Event Report Improving Transport Capacity Utilization
The first conference on “ImprovingTransport Capacity Utilization in the Supply Chain” was held on the Brussels campus of Vlerick Business School. The conference was organized by two innovative companies, Transmetrics and TRI-VIZOR, both founded by Vlerick alumni, and was moderated by Prof. Robert Boute.The official partners of the conference were the European Logistics Association (ELA) and Council of Supply Chain Management Professionals (CSCMP Benelux Roundtable).
The event brought together over 40 representatives from three different parts of the supply chain: shippers, freight forwarders and carriers, who each looked at the problem of capacity utilization from their own perspective.
The problem of low capacity utilization is much bigger than many realize - the number one commodity shipped in EU supply chains is air. According to the World Economic Forum, 24% of the road freight kilometers in Europe are covered by trucks which are completely empty. When carrying cargo, the trucks are full to only 57% of their gross weight capacity. The estimated annual losses amount to €160 billion. Logistics companies can no longer solve this problem by adding extra shipping capacity because this is not a sustainable solution. There are several trends underway in Europe including the massive growth of e-commerce, limitations on building new transport infrastructure, and pressure to cut CO2 emissions. These developments are pushing supply chain players to seek better, more innovative and more sustainable solutions.
The solution favored by participants at the conference was the smarter utilization of companies’ existing assets. This can be done in two ways: horizontal/vertical collaboration and predictive analytics. From the shipper’s perspective, Marc Verelst, in charge of Supply Chain Research & Innovation at Procter & Gamble, presented a New Intermodal Network Approach (NINA). This approach facilitates a collaborative shift from road transport to rail transport in line with P&G’s sustainability objectives. Mr. Verelst listed several reasons for this shift, including traffic congestion, the shortage of truck drivers and under-utilized rail infrastructure. He emphasized the need for an open network and multidimensional collaboration (both horizontal and vertical) for the NINA project to succeed.
“The growth is not within Europe, the growth is somewhere else. So we have to become smarter with the existing volumes and we have to make a profit without growth.” Philippe Fierens, a.hartrodt
From the freight forwarder’s perspective, Philippe Fierens, Director at a.hartrodt airfreight N.V., set out the importance of vertical and horizontal collaboration in supply chains. According to the studies referred to by Mr. Fierens, profit is not the main reason for collaboration. The main reason is the possibility of offering higher quality service while profit only comes in the third place. Collaborative projects allow companies to offer additional services, better geographical coverage, volume exchange, combined marketing and investments, and other advantages. Vertical collaboration between shippers and forwarders allows them to enter long-term relationships, establish a work-flow and data-flow between each other, and share accurate forecasts to achieve higher load factors at better rates. Although the collaborative approach is not new and its benefits are clear, in practice companies are still reluctant to collaborate. According to Mr. Fierens, we still need a “mental shift.”
“In order to get to high load factor we need to forecast” Guy Jaspers, DHL Aviation
From the carrier’s perspective, Guy Jaspers, Senior Director at DHL in the Global Network Management team presented the second approach to improving asset utilization: predictive analytics. Mr. Jaspers mentioned two key benefits of forecasting future volumes. Firstly, to make sure there is enough capacity for on-time shipment delivery. Secondly, to know in advance how much free space is going to be available. In both cases predicting the numbers and planning ahead allows DHL, and other transport companies, to achieve significant cost savings. Mr. Jaspers also mentioned a project, which DHL undertook with Transmetrics exploring forecasting through Big Data and predictive analytics. With Transmetrics they analyzed data on the level of individual shipments in order to develop the best algorithms for forecasting. The project showed promising results, improving DHL’s forecasts by several percent, which can lead to significant savings.
During the panel discussion, the audience had a chance to share their thoughts on issues in the supply chain. There were several main trends mentioned during the debate including the need for a better data quality, confidentiality issues when sharing data and fear of anti-trust regulation as a barrier to innovation in the industry. The audience and the speakers agreed that focusing on IT and ‘Big Data’ in the industry is the right direction to follow but that mindsets about data sharing and collaboration have to change faster. Audience-members represented well-known Belgian and global companies including Sony, Nestlé, Ahlers, Katoen Natie, Vandemoortele, Cargill, Wim Bosman, and others.
“For the first time in the history of logistics, we have a level playing field for horizontal collaboration in Europe and a possibility to create a paradigm shift. All the pieces of the puzzle are there, we just need to stop talking and start acting. It is great to see that some big names like P&G, Nestlé and PepsiCo are taking the lead.” Sven Verstrepen, TRI-VIZOR
The conference was a great success. It showed agreement between shippers, freight forwarders and carriers that companies should take action to improve capacity utilization in the supply chain in order to stay competitive on the market. Several solutions were presented during the event, including horizontal/vertical collaboration and predictive analytics. The conference was sponsored by Vlerick Business School and Ahlers.