Daimler will roll out its performance-related-payment (PRP) scheme to its commercial vehicle carriers beginning in January 2009, a system by which carriers stand to gain or lose a percentage of their contracted payment depending on the audit of certain key performance indicators (KPIs). Daimler instituted PRP for its passenger car carriers in 2007.
Measurements for the PRP, discussed during the 2008 European Carrier Day, are based on transport damages, pick-up performance, loading audits and the age of fleets - KPIs that also feed into the selection of winners for the Carrier Day award. Carriers can have a maximum gain or loss of three per cent. The scale for passenger car carriers has also been set to this figure, a change from the original scale that meant carriers could have a maximum gain of 4 per cent, or loss of 10 per cent.
PRP for commercial vehicles will differ from passenger cars in several respects. Firstly, carriers will be measured at six months intervals, roughly half the length for passenger car carriers, with their pay rates adjusted at the end of each year. However, commercial vehicle carriers will begin the first six months of their contracts at 97 per cent of agreed rates. If they perform at the base level (which would normally mean no change in payment) they will receive a three per cent credit at the end of the six months. If they perform at higher levels, they could receive a credit of up to six per cent, but likewise if they under-perform, they will receive less than three per cent, or zero credit at the worst level.
“It was a decision taken to motivate carriers to perform better,” said Jan Maes, responsible for commercial vehicle distribution at Daimler. “We are not mainly interested in saving the money, our main goal is to see good performance.”
Maes said that Daimler calculated the pre-financing cost for customers to be minimal: less than a tenth of a per cent. But some carriers see the withholding of even nominal amounts as unfair, especially in the current economy when many companies are suffering from a lack of cash flow and financing. “It’s a question of cost versus availability of capital,” said Alain Leray of STVA at the Carrier Day. “The issue today for many companies is working capital and cash flow. Do you know a lot of companies who have free access to financing these days?”
Nevertheless, Daimler said the PRP was an important driver of good performance for its passenger car carriers. It revealed an analysis of average performance demonstrating an upward trend in most KPIs, although the recent drops in volumes has meant that load factors have decreased, as carriers struggle to find return loads.