Monday 24th Oct 2016 - Logistics Manager

Short-term hire – a supply chain essential

Easy and reliable access to materials handling equipment on a short-term hire basis is an essential element in the supply chain process for every kind of modern business – large or small – as it is a certainty that the requirement will arise in every enterprise at some time.

We live in a consumer-driven society where the ready and constant availability of goods, whether it is food, luxury items or other essentials for modern living, are taken for granted. Furthermore, in the UK we expect these goods to be available for seven days a week, and for the shops to be open all hours.

To ensure reliable and consistent levels of availability to meet the expectations of the consumer, successful businesses have developed efficient, strategically located storage and distribution centres that also incorporate sophisticated warehouse management systems.

In Europe, UK companies were among the first to recognise the benefits of acquiring their materials handling equipment using various types of leasing and contract hire methods – usually with maintenance included. This method of acquisition has been identified by many businesses as the most cost-effective way of operating their supply chains, as well as being tax efficient, and with the added benefit that capital is released for other purposes.

Today, some 75% of handling equipment in the UK is acquired in this way rather than through outright purchase.

These contracts invariably entail key performance indicators, including guaranteed uptime and productivity ratios, which mean that the onus for meeting equipment shortfalls caused by peak demands, servicing or breakdown scenarios rests with the supplier of the contracted fleet.

The trend for leasing and contract hire has been accompanied by a growth in the outsourcing of a company’s entire materials handling operation to third-party storage and distribution specialists. This enables companies to concentrate on their core business.

Seasonal peaks

The UK is very fortunate in this respect, since there are excellent third-party distribution companies with international reputations who offer the unique skills and expertise required for this important function. The third-party specialists will in turn invariably acquire their handling equipment using the contract hire route.

Whether the supply chain is operated directly, or using third-party specialists, both have to cope with seasonal periods of peak demand such as Christmas, for example.

For the retail trade and supermarkets in particular, Christmas represents the ultimate test of the efficiency and reliability of any supply chain system.

During these exceptionally busy periods the retail outlets require much more frequent replenishment which, back at the distribution centres, entails significant increases in order picking volumes and storage retrieval operations, as well as marshalling and loading bay activities.

Other examples are cold stores where seasonal rises in activity are influenced by the weather, creating a greater demand for ice creams and other frozen products during the summer with the subsequent increase in stock turnover. Farmers and fruit and vegetable businesses will also take the short-term hire route to satisfy consumer demand during seasonal peaks.

The supply chain process adds cost to the product without adding to its value, so every modern business aims to achieve the optimum balance between providing an efficient service to its clients, but in the most cost-effective way to ensure handling costs are kept to a minimum. After all, an efficient service can only be sustained by a profitable operation.

This means having the right type and quantity of equipment to handle normal periods of activity with easy access to short-term rental equipment to meet seasonal and sometimes unexpected peak demands.

It makes no economic sense to have more trucks in the fleet than are necessary to run an efficient supply chain. The capital tied up in surplus and depreciating assets simpl`y to cope with peak demands can be put to more effective use elsewhere.

At Linde we have a fleet of some 10,000 short-term hire trucks available through our local national network companies, and the fleet-mix reflects the historical usage patterns in each region.

However, it is not sufficient to simply have any old trucks because the most important point is that they must also be reliable and productive. This means they must be reasonably modern with full service histories and, ideally, to have been regularly serviced by the equipment supplier.

The popularity of contract hire as a means of fleet acquisition in the UK has meant that the supplier must always have standby trucks available from its short-term hire fleet. Depending on the fleet size, or the intensity and type of application, it is sometimes necessary for the contracted equipment supplier to keep some short-term hire trucks on the customer’s site. This is to ensure cover is maintained to cope with frequent peaks as well as gaps created by the regular servicing schedules of the long-term contract hire equipment.

Easy access

The UK is an entrepreneurial society where there are a myriad of small businesses creating a dynamic, ever changing economy with many new business start-ups each year. All these small, growing businesses require materials handling equipment of one kind or another and, depending on their circumstances, will usually aim to acquire used equipment or use short-term hire trucks; and sometimes a combination of both.

It is a natural phenomenon of small, growing businesses that there will be more frequent demand peaks – both planned and unexpected. This in turn will require the use of short-term hire trucks, sometimes even for only a day. Easy access to short-term equipment is just as essential for these small companies as it is for the larger fleet users.

For the supplier, the