A Q&A with a head of transport on the effects of COVID-19
We are now in our 3rd month of COVID-19 lockdown and throughout this period we’ve seen volumes spike in some areas of the supply chain and completely grind to a holt in others.
Our CEO, Simon Crick, had a zoom call with the Head of Transport at a leading operator to get their view of how COVID-19 has affected the road transport sector and what we might expect as we enter the new world once lockdown restrictions are eased and we start to go back to work.
This conversation took place in week 8 of lockdown, here’s an overview of the discussion.
How has COVID-19 effected your work so far?
Volumes are 50% down and we have no real insight of what the next few weeks looks like. We are essentially waiting for Boris to make an announcement to see if people can go back to work, and the economy can start moving again.
In terms of the original starting point, prior to Boris’s lockdown announcement, before furlough was even mentioned - we experienced a huge peak in demand. We saw a massive requirement from the supermarkets for traction, drivers, more trucks, trailers – anything people could get their hand on really. Trying to support and maintain the network as the public were panic buying across the county.
We then became very busy starting to put plans into place, speaking to our client base, unaware of how long it would continue like this - and also having our usual client base still ticking over in the background. Do we bring in more trucks to meet the demand, when can we get them, how long will we need them.
Then, 4-5 days later, after making all these phone calls and organising everything, it just completely drops to nothing and the requirement is no long needed.
Soon after the furlough scheme is announced, with schools shutting and key workers only allowed to continue working, we were seeing downturn in volumes, and then slowly over the next few weeks when the high street started to close, it dropped further.
At this point, we had a lot to consider, do we have to furlough our staff? What can we do with all the trucks/trailers? What can we do with fuel – should we buy bulk as pricing are dropping, do we need it?
What operational/procedural changes have you had to implement as a result of this pandemic?
Firstly, everything that is associated with money we have had to tighten. Aged debt - anything over 120 days is, although critical already with your bank, now a game changing decision. If you have customers at 120 days outstanding payments and your suppliers are demanding money, your cash flow can go from being quite comfortable to problematic.
It’s hard, trying to tighten the belt when all your customers want support with reductions in rates, extended payment terms etc at the same time as suppliers requesting more money and a faster payments.
Further to this we’ve also had to rethink how we operate day to day, how do we maintain social distancing, improve hygiene procedures across the business to do what we can to keep everyone safe. For example, we created cleaning packs for the drivers to help them keep their cabs clean and safe – especially for the drivers who must change trucks from day to night.
Additionally, where possible we are reducing the amount of trucks coming back to base to do the night runs in order to lower the number of drivers who must swapping trucks. This has then had a knock-on effect to the business as instead of saving money, we’re having to pay for drivers’ to night out in the truck rather than normally bringing them back to base and getting it out again earning on the night runs.
All of this adds further cost and complication to the business, all when we are trying to do everything to reduce costs.
Have you seen a difference in driver performance throughout the pandemic?
We have a driver bonus scenario which is based on driver grades taken through our telematics based on a KPI’s. On average, 10-15 drivers hit that KPI each week and therefore get paid a bonus as higher MPG’s are achieved.
The number of drivers achieving a bonus has increased through COVID – many factors come into play here, but a big one seems to be a reduction in traffic on the roads - drivers are able to use cruise control and have better conditions for planning ahead.
Either way, driver scores have risen to an all-time high which means we’re achieving great MPGs with current fuel prices also being a benefit – plus we can pay the drivers more too – hopefully this will continue post lockdown.
The traffic will obviously increase back to normal when the pandemic is over, but the drivers will naturally prove to themselves that they can achieve higher scores, see how the telematics work so will hopefully see a benefit in that and continue to develop.
If there is a decrease in scores, we will be able to coach and train drivers by showing this is how you did do it, and although there may have been no cars in front of you, now there is, so just apply the same method.
We may not continue this process to this level, but we will continue to look more carefully into this and be more cost aware.
Many individuals across the supply chain have been listed as essential key workers. What roles do you see as being affected the most during the pandemic?
In terms of somebody in my role, I’m affected as I need to do reduce costs at the same time as becoming more efficient at the same time. I need to make big decisions very quickly, with limited information and visibility. Customers all want a reduction in price and more flexibility, but we already price our work aggressively so there is not much else we can take out. Some operations are taking on work where they are operating at a loss – we simply just can’t do this.
In terms of the drivers, the ones that are working have been impacted financially as the work is not there to do the hours that they normally would. There is also a wellbeing element to this with their mental health and stress levels - do I need to provide my drivers counselling after this, I’m not sure? They have been out there for 2 months now, every day touching people/products etc, with the worry that they could catch the coronavirus – what effects does that have on someone?
In terms of furloughed drivers, office staff and those who are classified as vulnerable, they have been in lockdown now for months without seeing family and friends – what are the long-term side effects of this – again I don’t know, I feel like I should have answers to these questions – its frustrating.
When lockdown starts to get lifted what will happen to the transport market?
I think when we come back there will be less small family run businesses that own a couple of trucks, as a lot of them will have most likely lost their business.
Some large transport companies may also have to downsize as they will have lost a lot of their clients – some of the businesses will probably have had to shut their doors too.
Demand wise, I generally think there will be a downturn in availability, however it won’t outweigh the demand. The companies will be trying hard to get work back in, accepting jobs at a reduced rate to what it used to be. The market will be very aggressively priced for a while as companies continue to struggle to stay afloat – operating at a loss can’t be sustained though.
2020 was tipped to be a challenging year anyway with Brexit and IR35 – both being challenging to transport operators - what do you think about these things now?
To be honest, I have not thought about Brexit for months - I wasn’t too concerned before, but I knew it would have an impact.
There were a lot of question marks regarding the driver workforce – would Eastern Europeans that come over here to earn as much money as they can to send money home etc. now just go work in Spain as they can get the same money there?
Would we then see a decrease in the driving workforce? Also, what would it do to companies if they start to dissolve for whatever reason, the more the demand drops the more people have to get involved and start to beat down the prices, meaning eventually you’ll end up running at a loss.
In terms of moving from Brexit to IR35. I thought IR35 was a big deal and thought it would be implemented. We prepared for the change in legislation, with a clear transition to PAYE for contractor drivers. We want the drivers who turned up at our window to be on the same money, package and benefits.
The pandemic has put that on hold for a year, it’s our view that the revenue will roll this out next year – overall we welcome the change and see it as a positive step forwards.
Closing question, what positives do you think we can take from this situation, if any?
We can do a lot of things in our country with no notice. It depends how you read the press and listen to the government, but we can do anything. The main thing that I look at is the amount of people, whether you are NHS, in the Army, Boris Johnston or me and you sat on this call, so many people are working together and supporting each other – that’s great to see.
I look at this as I’m a key worker. There are a lot of more important key workers than me, but I am a key worker. This isn’t me saying the government needs to acknowledge me, but the government needs to acknowledge the people that do a job that saves people’s lives.
When a pandemic breaks out across the world, we have to let them continue to work and put their lives at risk to save our population - how can they not be on a pay scale that reflects the risk and skills required? The structure of that kind of stuff needs to be looked at.
With regards to lorry drivers, if you asked someone about them 3 months ago, people would moan, but all of a sudden, they are now heroes and getting clapped at 8pm on a Thursday, so people’s mind-sets can change.
I think we have proven not everybody that goes to work every day clogging up the M1, M62 & M25 actually needs to be at work so that needs looking at. If the government’s stance is by 2050 every vehicle needs to be electric and that will cost £100 billion, actually getting everybody a laptop and requesting those who can work from home do so 3 times a week would cost less and actually be better for the environment.
Just generally people working together is something we need to keep. People within the same industries that are competitors actually working together to support one goal, which is the NHS.
What won’t be the same is the high street, and we’ve probably got 18 months before travelling will get back to normal. It’ll take a long while before people feel comfortable enough going back to pubs, airports, shopping centres etc. Work life is impacted with everyone’s social life.
Going forward, shopping-wise we should be keeping up the momentum of van delivery drivers so that elderly and vulnerable people don’t have to go shopping. A lot of the stuff we are now doing, for example this zoom call, we probably wouldn’t have done that before, but why not? Nothing has changed in terms of technology, and the more we’re in this situation the more normal these changes will feel.