Manufacturers outsource transport to overcome delivery problems

When paper bag manufacturer, the O’Kelly Group, considered outsourcing its delivery transport, General Manager Sarah O’Kelly was caught between running their own transport as they always had and moving to a more modern approach of doing business.

Previous generations of the company, established in 1948, were hesitant about outsourcing but O’Kelly said the company needed to consider more flexible approaches to transport.

“We have to deliver when we are expected to no matter what. Not delivering is not an option.

“If a driver was absent it created problems. We would re-allocate staff from the warehouse or elsewhere to do the deliveries. But then we’d be one down and those areas of the business would be affected, so it made sense to outsource.”

O’Kelly said that her father and grandfather’s generation would have been worried about loss of control when outsourcing. This time the manufacturer, operating one of Australia’s largest paper bag manufacturing facilities at its Dandenong processing plant, decided to start small.

O’Kelly engaged national transport company Ontime Group to provide one driver and vehicle around five years ago. Over time this has increased to four, and occasionally more during busy times.

“It was a big decision because the company had managed its own transport for about 60 years. But we put one driver on and it went really well so we gradually increased our commitment,” she said.

Delivery demands are high and constant – it has four to five trucks conducting 750 deliveries a week, close to 40,000 per year. Product includes paper bags, both flat and satchel, which are used for fast food, bottle bags, mushroom bags, grease-proof sheets and more.

The company is also a distributor of other products in the fast food container range such as coffee cups and plastic containers. But paper bags account for 40% of business.

O’Kelly says that outsourcing transport has saved costs but that some benefits would be hard to quantify. “There is a saving but it was never about that for us. It was about the cost of interruption to the business, and it’s hard to quantify that.

“The flexibility would have a financial benefit but it’s not always easy to put a number on it.

“When running your own fleet you’re dealing with vehicle costs, breakdowns, maintenance. Something could go on a truck and you’re up for $2,000. But then you don’t have access to the vehicle either so you need to cover by short-term leasing a vehicle.”

The biggest benefit is flexibility to manage resources, according to O’Kelly. She says the increase in control was an unexpected benefit and contradicted her initial worries about outsourcing.

Having regular back-up drivers on standby covers absenteeism and spikes in demand. “We have one driver who has been with us for years. He stayed on with us when we switched to Ontime, but has unfortunately had to take four months sick leave this year. So we used an Ontime back-up driver during that time and have been able to keep the position open for our driver when he recovers and returns.”

Public holidays were always a problem previously due to the backlog of orders that weren’t able to be delivered on the day. But O’Kelly says it’s now solved by booking extra drivers either side of the holiday.

For a period of time O’Kelly has added an extra driver one day a week to manage a slightly increased load. “We can add a driver easily, which is important for growing our business. But doing it ourselves, the capital investment to add even one driver is huge.”

Ontime’s drivers are managed through one contact point. “They are part of our team. We treat them like employees. They wear our uniform, they are here every day. We can’t have couriers doing their role.”

Delivery transport is also a day-to-day issue for Plyco, an independent Australian manufacturer, distributor and retailer of timber-based panel product. Plyco has a small plywood processing plant where it can produce low volume, specialty orders for boat builders, cabinet makers, joinery, musical instruments and other requirements.

The business is growing strongly and conducts approximately 50 deliveries a week to its customers. For transport Plyco uses a combination of its own small fleet and an outsourced component, consisting of a Tautliner managed by Ontime Group.

The decision to partially outsource the delivery fleet came down to reliability, according to business owner David Garvey.

He said customers in joinery shops and factories run tight schedules and can’t afford deliveries being late. “There has been a slight cost saving but reliability was the main thing. It’s a time-sensitive product and we risk losing customers if we are late too often.”

But he said the company was having issues getting and keeping reliable drivers on that delivery run. “We had issues replacing them on sick days. We would either have to draft someone from the warehouse or if we were really desperate I would have to do it.”

Garvey said that absenteeism had effectively been solved by outsourcing, as the onus is on Ontime to arrange suitable replacements.

The result is more reliability and efficiency. “Deliveries are now more regular, and having access to a Tautliner has improved efficiency because it means we can deliver in any weather conditions, whereas previously with an open tray we couldn’t delivery in heavy rain.”

Garvey said Plyco was opening a new distribution warehouse next year and would consider more outsourcing to cater for any increase in deliveries.