A cheap mobile phone has, notoriously, more computing power than NASA used for the Moon landings, and all of it can be (relatively) cheaply deployed in the cab of a truck. But what do commercial vehicle operators, logistics companies, and their clients, actually want or value from the mix of options, from simple tracking or routeing systems to highly sophisticated optimisation routines? That was the question posed at the most recent ‘Supply Chain Standard’ Roundtable by our sponsors, Blackbay and Motorola.
For the logistics providers present the question was subtly different – how do we convince our clients that there is enough added value in in-cab systems for them to pick up at least part of the bill? As SCS editor Nick Allen put it ‘We have fantastic levels of control over goods while they are in the warehouse environment … but as soon as they are on a lorry they “disappear”. Customers want a whole raft of questions answered in real time, and the solutions have been around for a while, but take-up has been distinctly patchy’.
Actually, that’s not quite true, as Richard Conneely of Wincanton [see panel for affiliation] explained – uptake has been scary in its diversity. ‘We’ve got perhaps 44 different systems, and whenever we gain a new major client, or a new subcontract supplier, we add more. We have transport management, fleet management, driver management, routeing etc etc – in the contract logistics business it’s whatever the customer wants, or is already using.
‘The systems tend to be self-contained within the contract – there’s not much chance to marry them up, and standards aren’t an issue – Tesco may need something very sophisticated, others may be happy with something running on the back of an Excel spreadsheet. Sainsbury doesn’t require the same things as Argos. It’s a big challenge understanding what clients need, and the upshot is that, although we have around seven different in-cab systems deployed across Europe, out of our 5 – 6,000 vehicles, only about 1,000 have in-cab systems’.
And that’s just Wincanton’s own fleet. Conneely says that Wincanton spends €147 million a year in the UK on sub-contractors, proportionately rather more in Europe – perhaps 700 different subcontractors in all. With even allegedly ‘off the shelf’ solutions invariably requiring at least some customisation, the chances of deploying ‘standard’ solutions are remote.
Ian Truesdale of Ceva Logistics agreed that ‘The reliability of subcontractors is a major issue for everyone. We are expecting ever higher levels of service from what used to be basic trucking companies, and yet we are under pressure to find low-cost suppliers – getting them to invest, even in something as straightforward as a mobile phone, is not easy when you are at the same time required to beat them up over price. There are real tensions’.
From the academic perspective, Dr Melvyn Peters of Cranfield agreed that sub-contractor attitudes are critical, but felt that change is on the way. ‘You may have seven different in-cab solutions, but actually you can probably standardise the way the outputs are presented fairly readily. In the longer term, large scale players will demand certain standards from subcontractors, and enforce them through managed service contracts and collaborative agreements – but there have to be the volumes to make that work’.
That in term says something about the future of structures. Truesdale suggested that in cross-border, Continental Europe, shared networks and the consequent leveraging of volumes are becoming more prevalent – ‘the dedicated 3PL solution, that lead to different systems for different customers, was 10 years ago. Now we are finding that Nestle or P&G are saying “we want this service – you set the network up and impose the necessary standards”.
This view interested David Picton of Motorola. ‘The last ten years, has seen outsourcing of logistics as being non-core – but in the past 18 months we’ve been in conversations with a lot of people who are looking to recapture the supply chain knowledge and data, the understanding of what’s happening, the interfaces, the effect on profits and margins, that they may have surrendered’. Ian Chong of UPS Supply Chain Solutions agreed. ‘Our experience is not so much that people are needing more granularity of information for its own sake – rather that, as marketplaces have become more competitive and product life cycles shorter, the supply chain is the last frontier, the differentiator, for a lot of manufacturers, and to achieve the flexibility they need in order to compete, they have to have concurrent information’.
It’s truer in some industries than others, suggested Truesdale. Mobile phone retailers need to know exactly where every handset is – if your competitor gets the latest Nokia three days earlier, you have lost three years of contract revenue. In other sectors it may not be so critical, although he noted that his company has invested heavily in North America on automotive inbound, to give OEMs visibility of every truckload that is coming into the plant, three or four days out – and therefore often before the load has been through consolidation.
But that is the logistics provider investing, not necessarily the OEM (although of course they will pay for it one way or another). Truesdale pointed out that in the UK, Ceva has literally hundreds of trucks on dedicated networks in the automotive aftermarket, yet 20 per cent may be idle on a Monday morning (demand tends to peak towards the end of the week). There are clear inefficiencies yet, he said ‘we’ve spent three or four years trying to get OEMs to share networks, but they won’t put “our parts” on the same truck as someone elses’s – even if they are all identical bits from Bosch in the first place!’. Peters confirmed that to his knowledge ‘Ford still hasn’t merged the logistics for its different brands, even where the flow is from the supplier to adjacent dealerships’.
The current and growing emphasis on the environmental impact of supply chains might be expected to concentrate minds, and therefore the adoption of the sorts of in-cab systems that could make a difference, but panellists appeared to believe that more traditional economic analysis would be the driver for a while yet. Paul Tyson of Nightfreight, whose company is currently piloting Blackbay/Motorola in-cab technology, said that their focus was on getting better fleet management in terms of more drops and activity on the round, by controlling driver routes, seeing where they are (as opposed to being told by a driver on a mobile – some drivers have been known to be a little economical with the truth!), being able to meet collection requests – reducing the carbon footprint would be nice, but that is a result of more efficient working, not a driver in itself.
You can though do some surprising things. As Peters recalled, there are US parcel carriers who use routeing technology to avoid left turns (think right in the UK) – less fuel used while stationary in traffic, and also a lower accident rate. But are the customers going to change or adapt their practices to accommodate this sort of thing, let alone pay for it?
And as Truesdale pointed out, under a dedicated 3PL contract, the customer has to be prepared to pay. In a multi-user, shared network, the investment challenge passes back to the 3PL, and even if having the technology in theory gives you the competitive edge, ‘It’s a brave man that signs off the CapEx without the customers in place’.
Larry Klimczyk of Blackbay suggested it may take time for people to learn how to put the business proposition for, for example, shared networks with their associated telematics, together, not least in the service provider’s own organisation. ‘Operations may believe in the systems, and see the other potential benefits, from enhanced capability to manage returns to a lower carbon footprint, but you have to train your business development side as well’. Truesdale confirmed that ‘Our business units around Europe have very little knowledge or experience of putting together that kind of business case. They are good at a case based on throughput of a warehouse, but the uncertainties of a returns operation? There’s education, training and perhaps some external input required’. Peters emphasised that justifying systems, to yourself or to your customer, ‘has to start with identifying the business problem you are trying to solve. I know one company that was trying to track and analyse it’s tractor fleet – and realised that the real problem was that it didn’t know where it’s trailers were!’
Richard Tindall of Geodis also pointed out that ‘Most parcel/pallet operations have invested for fairly simple economic reasons, but when you try to separate it out to the costs and benefits for single customers on smaller volumes, it’s a lot harder to make the case’.
So what sort of justifications are deployed? They vary enormously. At Nightfreight, said Tyson, ‘Our investment decisions centred around gaining visibility of where customer consignments are, and also using SMS text to advise customers of more precise arrival times – for example, after each drop you can text on the estimated time for the next drop. We should get a higher percentage of successful deliveries and cut a lot of the customer phone calls, which will give us an efficiency and an edge’.
Truesdale mentioned a ‘lean transportation’ project – trucks may be waiting 15, 20, 30 minutes on each drop, for all sorts of reasons, but usually because the recipient isn’t ‘ready’. If accurate pre-notice of arrival could reduce that to 10 minutes per drop, there would be a huge increase in productivity. (Peters pointed out that firms who deliver fuel to petrol stations already do this, so that the forecourt can be cleared and made safe, without closing the pumps for hours, or keeping the tanker waiting).
Possibilities raised by Conneely included ‘real time fuel consumption’. ‘We don’t actually need that in real time’, he conceded, ‘but it does mean that we can take a lot of the back office work out of identifying, and then improving, worst-performing drivers or vehicles’. Customised service intervals or preventative rather than time/mileage interval service for the fleet may also be a possibility.
Neil Harries of Norbert Dentressangle revealed the extent of the human investment that a major logistics provider may need to make in keeping a competitive edge in this field. Although he characterised Norbert’s practices as ‘Mobile phones, SMS texting, links to the customer portal – standard stuff’ he revealed that the firm has 50 people in its Paris engineering department constantly gauging systems and trying to reconcile these to specific customer requirements or dictates. And it’s a long hail – Ian Chong recalled that UPS implemented the early, clunky versions of a lot of the current solutions fully 15 years ago – ‘and there have been many, many iterations since’.
And even UPS, which must be a bigger company than all but a handful of its customers, can’t dictate solutions – at least on the 3PL business. Businesses need to segment themselves internally, recognise that different parts of the operation need different degrees of granularity, that there are things you should do through your own asset base, things your partners should be doing, even things you should be providing for your partners, because ‘if you commoditise your partners, you end up commoditising your own business’.
Meet the panelists
Corporate Sales Manager Geodis UK
‘Most firms have invested for simple economic reasons, but when you try to separate out costs and benefits on smaller volumes it’s harder’
Dr Melvin Peters
Director, Cranfield School of Management
‘You may have seven different in-cab solutions, but actually you can probably standardise the way the outputs are presented fairly readily’
Head of Transport, Wincanton
‘We’ve got perhaps 44 different systems, and whenever we gain a new major client, or a new subcontract supplier, we add more’
‘Operations may see the benefits from enhanced capability to manage returns to a lower carbon footprint but you have to trian your business
Corporate Director, Ceva Logistics
‘We’ve spent years trying to get OEMs to share networks, but they won’t put “our parts” on the same truck as someone elses’
‘Our investment decisions centred around gaining visibility of where customer consignments are, and using SMS text to advise customers of arrival times’
Director, Enterprise Mobility Division, Motorola
‘Recently we’ve been in conversations with a lot of people who are looking to recapture supply chain data’
Drector of Customer Solutions, UPS
‘As marketplaces have become more competitive and product life cycles shorter, the supply chain is now the differentiator’
Nick Allen (Chair)
Editor, Supply Chain Standard
‘Customers want a whole raft of questions answered in real-time, and the solutions have been around for a while, but uptake has been patchy’
Business Development Manager, Norbert Dentressangle Logistics
‘There are 50 people in the Paris office constantly gauging systems and reconciling to customer dictates’