Factors affecting the utilization of truck capacity
Companies do not wilfully under-load their vehicles. Nor is poor loading very often a result of careless management. There are many good reasons for trucks travelling around empty or only partly full. The main constraints on vehicle loading and classifies them into five categories (McKinnon, 2007):
· market-related constraints associated with the spatial pattern of trade and fluctuations on the volume of freight flow;
· regulatory constraints governing the size and weight of vehicles, the timing of deliveries and health and safety aspects of vehicle loading/ unloading;
· inter-functional constraints imposed on transport management by other departments within the business;
· infrastructural constraints related to the physical capacity of transport networks and storage capacity at both ends of a freight movement;
· equipment-related constraints resulting from the incompatibility of vehicles, handling equipment and loads.
We will now examine some of the more important constraints in greater detail and consider what, if anything, companies can do to ease them.
This review reveals that in under-loading their vehicles companies are sometimes making perfectly rational trade-offs between transport efficiency and other corporate goals, such as minimizing inventory, optimizing the use of warehouse space or maximizing staff productivity at the loading bay. As a result total logistics costs may be minimized. When environmental costs are factored into the calculation, however, the tradeoffs usually have to be rebalanced to give greater priority to vehicle utilization.
Demand fluctuations
Sales volumes can vary widely over daily, weekly, monthly and seasonal cycles. For example, illustrates the average daily flow of groceries in the UK food supply chain. Vehicle capacity is often planned to accommodate peak demand, inevitably leaving the fleet with surplus capacity at other times. Companies subject to pronounced, and quite predictable, seasonal fluctuations can hire additional vehicles or outsource more of their transport at peak periods. It is more difficult to adopt this strategy where there are wide and unpredictable variations in transport demand from day to day.
If transport managers and carriers can be given more advanced warning of future demand they can plan the use of vehicle capacity much more effectively. One of the key objectives of Collaborative Transportation Management (CTM) is to involve managers responsible for the transport operation at an earlier stage in the logistics process (Browning and White, 2000). By creating an ‘extended planning horizon’ some carriers have been able to increase the utilization of their regional truck fleets in the United States by between 10 and 42 per cent, mainly as a result of improved backloading (Esper and Williams, 2003).
The Nominated Day Delivery System (NDDS) helps firms achieve much higher levels of transport efficiency by getting customers to adhere to an ordering and delivery timetable. They are informed that a vehicle will be visiting their area on a ‘nominated’ day, and that to receive a delivery on that day they must submit their order a certain period in advance. By concentrating deliveries in particular zones on particular days of the week, suppliers can achieve higher levels of load consolidation, drop density and vehicle utilization. This practice is, however, resisted by some sales managers on the grounds that it impairs the standard of customer service and can weaken the company’s competitive position.
Some demand fluctuations are artificially induced by standard business practices. Promotional activity, for example, destabilizes the flow of goods, making it more difficult to manage transport capacity at a uniformly high level. The normal practice of paying bills at the end of the calendar month and giving sales staff monthly targets also causes freight volumes to peak at the start of the month. Vehicle capacity provided to meet this peak is often under-used later in the month. Relaxing the monthly payment cycle and moving to a system of ‘rolling credit’, in which customers are still given the same length of time to pay but from the date of the order rather than the start of a calendar month, can significantly improve vehicle utilization. It has been suggested, for example, that this could significantly cut supply chain costs and environmental impacts in the European chemical industry (McKinnon, 2004).