Expect the unexpected – it’s a common business motto, but when the unexpected is a volcano erupting for the first time in 200 years who could have predicted the chaos it would cause?
Air traffic across Europe ground to a halt, leaving thousands of holiday makers stranded in far-flung places, but more importantly for the logistics and transport industry, it left international supply chains without a critical link.
Airfreight may only be used to transport a small proportion of goods in the UK compared to road, rail and sea, but it accounts for some 25 per cent by value, so the financial implications could have been significant.
“It was a drastic and unheard of situation for the industry to be in,” says Susanne Oud, operations director, Europe for Bellville Rodair International, which had its airfreight operations halted throughout Europe. “Some of our offices are purely airfreight so that caused quite a few issues, but we got around it by offering customers alternative routes, especially those with urgent shipments.” When flights were first cancelled BRI moved goods by road to Amsterdam, and then when Amsterdam went down it trucked loads to Madrid and Barcelona for onward movement to the US and South America.
“The only real issue for us was not knowing how long it was going to go on for, so we weren’t sure whether it would be best to find alternative routes for customers or to wait until the situation cleared.”
It was a similar story for DHL. Despite having contingency plans in place for unusual situations, Jörg Wiedemann of DHL Express Global/Europe says the volcanic ash cloud was different because it caused simultaneous breakdown of all air traffic over a wide area of Europe.
However, Wiedemann reckons the size of DHL’s network helped it to swiftly adjust to the situation. “Size and geographical reach definitely matters,” he says. “Global logistics services providers like DHL have a big advantage, owing to the fact that their networks stretch around the world and they either own or have access to vast air or road capacity. This gives a high degree of flexibility when reorganising parts of operations during a regional crisis.”
DHL used its hubs and gateways along with airports which were still open in southern and eastern Europe to get intercontinental shipments in and out of Europe. For intra-European deliveries it made an early switch to alternative transport modes such as trucks and rail to keep the flow of shipments going. “In other cases, where air space was closed and shipments could not be trucked,” continues Wiedemann, “we stored them in warehouses close to airports to have them ready for quick loading once air space would be reopened.”
For many however, storing consignments until the ash cloud moved on just wasn’t an option owing to the nature of the load, so in order to cope, extreme lengths had to be taken to rescue the situation.
Emergency logistics company Evolution Time Critical saw a surge in requests for deliveries from vehicle manufacturers when air space was closed and during the aftermath, which managing director Brad Brennan says demonstrates a need for more extensive contingency planning.
“The majority of problems currently being experienced by our OE customers relate to delayed parts deliveries from Tier 2 to Tier 1 suppliers, with electrical components among the most badly hit,” explains Brennan. “Many of the electrical components from Tier 2 suppliers to Tier 1s are scheduled by air because of the high value to weight ratio and physical distance between the two companies.”
Evolution used a combination of on-board couriers, dedicated road transport and airfreight to carry out urgent deliveries, selecting routes via airports in southern Europe. For one company it moved a shipment of electrical components en route from China, but delayed in Hong Kong, as the shipper had been unable to make an airfreight booking. It booked a seat on a flight bound for London Heathrow and an on-board courier carried the shipment as excess baggage. The parts were then picked up by a driver at the airport who took them to a waiting helicopter. The goods were eventually delivered 15 minutes before it would have been necessary to stop the manufacturer’s assembly line.
Problems such as this have been further exacerbated by the fact that inventories have been reduced over the past year to free up cash to better cope with the recession.
Mawgan Wilkins, senior director technical services at Cisco Systems, says: “Many companies have taken lean to the extreme and become anorexic, so much so that they have no safety stock to respond to unforeseen circumstances such as this.”
Prior to the recession, and depending on the type of business, it was not unusual for a company to overstock by around 20 per cent which meant in an emergency there was enough inventory to tide it over until the situation abated.
“With no safety stock, if an unprecedented situation arises, or there is any kind of disruption, it will have a huge impact,” explains Oracle’s Andrew Spence, and a company could very quickly run into difficulty.
The correct level will differ from business to business, but Spence says it’s vital for companies to have good quality data so it’s based on fact rather than guesswork.
Norbert Dentressangle operates one of the UK’s largest perishable air freight handling centres at Heathrow Airport, so like many others had to think quickly when the volcano erupted. However, despite the chaos, solutions and operations director Brian McDill says Norbert wasn’t adversely affected.
“We just transferred from air to road – networks are designed for that flexibility. They have the inherent agility to cope with demand increases and decreases. In fact I’d say they are as flexible, if not more so than a dedicated service. Agility is their key.” McDill points out that considerable savings can also be made by switching to a network.
“In general, customers can save in the region of five to ten per cent from switching from a dedicated to a shared user network, but it’s very difficult to put a specific figure on it without knowing the network we’re talking about.” It can also take ten to 15 per cent of food miles off the road and reduce carbon footprint, he adds.
“It’s a smart way of doing business,” agrees Susanne Oud. The financial savings can be significant, but she points out that transit times are likely to increase so it’s a case of weighing up what is most important. As an example, she says the road freight rate for moving four pallets with a maximum loading metre (LDM) of 1,765kg from the UK to Hungary is £520 for a groupage service compared to £900 for a dedicated service, based on a 7.5-tonne truck with a maximum payload of 3.2 tonnes. However, the dedicated service will arrive in just 48 hours, while the groupage service will take four days.
Fabio Manto, brand and marketing manager at Palletways Europe, says that networks work particularly well for smaller loads. Cost savings are “significant in the case of a dedicated pallet network operation,” he explains. “We can offer major cost efficiencies from consolidating small consignments of goods from different customers on the same vehicle to be delivered to multiple destinations across Europe.
“In addition, our networks support a growing requirement for smaller volumes of goods to be delivered more frequently, so there is less inventory in the supply chain. Moreover pallet network operations enable customers to move away from fixed costs, adopting a variable cost structure for their transport and releasing valuable financial resources.”
Palletways recently launched an online scheduler, claimed to be an industry first, which provides customers across Europe with lead time information before their consignment is dispatched helping to boost visibility and promote better management.
The company has also introduced a door-to-door pallet rate card for its pan-European operations. This allows customers to find out which pallet size is applicable to their consignment, check to see where their pick-up postcode is and in which country and decide on their destination postcode before referring to the tariff tables to find the price.
“This means that a customer in Birmingham with consignments bound for Europe can now use the pioneering online scheduler to see when Palletways can deliver the goods and use the new simplified tariff rate card to find out the cost straightaway,” explains Manto. “The goods can then be collected together and dispatched to their respective destinations, while being tracked throughout their journey.”