While TDG may not have invented the term 4PL, it was certainly one of the leaders in making the concept work for its customer Corus Steel back in 2006. Since then TDG has been acquired by Norbert Dentressangle (ND) and Corus taken over by Tata Steel, and 4PL has been renamed KeyPL, but the business has gone from strength to strength, as Paul Hayes, director of KeyPL Transport at ND, explains to Steve Hobson
Paul Hayes has over 30 years experience in manufacturing and logistics, and played a key role in setting up TDG’s 4PL relationship in 2006 with what was then Corus Steel. The idea was to operate as a proxy distribution department for the client, using third party hauliers to provide the transport to combine the service benefits of an inhouse operation with the cost efficiencies of external transport.
“For a 3PL it is all about assets,” says Hayes. “We are different. As a 4PL it is all about management rather than assets. We provide warehousing, transport, planning, execution – everything. We are the transport department of our customers.”
Since starting out with one customer in 2006, KeyPL has grown its turnover to over £100m a year and its customer base to more than 20, including Tata Steel in Scunthorpe, Aggregate Industries in Linby near Nottingham, a well known soft drinks manufacturer in Ireland, a soft drinks ingredients maker and Geosica, a leading supplier of concrete products and machinery for rail projects (this operation involves shipping goods from Spain to London).
“We have three control towers at Scunthorpe, Dublin and Linby, and use the market to provide the assets,” explains Hayes. “We handle all back office functions and contract with around 300 hauliers, from owner drivers to family firms with 400 trailers. The customer gets one invoice – we do everything from procurement to payment.”
Scale
Now that KeyPL has a baseload of work it is able to use economies of scale to benefit customers of all sizes. “Because we have big customers we can bring in any company of any size – they could be £5m or £20m, 60 sites or just one,” says Hayes.
The length of contract with customers varies from five to eight years, though some are open-ended with a notice period. Some work can also be short term or for a fixed period – KeyPL does a seasonal distribution job every Easter for one manufacturer, for example.
In the main KeyPL operates on an open book basis, says Hayes, but it can work on a variety of contracts. “We are flexible in our commercial approach to suit our customers and have a mix of open and closed books along with various management fee structures down to traditional lane rated closed books.
“We have a fuel price mechanism in the form of a monthly surcharge formula that triggers rate changes for hauliers and customers. We see fuel as cost neutral.”
Less waste
The obvious route for a manufacturer looking to contract out its distribution would be to enter into a conventional 3PL arrangement with a single operator. But Hayes says a 4PL does a better job at lower cost.
“Some customers like the comfort factor of a 3PL but they want dedicated assets at back load prices,” he says. “Some potential customers are now using 3PLs, some are with a type of 4PL and some still have their own transport. We serve over 100 sites and we have never been beaten on price.
“We drive prices lower by taking out waste. We also help make the hauliers more efficient so they make more money. Because we dovetail different customers’ workloads we can triangulate legs for hauliers - they get five loads instead of four in return for committing to a fixed price. We have a big bucket of work.”
This bucket includes 1,500 loads a day out of Scunthorpe, 800 a day from Linby and 25 a day from Dublin. While some hauliers were sceptical at first about engaging with KeyPL, Hayes says that in seven years no haulier has pulled out.
“We pay fixed prices so they know what they are getting,” he says. “Anne Preston [chairman of North Yorkshire haulier Prestons of Potto] was a big sceptic in 2006 but within three months she had written to say how good it was.”
High standards
KeyPL sets high standards for its hauliers and works with them to improve their training and health and safety procedures where necessary.
“We produce lots of KPIs for our customers and hauliers,” says Hayes. “We tell them month by month how they have done and we will part company with a haulier who doesn’t perform. We let one go at the start – we inherited a haulier from Tata Steel at Scunthorpe and they were not hitting the KPIs. We tried to work with them to improve for six months but ended up exiting them.
“We have also had half a dozen companies decline to join us because they didn’t like the idea. They were all owner drivers who couldn’t change their practices.”
Another key element in making a 4PL work effectively is the IT system that optimises routes and loads.
“KeyPL is driven by people and IT,” says Hayes. “Automation helps keep cost down – if customers all wanted the same we could run leaner as well. But they all want something different so it is more manual intensive. We employ 70 people – a 3PL would have a lot more for £100m turnover.”
KeyPL’s IT systems have been developed since 2006 at a cost of £7m and in an ideal world every customer would be inputting their loads direct via electronic data interchange rather than by emailing spreadsheets. However ND can also work with manual systems as required. Hauliers have no choice – they must use the automated load booking system but Hayes says he also encourages verbal communication.
“If a haulier wants a fax we took the view they are not up to our standards,” says Hayes. “They must use our system but it can be done on a mobile or tablet. In the main there is no spot hire – all rates are contracted and agreed in advance. There is no bidding for loads so it is not dog eat dog – we pay a fair rate and the hauliers all know the rate.”
Marketplace
Having said that, KeyPL is developing a new tool called Marketplace. This will not be for regular work but if, for example, one of its customers has a special one-off batch of work KeyPL can put it out to its hauliers for instant tender.
Hauliers can also offer an empty vehicle to take a load, such as when a truck has tipped for another customer and is available for a return load. “There is no guarantee but there is a good chance we can fill it,” says Hayes. “They get a back load and we get a better price because that load is not on the contracted rate – they can tell us the rate they want or we can negotiate it.”
This benefits the customer as well as the haulier. “A quarter of all work we did for one customer operated on back loads, saving them 6.8% or £3m last year,” says Hayes.
KeyPL has also developed a mobile phone app for drivers to access the KeyPL system, which will also act as a track and trace device for the vehicle.
“The driver logs in, the system shows him his loads and we can then track him,” says Hayes. “Our top five hauliers are using it now and we aim to roll it out by end of the year.”
The app also doubles as an online proof of deliver (POD) – if the customer agrees to accept electronic rather than paper PODs. “The recipient can sign on glass or the driver can take a photo of a paper POD. Many customers however want every POD – the technology is ahead of what some want,” says Hayes.
Regular payments
Another benefit of working for KeyPL is the regularity of payments hauliers can expect.
“With the exception of customers who require a POD in their hand – which are mostly our smaller ones – when a haulier completes on our system we pay them and invoice the customer,” says Hayes. “So on a Monday we can tell them the payments that are due the previous week. By Tuesday we have raised any queries, and we close the self-billing system on the Wednesday and invoice the customer.
“We pay our hauliers and bill the customers monthly. This is particularly beneficial for our hauliers, who know when they will be paid and this obviously helps provide a stable cash flow for them.”
As well as KeyPL, ND of course operates conventional 3PL and groupage divisions, but there is no obligation to share work.
“We are independent and could compete for business with Norbert Dentressangle Logistics or Transport Services,” says Hayes. “We would only use the Norbert Dentressangle fleet if it is right option for the customer and if one of our hauliers can’t do it – otherwise we would lose credibility.
“KeyPL works best with full trailer loads, though we do some multi drop and part loads. Groupage is not what we do – in that instance we would talk to our asset-based network and they would take that customer.”
Looking ahead, Hayes has ambitions to expand into Europe.
“Several of our customers’ work is international and that represents around 10% of KeyPL’s volumes,” he says. “Part of my strategy is to be pan-European and export the UK model to Europe.”
