Surviving the storm
Weathering the global financial crisis has been tough for many businesses. Smaller fleets are especially vulnerable and need to be well equipped to handle the ups and downs.
The entire trucking industry has had to hold on for a rough ride over the past two years as the reverberations of the financial collapse buffeted businesses based on tight margins and stiff competition. For the larger corporates, life was difficult and cuts were made, pain has been felt from top to bottom in the industry. However, medium-sized family fleets have always had to run at peak efficiency in order to survive. There is very little fat in these businesses and little scope for cutting costs.
Herb Blanchard Haulage has been running for 55 years and is now owned and run by the second-generation of Blanchards. One of them, Robert, is now the CEO. It is a compact and efficient fleet handling a diverse range of freight out of the Northern Rivers region in Northern New South Wales. The company owns 21 prime movers and six rigid trucks.
Prime Mover spoke to Robert Blanchard about the kind of things a small operator has to think about in order to survive in these tough times. He has long been a vocal advocate in the trucking industry seeking to get practical reform for companies like his, working at the coalface of the trucking industry.
Placed roughly halfway between Brisbane and Sydney, Herb Blanchard Haulage is a traditional regional carrier. Its trucks haul local products out of the Northern Rivers area heading north and south to the capital cities and beyond, before making their way back to Grafton when loads and time permits.
“When you deal with the large national companies as a small operator, when they say you’ve got to do something, you’ve got to do it,” says Rob. “They change the rules like stopping the use of dogs when loading steel and there’s no new money in the rates. To equip our trucks to handle the work, it’s going to cost us $26,000. That work is not the majority of our business but on the odd occasion when we do load steel we have to comply.
“We look at the problem and it is a matter of having to spend the money, we don’t have a choice. We could have a truck in Sydney or Newcastle and we need a load out but we can’t get one if we don’t have the right equipment.”
There are so many rules and regulations within the transport industry for operators like Herb Blanchard Haulage. There are many different schemes with which they have to comply. They deal with a wide variety of consignors and consignees and all of their different locations, it is very difficult to keep a handle on. One day the trucks will be at Bluescope Steel, the next day they might be at IGA, then it might be Woolworths. Each one of these locations have their own intricate rules.
“We carry in and out of regional centres not just the capital cities,” says Rob. “We rely on regional industry such as timber mills, wool, cotton and other goods. The big consignors in the capital cities are just focused on themselves. We are fragmented in our rules and regulations, each consignor and consignee may have a different way of looking at things.
“Because we are so diverse and going to so many different places, it can be dear in terms of load restraint and containment equipment. It’s also a concern for the drivers with all of the OH&S personal protection equipment that they have to carry. We go into certain locations where you can’t have a yellow hat on, when we go to the railway you can’t wear a yellow vest it must be orange. The poor old cabin of the truck becomes a mobile PPE equipment storage area.”
One of the large national timber companies requires drivers to get a full induction for every one of their sites throughout Australia. Each induction will carry a large amount of information which is common to all of their sites, with a small amount of site-specific material added. A lot of time and energy is spent putting Herb Blanchard Haulage’s drivers through an induction, most of which they have heard before. Herb Blanchard Haulage has requested a change which would see each driver receiving a comprehensive overall induction to be followed by smaller site-specific inductions as and when required.
Looking out to the broader economy, Rob observes the recent buffeting the industry has received as the effect of the global economic crisis was felt in Grafton, but he feels the company coped quite well, in the circumstances.
“We were lucky. Based on the North Coast of NSW which is a growth area, we didn’t see too much tapering off, business wise,” says Rob. “People are still moving into this area so the construction industry is still working and we also have the Pacific Highway upgrade. The increased infrastructure expenditure, like the school building program has been quite effective in regional areas.
“To survive, I think you have always got to be open-minded. You also have to be constantly on top of your costs. When customers start to demand things you need to be aware of what your costs are to make sure that you are recovering it correctly. There are times when you simply have to say no to a customer.
“You’ve also got to have some good tools available to help you manage your business. Getting the trucking industry to use tools which will help them get on in the industry is an everlasting job. Apart from being in total control of your costs, you need to have a lot of your own prime freight, you can’t just rely on subcontractor freight. You also have to work hard to make sure you have a very strong working relationship with your customer.”
Customers have become accustomed to the fact that fuel is a variable cost and they are used to it changing monthly. In many cases, Herb Blanchard Haulage has rolled the fuel levy increases, caused by the massive price hike in diesel in the last few years, into their overall rate since price variations have calmed down.
“NatRoad worked hard to develop our own fuel calculator,” says Rob. “Unfortunately, the ATN/PKF industry costs index is no longer available. There is only one substitute available now from Transeco. We are trying to help develop a cost index with them. As an operator, we don’t have the time to go out and research where prices have changed. We need these external tools which are easy and quick to use. When a customer comes to you talking about a rate review, you need to have the data to back up what you are saying.
“In a lot of cases, businesses understand you are in business to make money too. They are not there to screw you, they’re there to get a good service, a good service from you which comes at a reasonable cost. If you are coming up with some data and some truck cost models that can spit out a dollar per kilometre or dollar per hour rate, they can understand that.
“You can’t have all three: price, service and quality. You can pick any two out of the three at any time. When you can get a customer to talk about and look at service and quality, cost doesn’t become such a big issue. When people really hound you on price you wonder whether you really want that customer.”
The problem for Blanchard, as it is from many other small operators, is when they are not the primary contractor. Many of their back loads out of the capital cities are as a subcontractor to the national carriers. Herb Blanchard Haulage has to rely on the negotiating power of the big boys and hope it leaves some of the margin in the price for the subbies. Herb Blanchard Haulage believes they are in a position as a price setter in between 50 and 60% of their business.
“If your customers see the value in the service you are supplying, then cost isn’t the biggest factor,” says Rob. “This is what we have done with our new crane trucks. We have developed a business wide solution to a customer’s problems. They needed their poles delivered on the ground without the safety and manpower issues they’re burdened with. We’ve come up with a solution and then, all of a sudden, cost really wasn’t the issue.”
The new crane trucks were made possible by going down the route of Performance Based Standards. They are longer overall than 19 metres and the prime movers use an 8x4 configuration to handle the extra mass associated with an on board crane.
“In the last two years it has probably been a period when we have got most involved with finance,” says Rob. “We have invested in this expensive new equipment and it’s been very important to have a very strong relationship with our bank. He has a very good understanding of my business and I have a good understanding of what he expects when I am asking for finance.”
Many of the tools Herb Blanchard Haulage has in place to monitor the business and control costs, which they use when negotiating with customers, also come in handy to demonstrate its ability to pay off a loan.
Even with finance available, expansion of the fleet is not an issue, Blanchard feels the operation is about the right size. Any larger and he feels the management starts to lose personal control – those personal relationships with customers and staff members. He agrees a fleet like this could grow buy a few trucks, if required, but is comfortable being around the same number of vehicles it has been for about eight years.
No matter what the size of the operation, the imposition of regulation and compliance is common to all in the trucking industry.
“It’s a changing world all of the time when you’re dealing with compliance issues,” says Rob. “You have to be compliant, if you are not compliant in today’s world you simply won’t survive. It will get you in one way, shape or form.?
“We are running now on BFM but we had gone down the track of applying for AFM when the new fatigue rules came in. Unfortunately, we are at a stalemate at the moment. We went to the expense of external auditing and a fatigue expert report, and all that was submitted with our application to the RTA. But I am afraid the RTA has a different view of AFM than the industry does.”
Herb Blanchard Haulage was simply looking for a little more flexibility over the two-week period and to avoid the 84 hour rule making drivers stop for a full 24 hours. It is not just an issue for Herb Blanchard Haulage, there are no AFM accredited truck operators in NSW at this point. Herb Blanchard Haulage and other forward thinking operators like this have been stopped in their tracks by an intransigent RTA.
Despite the setbacks they have met, the attitude of the Herb Blanchard Haulage operation remains positive. It is very much a family operation and retains that personal relationship associated with this kind of business. As CEO, Blanchard is also keen to stress the role membership of an industry organisation can play in keeping ahead of the game. Apart from the involvement in discussions, he sees the company’s membership of NatRoad as vital in being kept abreast of the issues likely to appear over the horizon in the next few years for small operators.