Q
uite a lot of my time is now spent back in
theworld of third-party logistics, which has
caused me to reflect some more on how
well or otherwise we tackle this area in the rental
industry. I suspect, firstly, that when we think of
logistics ourmind immediately turns to transport.
Of course in the rest of the world there is much
more to it than that. A dictionary definition of
business logistics would read something like
“ensuring the right inventory is made available
to customers, at the time they want it and at the
lowest possible cost toprovide”.
Starting at the beginning, if the first objective
is to ensure we have the inventory the customers
want (and thatwehave set ourselvesup toprovide –
not everybusinesswants tobeoffering35mbooms
or large-capacity tower cranes – and have targeted
our customer base accordingly) in places where we
canget it to the customer.
This means ensuring that each location, as far as
is economically justifiable, has immediate access to
the inventory its customers want to rent on a day-
by-day basis.
Stock out positions
A small depot with a fleet of, say, 100 tools or 80
aerial platforms is always likely to be in a “stock
out” position, where the customer’s core demands
frequently cannot be satisfied from their local
inventoryandwhere thechoice thenhas tobemade
between letting thecustomer down, sourcing froma
competitor (if theyarewilling to supply) or shipping
down from the next nearest depot.
The more efficient operators will have
accurately profiled what their customer
base wants to be able to rent and how
much they have to hold to satisfy core
demandplus a small safetymargin.
This is often a source of confusion
and, I would say, error amongst non-
logistics professionals, including many
in the rental industry. There is oftenan
assumption that the best service will
be supplied by being physically close
to the customer, which tends to then
be interpreted as lots of relatively
small – in fleet terms – depots.
The truth is, of course, that even
in tool hire 80% plus of business is
done on a delivered, rather than collect, basis and
so the customer has no idea, and even less interest,
inwhere the equipment is delivered from.
The goal, as every significant retailer has
discovered, is to find the optimum balance between
holding inventory close enough to the customer to
be able to react quickly, but not to the extreme of
havingawarehouseattached toeverysingle “shop”.
The impacts of getting network configuration
wrong are, in my view, what allows space for the
local independent operator to continue to thrive.
Volume andmix
These smaller companies tend to be expert at
getting exactly the right volume and mix of fleet
for their local customer base and, because they’re
not obsessed with their “national network” they
consequently end up with much more effective
operations than theneighbouring local depot of the
national operator who never has quite enough of
the right stuff in stock.
Once thedepot operation is set upeffectively (not
too small, not too far from the customer base it is
trying to serve), the challenge of running effective
transport operations is next on the list, as this is
typically the biggest area of truly variable cost for
rental businesses.
I think the industry has taken tremendous strides
in this area over the last few years. It is much
less common now to see trucks leaving full in the
morning and returning empty, followed by leaving
empty in the afternoon and returning full. The key
area of cost optimisation is being able to combine
delivery loads and link these to collections waiting
tobemade so that vehicles are never run empty.
I think there is still a lot to be done with rental
company networks in terms of scale and efficiency
and thiswill continue to be a focus over the coming
years.
It may even be that we see third party logistics
operators coming in to run some transport
activities for rental companies although, even
working for a logisticsoperator, it ishard to seehow
they can bring a lot of added value to the operation
of specialised transport equipment across large
numbers of locations.
In any event, we remain a logistics centred
industry, and we need to strive to get better and
better at it.
IRN
KEVINAPPLETON is former CEOof LavendonGroupplc and former divisional
chairmanof Travis Perkins plc. He is currentlymanagingdirector of Yusen LogisticsUK,
non-executive chairmanof HorizonPlatforms, non-executivedirector at Ramirent Oyj
andnon-executivedirector of the Freight Transport Association. To comment on these
articles please email:
Navigating
business logistics
Rental remains a logistics-
centred industry, and needs
to strive to get better and
better at it. KevinAppleton
spells it out.
11
THEAPPLETONCOLUMN
IRN JUNE 2014
