As a major Canadian food retailer and distributor with operations concentrated in Quebec and Ontario, METRO Inc. finds that its fleet of trucks is crucial to its day-to-day supply operation. And throu...
As a major Canadian food retailer and distributor with operations concentrated in Quebec and Ontario, METRO Inc. finds that its fleet of trucks is crucial to its day-to-day supply operation. And through experience and careful evaluation has found that a leasing strategy is the best way to ensure those trucks deliver top performance.
METRO is the second largest food retailer in Quebec, where it also active in the food services industry. It is also a distributor of pharmaceutical products as the franchisor of Brunet drugstores and Clini-Plus pharmacies. In Ontario, with its Loeb and Super C banners, METRO also ranks second in the supermarket segment in Ottawa and in the northeastern regions of the province.
The company employs 32,500 people, including its employees and those of its affiliated retailers and pharmacies. It operates 245 stores under the METRO banner in Quebec, 62 Super C discount supermarkets in Quebec and Ontario, and 37 Loeb stores in eastern and northern Ontario. METRO also supplies over 5,000 clients such as hospitals, nursing homes, schools, restaurants and hotels, as well as small retail outlets.
Logistics are a major issue for a food retailer and distributor. METRO’s Grocery Division operates four warehouses, located in Montral, Mont-Joli, Ottawa and Quebec City. This division also operates another 12 warehouses for the procurement and storage of meat, frozen foods, fruits and vegetables, as well as for the supply of institutional clients and small retail outlets.
METRO owned its entire truck fleet in the 1980s and operated two maintenance facilities. “At that time everybody in the industry felt it was best to own your fleet and do your own maintenance,” said Paul Laporte, METRO’s vice president logistics and distribution. “We had the impression that we were getting a better deal by doing it ourselves.”
While the company still owns some vehicles, the major portion of its fleet is leased vehicles from Brossard Leasing in Montreal. Of a total leased fleet of 125 tractor/trailer units, 75 are refrigerated and 50 are regular units split between Montreal and Quebec City operations.
The decision to lease was reached following a trial period with ten leased trailer units. “That test confirmed to us that it was cheaper to lease than to purchase,” says Laporte. “After the trial period we leased units for everything we replaced.”
METRO evaluated a number of issues prior to the decision to lease its fleet. Fleet ownership requires maintenance facilities and costs including operating the shop, stocking it with parts, and vehicle downtime. Laporte suggests there is a tendency to run trucks into the ground to justify ownership and related costs.
“As miles increase, so does downtime related to maintenance and repairs,” he said. “Scheduling becomes a problem when trucks are unavailable and drivers have assigned route priorities.”
And since the maintenance facilities were next to the warehouse, drivers had a tendency to go to the shop for minor repairs. The proximity of the shops as well as drivers’ downtime was costly. Laporte says the elimination of in-house mechanics is just one of the personnel implications of full-service leasing.
METRO’s fleet is crucial to the day-to-day supply operation in part because the stores do not have back storage areas any more and products must be delivered daily. Equipment breakdown is a paramount concern with stores geographically spread out across two provinces
“We can’t afford to not have one link in the chain working properly,” Laporte stressed.
“We really appreciate the on-site road service repairs or quick replacement of vehicles if necessary. It doesn’t affect my operation or costs.”
Laporte says the most important aspect of leasing versus buying is cost — the need to maintain parts inventory, facilities and the related utilities costs, as well as salaries for mechanics, support staff and administration personnel.
“When the cost per kilometre of leasing is compared to ownership, it is very clear that leasing is better,” he says. “And it is more cost effective to have repairs as part of the lease agreement.”
METRO just doesn’t have the purchasing power that a leasing company has to regularly place new equipment on the road. It cannot get the same conditions from manufacturers and dealers that a leasing company can because of volume purchasing power.
And various leasing terms based upon annual mileage and the particular use for each vehicle have also helped with costs.
“We are able to negotiate longer leasing terms and better rates for vehicles doing less annual mileage,” said Laporte. “That’s a win-win for METRO and for Brossard.”
Laporte also appreciates the expertise that their leasing company has related to equipment specifications and their ability to identify the right vehicle for the job. One example he noted is a vehicle with set-back axle and short wheel base which is highly suitable for the tight turning radius necessary for stores located in congested urban areas with narrow streets.
By switching to leased equipment, METRO has achieved a range of cost savings. “We compared the cost of full-service leasing to what we were paying to keep our own fleet running, Laporte noted. “The numbers were clear.”
“I can tell you today without a doubt that the results we are getting with a leased fleet are better than when we owned our own fleet,” he added. “We don’t want to have our own fleet anymore.”
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