Yearsley Group reduces costs

Cost pressures are a daily reality in distribution but Yearsley Group has shown that it is possible to swim against the tide and reduce their impact. On its contract with Unilever Ice Cream & Frozen Foods (UCIF) it achieved a 16.9% reduction in cost per pallet between 1999 and 2005, at a time when fuel costs soared by 20.4% and driver costs by 34.5%. The company has combined back-hauling, fuel savings and better equipment to drive out waste and maximise performance and was rewarded with the Efficiency in Operation trophy in this year's Motor Transport Awards. Yearsley Group is contracted to provide a core fleet for primary movements and to manage a series of contractors for outbound movements - there are on average 100,000 pallet movements a month. It moves products between factories in Lowestoft, Hull and Gloucester into UCIF's national distribution centre in Hams Hall near Birmingham, which is capable of storing 42,000 pallets.

The products - including the Birds Eye, Walls and Ben and Jerry's brands - are then distributed to retailers. Soon after taking on the work, Yearsley saw that it had the potential to go beyond the basic requirements of the contract. Geoff Herring, contract general manager, recalls: "Initially the plan was to move product from the factories to the ndc and go straight back but we decided we could utilise the vehicles better by making deliveries on the return journey." Operations project controller Will Maycock adds: "We began to do more and more work in making retail deliveries close to where the factories are based or in picking up materials such as packaging and taking it the factories." Some of the movements can be complex but with good planning can virtually eliminate empty running while at the same time create extra revenue. So if peas need to be transported from Hull to Lowestoft, rather than a direct journey, they would be taken to Hams Hall. The vehicle would then be reloaded and used to make a retail delivery or supplier collection close to its home base in Hull. A different vehicle could then take the peas to Lowestoft and bring back an inbound load to Hams Hall.

Alternatively, in the growing season there could be a need to pick up products from, for example, Scotland. During the season, Yearsley might put on a trunking vehicle which would take products to a retailer close to the growers and then bring back the products. "Rather than running empty we are getting a benefit from back-hauling that we can pass onto Unilever and the retailer," Herring explains. Each of the factories has a transport controller who liaises with the central planning function at Hams Hall to enable this to happen. A team of controllers at the ndc is responsible for all inbound and outbound movements and there is also a dedicated controller for the core, primary fleet. Careful management of the contractors making the outbound movements is also necessary and their performance is closely monitored. "We have agreements with all of them, taking into account service levels and cost matrices. We also carry out compliance reviews of them," Maycock explains.

As well as back-hauling, Yearsley Group gains other forms of non-primary revenue including from retailer Factory Gate Pricing initiatives and from moving products for other parts of the Unilever Group under an initiative called 'One Unilever'. Totalled up, these extra forms of income amounted to £548,000 in 2005 and helped to limit overall costs to a level which was 5.2% below planned spend for the year. This was despite pallet volumes being 4.5% above expectations. The contract is an open-book one and allows both parties full transparency of costs. All savings are shared, incentivising both sides to introduce efficiencies. This helps to create a partnership approach, Maycock believes, and identifies high-cost areas which need to be addressed. "There is no hidden agenda, everyone knows the costs and revenues gained. Both companies have the same goals," he says.

Yearsley Group's performance is measured by a series of KPIs and it has managed to consistently beat its targets. For example, on-time deliveries have been around 97% for several years, compared to the target of 95%, and its targets for replenishing factories with raw materials and empty trailers have been exceeded. On-time collection from the Gloucester, Hull and Lowestoft factories averaged 87% compared to the KPI target of 75%. The performances of different sites is also measured. For example, of the transport savings achieved in 2005, Hull was responsible for 43.6% of them, Hams Hall for 31.4%, Lowestoft for 17.6% and Gloucester for 7.4%. Despite its successes, Yearsley is committed to a process of continuous improvement and was recently awarded a year's extension to its existing contract, without a tender process, taking it to September 2007.

Since the contract started there have been a number of changes. The Hams Hall contract was initially run by Frigoscandia, which became Celsius First. Yearsley Group then bought part of Celsius First, including the Hams Hall contract, from the latter's administrators in March this year. Throughout the changes, however, the key personnel stayed in place. Further change is now taking place, with Unilever reaching an agreement, subject to regulatory approval, to sell the majority of the frozen foods business, including the Bird's Eye brand but not ice cream, to private equity firm Permira Funds. Just what effect, if any, this has on the Hams Hall operation remains to be seen. But the achievements in transport have already shown the possibilities when a concerted effort between client and contractor is made to cut costs and ensure the best use of the available assets.

THE FLEET

Yearsley Group does not own any of the assets used on the UICF contract. Instead it leases the vehicles from BRS, which also provides drivers - a system that Herring says works well, due to a close working relationship. "The BRS operation sits alongside our operation at Hams Hall and we are constantly talking to them about driver availability, fuel issues and overall performance. Over a period of time we have found it to be ideal for us," he says. It is particularly useful when managing the peaks in the business, he says. There are sales rises for ice cream in the summer and increased transport activity during the growing season for vegetables.

BRS has the resources to supply extra equipment and personnel in these instances but the relationship with transport contractors at this time is also vital. "We give them a share of the work during the year and then when we are busy we can talk about them providing additional resources," Herring says. Yearsley Group is using its second generation of trailers since the contract started six years ago and these are designed to be as flexible as possible, to allow for different types of back-hauling work - they are able to carry frozen, chilled or ambient products. The company has also introduced IT links to cabs and, instead of ringing in information about deliveries, drivers can now key in arrival/departure information.

FUEL CONSUMPTION

The Hams Hall operation has seen significant improvements in fuel consumption. Prior to the contract starting it was 7.7 mpg, rising to 8.1 mpg in 2004 and 8.6 mpg in 2005. There are plans to go above the 9 mpg mark eventually. The savings achieved already equate to around £225,000, based on a price of 70p per litre. Some of the measures taken to achieve this have included enforcement of correct fuelling procedures, defensive driver training, KPIs covering fuel management, and the use of Volvo Dynafleet fuel/driver management systems. Yearsley has introduced driver performance leagues to encourage competition and to identify where individuals could benefit from extra training. The systems also identify driving styles and assess whether they are in accordance with company policies. This could include whether cruise control is being used or whether drivers are within the economy rev band.

• A comprehensive series of initiatives leading to a sustained improvement. Demonstrated the gains made.
• Meets all MT's entry criteria including reducing empty running and saving fuel.
• Transport expenditure is down, as is the cost per pallet, while the number of pallets has increased. All the savings substantiated.