Starting new transport company, need advice

UK PROFESSIONAL DRIVERS FORUMS OWNER AND FLEET OPERATORS FORUM (INTERACTIVE)
1

Hi All,

Hope you are well. I work for an Italian bread supplier, based near Heathrow. Due to Covid, my company had to make around 70% of our staff redundant. But fortunately for me, as a result of this I had been promoted to the position of supply chain manager in September. The job would usually require me only to plan the logistical side of things, but having got rid of our distribution manager, I’m in charge of maintaining our fleet also. For the sake of being competent, I insisted the company provide learning materials to enable me to do my TM CPC exams. Thankfully I’m a fast learner, passed both exams and am now qualified. The chairman of the company, would like to outsource our distribution all together to someone small that grows with the company. I saw the opportunity and seized it, suggested with a little more experience I should be that someone small. Thankfully, the extremely wealthy owner, has given me his 100% backing to take on this role. As you can see, I’ve had a whirlwind 6 months, and I’m conscious that I’m growing too much too quickly. I would like some advice from industry experts on a few things if you don’t mind.

  1. Subcontracting: In my fleet I have 3 x 44t artics temperature controlled, 2 x 3.5t sprinters 1 of which temperature controlled. All but 1 vehicle is used everyday for about 8 hours each. All of which come back with an empty load due to us having only a restricted licence. After starting my company, obtaining operating licence etc. I will be looking at getting return loads from the midlands. Is subcontracting the only option for this? Is there a transport company that specialises in temperature controlled goods who are looking for subcontractors? I’ve read about stobart, maritime, Amazon, Slam…are there any others I should consider? What subcontracting would you recommend for the 3.5T vehicles around London, multi drop perhaps?

  2. Retrofitting vehicles: unfortunately all 3 of my tractor units are euro 4, with the low emission zone coming into affect in a couple of weeks this becomes a problem for me. However, thankfully only 1 of my customer is within London. But this means I will have to do 2 runs with the 3.5T and can’t use my trailer. I couldn’t find online where I can retrofit the vehicles to make them euro 6. On the TFL website, I couldn’t find a company to upgrade the Mercedes actros. Any suggestions?

Thank you for your time, any help would be greatly appreciated.

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2

It is not clear who owns these vehicles and the haulage organisation and O licence. A restricted licence only allows the carriage of own goods so unless the backloading is required supplies for the bakery then the bakery cannot backload. If you are the licence holder carrying the bakery’s products in your vehicles then you need a standard operator’s licence. Who is US in the second line of your second paragraph?

3

A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

4

cav551:
It is not clear who owns these vehicles and the haulage organisation and O licence. A restricted licence only allows the carriage of own goods so unless the backloading is required supplies for the bakery then the bakery cannot backload. If you are the licence holder carrying the bakery’s products in your vehicles then you need a standard operator’s licence. Who is US in the second line of your second paragraph?

Currently, the bakery owns these vehicles and I am an employee of the bakery.

As soon as I am able to form my own company, I will apply for my own standard national operating licence. All the distribution related assets will be acquired by my new company. Employees such as myself, drivers, supply chain planner will stop working directly for the bakery and sign new contracts with the newly formed transport company. After the new company is formed, assets and employees transitioned, I should be considered 3rd party logistics with a dedicated service for the bakery.

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5

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Euro 4 can be retrofited to Euro 5 (Dinex exhausts). We have one P270 that has been done with the Dinex exhaust.

Euro 5 to Euro 6 is far too expensive (circa £20k).

To the original poster, why would you need 6x2 units if you run bread?

Be very careful in terms of acquiring those euro 4 assets. To me it seems more like they want to get rid of the vehicles and have found a person that will take them.

By the way Amazon requires Euro 6 as far as I know to undertake their work.

I would recommend to get a class 1 licence also and learn the basic mechanics of vehicles so that you don’t get ripped off and can do basic maintenance by yourself. Furthermore a small workshop is highly advisable if you plan to run an older fleet of vehicles.

Don’t go with leasing vehicles, buy them outright and sweat the assets. In your type of business you need to aim for 1.2-1.3m km from each tractor unit you buy. Changing over units every couple of years will make you a slave of the finance company.

6

Riho:

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Euro 4 can be retrofited to Euro 5 (Dinex exhausts). We have one P270 that has been done with the Dinex exhaust.

Euro 5 to Euro 6 is far too expensive (circa £20k).

To the original poster, why would you need 6x2 units if you run bread?

Be very careful in terms of acquiring those euro 4 assets. To me it seems more like they want to get rid of the vehicles and have found a person that will take them.

By the way Amazon requires Euro 6 as far as I know to undertake their work.

I would recommend to get a class 1 licence also and learn the basic mechanics of vehicles so that you don’t get ripped off and can do basic maintenance by yourself. Furthermore a small workshop is highly advisable if you plan to run an older fleet of vehicles.

Don’t go with leasing vehicles, buy them outright and sweat the assets. In your type of business you need to aim for 1.2-1.3m km from each tractor unit you buy. Changing over units every couple of years will make you a slave of the finance company.

Except there’s no point in 4 to 5 any more .

7

Is the “extremely wealthy owner” prepared to fund your idea? Or did the extremely wealthy owner become wealthy by selling obsolete vehicles on the open market!

8

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Forgive my ignorance with this, give me some rope. But seems as though I have exhausted all options. Government scrapage scheme no longer exists through lack of funding, covid related no doubt. Unable to alter the vehicle to make it compliant. Spoke to RHA and they advised the same thing. Only option to buy new vehicles. How are the owner drivers surviving if they have an older vehicle, the fines are ridiculous!

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9

Riho:

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Euro 4 can be retrofited to Euro 5 (Dinex exhausts). We have one P270 that has been done with the Dinex exhaust.

Euro 5 to Euro 6 is far too expensive (circa £20k).

To the original poster, why would you need 6x2 units if you run bread?

Be very careful in terms of acquiring those euro 4 assets. To me it seems more like they want to get rid of the vehicles and have found a person that will take them.

By the way Amazon requires Euro 6 as far as I know to undertake their work.

I would recommend to get a class 1 licence also and learn the basic mechanics of vehicles so that you don’t get ripped off and can do basic maintenance by yourself. Furthermore a small workshop is highly advisable if you plan to run an older fleet of vehicles.

Don’t go with leasing vehicles, buy them outright and sweat the assets. In your type of business you need to aim for 1.2-1.3m km from each tractor unit you buy. Changing over units every couple of years will make you a slave of the finance company.

When I say bakery, you have to understand it’s not your usual bakery. Customers include, Costa, Starbucks etc. Have on average 40-50,000 rolls on the trailers. I take your advice on potentially getting a class 1 licence to learn the basics of vehicle maintenance. 95% of current routes, avoid London all together, so not a complete disaster. But I would prefer if they were euro 6. Don’t want the driver missing the exit and then be left with a hefty fine. I do have a supplier who gave me a HP option for a 16plate Mercedes tractor unit, something I’m considering without tying up capital

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10

Wheel Nut:
Is the “extremely wealthy owner” prepared to fund your idea? Or did the extremely wealthy owner become wealthy by selling obsolete vehicles on the open market!

Yes, he is providing a significant business loan, enough to buy a new fleet. But I was hoping to update the current vehicles if it were a possibility and the cheaper option. It seems as though, it is not.

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11

azmol.ali:

Riho:

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Euro 4 can be retrofited to Euro 5 (Dinex exhausts). We have one P270 that has been done with the Dinex exhaust.

Euro 5 to Euro 6 is far too expensive (circa £20k).

To the original poster, why would you need 6x2 units if you run bread?

Be very careful in terms of acquiring those euro 4 assets. To me it seems more like they want to get rid of the vehicles and have found a person that will take them.

By the way Amazon requires Euro 6 as far as I know to undertake their work.

I would recommend to get a class 1 licence also and learn the basic mechanics of vehicles so that you don’t get ripped off and can do basic maintenance by yourself. Furthermore a small workshop is highly advisable if you plan to run an older fleet of vehicles.

Don’t go with leasing vehicles, buy them outright and sweat the assets. In your type of business you need to aim for 1.2-1.3m km from each tractor unit you buy. Changing over units every couple of years will make you a slave of the finance company.

When I say bakery, you have to understand it’s not your usual bakery. Customers include, Costa, Starbucks etc. Have on average 40-50,000 rolls on the trailers. I take your advice on potentially getting a class 1 licence to learn the basics of vehicle maintenance. 95% of current routes, avoid London all together, so not a complete disaster. But I would prefer if they were euro 6. Don’t want the driver missing the exit and then be left with a hefty fine. I do have a supplier who gave me a HP option for a 16plate Mercedes tractor unit, something I’m considering without tying up capital

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Yes, that’s all good, but (there is always a but :smiley:)

If your routes avoid Londongrad most of the time why would you upgrade the whole fleet?

Do you have a clue about how much do any of the sensors on an adblue system cost? For a Daf xf105 2008 a Nox sensor oem is £350+ vat.

If you dont run into Londongrad that often then think about upgrading one vehicle. I would not personally recommend a Merc, as they don’t like hills and the depreciation seems quite high compared to a Scania or Volvo. Gearboxes are also quite awkward (if something goes, then that’s basically it, Dafs in comparison have ZF gearboxes which are relatively good)

There are loads of things to consider about how you go about with setting up the whole thing.

Even when you say reloading from the golden triangle back to SE, not all deliveries will be the same day, so that might have a knock on impact on servicing your bakery contract.

12

Riho:

azmol.ali:

Riho:

Punchy Dan:
A euro 4 can’t be made in to anything more than ,at that size anyway.
More or less any vehicle can be made in euro 4 from 0 but not to 5 or 6 other than the specialist sector with smaller engines .( disclaimer unless things have changed ) :unamused:

Euro 4 can be retrofited to Euro 5 (Dinex exhausts). We have one P270 that has been done with the Dinex exhaust.

Euro 5 to Euro 6 is far too expensive (circa £20k).

To the original poster, why would you need 6x2 units if you run bread?

Be very careful in terms of acquiring those euro 4 assets. To me it seems more like they want to get rid of the vehicles and have found a person that will take them.

By the way Amazon requires Euro 6 as far as I know to undertake their work.

I would recommend to get a class 1 licence also and learn the basic mechanics of vehicles so that you don’t get ripped off and can do basic maintenance by yourself. Furthermore a small workshop is highly advisable if you plan to run an older fleet of vehicles.

Don’t go with leasing vehicles, buy them outright and sweat the assets. In your type of business you need to aim for 1.2-1.3m km from each tractor unit you buy. Changing over units every couple of years will make you a slave of the finance company.

When I say bakery, you have to understand it’s not your usual bakery. Customers include, Costa, Starbucks etc. Have on average 40-50,000 rolls on the trailers. I take your advice on potentially getting a class 1 licence to learn the basics of vehicle maintenance. 95% of current routes, avoid London all together, so not a complete disaster. But I would prefer if they were euro 6. Don’t want the driver missing the exit and then be left with a hefty fine. I do have a supplier who gave me a HP option for a 16plate Mercedes tractor unit, something I’m considering without tying up capital

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Yes, that’s all good, but (there is always a but :smiley:)

If your routes avoid Londongrad most of the time why would you upgrade the whole fleet?

Do you have a clue about how much do any of the sensors on an adblue system cost? For a Daf xf105 2008 a Nox sensor oem is £350+ vat.

If you dont run into Londongrad that often then think about upgrading one vehicle. I would not personally recommend a Merc, as they don’t like hills and the depreciation seems quite high compared to a Scania or Volvo. Gearboxes are also quite awkward (if something goes, then that’s basically it, Dafs in comparison have ZF gearboxes which are relatively good)

There are loads of things to consider about how you go about with setting up the whole thing.

Even when you say reloading from the golden triangle back to SE, not all deliveries will be the same day, so that might have a knock on impact on servicing your bakery contract.

Hi Riho, thank you for that, that was very informative.

I’m not planning on updating the entire fleet, I just have the budget to do so. Having said that, I do think it is the sensible thing to do to upgrade at least 2 vehicles to euro 6 instead 1. The reasoning behind this, If for some reason the vehicle has any issues going into London, I am able to use the 2nd one. Also, with the plan to subcontract return loads, chances are that the final drop would be in the low emission zone. The 3.5t’s don’t need replacing, both 19 plate. I would consider looking at alternatives to Mercedes, just my preference currently because that’s what we have.

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13

It sounds way toooooo good to be true. So wealthy business owner with spate cash wants to outsource to 3pl, that I can understand. Vehicles, staff, office costs and running operations can be a pain both financially and operationally.
Oh, and by the way, the investor is also assuming all the staff will want to transfer over, and gets the chance to get rid of some older vehicles - to pass the high mileage old euro4 motors. If the investor has cash to buy some newer vehicles, why are they waiting to pass that “benefit” to the 3pl and not using it now - that just doesn’t make sense.
The investor can sit back and make all sorts of demands of the 3pl, safe in the knowledge they have very little risk.
However, if the investor opted to be named as a director in the new company, a robust contract for security of that contract then that may be something different.
As it stands the investor could step back from the OP on day 2 and go to another provider with absolutely no loss, the OP is left with staff, vehicles etc and no contract.

If you are looking to appreciate some of the mechanics relevant to the PMIs and operations, domt bother with getting a LGv licence, that’s to drive and break them. You’ll be the boss of a relatively large business and need to know how to manage that, not work the tools.

Overall, sounds too good to be true.

14

Acorn:
It sounds way toooooo good to be true. So wealthy business owner with spate cash wants to outsource to 3pl, that I can understand. Vehicles, staff, office costs and running operations can be a pain both financially and operationally.
Oh, and by the way, the investor is also assuming all the staff will want to transfer over, and gets the chance to get rid of some older vehicles - to pass the high mileage old euro4 motors. If the investor has cash to buy some newer vehicles, why are they waiting to pass that “benefit” to the 3pl and not using it now - that just doesn’t make sense.
The investor can sit back and make all sorts of demands of the 3pl, safe in the knowledge they have very little risk.
However, if the investor opted to be named as a director in the new company, a robust contract for security of that contract then that may be something different.
As it stands the investor could step back from the OP on day 2 and go to another provider with absolutely no loss, the OP is left with staff, vehicles etc and no contract.

If you are looking to appreciate some of the mechanics relevant to the PMIs and operations, domt bother with getting a LGv licence, that’s to drive and break them. You’ll be the boss of a relatively large business and need to know how to manage that, not work the tools.

Overall, sounds too good to be true.

I agree with you, this is almost too good to be true. I’ve been mulling over what could be the potential pitfalls, you’ve identified a few yourself. Nothing significant, only more stress and responsibilities but the benefits outweighs them massively. I’d literally be a fool not to take over transport.

I have no doubt there aren’t hidden agendas when it comes to this offer. The investor is an 84yr old serial entrepreneur. He takes great pride in building small company’s and watching them grow. I’ve been working for him 12 years, I know him extremely well. Everything you have assumed is correct, he wants to rid of his transport, and the headache along with it.

He is a shroud business man though, he will make sure the bakery benefits from this deal. I will also ensure that I have a contract in place for security, perhaps a matrix pricing system to account for growth. I had a previous role as management accountant within the business, costings were apart of my daily routine. I did a cost analysis of own distribution vs 3PL, interviewed 6 hauliers. The outcome was the cheapest haulier would reflect a 40% increase in costs over current distribution. We opted to keep our own. For me to win this business, I need to come in cheaper obviously. I seem to have found myself in an extremely good bargaining position, with the knowledge that I have.

I agree, with the money that he has, why doesn’t he invest in new vehicles. There are several factors in this. Firstly, I think he does have an emotional attachment to the vehicles. He attempted to start a logistics company himself, but he was tendering out for contracts against the big boys. It was a big failure. Not my business model, I’ll be looking to profit from subcontracting return loads on top of this contract. Also, he refuses to believe the government would put us in a situation where you are forced to dispose of your vehicles without providing an alternative solution. I agree with him on this, I find it ridiculous. It is his understanding that I’ve not looked hard enough to the solution. Hence the reason behind my original post. He has agreed to provide me x amount for a business loan, he doesn’t know what I’d use it for, it would be my decision to upgrade part of my fleet to euro 6. In terms of whether the employees would want to move over to the new company, ultimately it wouldn’t be his concern, he’d be paying me for that headache. I have spoken to the drivers about this however, thankfully they’re all on board. I guess having steady income during a covid year is priority for all of us.

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15

Acorn:
If you are looking to appreciate some of the mechanics relevant to the PMIs and operations, domt bother with getting a LGv licence, that’s to drive and break them. You’ll be the boss of a relatively large business and need to know how to manage that, not work the tools.

For a small company (and that is exactly what that business would be) it is key that the owner can do most of the activities associated with the business.

He does not need to be a ■■■■■■■■ trucker, but if a driver gets stuck in getting back to base and that has a knock on impact on the following day, or a driver calls in sick last minute that licence will come in handy. Knowing how the business works in reality vs being a spreadsheet slave is more advantageous.

As for mechanics with 6 vehicles there is no point having an in-house mechanic. What is needed is having the knowledge to repair an air leak in the system, do a basic service (change oil + filters) on a sprinter van or lorry (should be every 7k miles we have one sprinter with 385k miles on the clock and the engine is fine under such service intervals).

From my own experience the more you know about all activities in your business (not theoretically, but practically) the better. Transport is not the business where you constantly meet clients and devise strategy. Once everything is running and things are done properly from the outset the daily problems will come from drivers, delays, accidents. If the team is good then the delays will be the ones to deal with most often.

16

I wish you all the best in your new venture, you have obviously thought it through!

17

Wheel Nut:
I wish you all the best in your new venture, you have obviously thought it through!

Thank you, I appreciate the support.

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18

The one thing that stood out there for me was when you said that having looked at out sourcing with an external provider, the cheapest was 40% more.

Transport runs on notoriously small margins and I am presuming that these are companies that already are back loading either directly or sub contracting and they still come in 40% higher. Obviously I don’t have your numbers in front of me, but on the face of it I’m struggling to see how you can operate much below that.

It’s certainly an interesting and potentially good option for you but you really need to look carefully at the costs.

Good luck!

19

albion:
Transport runs on notoriously small margins and I am presuming that these are companies that already are back loading either directly or sub contracting and they still come in 40% higher. Obviously I don’t have your numbers in front of me, but on the face of it I’m struggling to see how you can operate much below that.

Good luck!

Absolutely good point about backloads. That’s a real challenge when the original load is fresh cooked foods - I’m sure the OP already knows, but may be a handy reminder! Being able to fully record every load is a huge benefit and expectation to cover themselves in case of complaints of cross contamination etc. And that costs time and money and staff and systems - that would be pretty remarkable if the OP has priced at 40% less than a competitor!!

20

Acorn:

albion:
Transport runs on notoriously small margins and I am presuming that these are companies that already are back loading either directly or sub contracting and they still come in 40% higher. Obviously I don’t have your numbers in front of me, but on the face of it I’m struggling to see how you can operate much below that.

Good luck!

Absolutely good point about backloads. That’s a real challenge when the original load is fresh cooked foods - I’m sure the OP already knows, but may be a handy reminder! Being able to fully record every load is a huge benefit and expectation to cover themselves in case of complaints of cross contamination etc. And that costs time and money and staff and systems - that would be pretty remarkable if the OP has priced at 40% less than a competitor!!

I’m wondering if/ how much the logistics side of the business is subsidised by the bakery? And what level will be maintained. I’d certainly want a proper contract in which timescale for yard usage and office space etc were written in stone. The OP has a good relationship with the owner, but at 84 there are practical considerations to think of, namely what happens if he were to pass on in 6 months and who would be his successor and what would there approach be.

I hope I’m not being negative BTW, just tryingnto look at various angles. I dp believe however you go forward, a formal contract is imperative.