Legal Brief
Partnership (pärtnr-shp) .n - Our Way or The Highway.
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The main news item tells the reader that Kemira are building a new plant and that "The investment is worth € 21 million and will be covered using GrowHow's own cash flow". Not short of cash then, so why the bullyboy attitude towards its hauliers? A 5% cut in the rate Kemira pays to its hauliers is a drop in the ocean to this company with € 1.2 billion sales and 3100 employees. Wondering about the company's attitude I looked at another story on their web site; this time it was about the company's name that was changed in February. The site tells us:" The new company name and logo incorporates a three word 'strap line'; partnership · knowledge · solutions"
In a message to employees and customers during launch events throughout the world, Heikki Sirviö, President, stated that these three words summed up precisely what the company has to offer through "establishing strong and lasting partnerships."
Strong and lasting partnerships? You can't create a strong and lasting anything by forcing your small suppliers out of business!
The letter to the hauliers was sent by the UK Logistics manager and you have to wonder if he has lost the plot altogether. The trend nowadays is exactly what Kemira have put on their web site - to create strong and lasting partnerships. All modern organizations are working more closely with their suppliers to integrate and improve efficiency. Close supply chain integration is especially important to every organization, but here we have the UK Logistics manager cutting the three-year-old haulage rates and thereby stalling any hope of its hauliers being able or willing to invest in new technology.
I am currently working with large haulage users such as Proctor & Gamble, Gist and Carlsberg Tetley. They also want to reduce their haulage costs but, unlike Kemira, they realize that the way to reduce costs is to use modern techniques and increase their overall supply chain efficiency. These companies actively encourage their suppliers to work more closely with them to introduce modern EDI and computer systems that will benefit both parties. Investment in closer collaboration and modern electronic trading methods can provide much higher savings than a 5% cut in haulage rates. Kemira's President realizes this and has even included the word "Partnership" within his company's logo so why are his announcements ignored within his own organization regarding its hauliers?
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Large organisations that use multiple subcontractors have correspondingly high transaction costs, hence the need to reduce rates for the work.
Small hauliers need to consider their position carefully - there is less scope for gaining network efficiencies, improve vehicle utilisation (double shifting) than in a larger organsiation.
The haulage industry is polarising - the big getting bigger, the small, smaller. There are so many issues that will effect operators in the coming years - WTD, LRUC, Compulsory Re-Training. Costs are going to rise, but the answer is not simply to increases rates in line. You have to be innovative in your thinking, how you plan and execute your business operations. What is your level of empty running? How full are your trucks? Could this be improved by better vehicle specification? How many billable miles or hours are there each day - could this be improved.
Can you work cooperatively with other hauliers in a more effective manner?