In the family

Tom Nauwelarts of Al-Futtaim Logistics believes buying more trucks and bringing operations in-house was a smart move - despite the change in the market.

Managing a fleet of heavy trucks is never an easy task, particularly in this part of the world. Errant drivers, damaged tyres and ever-changing road use restrictions all conspire to make the life difficult of anybody whose fleet numbers in the dozens.

It is tempting then, to outsource the jobs to a third party. For a fixed fee, the fleet manager can let someone else haul your goods around, and they can absorb the costs relating to maintenance and drivers. Tempting it might be, but outsourcing, even when using several different transport firms, can lead to problems of its own, as Tom Nauwelarts, head of logistics at Al-Futtaim found out.

"The service was not that fantastic and that the capacity constraints meant that some providers gave rather poor service, especially looking at what we were expecting to provide internal group customers - so this was a problem."

Indeed it was, as one of the firm's internal customers is Volvo CE. Delivering parts for the truck maker with a potentially tatty trailer and truck head of uncertain brand cannot have been good.

This wasn't the only driver for change, though. As most of you will remember last year, when most of the contracts were up for renewal, there was a shortage of diesel, leading to skyrocketing prices, particularly in Dubai. This, as well as the belief they had a captive market, lead the subcontractors to vastly inflate their prices.

"One of the transport companies who were coming to the end of a three-year contract said they were going to increase fuel costs by as much as 50% as the oil price was going up, as was the labour cost and equipment costs" said Nauwelarts. "There was still a massive growth in the market, and that rates needed to be increased because of the market. So that was an issue."

Outsourcing

Other factors came into play as well. Some of the trucks that the subcontractors were using were distinctly below par. "In terms of equipment that they provided we saw that could also improve. Although we are a premium business, the equipment that we provided was just like the average truck in Dubai." Nauwelarts said.   So with those factors, we thought that if the price was increasing by 40%, they are driving an old and shabby truck and the service isn't that amazing we thought maybe we could do it better ourselves - it had to be an alternative."

Budget

When the numbers were done, it was clear that the firm could do the vast majority of the work that it had subcontracted to in house without too many problems. In fact, as much of 90% could simply be switched to the group's own fleet, with only occasionally used special body trailers, such as side loaders being farmed out to outside contractors.

Fleet

What was needed was the purchase of a fleet of trucks. Now, you might think this would be a no-brainer for the company, given that other parts of the group represent not one, but two well-known truck brands, but according to Nauwelarts, this was not so. "Although we are a group company, everything has to be played at arm's length."

"Everything goes through a subtle game of negotiation" he said. In fact, the group had discussions with a competitor truck firm to see what they had.

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