Company turnarounds require tough decisions and strong leadership. But for McColl’s Transport, the secret has been to lock operational activities into standardised systems, as CEO Simon Thornton explains to Gay Sutton.
In just 18 months the new management team at McColl’s Transport has achieved a significant business turnaround, returning what had once been a well respected family-run Australian transport company to profitability, and re-establishing its reputation for delivering quality services reliably and consistently. Brought in by the company’s new owner, 333 Management found staff morale at rock bottom with remedial action needed quickly.
“The transportation industry tends to be very price competitive, and for many it’s a race to the bottom, with competitors vying to offer the lowest prices,” CEO Simon Thornton explains. And since 2005, when bought out by a private equity firm, McColl’s had lost its way and become one of those tumbling towards the bottom with decreasing service levels and increasing debts. The challenge was to reverse that decline.
“We recognised that there were blue-chip brand name companies that could not afford their logistics to operate like that, and would be prepared to pay a modest premium for a company prepared to invest in systems to deliver a consistent and high quality service. Our strategy, therefore, was to divest areas of the business that made no sense for us and invest in those areas of the business where we could do well. We then began to lock-down everything we did into systems so that we could achieve repeatable and consistent results for our customers.”
Of an original customer base of around 300, the cull was impressive. “We were really brutal. We got rid of all those who didn’t fit with our way of operating, and today we have just 15 customers that really matter to us.”
The choices must have been difficult. But they were based on a thorough analysis of the company’s capabilities and resources, and by defining the way the company wished to operate. With a large fleet of 500 specialised tankers equipped to provide a high quality service for farm milk collection, the company already had a dominant position in the milk marketplace, and the facilities to deliver a value added service. At the other end of the spectrum, its large fleet of tautliners—large dry freight lorries—operated in a highly competitive and low value arena. “It was a $50 million division of our business but we made the decision to close it. And it has worked very well. We reinvested the money in technology and training to provide better services for our core customers.”
Today, McColl’s operates in three principal markets: the farm milk collection service, transporting milk between factories, and transporting chemicals—and it has seen business increase significantly in each area.
Alongside this rationalisation, the company has implemented a business improvement programme based on locking all operational activities and events into defined business systems—a concept it calls being ‘systematically better’. At the heart of the newly tuned internal administration lies a specialist transportation ERP system that had been in the company for 12 years but only used for its invoicing capability. This has been cleansed and populated with accurate data and is now being configured to manage the business administration faultlessly from end-to-end, from initial order entry, through truck scheduling and materials ordering to customer invoicing.
Beyond this, great improvements have been achieved at the driver level. A $1.6 million investment in a GPS truck management system named McColl’s Co-Pilot is significantly improving operational efficiency as well as driver safety. Installed in every truck, the system monitors and measures all aspects of the equipment’s activity in real time. The control centre therefore records and monitors where the vehicles are, how they’re being driven, whether speeding or driving in a fuel efficient way and so on. “We can then reward drivers who are driving efficiently, and improve the driving skills of those who are not,” Thornton says. With a fleet of 200 prime movers and 500 tankers and trailers travelling around Australia and an annual fuel bill of between $14 million and $20 million, even a small percentage improvement in fuel efficiency significantly impacts the bottom line.
“One of the big issues in Australia is managing driver fatigue and we have strict fatigue laws that govern this,” Thornton continues. “However they’re difficult to manage unless you put in some systematic way of doing it.” Most companies operate a paper management system using driver diaries that are filled out and checked retrospectively, but McColl’s is going to be the first in Australia to manage this also in real-time electronically. When the driver gets in the truck he punches in his pin number and it keeps track of him, reminding him when he should take a break, and alerting the control room if he fails to do so, making it easier for drivers to manage their safe driving hours. “We have found this is a great differentiator with our clients. We have legislation called the Chain of Responsibility, which extends the liability for road transport offences to our clients and their respective clients. We are therefore managing the Chain of Responsibility for everyone and ensuring the rules cannot be broken.”
The Co-Pilot is currently being integrated into the ERP system, and once completed, each driver will receive their job instructions in the cab, including sat-nav directions to the pick-up and drop-off points, instructions about the plant layout and the loading and unloading operations. “Everything is documented, even down to which hose to use, so there is a systematically reduced likelihood of a mistake.”
The second major investment is in a driving simulator costing around $1/4 million, which is due to be delivered shortly. The aim is to improve safety by simulating normal driving conditions and then presenting the drivers with almost everything that could go wrong, whether that’s losing the steering and brakes or a pedestrian stepping out in front of the vehicle. Simulator training can then be provided to improve any skills deficiencies.
Early on in the change process, the company brought in a safety specialist to analyse the accident rate prior to the takeover; and one of the key findings was that many drivers continued for excessively long hours, and this rang some warning bells. Although a drugs and alcohol testing regime had been in place it had not been effective, so the team implemented a strict regime, testing 20 per cent of its 600+ drivers every month. “Early on we lost a lot of drivers because they knew the game was up,” Thornton comments, “and we fired everyone who tested positive. Then after a few months there were no more problems.”
Putting all these programmes in place has resulted in significantly increased consistency of service, which is appreciated by customers who are prepared to avoid the ‘discount transport trap’ in return for the safety and reliability. 333 Management took over halfway through 2009; and the figures speak for themselves.
“Our net debt has been reduced from $71.8 million to $36.6 million over the past 18 months,” Thornton says. “And we see plenty of opportunities to expand. As we’ve differentiated ourselves in our three business areas, more and more business has been coming towards us.” But the company is remaining true to its principles: it will not accept every contract on offer. “We will not be all things to all people,” Thornton concludes. “We are very specific about what we offer, and we’re very disciplined in how we deliver it.” www.mccolls.com.au
