A journey towards automation
Building the case for a Supply Chain running on its own
Road transportation is being hit by a violent storm these days. Everybody has heard of at least one of these statistics, putting the whole ecosystem under high pressure:
The list of countries facing driver shortage is endless¹. The US market is short of 48 000 drivers and, at the same time, will need to hire one million of them in the next 15 years. In Germany, 40% of truck drivers will retire in the next 10 years, creating a shortfall of 150 000 drivers. Brazil and the UK are short of 100 000 and 50 000 qualified drivers, respectively. And, this situation will only get worse due to it being related to structural root causes, such as demographic imbalance, a greater need for last-mile delivery jobs with the boom in e-commerce, and insufficient public awareness. Some carriers now consider it not uncommon to see their trucks parked waiting for drivers to become available. At the same time, the demand continues to grow: freight tonnage moved by trucks will increase by 27% by 2027².
European ports are quickly approaching their maximum capacity. Container volume is flooding the important ports of Rotterdam, Antwerp, and Hamburg, with growth rates of around 10% in the last 12 months. Congestion is causing significant delays and inland transportation bottlenecks as most of the import and export of containers is done by trucks. Not to mention the upcoming Brexit that could cause massive tailback at British, French and Belgium ports.
Delays and dwell times at logistics sites are constantly rising, causing shippers to spend a lot of money in detention fees and higher freight rates. In France, a Court of Cassation judgment acknowledged in 2017 that drivers had to be paid by their employers for any waiting times before or during loading operations. In the US, 90% of drivers are experiencing detention on a weekly basis. As a result, detention charges and higher freight rates represent $35 billion paid each year by shippers³. It’s almost the whole GDP of a small European country!
The rate of active truck utilization is reaching 100% everywhere due to the fact that more and more regulations are being imposed on trucking companies. The ELD (Electronic Logging Device) mandate in the United States took effect in December 2017, imposing drivers to electronically record their hours of service. At the same time, the European Commission is imposing more and more strict regulations on rest times.
When fortune rewards bold and innovative Supply Chains
So, what are we experiencing? Less trucks on the road, more legal and environmental constraints, and high pressure to lower freight rates while at the same time continuously demanding a better service and more agility to better serve high-demanding customers with fast-evolving needs. It has almost become a cliché to explain that Amazon has dramatically heightened consumer expectations and increased the stakes on service and shipping!
It is no surprise that delays, dwell times, or congestion, combined with a lack of capacity, create a dangerous mix for the entire industry. But as always, every complex situation and environment create a set of new opportunities. Those who know how to reap the benefits of innovation will jump ahead of the competition and become the new leaders. Shippers who manage to run their operations efficiently will definitely be less impacted by the lack of capacity and therefore unlock new opportunities.
We are living the most intense years regarding Supply Chain innovation, with the last game changing innovation dating back to 1956, when Malcolm McLean created the first intermodal container!
We are currently experiencing the mightiest technological revival of the last 60 years:
Logistics spending on Artificial Intelligence will reach $52.2 billion by 2021⁴. New generation algorithms based on computing techniques, such as machine learning or deep learning, are now used to identify patterns in order to accurately estimate arrival times. This information helps assess the probability of a carrier canceling its booking, or measures how weather influences schedules, which help streamline and automate every Supply Chain process. McKinsey recently revealed that early adopters with an AI strategy in the transportation and logistics sector enjoyed profit margins greater than 5%.
API (Application Programming Interface) technology has become widely developed in transportation, helping connect and standardize the whole industry. Even if EDI (Electronic Data Interchange) is still often used, given that many companies still use legacy systems, API technology is a strong lever to run dynamic decision making in any Supply Chain. The technology is easier to deploy, requires less maintenance or troubleshooting, and allows non-technical users to access a new set of data helping them eliminate silos inside and outside the company. API is probably one of the most direct gateways to real-time visibility and predictive analytics in the Supply Chain as it helps connect every dot without constraint of volume or delay. It is also a clear lever to reduce costs, since it eliminates manual exchanges of information and consequential human errors.
Autonomous trucks are becoming a reality and could help solve the capacity crunch as the technology will be mainly applicable to long haul deliveries. Autonomous trucks will eventually drop trailers at suburban transfer stations, and smaller conventional trucks will manage the last mile delivery, which will help convert long-haul trucking jobs into short-haul ones, making it more appealing to hire new drivers.
Going beyond visibility: why « automation » is not just a buzzword for your logistics organization
The common denominator of all these innovations is automation.
Automation helps companies streamline their logistics processes by accelerating the exchange of data in real-time, which results in reduced costs and improved quality of service.
At Shippeo we see 3 major phases, all of which rely on the new technologies mentioned above, in order to achieve this process of automation and reduce friction areas for any Supply Chain.
Phase 1: « Connect and Collect » to get real-time data
The first challenge here is to collect a very large amount of data from a very large network of partners in your Supply Chain. In road transportation, thousands of trucking companies are using thousands of different IT systems (truck telematics, dispatching systems, TMS, IoT devices). And there won’t be one unique system to rule them all!
So let’s move away from proprietary systems, specific developments, or non-cloud softwares. Interconnectivity should mean « open » systems, standard features, and cloud-based softwares. There are more than 400 truck telematics providers in Europe and the fleet management industry will double in size by 2021⁵.
At Shippeo, we’ve developed the largest API-based network of tracking systems in Europe by connecting to more than 150 TMS and telematics systems in the last 12 months. However, IT integration should not be the endpoint.
Connecting to a telematics systems is the starting point, but you also need to make sure carriers are providing your platform with reliable, good quality data. And that’s a whole different ball game! This is why at Shippeo we have a dedicated team of more than 30 talented professionals who speak 18 different languages, and who are laser-focused on onboarding carriers in a successful manner.
Phase 2: « Analyze and Predict » to get answers, not just data
At this stage, everyone agrees that supply chain visibility is much more than simply following trucks on a map or boasting the largest data lake in the industry. Data does not speak for itself! You need to turn this data into actionable and prescriptive insights.
At Shippeo, we use machine learning technology to help our users accurately anticipate problems and mitigate the impact that the lack of Supply Chain visibility imposes. Our Data Science department has developed a proprietary, machine learning ETA algorithm that shows better results than any other available software in the market. The value of having access to an accurate ETA more than 20 hours before delivery is huge for a lot of shippers. Take the example of manufacturers relying on build-to-order or make-to-stock production workflows and you could easily imagine how predictive visibility can help streamline operations and reduce latency or bottlenecks in their Supply Chain.
Phase 3: « Automate and Synchronize » to run perfect processes
Now that you have the network connected, and that you leverage real-time, historical, and forecasted data through Artificial Intelligence to design and run efficient transportation plans, it’s time to think outside the box and use these insights to optimize the whole Supply Chain.
Automation means building a frictionless Supply Chain by eliminating all the non-value added and unproductive downtimes in a typical day of a product moving into your Supply Chain. One concrete example is the link between visibility and yard and warehouse scheduling. At Shippeo, we recently launched our new FastTrack solution, helping shippers reduce the average time spent by a truck driver on a logistics site from 110 to 60 minutes.
Given that the market standard today is approximately 2 hours to load a truck and 2 hours to unload the same truck, we saw a great opportunity to reduce this by eliminating dwell times.
After talking to one of the largest CPG company in Europe a few weeks ago, I was struck by the following statistics: sometimes trucks stay 2 hours in their factory grounds, but it only takes them 8 minutes to actually load the truck. This means we have 1 hour and 52 minutes lost at the parking lot, the gate, and the yard! The Shippeo FastTrack solution makes it possible to accelerate transportation flows by connecting transportation visibility directly to the driver’s digital check-in terminal and automatic barriers with license plate readers. This allows us to create priority lanes with automatic verification and pre-filled information.
This is a very concrete opportunity to reduce your detention charges and become a « shipper of choice » at a time when carriers are more and more selective about who they are serving. That is exactly what we call a frictionless Supply Chain.
The logical continuation of this innovation is to synchronize docks dynamically in order to optimize your production planning. It is sometimes valuable to stay flexible on dock scheduling, to better organize your operations. Sometimes, it might be more rewarding to invest in an efficient check-in process and a new facility that helps speed up loading operations instead of imposing a 15-minute delivery window to a carrier. Let’s not forget that in most of the cases, a truck driver will arrive late at your facility because he, or his previous customer, were not able to meet a very strict appointment time. The first-come-first-serve rule might not always be a synonym of chaos in a continuous search for optimization.
From on-time deliveries to right-time deliveries
It is no doubt that the satisfaction of any B2B customer will be highly impacted by a company’s ability to drive a connected and networked Supply Chain.
Today, the market requires on-time deliveries, tomorrow it will require right-time deliveries, meaning more flexibility and less rigidity in order to efficiently streamline operations.
Any Supply Chain Manager should have a multi-year roadmap along with a bold ambition to overcome these challenges. One can talk about synchronization, orchestration, automation, or responsiveness, but the most important aspect is to take control of your Supply Chain and move away from the clichés and other buzzwords. Everybody knows about this storyline: 600 000 trucking companies in Europe, 80% of them having less than 20 trucks, and 25% of these 2 000 000 trucks running empty. But the future of the industry is not Uber for trucking. In a more and more constrained environment, these digital platforms won’t help shippers find more intelligent truck capacity at a better price and service. The automation of your processes will.
¹ IRU (International Road Transport Union)
² American Trucking Association
³ VelocityRater
⁴ International Data Corporation
⁵ Berg Insight
About Shippeo:
Shippeo, the European leader in Supply Chain Visibility, helps leading Supply Chains leverage transportation to deliver exceptional customer service and achieve operational excellence. Its real-time transport visibility platform provides shippers, carriers and end-customers with instant tracking and predictive ETAs of every delivery, allowing them to quickly identify problems and proactively alert end-customers before they are impacted. Founded in 2014, Shippeo tracks more than 5 million loads per year throughout Europe for market-leading customers such as Faurecia, Schneider Electric, Saint-Gobain, Auchan, Heineken, or Leroy Merlin, and connects to 140.000 carriers in more than 40 countries. Learn more at www.shippeo.com
