The Headache of Logistics Procurement | An Introduction

Posted 01/11/2015

Two quotes come to mind when summing up the operating environment that face Logistics managers at present and into the foreseeable future: 

“It was the best of times, it was the worst of times” (A Tale of Two Cities)

and

“Anything can happen in the next half hour” (Stingray).

Apologies to those under 35 for the second reference, which probably only means something to those of us who grew up watching children’s television in the 60’s and 70’s! 

Let me start with the short list that illustrates “the best of times”.  Essentially it consists of one item – fuel costs! These used to be an ever increasing headache but since December last year when the price of Brent crude went from over $100/barrel to well below $50/barrel and has since stabilised in the $50 - $55 range. This means fuel surcharges imposed by courier companies are at historically low levels, and win/win negotiations to share the windfall gains are possible with a range of 3 rd parties for whom fuel is a substantial element of their cost profile. Also you can probably shelve those plans for tear drop shaped vehicles and other assorted programmes / oddities designed to create a fuel efficient fleet – including the all those fuels with that special additive that improves mpg by X% 

That’s the good news, what about the bad or at best unpredictable (anything can happen in the next half hour!) news. Well, take your pick from: 

  • How to manage the predicted 45 – 55,000 driver shortage over the coming years (a serious headache if you are trying to recruit multi-drop HGV1 drivers and/or need to find ways of curbing runaway agency driver costs) 

  • The fallout from the VW emissions scandal, again take you pick from:

i. Potentially increasing prices (lowered discounts) from other manufacturers as they soak up demand from buyers “avoiding” VW and/or diesels generally (probably particularly apparent with the major supplier of hybrid vehicles – Toyota)

ii. RV’s (Residual Values) for used vehicles taking a hit across the board as buyers become nervous of the “value” of any vehicle – this issue will compound the problem already becoming apparent as former PCP cars start hitting the market in very substantial volumes.

iii. Using or indeed making sense of total cost of ownership calculations – it’s clear the manufacturer’s figures regarding fuel economy are as “flaky” as the NoX figures so apart from hybrids how can you choose a vehicle on a valid TCO basis? 

  • Finally there is regulation, we have had Euro 4, Euro 5 and Euro 6 engines and now for those of use operating in London the good people of TfL want to bring in ULEZ (Ultra Low Emission Zone).  They want to introduce it in 2018, or maybe 2020! : despite there currently being few vehicles that can meet it apart from plug in hybrids (which of course don’t if you decide not to “plug in” very often, or you cannot find a plug in point!
 
As I said at the beginning, challenging times indeed, and the level of change / unpredictability is likely to get more challenging as new “enforceable” emissions / efficiency regulations are put in place following VW.  Whilst at the same time hybrid and ultimately fuel cell technology will need to be factored into our fleet decision making.  Pass the headache pills!

Tagged by topic: Logistics

  by John Matthews

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