Preparing for the next decade in Automotive Logistics
Looking forward, it’s not hard to predict change in the North American finished vehicle logistics sector over the next decade. Its perhaps harder to predict which change will impact the sector the most:
- Trade agreement (tariff) changes with China, Mexico and Europe disrupting the current production and supply models. Will this localize more production, add to costs or reduce sales as prices rise?
- Then there is the advent of EV’s and changes to propulsion units changing what’s shipped and how its cared for whilst in the logistics chain.
- Finally, and perhaps more immediately, we have seen the productivity loss fallout of the introduction of ELDs since December 2017 and driver shortages putting strain on LSP’s ability to service OEM clients.
This latter point is a significant challenge facing all LSPs with truck fleets. The old solution of recruiting more drivers is no longer effective; candidates are just not out there, and rates are rising for those who remain in the sector. Many LSPs have found their recruitment costs spiralling yet their net team size remaining static or even contracting.
We know that these issues are having a knock-on effect on OEMs in terms of their costs and supply constraints; Honda is now moving away from Just in Time production management (JIT) for inbound logistics;
“For us, it is now more important to fill the trailer and get as much cube on that trailer as possible coming in,” said Grahovac (of Honda). “We know that cube-miles as well as trailers are more expensive than warehouse space, so we are trying to rightsize the warehouse. Before it was one day – no more, no less – but we are rethinking that model.”
So perhaps the most immediate change for LSPs is to develop strategies to respond to their operational shortages of drivers. We know that platooning and driverless models are in the R&D stage as we speak, but not yet ready for deployment on a widescale basis.
Sub-contracting loads for which there is no return load is a viable answer. In Europe where the technology was developed, we have seen utilisation improvements of approximately 10%. That’s like recruiting an extra team of drivers who bring their own truck!
Technology investment – do you develop in-house or use an external solution?
Many organisations naturally look to develop an existing internal system to help them manage their transport logistics better or develop a new system so that it meets their exact needs. However, whilst there is often some benefit to this approach, it is likely to mean that you need to access and update multiple partner’s system as well. Then, how do the systems talk to one another? If you update details on one, how do you make sure it updates the details on all other systems? What about opportunities with businesses you are not connected to yet?
Businesses need access to a platform to manage their own trucks/cars/information as well as having visibility on movements that are relevant to their business and partners who are requesting movements or promoting empty legs. What is even more important is that this information is in real time so that anywhere in the world, your business can make decisions based on accurate information.
In-house designed IT systems can work well when the trucks from just one provider are used; they can connect to the one brand of telematics in use by all of the trucks. Drivers equipped with software in the cab can update the in-house system promptly.
But that is often not how logistics providers actually work, because it’s not an efficient way to work. Why send a truck on a route where there is no return load, when a sub-contractor can offer return load rates, making it cheaper and at the same time free up valuable in-house capacity. As a result, sub-contracting is a good and normal activity. But this is the key weakness of most in-house IT systems.
The sub-contractors have their own IT systems and cannot interact with the In-House system. So email, fax and spreadsheets are all used to try to fix the problem. Information is delayed and lots of phone calls are made to find out what is happening.
At Fracht, we have used some of the most innovative technology available to build a readily accessible (cloud based) platform that improves truck utilisation by matching truck resources with loads that need to be moved.
Have you considered joining a FVL Transport Logistics Alliance?
Alliance members can offer, accept and transact loads electronically. The search for backloads is made easier therefore utilisation and income are both higher for the logistics providers.
OEM’s and their agents benefit because they can move vehicles quickly and cost efficiently. Members can also track the load easily, no matter who is actually moving the vehicles; everyone is connected. Taking a collaborative approach to logistics means that providers, agents and OEMs can work together more efficiently.
Members need much more than a simple load exchange market place. They need people who have worked in the finished vehicle logistics market to develop it – people who first hand, understand the frustrations and the needs of this market. The platform needs to be coded to the business processes of this industry, not the industry fit itself into a technology solution.
Many of our logistics partners only use ALCS; our software is their transport management system coping with everything from drivers’ hours to truck servicing schedules, toll payments and billing.
However, at Fracht all partners are connected already. ALCS is compatible with the top 18 telematics suppliers and our software deploys to all mobile platforms such as Android and IOS. So, no matter who transports the load, as an OEM or their agent, you can see instantly what the status of every load is, and the business process is un-changed.
As such, ALCS is the only solution that really works in the real world of finished vehicle logistics.
Is there an opportunity? Let’s keep in touch
We are sure that our Alliance and ALCS can have an immediate and beneficial impact upon the current driver shortages in North America. We are keen to speak to LSPs who are interested in launching a North American based platform. We sponsored and exhibited at the FVL North America conference this month and had a great event. However, if you didn’t make the conference, or we didn’t get a chance to speak at the event, please feel free to reach out to our CEO, Renatas Slenderis.