Transport Management: Bus Falls from Skyway Part 2 . . . How We Pay Truck Drivers & Accidents on the Road

Also similar to the previous post concerning Bus Falls from the Skyway, I want to bring up the situation of Truck Drivers in Manila which should be of concern to for how Logistic managers contract Trucking (or Cargo hauling) services in the Philippines:

1.  Truck drivers (working for Third-party trucking providers or haulers )are usually paid by the trip.

courtesy of AP/Patrick Reddy

2.  Provincial trips are paid a higher per trip rate and may or may not include an allowance for meals depending on umber of days to complete the delivery.

3.  Company-hired drivers are paid by the day or month with overtime pay in excess of 8 hours.  (For 3rd-party drivers, there is no such thing as fixed hours and OT pay.  Benefits are optional)

4.  Most manufacturers use 3rd-party trucking providers (as use of company-hired drivers is more expensive due to higher government-mandated wage rates & benefits as well as OT pay which outside truckers do not have to pay)

5.  Because Logistic managers of manufacturers pay haulers by the case or by the trip, the hauler also pays his driver by the trip.

6.  The hauler cannot pay monthly wages as there is no guarantee that the client-manufacturer or company will give him a daily trip.

7.  During lean months, the hauler will have to contend with idle trucks or trucks that deliver less-than-full truckload meaning his revenue may be at a loss if the number of cases paid for is less than his fuel and wages.

8.  The driver has to complete each trip in one day so that he can earn again the next day's trip.  If his trip takes more than 2 days, the hauler will only pay him once.

9.  Tendency then is for the driver to rush to finish his delivery.

10.  Also, in Manila we observe truck ban periods (no trucks on the road) from 5am to 7am and from 5pm to 9pm.  Hence, a driver that finishes his load has to wait for 9pm before he can go home i.e. maybe 10 to 11pm but has to be on the road again at 2 to 3am to avoid the truck ban at 5am.  Hence, he gets his sleep whenever the truck is waiting to be loaded or unloaded.

11. Drug usage (to keep awake) among drivers is always a problem for the hauler and Logistics manager.


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Transport Management: Bus Falls from SkyWay (Interstate Overpass). 3 Dead. . . . . Does Management Care ?

Today's News reported a loaded passenger bus that hit the guardrail of the Skyway (that would be your Interstate Overhead Freeway) and fell more than 40 feet below.  There was a report of 3  fatality which included the driver as well as injuries.  The bus was reportedly racing with another bus.

Bus falls from Skyway above.  3 dead.  (courtesy of the Alabang Bulletin)

Reading the comments on the Yahoo News blamed the driver for either speeding, recklessness and lack of driver training.  I think they miss the point and that is, the reason the drivers have to speed is because of the manner in which they are compensated:

  1.  Almost all drivers plyng Manila's main roads do not receive a fixed salary but instead get a commission based on the total fare revenue collected for the day;

  2.  This is aggravated further by the way this commission is computed.  A driver of a major bus company in Manila told me that the percentage rate of commission is on a graduated scale.  Example If the driver reaches P20,000 of total fare revenue for the day, he gets 10% but if he fails to reach P20,000, he only gets 8%.

  3.  While the intention of the bus company owner is to offer the 10% as an incentive, the driver understands it as a penalty i.e. if he does not reach P20,000, he loses 2%.

 4.  The 2% is a huge paycut for the driver as a typical driver works only 4 to 5 days a week (the other 3 to 4 days is for him to catch up with sleep)

5.  Because he is paid by commission with a penalty paycut, the tendency for the driver is to:

a.  Speed-up as he races against other drivers with the same paycut scheme

b.  The driver who narrated me how he is compensated admitted that he only gets 3 hours of sleep at best because he has to beat every other bus driver during rush hour crowd at 5am or earlier and ply the route till 2 - 3am just to make the P20,000.

c.  There may be lack of buses during rush hour, but there are so many empty and half-empty buses during off-peak hours that a driver has to race the main roads trolling for passengers.

d.  It is no surprise that there are reports of drivers on Shabu (or methamphetamine stimulant drug) or drinking a lot of energy drinks (Red bull, Cobra, Sting) with high caffeine just for them to stay awake!



Do not be surprised why there are so many accidents and deaths involving Manila buses, to wit:

1. The bus company owners do not care because in most cases, the driver cannot be found after a bus is involved in an accident.

2.  Some drivers told me that in an accident, it is better for the bus company that the passenger dies as compensation for death is a fixed amount unlike an injured passenger that may require medical treatment over a long period of time.

3.  Never sit on the empty seat on the right front side of the driver because in the event of an accident as when the bus will hit another bus or wall, the driver will always save himself by letting the right front of the bus hit the other bus or wall.



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Which is Better, a Company-hired Employee or a Contract-based (Contractual) Worker?

Will I Regret Hiring You?  (courtesy of doitsolowithnolo.com)

When I was the Plant Administrative Services Manager of an Integrated Textile Mill south of Manila, I was in charge of a 1,200-man workforce of which about 300 were contract-based (contractual) workers and the rest were unionized regular (company-hired) employees. There lies the dilemna faced by many charged with managing a work force, to wit:

1.  In the Philippines, a contract-based or contractual worker must be regularized if his/her work tenure reaches 6 months of continuous work.  In almost all cases, contractual workers are let-go by the time their service reaches 5 months.

2.  In a skill-based industry such as a textile mill, our expatriate-technicians used to say it is a waste because the first month or two, the contract worker would just be learning the task \& hence exhibit high quality defects and just as she goes over the learning curve, she is laid-off.

3.  The unions have always condemned the use of contractual workers as this was a means to evade unionism (contractuals are not members of the union).

Company-hired or Contractual?  (courtesy of learnthat.com)

4.  When I asked our then Spinning mill manager where the bulk of the contractual workers were, it was mentioned that contractual workers are more conscientious with their work as they know that they can be let-go anytime if their performance do not meet company standards whereas regular workers tend to take their job for granted as they know they cannot just be removed from their jobs. (In my plant, we have 3 unions of which one of the unions calls themselves the February 21 Movement, a militant group of the Federation of Free Workers in the Philippines)

Of course, not all regularized employees are like that (I believe most regular employees care for their jobs especially as jobs are hard to come by) but one cannot help to play it safe and just bite the bullet (learning curve ills) & stick to contractuals.

Reach truck operator putaway of goods (courtesy of mhedcm.blogspot.com)

Take for example a Reach Truck or Forklift operator for a Logistic Distribution Center:

1.  The Reach Truck could cost upwards of P1.4 Million (USD 28,000);

Reach truck operator in a Warehouse

2.  Because operating a specialized equipment like a Reach Truck requires skills & years of experience, it is very difficult to hire good operators;

3.  A Reach truck operator would tend to know where all the SKUs are located in a Warehouse Racking System because of the day-in/day-out putaway/picking activities that he does & that has a very distinct bearing in the speed of storage or issuance of products;

4.  So, do I let-go of him after 5 months or not?

5.  Or do I just outsource the function and let the manpower agency worry about what to do with the reach truck operator if he turns out to be a "Bad Egg"?



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Still Another Way to Steal Fuel From the Company -- The Sophisticated Way

When I was working for an Integrated Textile Mill south of Manila as their Plant Administrative Services manager, my department was in charge of receiving fuel deliveries for our 500,000-liter Bunker Tank as well as a smaller 45,000-liter Diesel tank.

Most oil companies like Shell, Calter/Chevron and Petron (Esso before) would employ third-party fuel tanker haulers to bring the fuel from the Pandacan Manila Oil Depots to our plant. And here is how the third-part fuel tanker operators steal our fuel:

Is there a hidden tank within the truck chassis?  (courtesy of afafueltrucks.com)

1.  Hidden within the fuel tank and towards the bottom of the truck chassis (or hidden between the chassis channel beams) is another fuel tank.  This tank is connected to the Main Tanker Tank thru a small pump.  The top hatch has a gauge to indicate the level of the fuel compartment as it was filled at the depot. As a procedure, our warehouseman will check that the fuel level is within the Gauge at top to make sure the tank is filled to capacity.

2.  Instead of a secret tank, the Main Tank is connected to the truck's fuel tanks thru a hidden pipe.

A fuel storage tank is as high as  a tall building. (courtesy of istockphoto.com)

When pumping starts, the driver will run the pump that will pump the fuel to our tanks.  At the same time, he secretly runs the other pump to pump fuel from the Main Tank to the hidden tank or to the truck's fuel tanks.

The driver makes sure always that the theft is small enough to fall within the tolerance (measurement margin of error) of  our huge Bunker tank even if the warehouseman conducts his sounding to determine the level of fuel that went into our tanks.  There is a margin of error because to take mearsurements, our warehouseman has to stand on top of the bunker tank which is as a high as a multi-storey building.  To take an accurate reading, the sounding tape scale has to be held perfectly vertical but with wind and height, the scale could be tilted slightly and that will already equal a couple of liters of fuel.

From the point of view of the manufacturing plant, their operating costs will go up. It is a Logistics concern from the point of view of the Fuel Tanker company in charge of the physical distribution of fuel -- Logistics is making sure the product arrives at Point B n accordance with the requirement of the client.



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Another Way to Steal Fuel from the Company -- The Traditional Way

1.  Driver requests petty cash of Pesos 1,500.00 to cover his trip for the day.

2.  Driver drives up to the company's authorized gas station and waits specifically to be loaded by his gas pump boy-accomplice.

Shouldn't that Gas be inside your Truck's fuel tank?  (courtesy of madsens 1.com)

3.  Gas pump boy-accomplice loads only Pesos 800 worth of fuel to the truck.

4.  The balance of Pesos 700 worth of fuel is loaded onto a fuel container.

5.  Gas pump-boy accomplice will later sell the fuel to other public transport vehicles that are owned by individuals like Jeepneys (common in Manila) and trucks that are owned by individuals and always willing to accept cheap fuel.

6.  Driver and gas pump boy-accomplice split the sales on his next trip.  And again , the cycle repeats itself.

How many Logistics or Transportation managers have a policy of spot-checking the fuel tank of trucks just after they fill-up with gas?

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The Problem with Fuel Cards As A Deterrent Against Fuel Pilferages

Shell Fleet Card (courtesy of Shell Philippines)

 Our Company maintains a fleet of about 39 20-ton Cargo Trucks delivering to all points in Metro Manila. Since Fuel is accounts for a significant portion of our Distribution  costs, the Management decided to enrol our trucks and drivers to the Fuel Card program offered by our Fuel supplier (Shell and Petron both have these programs).  This is how it works:

1.  The driver would present the Fuel Card to the gas pump boy before filling up.  The Gas pump boy would then swipe it in say Shell's swipe machine and this would message if the Fuel card is still valid or has been cancelled.  The gas boy is supposed to also check if the license plate of the truck conforms with the data on the Fuel card and to take note of the odometer reading of the truck.

2.  If ok, the gas boy then pumps the fuel.  When done, the gas purchase in liters and pesos are entered into the POS which will also capture the data on the Fuel card.

Is the fuel going to your truck, or somebody else's (courtesy of workitmom.com)

3.  At the end of the month, Shell or Petron would issue a monthly report to us showing:

a.  Plate number and driver name

b.  Distance travelled

c.  Total Fuel purchases (in pesos and liters)


d.  Kilometer per liter

 Based on the data of the kilometer per liter per truck , the company will know of a potential problem with the truck's fuel system or warn of possible fuel pilferage accounting for the high fuel consumption.

The problem is that the bulk of cargo trucks in the Philippines arrived as chop-chop units.  A Chop-chop means that the truck was chopped up to smaller pieces at the Point of Origin and imported as truck parts at a lower Customs duties rate. Things like speedometers and odometers are either not functioning or never checked for accuracy.

One solution suggested by a trucker friend of mine who has more than 100 trucks servicing Nestle Philippines:

Pumping dollars to the wind (courtesy of marinrealestate.com)

a.  All trucks are not allowed to load fuel elsewhere other than the Fuel Depot at the company's garage.

b.  Every trip of a truck is evidenced by a Trip Ticket prepared by the Dispatching Staff.  In it is contained the customers' names and general location (as in province or state). Another Staff would then compute the estimated distance to be travelled (based on a prepared kilometer distance template of all points of destination served by their trucks with their Main Garage as the Point of Origin).  The same Staff will also compute the amount of fuel to be loaded plus a certain allowance (based on the historical fuel consumption of each truck/engine combination).

c.  Driver presents the Trip Ticket to the Gas pump boy and fill-up the fuel.

d  If the truck should run out of fuel while along the way or on the way back, the driver is obliged to purchase fuel at his expense since there is already an inputted allowance.

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Fuel Theft by Company's Own Truck Drivers

Where did the gas go? (courtesy of imageenvision.com)

When I was with a Third-Party Logistics Provider or 3PL company as their Operations Manager, we had a fleet of about 39 20-tonner trucks delivering canned goods to Manila's supermarkets.  Since we work only on somewhat slim margins, Management watches keenly on its Operating Cost components and one of the most monitored would be Fuel.

We enrolled our trucks in our supplier's Fleet Card program wherein drivers were issued individual Fuel Cards which have to be presented to supplier's gas stations.  The Gasboy would then swipe the Fuel Card to capture data like date fuel was purchased, truck license plate number, driver name, amount of fuel, kilometer reading (optional) and fuel cost.

The idea is that a Monthly report will be submitted to us and we can see the total distance travelled, total fuel purchased and a kilometer per liter reading.  That last one is supposed to flag any unusual high fuel consumption to show of an engine problem or warn of possible fuel pilferage.

All fuel purchases were covered by computerized sales invoices issued by the gas station.  We had the proof when one of the gas invoices presented for reimbursement showed that payment was in the form of a Citibank credit card when in fact we provided petty cash to our drivers for all fuel purchases and these drivers do not have credit cards, let alone use it for a company purchase.

We brought the invoice in question to the attention of the gas station owner who called in the gas attendant whose name appears on the invoice.  The gas pump attendant confessed and this is how it happened:

1.  Our driver and the gas attendant where in cahoots.

Did you actually get the fuel that you paid for?(courtesy of sugarslam.com)

2.  Very few motorists bother to get their copy of the sales invoice.  Upon remitting payment, the cashier would give to the gas pump attendant the sales invoice and the change money.  After giving the change back to the motorist, the gas pump attendant would pocket the sales invoice if the motorist does not ask for it.

3.  When the driver accomplice comes, the gas attendant would look for an invoice of say P1,500 and give it to the driver.  No actual fuel was loaded.

4.  The driver would present the invoice as proof of purchase to our company's petty cash custodian.

5.  The driver and the gas boy divide the P1500 of fictitious purchase.

Of course, the driver would alternate between actual fuel purchase and the above.  The truck does not run out of fuel as our trucks have double-tanks and companies do not always check fuel consumption per truck versus actual distances travelled.

Logistics in its simplest form is planning and implementing the process to move the goods from Point A to Point B at the right time but just as important to the Logistics Manager is knowing HOW THE GOODS GOT THERE!!!


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How Important Is High Quality Service & Customer Loyalty When Your Customer Has NO CHOICE?

Assume any Bus Route and while there may be many bus companies plying the route, one bus company has the lion's share of the volume as it has the most number of units and they are the only bus company that operates as much as 23 hours a day, to wit:

1.  When they started, the bus company fielded an all-brand-new fleet of buses, airconditioning was the coldest among any of the buses plying the route and their bus crew were in freshly-pressed uniforms.

Is Quality Customer Service dead?

2.  Service was very good as their buses are a big improvement over the very much older and dank smelling then-existing buses and since they have many buses, the waiting time between buses was short.  During rush hour, it was not a problem getting a ride as you could see their buses all lined-up spanking-new at the many bus stops dotting the route.

3. The buses seem well-kept as one driver told me that the bus management are very strict in the physical appearance of the buses and any bumps or dents attributed to driver fault shall be charged to the driver. And so, the drivers were careful while driving on the road.

4.  Commuter would rather wait for the new buses rather than ride the old buses.  They did a great service to the riding public to end a rather tiring and stressful day with a comfortable ride home.

5.  Unfortunately, this High Level of Customer Service did not last.  They are no longer the way they used to be-- delightful and worth it.

6.  The bus seats are with dirt spots and the bus curtains are rumpled and appear to not have been washed for ages.

7.  The bus interior smells of human sweat.  Because the bus crew ends their day at 3am but they have to be in line at 5am to meet the coveted Rush Hour in the morning, the crew sleeps inside the bus.

8.  The crew says they only sleep 2-3hours a day as they have to be in line early.  You see, because the bus company has so many buses, the lines of buses trying to catch the Rush Hour Traffic can be long.  If the driver is late in line, he will be dispatched after the Rush Hour when bus passengers are by then much fewer.

9.  The buses of this company are often speeding at breakneck speed when on the open road but take so long at every bus stop (in the Makati bus stop, the wait can be as long as 45 minutes) as the driver always wants to fill-up the bus before proceeding.

The reason is this:  The crew have no salary but instead earn a commission which is a percentage of sales.  If they do not reach the Target revenue per day, the bus company pays them a lower percentage of sales. Hence, the driver speeds up on the open road but takes a long time at each bus stop along the route.

10.  One time, we left the Makati bus stop on the way home with only a few passengers.  The bus driver stopped the bus on the side of the highway and asked all of us passengers to transfer to another bus going the same route.  Afterwards he turned the bus around to get passengers on the other direction of the road where maybe there are more passengers!!!

11.  Sometimes, you see two buses from the same bus company trying to out-race each other on the way to the Makati bus stop during rush hour-- scaring all passengers!!!

12.  Their buses now bare the evidences of these racing as they have dents and scratches all over.


Of course, passengers can always take another bus and some do but for the majority, passengers still take their bus because they have the most number of buses and everybody wants to go home.  In short, the passengers have NO CHOICE.

My questions:

1. Is Quality Service garbage in this instance?

2.  Is Customer Loyalty a useless concept and who cares?

The above is a hypothetical situation but one am sure passengers have experienced several times over.

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How Big Should Your Warehouse Be?

Most Logistics practitioners follow a set Guideline (and using the latest CAD/CAM or computer modeling) to determine the Right Size warehouse for their Company's needs but I remembered what my boss, the owner of one of Philippines' largest food conglomerate, used to tell me:

Wasted Assets???? (pic courtesy of forum.skyscraperpage.com)

Richard, With your present warehouse, warehouse space is not enough.  If  we increase your warehouse space, inventory levels will grow so that the increased warehouse space will still not be enough.

So, he said something to the effect that it is better to keep warehouse space always a  bit short as it will:

1.  Force Sales to move-out the stocks fast

2.  Force Warehouse to maximize the use of space in a more efficient manner.

You see, for my boss, a warehouse is:

1.  Non-income generating asset;

2.  Inventory should be in the hands of the company's customers and not locked up in the company's premises.

The above might be so simplistic but still I believe in it.




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How Do You Conduct Your Cycle Count?

One of the reasons you conduct Cycle Count is to check the accuracy of the inventory records versus the actual inventory.

Variances could mean wrong issuance i.e. the customer order was for a potato chip cheese flavor but what was issued and eventually delivered was barbecue flavor. This results in Lost Sales as the customer would reject the Barbecue flavor as Cheese flavor sells more.

courtesy of system-ideas.com

An even more significant reason for conducting cycle counts as it could hide pilferages in the warehouse.

But sometimes, the cycle count is not done in a proper fashion as in the following:

1.  It is better to conduct cycle counts in a surprise or unannounced manner to preclude any cover-up of shortages;

2.  A Cycle count team should be composed of one Accounting (or non-warehouse personnel) and one warehouse personnel and both should count independent of the other to preclude one copying the results of the other.

Both Cycle count members can count different portions of the warehouse simultaneously;

3.  All SKUs must be subject to a cycle count preferably on a monthly basis. Hence, the Cycle count team is a permanent one i.e after the finish counting the last SKU, they then start counting the first SKU.

This method I gathered from the Logistics manager of a Philippine Supermarket chain wherein all 35,000 SKUs in their Distribution Center is counted continuously.

4.  After the Cycle count has been done, determination of the variances and disposition of said variances must be done immediately to avoid any cover-up of shortages and to correct the computer records so that no errors in invoicing will occur.



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Pilferage. Have You Checked the Areas Around Your Factory or Warehouse?

I was the Operations Manager for a Canned Fruit National Distribution Center located in the outskirts of Metro Manila.

We have gotten reports that Bad Order and Good stocks were being sold at very low prices among our neighborhood.

Bad stocks sold as Good Stocks (courtesy of freewebs.com)

Bad Orders are stocks that were delivered to the Trade (mostly Supermarkets) and subsequently returned to us as damaged goods, expired, rat-bitten and the like. Sometimes these Bad Order goods have their original shipping carton still in good condition and in the case of expired goods, even the tin cans still look in good condition.  Dented cans  will still be purchased by people especially if they are sold at a big discount.

To check it out, I had my warehouse supervisor visit the residential houses surrounding our Finished Goods Distribution Center as well as our Bad Order warehouse and to pose as a potential buyer of these damaged goods.

On his return, he reported that it was like a Home Industry as several residents were openly displaying and offering for sale said Bad Order goods.  Pretending to be a buyer, he entered one such house and was shown stocks of our products.  Holding some of the more or less good-condition cans, he noticed that they bore code-dates with long expired dates!

Source of the Bad Order cans:

1.  After delivering to the supermarkets and picking up the said Bad Order goods, our company drivers are supposed to proceed immediately to the Bad Order Warehouse to unload said Bad Order goods but instead, they would park a distance from the warehouse and offer these Bad Order goods to the residents.

2.  There is also the possibility that after receiving these Bad Order goods at the warehouse but before condemning same into the disposal dump, the Bad Order warehouse personnel would bring out these Bad Order goods for resale.

3.  Scrap buyers of the tin cans (in connivance with warehouse personnel) do not crush the filled Bad Order cans but instead bring them out as is for resale.

What would Food Poisoning do to your Brand? (courtesy of healthmad.com)

So next time, conduct periodic checks of the residents surrounding your factory or distribution warehouse for any sign of illegal reselling of your Bad Order stocks.

Imagine if an innocent buyer purchase such goods without knowing that they are Bad Order goods and his/her family suffer food poisoning, they would sue your Company!!! How about a situation wherein because of such incidents, the government will compel your Company to recall all of your products from the supermarket shelves?  How about permanent damage to your Company's Brand????





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