuel price of 0.70 per litre) and lower CO2 emissions The capital cost of refrigerated transport equipment may account for less than 50% of its whole-life cost when maintenance, fuel and other operating expenses are taken into account. Halving working time, as only one driver is required to deliver the same load Improved average utilisation (only one vehicle required) Double-deck Trailers Many businesses suffer from inefficiencies in their deliveries due to variable product sizes, meaning that efficient vehicle fill is difficult to achieve. Innovative vehicle specification can help to improve vehicle fill and increase productivity. Performance measuring can help to verify that the introduction of double-deck trailers has had 29

30 Christian Salvesen Christian Salvesen delivers tyres for Dunlop on a national contract from Birmingham. The company chose a system of swap-body technology to help it trunk tyres efficiently around the motorway network whilst being able to use small, urbanfriendly rigid vehicles for the actual delivery of the tyres. The company sends at night several drawbar lorries from the National Distribution Depot to eight regional locations, each with three full 4.7-metre demountable boxes. The prime mover has one box and the trailer two boxes. The night driver arrives at the regional centre, drops the legs on the full boxes and collects the three empty boxes for return to Birmingham. Then next day small delivery vehicles take just one box each around the local urban area, visiting the tyre distributors and returning to the regional yard at the end of the day in time for the night trunk. Padding Block The operation also avoids the need to tranship the tyres from a large lorry to a small vehicle. The company has 120 boxes and regularly uses more than 80 each night. The idea has been copied by other companies in the food, parcel delivery, retail and tyre industries. The main benefits are: Reduced driver waiting time while loading takes place Facilitating the use of unmanned drop-off sites Fewer transfers of stock Minimised storage requirements Demountable Bodies Demountable bodies offer another approach to improving operational efficiency through vehicle specification. Demountable bodies enable drivers and vehicles to be used more intensively owing to quicker turnaround times at the depot. Essentially, drivers do not have to wait for the vehicles to be re-loaded. In terms of KPIs, a company can measure demountable efficiencies by analysing the loading times which would cause a standard vehicle to be standing in non-working activity. Efficiency gains can also be made with regard to reduced damage to products. If high-value, awkward-to-handle products are being transported between depots and transhipping is required, then looking at the statistics on damages can show whether it would be worth introducing a demountable operation to reduce the cost of damage. 30

31 Condition of Vehicle Fleet Other factors influence vehicle performance, such as age and general condition of the vehicle, especially in terms of engine, axles and tyres. Ensuring the most appropriate vehicle specification for the tasks that are expected to be performed will improve both fuel and operational efficiency. There is often a financial trade-off between the initial investment required to buy a higher specification vehicle and the cost of operating the vehicle over a long period. For example, the effects of using a vehicle that makes loading and unloading of the product difficult, or poor manoeuvrability of the vehicle in an urban environment may increase delivery time. By collecting data on vehicle maintenance costs, fuel used and average loading and unloading times, a fleet manager can begin to work out the operational costs of running the vehicles in the fleet. This can then be set against the cost of the vehicle lease or purchase. Aerodynamic Styling Aerodynamic styling fitted to goods vehicles can significantly reduce fuel consumption, but this saving has to be weighed against the cost of fitting aerodynamic styling products. However, it may be possible to test the benefits by benchmarking two similar vehicles, one of which has good aerodynamics and one which does not. It is then possible to see the effectiveness of the aerodynamics for the particular transport operation. Maintenance costs should also be taken into account. In-fleet trials provide a basis for understanding these costs. Correctly fitted aerodynamics equipment can improve performance significantly Tip A truck specified or fitted with the correct aerodynamic styling can use 6-12% less fuel compared to a vehicle with little, or badly adjusted, aerodynamic equipment. You do not even have to replace your vehicles there is a range of add-on features available that can significantly improve the aerodynamics of many vehicles on the road today. The Freight Best Practice programme offers a comprehensive and pocket-sized guide which: Provides a brief introduction to aerodynamic styling and its benefits Helps you to work out which aerodynamic features are suited to your operations Shows you how to maximise the fuel savings from any features fitted to your vehicles Points you to further information See the Freight Case Study Smoothing the Flow at TNT Express and Somerfield using Truck Aerodynamic for more information. Tyres Most operators know that improving the aerodynamic performance of their vehicles can reduce fuel consumption. However, did you know that the rolling resistance of the vehicle s tyres can also have a significant impact on the amount of fuel used? Suppliers claim that fitting tyres with a 25% reduction in rolling resistance on all axles of a vehicle could improve its fuel consumption by at least 5%. Monitoring and maintaining the correct tyre pressure is essential and the potential for contributing to maintaining and improving standards is too important to ignore. (See the Moy park mini case study on page 23.) 31