The ever escalating expenditure relating to transport and distribution activities draws a lot of attention at board level, and increasing pressures are exerted on middle management and contractors to reduce these costs drastically. The competitive nature of most industries makes it extremely difficult to pass on all these escalations to the client.

The significant contribution distribution costs make towards the total cost of the delivered product can easily result in a product being out-priced in the market, and can also detrimentally affect sales volumes and ultimately profits. The typical manufacturing concern applies exhaustive efforts in the optimisation of production lines, raw material pricing, inventory controls and other areas to ensure competitive pricing. The pressure to reduce costs impacts on transport departments, and contractors are squeezed to allow the shipping company to remain competitive.

The most logical approach to cut costs is to examine the elements influencing the running costs of the vehicles. Fuel-saving devices, on-board computer technology, tachograph analysis, wind deflectors and many others are resorted to. And the driver is mostly seen as having the most influence through over-speeding, over-revving, excessive engine idling, and bad tyre pressure monitoring. All these steps are effective but the impact is relatively small in relation to the total distribution expense, with a saving of 5-10 percent being regarded as significant.

Charel Schickerling, a transport economist and general manager of CargoWare, claims the significant savings are achieved by the optimisation of the fleet size. He explains: "The challenge is to achieve the same or better production output in terms of deliveries by using fewer vehicles without having a negative effect on customer service levels. This can only be achieved my managing and improving utilisation of the assets deployed to do the job."

He classifies and defines the types of utilisation measurements forming the index that will be the significant factor for success:

• Capacity utilisation - this index is measured by using a physical load measurement like tonnes, litres, pallets or boxes, and expresses the actual load carried as a percentage of the maximum legal payload capacity
• Time utilisation - the total round-trip time is expressed as a percentage of the available time at the disposal of the operation
• Distance utilisation - is calculated by expressing the total distance carried with load as a percentage of total distance covered (empty leg management).

	Charel Schickerling, transport economist and general manager of CargoWare

Schickerling says that combining these three indices will provide for a measurable figure to manage the performance of the operation as well as evaluate trends to gauge changes in the operation.
"Optimisation of the fleet size, however, has a much more significant impact as it reduces the fixed cost element of the fleet as well," he says.

The challenge is to achieve the same or better production output in terms of deliveries by using fewer vehicles.

"During a recent consultancy project we reduced the fleet size from 45 to 39 trucks and still delivered the same output with an improvement in customer service levels. The key lies in managing and improving the utilisation levels through better planning and execution of the tasks at hand," he says. Schickerling maintains the systems used to achieve such results are available at different levels of sophistication and cater for the smaller as well as the larger corporate operators and can be tailored to address specific operational needs. CargoWare is a division of Cargo Carriers and is the sole distributor of DPS International's full range of route planning and scheduling solutions catering for the full spectrum of operators.

"It is critical to follow an integrated approach. Transport and distribution is a complex discipline and one has to avoid managing the various activities in isolation. The challenge lies in identifying the players as well as where the overlaps and influences are. The activities of the players in the supply chain need to be consolidated to identify the impact each has to ensure a logical integrated approach to be successful," concludes Schickerling.