Memorandum by The Reed Boardall Group
(RH 18)
REED BOARDALL
GROUP—ACTIVITIES
The Group's principal activity is the distribution
of Frozen and Chilled Food from manufacturer to retailer with
some 30 major customers and 3,500 product lines, handling 250,000
orders per year and over 100 million cases with a value in excess
of £1 billion.
We operate 150 Low Emission Vehicles and 67,000
pallet capacity -28C Cold Store on a 24-hour, 7 day week, 364-day
year, with some 350 employees.
We have the largest retail consolidation operation
in the UK and are the only single site consolidating frozen supplies
to all the top six supermarkets' Regional Distribution Centres.
All our operations are ISO 9002 accredited.
FOOD DISTRIBUTION
TO RETAILERS
The ever-increasing cost of retail selling space
has driven retailers to reduce stock holdings at point of sale
to levels not much greater than the content of their cabinets
and shelves. Initially this resulted in stock holdings being held
at Regional Distribution Centres (RDC). However, further pressure
on stock holding levels in order to reduce wastage and working
capital and to meet the consumers' desire to have freshly-made
product, even when frozen, has had the effect of removing much
of the stock out of the supply chain altogether. Consequently
this has imposed a requirement on manufacturers for more flexible
production schedules with shorter runs and more deliveries of
smaller quantities at specific times; a pattern of deliveries
that mirrors sales at Retail Store level. Some Chilled Products
are already being delivered twice per day and we expect Frozen
Foods to follow within 12 months.
Individual manufacturers cannot economically
support this concept of making deliveries of small, time-specific
quantities to RDCs every time Retailers' lower stock levels need
replenishment. This need has been met by the growth of Companies
such as ourselves, which over the last eight years has spent over
£20 million on facilities and seen turnover grow from £2
million to £26 million.
As a result of building a central facility,
we are able to make frequent deliveries of a variety of products
from a range of suppliers reflecting more closely daily Store
sales. Day one order for day two deliveries are now commonplace;
day one order for day one delivery is increasing.
Labour and fuel represent over 50 per cent of
our total costs of operations and it is these that are subject
to significant change. For this reason they are the two issues
on which we would like to pass comment.
GOVERNMENT POLICY—FUEL
AND VEHICLE
EXCISE DUTY
Revenue raised from road users has increased
26 per cent in the last three years. Brent Crude oil price has
doubled in the last year. Government spending on Transport has
reduced; the structural conditions of the roads are the worst
for 25 years. These are the headlines for the Road Haulage Industry.
The present policy appears to be one of discriminating
against Road Transport by increases in taxation in an attempt
to increase costs and thereby decrease road use. The Policy of
decreased use is not however holistic. Grant Aid to build production
units in far-flung areas requiring substantial delivery journeys
to markets continues apace. One is tempted to deduce therefore
that fuel duties are not an instrument of Environmental Policy
but a means of raising taxes.
Nonetheless, the effect of ever-increasing taxes
has been to:
— Keep UK Diesel Fuel prices at up
to twice levels of those in other Member States of the EU.
— Increase continental vehicles on
our roads, up 25 per cent in the first quarter of 1999. Vehicles
which are not subject to our construction or inspection standards.
— Increase in "Flagging Out"
to obtain tax cost savings.
— Create "Boot Legging" with
diesel.
— Day Trips to France for a "fill-up"
on cheap diesel.
— According to Customs & Excise
traces of paraffin have been found in 25 per cent of all HGVs
stopped for roadside checks.
— Consideration of building RCDs in
Continental Europe to service stores in Southern England.
A greater understanding of cause and effect
of fuel taxes is necessary if they are to achieve their objective
of reducing traffic levels.
Road Fuel Taxes are an indiscriminate and blunt
instrument of Policy. They tax equally those who use fuel in remote
areas, where no alternative means of transport exist, and where
base fuel costs are higher. They apply the same rate on use where
lower base prices exist and where many choices of alternative
forms of transport are available. Road Fuel Taxes fall on Commercial
Traffic at the same rates notwithstanding whether the cargo could
go by some other means or not.
How can it ever be argued that Road Fuel Tax
is a moral imperative to reduce Road Traffic?
It is essential that the Policy Target of Reduced
Road Traffic must be attained by a more effective and precise
methodology.
GOVERNMENT POLICY—WORKING
HOURS
The UK Government Policy of Drivers working
hours has been to give weight to road safety and avoid excessive
hours. The EU on the other hand has added another dimension by
reducing working hours hoping to increase numbers employed. This
latter dimension has caused the recent troubles in the French
Transport Industry.
There is no distinction between employed drivers
and Self Employed Owner Drivers.
The operation of the law on drivers' hours requires
a knowledge of what hours each driver has worked, had as rest
periods, and driven over the past 14 days before another job may
be given to him. The next job has to be considered in terms of
hours and rest periods and given to the particular driver who
has the working time available for its completion. One can imagine
the demands of staff in a busy Traffic office with 250 drivers
and 150 vehicles handling jobs being planned for same day or next
day fixed delivery times. Many of the drivers are already off
site making deliveries and into their working periods.
In general terms it is now the EU that determines
Working Hours Law and it is from this quarter that the proposal
to further reduce hours that drivers may work has come.
The proposal to restrict night driving and to
limit the working week will have profound effect on the viability
of all road transport operations and particularly those of us
who are serving the Retailer with Food Products.
— Drivers will wish to retain the same
total pay for fewer hours, more drivers will be required to complete
the same tasks; a cost increase in the order of 20 per cent.
— As the same journeys will not be
possible within a working day, this will entail more nights for
vehicle and driver to be away from home. Sleeping in an £120,000
investment of vehicle and trailer that should be earning revenue
will have a further effect on business efficiency. Restrictions
on night driving will have a similar effect.
— The idea that these rules will not
be applicable to Self Employed Owner Drivers will cause a considerable
shift towards this method of providing tractive power. Competition
will force Operators to employ Self Employed Owner Drivers at
the expense of employed drivers.
Once again the cause and effect has not been
considered. The concept that road safety can be improved by reducing
drivers' hours and cutting night working but excluding Self Employed
Owner Drivers from those rules without competition forcing a shift
towards Self Employed Owner Drivers shows a certain level of naivety.
The initiative to move goods at night thereby reducing daytime
traffic does not sit well with the concept of limiting drivers'
hours at night.
FINAL COMMENT
Consideration of Road Transport and the impact
of Government and Regulation on Fuel Duty and Working Hours leave
one with an apparent certainty.
Any attempt at a coherent logical, consistent
policy will conflict with the revenue raising opportunities created
by everyone's desires and need to move or move products. The raising
of taxes and transport seem to be inextricably linked. The sheer
amount of tax revenue produced from this source puts the control
firmly in the hands of the Treasury. Have we not increased taxation
under the cloak of environmental protection?
There is no indication that the Treasury will
make sound Environmental Policy.
Keith Boardall
Group Managing Director
8 February 2000
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