potatoes Transport and the potato industry Max Braun (Max Braun Consulting Services)

Transcription

1 potatoes Transport and the potato industry Max Braun (Max Braun Consulting Services) The cost of transport is a vital factor in getting farm produce and products from farm gates all the way to the last mile - just one step away from the consumer s table. Transport is one of the highest costs in the production of food and is firmly on track to continue rising through The cost of transport as it applies to producing potatoes is probably the second or third largest single item cost for producers, depending on the, inter alia, the production region and the yield achieved. Transport costs to the fresh produce markets can easily amount to R per hectare potatoes for production regions that are far from the markets. The factors driving the increasing cost of transport, especially as it applies to agricultural logistics, have been heading upwards for several consecutive years. Much of the increase in road transport operating costs resides in the high cost of diesel, capital cost in respect of new vehicles, vehicle licences, taxes (fuel levy and toll fees) and drivers wages. Most of these costs are mostly beyond the control of transporters, brokers and producers using their own vehicles. In Table 1 the annual cost of owning and operating a typical vehicle for transporting potatoes to marketing outlets for the period 2014 to February 2017 is reviewed. It is important to keep in mind the calculations are based on average transport operations transporting potatoes on good roads at an acceptable average speed (approximately (64 km/ hr). It is further assumed the vehicle is decently driven and properly maintained. Note the huge increases in standing cost (fixed cost) driven by rising equipment costs that impact on lease rentals or depreciations. Trade-in prices are also largely unattractive. Vehicle licences, insurance and driver s wages will all rise further in Fuel accounts for 60% of running costs, notwithstanding the slightly lower average fuel price for the period 2014 to February 2017 (fuel taxes will increase by 39 cpl from April 2017). Maintenance and tyre prices continue to rise in tune with the Rand: US$ and Euro exchange rate. It is alarming to note that the cost of operating such vehicles for a full year exceeds R3.3 million Rand of which the fuel cost is around R1.3 million, and this is before including Page 38 CHIPS Maart/April 2017

2 overhead expenses, administration and toll fees. It is important for producers and transporters to take cognisance of the severe impact the high cost of transport has on a product such as potatoes. Think about the cost per ton or 10 kg pocket or as a percentage of the total cost of operating these large vehicles. It is essential to improve the overall management of transport operations to gain better control of costs as well as to constantly review the standing costs even if it applies to just one vehicle. It is also vital for transporters and brokers to recover all operating costs and just as important for producers operating their own vehicles to contain their transport costs to the lowest achievable levels. This is especially so in respect of maintaining tight control over kilometres covered, waiting times and delays Loading and Unloading Vehicles the lowest costs can be achieved only when vehicles transport the maximum permissible payload in terms of the regulations and the vehicle specifications. The cost per ton or 10 kg pocket skyrockets when payloads are insufficient to recover all the costs. It is necessary to travel sufficient kilometres to justify the investment. The operating costs, when expressed per ton transported, doubles if no payload is carried on the return trip. Potato producers using the services of transport brokers or transport contractors must ensure the amount they pay is for a full load from farm to final destination. When using your own vehicle look for companies keen to contract out one leg of their transport. This is proving helpful, especially in some agricultural value chains to eliminate empty return leg transport. Standing cost per hour (the wheels do not turn) strongly emphasises the importance of identifying the shortest route and any delays along the way that can be avoided. Trips should therefore be properly planned and last, but not least, steps should be taken to ensure vehicles are promptly unloaded. Implementing telematics and providing drivers with smart phones is revolutionising long distance transport. The real time access to drivers, consignees and home base reduces delivery times. Communicating the expected time of arrival assists in reducing time to unload and creates opportunities to reroute drivers if and when necessary. Drivers - Managing drivers is very high on the list of ways to contain transport costs. This begins with selecting the right drivers to undertake the important task of delivering large loads of potatoes over long distances. Good drivers have a good attitude, are properly trained, correctly licenced and committed to safe and cost-efficient driving at all times. Like in other countries in the world there is locally a severe shortage of properly trained and experienced drivers. Far too many are not properly trained and do not have a legal driver s licence. Drivers should be tested and assessed by a competent and experienced driver trainer. The coming changes to National Land Freight Strategy (NLFS) and the long-awaited National Transport Master Plan (NTMP) contain plans to CHIPS March/April 2017 Page 39

3 Table 1: Annual cost for a 7-axle Tautliner Interlink that travels kilometres per annum and is on the road 286 days per year December every year (February) % change since 2014 Average per annum Capital cost R R R R % 2% Interest rate (prime) 9,3% 9,8% 10,5% 10,5% 14% 4% Fixed cost (standing cost) * R R R R % 4% Variable cost (running cost) R R R R % 5% Total cost ** R R R R % 4% Fuel cost R R R R % 1% Diesel price per litre R 11,33 R 10,51 R 10,61 R 11,53 2% 1% Diesel: % of total cost 45% 43% 39% 40% -11% -3% Fixed cost perday R R R R % 4% Total cost: Rand per km R 14,41 R 14,50 R 16,01 R 16,59 15% 4% Cost to transport 1 ton for 1 kilometre (Cost per ton/km): Cost/TonKm 100% (cent)*** % 4% Cost/TonKm 100%(cent) % 4% * Down cost: Includes depreciation, interest, licence and insurance. ** Excluded overhead costs, administration and toll fees. *** When the vehicle carries a load of 34 ton per every kilometer travelled, the load factor is 100%. When the vehicle returns empty, the load factor is 50%. Source: MBCS reform driver training schools and for the introduction of driving simulators and provisional licences for newcomers. The limit on driving hours and the coming reduction in speed limits are likely to present new challenges to the transport operators to ensure compliance with the regulations especially where long trips are undertaken. The installation of speed limiters with effect from December 2016 in trucks registered for the first time, adds yet another unknown set of challenges. transmission, single or double-reduction rear axles and a host of other features. Keep in mind you are looking for cost-effective transport with which you can enjoy reliable on-time customer deliveries over the economic life of the driveline at lowest total cost to you. Using more power than is needed to do the job properly is a waste of fuel and just adds costs. If the new hi-tech trucks are a bit beyond your knowledge and experience give TruckScience (previously Transolve) for a comprehensive computer simulation Choice of Vehicles If you are seriously considering replacing vehicles or adding to your fleet at this time, you are bound to find most of the vehicle suppliers are willing to make considerable concessions by way of discount, over-allowances on trade-ins where they apply, as well as maintenance plans at attractive prices. There is an amazing array of vehicles on offer from which to choose. Make sure you do not buy more bells and whistles than you require. The major suppliers offer an amazing range of engine power, automatic or semi-automatic Page 40 CHIPS Maart/April 2017

4 over the routes you intend to travel. The TruckScience software facilitates the calculations for axle mass and dimensions as it applies to Regulation 330A-D commonly known as the Consignor/Consignee regulation for compliance with permissible loads and overloading offences. More than ever before, the latest generation vehicles require on-time service and maintenance to ensure the minimum running time will be lost due to unwelcome breakdowns. More and more transporters and fleet managers are adopting vehicle manufacturers maintenance plans. These usually cover between km and km depending on the operations. Be careful when it comes to choosing replacement parts, such as new tyres versus retreads. Cheaper imports also rarely match the performance of established brands. Fuel Diesel remains the largest individual expense when large trucks undertake long distance transport. Manage and make sure fuel is secure, properly managed and effectively burnt in your engines. A simple, up-to-date, correct management information system is a basic requirement for every transport operator and owner. The content should include complete and accurate details of fuel on-road purchases or when fuel is dispensed at a home-base. Records should include the driver s name, vehicle registration and date and time of the transaction. A fuel consumption standard figure than can be compared, should be assigned for each vehicle. The correct kilometres travelled must be recorded before and after each trip. Electronic monitoring of kilometres is usually more reliable than manual recordings. Tracking and/or telematics provides reliable feedback of driver attitudes and skills. In-depth studies carried out by the American Trucking Associations in the USA confirmed that the difference in fuel consumption between the best and worse drivers is a shocking 35%. Complying with the regulations It is generally accepted by transporters, consignors and consignees that the regulators have failed to properly implement and enforce existing traffic regulations. Based on the unacceptable number of road deaths that occur in South Africa each year the Department of Transport is seeking to tighten existing regulations and introduce new draconian laws in the hope it will result in fewer road deaths and accidents. Presently there are several impending regulations that have been awaiting proclamation for several years. The current Minister of Transport has admitted her department does not have the experience, expertise or capacity to simplify and implement these regulations. A National Transport Forum was convened in 2015 consisting of civil servants, industry stakeholders, academics and experienced industry experts. During the course of 2017 we expect several outstanding regulations to be implemented. These may well include: Driving Hours Employers must provide drivers with a log book as prescribed by the Department of Transport. A copy of the log must be retained by the employer The Department of Transport announced a reduction in speed limits. This regulation has not yet been implemented. However, it is expected to be promulgated in May this year All trucks of more than kg gross vehicle mass manufactured after 1 December 2016 must be fitted with a speed limiter. Consult the vehicle manufacturers of the vehicles that now require a speed limiter. OCAS (Operator Compliance Accreditation Scheme) for cross border transport has been published for comment. Meetings were held with the various local and regional stakeholders in preparation of launching pilot schemes. CHIPS March/April 2017 Page 41

5 The OCAS scheme has relevance for all transport operators with special reference to eliminating delays and bottlenecks at border gates, as well as a reduction in the cost of doing business as a result of improved productivity and utilisation of vehicles and manpower. The scheme envisages a reduction in corruption and improvements in safety and consequently fewer accidents. The following is a brief outline of the scheme's objectives in meeting the needs of operators and law enforcement. Similar schemes in Australia, the USA, Mexico and Canada have been very successful in respect of a free-flow between compliant countries including better law-enforcement and legitimate trade. The success of such schemes is dependent on buy-in, participation and collaboration between different stakeholders and role players. OCAS can be seen as complementary to the SARS Trusted Trader program. The operation of the OCAS Scheme is sustained by several components including: Accreditation of compliant operators - accreditation will be aligned to SADC protocols and other international conventions. Monitoring procedures. A points-demerit system for non-compliance by accredited operators. Incentives for compliant operators. Major local stakeholders include the transport industry, customs, police and security as well as provincial and municipal authorities. All compliance, accreditation and legal framework will be in place after the official launch. Accreditation components include: Overload controls. Maintenance and roadworthiness of vehicles. Mass and dimensions. Driver fitness and competence. Compliance with speed limit. Accredited operators will be subjected to regular audits of which there are various models. If found to be non-compliant they will be suspended or have accreditation withdrawn. OCAS encourages selfregulation which indicates that adopting the Road Transport Management System (RTMS) would be a helpful, if not, essential system to adopt. OCAS holds an opportunity for agricultural producers to increase cross border business across the SADC region with reductions in delays, risks and corruption. At the time of writing the Department of Transport was busy reviewing and planning to resolve longoutstanding Bills, amendments to regulations and draft regulations as well as major transport policies and out-dated regulations. These include: NLFS National Land Freight Strategy NLTA National Land Transport Act NTMP National Transport Master Plan ( ) RFS Road Freight System NTF National Transport Forum AARTO Administrative Adjudication of Road Traffic Offenses Embedded in these regulations is the intention to implement accreditation of operators in terms of the RTQS (Road Transport Quality System), proper training of drivers and also all levels of law enforcement, updating vehicle roadworthy regulations in respect of test stations and allied matters. Based on the statements issued by the Minister of Transport there seems to be a greater commitment to get the long-outstanding legal issues finally resolved, simplified, implemented and enforced. Hopefully there will be sufficient progress during the months ahead, if so, it will be featured in the next article. C Page 42 CHIPS Maart/April 2017