management
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matters By John Darker, AroBinn A. T. KEARNEY and Co Inc., the Chicago-based consultancy firm, has around 300 United States and Canadian road haulier clients. In early 1969, A. T. Kearney Ltd was established in England with offices in London and Birmingham. ATK employs some 350 professional staff worldwide with about 25 in the UK and 75 in European offices in Dusseldorf, Milan and Paris. The firm has undertaken large-scale distribution planning exercises in this country and in Europe.
A transport consultancy patronized by most of the major hauliers in America can be expected to offer down-to-earth advice. R. H. Coleman, managing director of ATK Ltd, reckons that it is better to "squeeze all the water out of an existing transport set-up" rather than to suggest a radical solution which may not be workable.
Despite detailed differences in American and British transport methods, each country can learn from the other. An evaluation of the feasibility of intermodal distribution centres, carried out by Kearney for a major warehousing firm in the States bore remarkable resemblances to the British Freightliner system. Container handling, stacking and stuffing techniques can be usefully compared, reflecting the costs of comparable equipment, and using existing time standards as a base for comparison.
Opportunities
ATK Ltd believes that there are dramatic opportunities for improvement in the operations of British hauliers. Greater use can be made of computer techniques in traffic operations, terminal locations and route development. There should be more careful analysis of the profitability of particular operations and services. Loading and unloading performance should be closely watched and strenuous efforts made to promote terminal efficiency. Improved driver—and, indeed, management—motivation is of crucial importance, just as it is in the US.
So far, ATK Ltd has concentrated on the distribution problems of sizeable firms; there is full awareness of the scope for consultancy in professional road transport work—the hire or reward sector before the Transport Act blurred the distinction. Interestingly, the firm has found that the transport practice of the best British firms is way ahead of much European practice. Perhaps British management is more receptive to objective outside advice?
ATK prides itself on its work in all transport modes. It has undertaken an immense amount of work designed to cut maintenance costs without impairing efficiency for a huge bus operation in the US. Air cargo handling advice has been commissioned by major American airlines and airport authorities. The firm is well placed to introduce successful ideas in terminal design involving the handling or processing of goods or passengers.
Despite the work done to control vehicle maintenance costs and to determine economic replacement policies, Mr Coleman insists that no one can judge operating and maintenance costs with new vehicles for a considerable period. Makers' claims may not always be realized. The best approach may be to extrapolate from previous experience—a neat packaged solution may not be possible, The aim is to set up a system into which information is fed periodically until such time as valid conclusions are possible. Too rigid adherence to a set vehicle or* plant replacement policy may lead to avoidable waste. Some extension to a vehicle life may be justified if major repairs have been undertaken recently.
Computer control
Inflationary pay settlements increasingly justify computer control of traffic operations despite the many practical difficulties. ATK's experience of computers in transport is exhaustive. The company has evaluated umpteen packages and its knowledge of hardware and software helped it to develop its own CARD system—Computer Assisted Route Development. The Kearney system produces routes which "make sense" to drivers. Fixed route situations are regularly updated. CARD is most relevant to reasonably static traffic situations—beer distribution, newspapers, postal work, etc. A successful scheme applying time standards for distribution work has been developed for the Linen Supply Association of America and is operating well in several US cities.
Mr Coleman rightly stresses the importance of supervisor motivation and development. At this "short end" of
management things must happen ic operating staffs or for customers il reorganization is to mean anything. Highee management strategy and tactics musi influence the lower levels responsible foi implementing policies. ATK Ltd is currentb undertaking work in both the public an private sectors on management organizatior and supervisor training, working at all level. of management. The approach is relevant ir this decade of participating management.
A key question for distribution executive concerns service standards, whether to rais them to meet competition or lower them save money.
One Kearney survey concerned a larg US haulier, with 500 tractive units and 130 trailers, carrying 90,000 tons month! between 31 terminals in 13 Eastern States a a cost of £5m per annum. The compan aimed to deliver 80 per cent of the load within 10 hours but achieved this goal onl 40 per cent of the time.
A painstaking analysis of all operation was undertaken and the data was computt processed. Linear programming method maximized efficiency in three areas.
Vehicle utilization: By scheduling an increasing the operating hours, the annic mileage per tractor could be raised fro! 70,000 to 97,000, at a saving of £200,00 2. Trip Planning: By re-routeing, and h re-arranging driver relay points, driver wal costs could be cut by £180,000 per year.
Spare trailers and empty, running: E analysing the daily and weekly load pattee
for each terminal, it was possible to redth the number of trailers needed and to c empty running by 15,000 miles per wee resulting in a combined saving of £110,0( per year.
Regular trips
The conversion to a system of regal trips with fixed "departure" times trnprov, control enough to assure service goals we achieved 85-90 per cent of the time Although savings amounted to only 10 r cent of total trunk haul costs, ti represented, proportionately, a much larg increase in the company's profits.
A detailed customer service survey for medium-sized Midlands hardware mar facturer was undertaken. by ATK Ltd. T client company—with spare producti capacity—suspected it was losing marl share due to poor customer service. A national parcels service was used for all deliveries; the setting up of its own transport service was being considered.
ATK Ltd audited the current delivery performance, analysed the "internal" portion of the total order cycle, and looked at sales in terms of geographical area, customer, product and order pattern, weekly and monthly. In-depth interviews with a carefully structured sample of customers revealed their real service needs. A new delivery system design was then prepared.
Pindings showed that sales were heavily concentrated in the London, Birmingham and Liverpool/Manchester areas. Only here was volume enough to justify own-van operations, and these could be run without depots direct from the factory. The customer interviews revealed the need for a faster and more reliable service in all but the most remote areas. The parcels service had proved to be slow, erratic and expensive.
Service goals With service goals agreed with the client detailed plans were submitted. They included appointment of a distribution manager, the use of postage-paid order cards, own-van deliveries in the three main sales areas with scheduled day deliveries, and, elsewhere, the use of the best local carrier in each area, with delivery in bulk to these carriers in the company's own vans. All ih, the cost was estimated to amount to little more than was being paid at present, with a very marked improvement in customer service and control.
Another Kearney assignment was with an internationally known manufacturer of office machinery. Altogether, including branch offices, distributors and agencies, it had effectively over 500 stocking points in Europe, yet delays and distribution costs were both growing, and were felt to be getting out of .hand. Distribution costs amounted to about £2.5m per year in total.
The study's aim was to determine the lowest-cost distribution strategy consistent with acceptable service levels. It included an examination of warehouse and transport operations; of the order processing and inventory control systems; a customer service survey; and a review of marketing policies and sales projections. Due to the complexity of the study it was planned using a critical path network, featuring programme evaluation and review techniques, and converging in the final phase on the use of AT K's own DEPOLOC computer program for finding the optimum depot configuration.
Lowest cost
The lowest-cost solution emerged as a five-depot network, which for service reasons was expanded to nine depots at an acceptable cost penalty. Together with identified improvements in transport, warehouse and inventory management, the total available saving compared with the present system was estimated to be in the region of £300,000 per year on 1969 figures, with, at the same time, a very marked service improvement. Taking account of the growth of the enterprise, savings will have risen to £380,000 by the time full implementation is achieved in 1973.
ATK's first motor carrier assignment in 1949 dealt with budgeting and incentive systems. Work in industrial engineering, management controls and equipment innovations enhanced its transport reputation. Much of its work today involves "task force" teams with many management disciplines. ATK won its transport consultancy spurs with road hauliers. Such a practical background helped the company to diversify to own-account firms and later to other media of transport.