March 2015 Budget update and other news


stick_figure_coffee_newspaper_pc_400_clr_3735Hi there, a few important updates for SCS clients

1) As advised previously (in December 2014 and earlier in March 2014 last year the second and final material labour increase of 3.25% will be introduced effective April 2015. This completes our strategy to lift our lowest paid staff who are fully certified as a junior Storesperson to earn 16.50 per hour which is 38.5k/annum (gross) deemed to be the minimum required for a living wage (based on our standard 45 hours week).

We’d like to thank all of our clients and pass on our deep appreciation for all of you who have supported us in this strategy, its literally changed a number of kiwi lives, for the better. These two increases, in part made up for 0% increases through the recession which for us ran from 2008 to 2014. Moving forward we expect any future increases to be in line with inflation.

Of note with this wages project, many of you know I have built a people management eco system (training, certification and task management) application called PaT. The certification ties directly through a new skills based pay scheme we have rolled out in conjunction with and as part of this initiative. It’s a first of its kind and we’re getting brilliant results in terms of staff increasing their knowledge in and of our industry.

figure_pulling_down_arrow_400_clr_13104Good budgeting news

1) The reduction in fuel in recent times has seen a 6% decrease in freight rates (through FAF reductions)

2) A reminder we have managed to absorb the last rental increase. This means we will have held the storage fees static for 4 years! This is an extraordinary achievement in lieu of a number of factors, key ones include.

  1. a) Commercial rentals have increased through this period and continue to increase. E.g. Goodman (our landlord) are at 100% occupancy (first time ever) and even building spec facilities – they are that buoyant.
  2. b) Land pricing is going nuts, we know of one large section in Takanini that was on the market for 150/sqm mid last year, the vendor is now asking for 250/sqm as of Feb…of course everyone knows what is happening in the domestic real-estate market.

What you don’t know is how SCS have managed to achieved this result for our clients…I can tell you now.

Early last year we lost a significant account, this was a reasonable blow at the time as we had a great relationship with the client, they were extremely challenging but we managed to drive the business up in our normal, very high 99 percentile on key metrics. The other blow was that for years we have claimed the highest client retention in our industry…by far, so this result tarnished this claim. The good news is that the client is coming back 🙂  That said we back filled the vacant space quite quickly and had no space to accommodate them. However when we built 11 Timberly in 2008 we future proofed the facility to accommodate a storage and processing model called VNA (very narrow aisle) operating this requires specialist hoists that cost 40k/annum each just to lease. With the recession, pursuing this model did not make sense but with rising prices we saw an opportunity to re-look at this model as a means to accommodate the returning client and that’s what we have done, we’ve decided to go full bore and convert 11 Timberly into a high density VNA operation.

So we have two specialist hoists on the water on their way here from the US and there is a massive project to reconfigure around 50% of Timberly to this new design. Through the project we will reconfigure 50% of the racking, move it, lay down wire guided tracks for the hoists and install 1500 new pallet positions…through this time we will still be trading, most of our work will be done at night with up to 28 additional staff, some customers will be effected for a day or two and they will be notified shortly of the schedule which will require a shorter cut-off time for one or two days.

The upshot is that through all this work we will be able to increase our yields per square foot, this in turn has helped us mitigate the need to pass on a rental increase to our clients…you’re welcome.

Anyway its going to be an insane project which will consume a few us through until mid May so see you on the other side!

Other pieces of info that may be of interest?

  • The business is going crazy, existing customers in aggregate are producing Xmas volumes (no one knows why) we continue to turn away a decent client every week (makes me weep), the only two 3PL’s other than SCS that I rate are also completely full. We are close to securing 50% of the 2000sqm we will be releasing end of 2016 already.
  • We are still exploring challenges for space and this is consuming a lot of my time, the potential JV I eluded to in an earlier post did not eventuate, we thought we might be able to partner with someone who was interested in investing in additional 3PL facilities but when they learnt about the level of investment required…the conversation didn’t go any further, that said I am still in discussions with a number of parties who live in our industry so there may be a space options coming up in the near future – fingers crossed.
  • Dave Allen who has been off and on with SCS for 10 year now, runs a large chunk of inwards at 11 Timberly had his first baby boy a couple of weeks ago, unfortunately it needed open heart surgery, the good news is that he has pulled through brilliantly and the prognosis is great.
  • We’re currently hiring 18 new staff across the 3/4PL and Professional Services divisions, if you know any great staff, drop me a line I’m especially interested in any recommendations for a senior Operations Manager
  • As a direct result of the poor domestic freight service we are conducting a full review/tender. Due to time constraints we’re outsourcing the process to another logistics consultant but its been 3 years since we did our last full market review, we expect this to take aroudn 2 months from now, we will keep you updated on this front. I can say the service has improved out of sight from where it was and hte general feedback is that the service levels are basically back to the high levels we used to experience with Retko when they were performing at their peak.





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