The Evolving Supply Chain
For fleet owners who recognized its value early on, connectivity has been a must-have competitive advantage since the days when it consisted of little more than a few pings on a map. The technology has come a very long way since then, and its rapid evolution has transformed the business of freight transport, and is continuing to disrupt the entire ecosystem.
“Commercial fleet telematics was the earliest and is today the most successful solution in the Internet of Things,” says Roger Dewey, CEO and Founder of Able Device. “The dream has always been fully integrated end-to-end logistics.”
Perhaps the current solution that comes closest to that dream is cold-chain technology, which Dewey calls the “biggest application” of connectivity in the service of end-to-end logistics.
To illustrate the technology, he takes the example of a shipment of bananas from Latin America to Europe, which passes through several stages and modes of transport: a truck to the Latin American port, from there by boat to Denmark, where it is again loaded on a truck for delivery in Europe.
“If something happens at any point during the transport and the bananas are spoiled when they reach the distributor, he will not accept them,” Dewey explains. “And the fault is usually given to the last guy with a truck. His insurers will not be happy because they will have to pay for the spoilage.”
To prevent this, sensors and devices are now used to monitor the environments in the packaging all along the route. That data is then communicated along with GPS coordinates and uplinked via satellite, so that if an event occurs at any time during the transport, all the parties involved are informed.
“Cold chain is currently the fastest-growing area in telematics,” says Dewey. “But it applies only to perishables.”
A similar solution is being used in the transport of home heating oil, enabling the owner of the firm to not only constantly monitor the level of oil in each of his trucks at all times, but also “to know, at any time, the net value of oil in a truck, how much it is worth, how much it was worth when he bought it, and the net value of his entire inventory,” he explains, adding: “The technology is getting mainstream now, it's getting more and more sophisticated in the end to end.”
Matthias Hormuth, director, Concepts & Solutions Logistics Software, at PTV Group, says this technology is being increasingly used, under a strategy dubbed Industry 4.0, “to decentralize logistics processes and make more use of mobile units.”
The idea, he explains, is to combine different information to optimize the entire transport chain. “More intelligence is put into the load unit in freight and combined with other intelligence that executes and plans. So you always know where the goods are and the condition under which they are being transported.” That could include, for example, information on whether valuable shipped goods are still locked up.
According to Kelly Frey, vice president of Product Marketing with Telogis, “Supply chains are collapsing today, because you have to get things from places you never thought of before. So you have to be more savvy.” As a result, “you have to be connected or you are losing out.”
He explains that the most important function of connectivity in the supply chain is to “provide visibility and to share that visibility with the concerned parties. Visibility is information.” One huge benefit it offers, he says, is that “you can better match capacity with demand for a more efficient utilization of assets.”
Another way the technology is disrupting the supply chain is by making it much more dynamic, Frey says. “The world is getting more dynamic; customers are expecting more. They want to get it done today. I call this the ‘Amazon Effect’, with the company shipping it the day after the order. The expectations on delivery are shrinking.”
Consequently, shippers are more willing to change their transportation provider, rather than rely on their contractual partners. “As a result, there is no more need for a long-term contract,” Frey says. “Shippers are saying, ‘If I had had more dynamic operability, I don’t need any more long-term contracts.”
He predicts that this will lead to a true open market, with shippers saying, “’I’ve got a load. Where is the capacity?’”
As Frey puts it, “We’ve still got a leg in the old world in which we say, ‘I’ve got this load. You make available this capacity.’ As a result, we often have trucks standing around. So the next month we allocate fewer trucks, but there could be more productivity. But with more connectivity and visibility, there is a better matching of loads with capacity.”
One consequence of connectivity is that technology will “open up the possibility of using more supply partners, which will open up more competition and put more flexibility in the market,” he says.
The technology has already seen the emergence of intelligent 3PL companies, Frey notes. “They are more advanced in technology adoption and are able to leverage technology across multiple fleets.” One such company is Coyote, Frey says, which “tackles logistics as a Big Data problem and is now taking business away from less nimble 3PLs.”
The disruption has gone so far as to lead to the creation of smart 3PL divisions in a number of trucking companies, such as Schneider. “They can outsource a fleet or take responsibility for freight heading to a yard in your city,” Frey says. “They are providing bricks as well as full logistics to companies.”
Schneider has a robust presence in China, he notes, where they take control of logistics, offering full visibility to other fleets to their end destination in China. “This is transforming business models 100 percent,” Frey says. “Carriers are looking more like logistics companies all the time.”
This is also making it far easier for large trucking companies to enter new markets, he adds. “Before, when a large trucker entered a market, he first had to build a distribution center and then put trucks on the ground. Now you enter a market by aggregating other truckers with their logistics services. You can get it up and running in a month because there’s no need to build a distribution center.”
PTV’s Matthias Hormuth says that the technology is also eliminating the walls between competitors by enabling shipping companies and transporters to maximize the use of data by cooperating.
“Previously, no one wanted anyone to know how and where their transport was running,” he explains. “Now there is a willingness to cooperate, and technology has to facilitate this by enabling the companies to exchange data and do something with it. By sharing transport services, you also share costs.”
One way this is now happening is that shippers are cooperating to fill up their capacity. “They exchange data on capacity to make optimum use of resources,” Hormuth says. “As a result, there is much less over-capacity.”
To illustrate, he uses the example of two logistics service providers, one that offers its services for the Benelux countries, Germany and France and another that covers Italy and Spain. “They will cooperate to fill up their capacity, by exchanging data on capacity and making optimum use of resources.”
Kornee Sterrenburg, CTO at IXOLUTION, a provider of integrated IT solutions for international transport, agrees. He says that competing pan-European rail networks are now booking with each other to maximize their reach and efficiency. “Through us, they connect,” he explains.
Hormuth agrees with Frey about the need for more technologically advanced logistics service providers that are able to organize the transport of goods by “bundling things and making use of as many modes of transport as possible.” This is particularly important in Europe, where goods may be transported by barge, truck or train.
These 4PLs, or 4Cs (cross-chain control centers), “combine resources in the most efficient way and make them available to customers,” he says.
The rapid development of the technology and its efficiency at producing data has produced one problem, at least for now, says Able Device’s Dewey. “The problem with fleets now is that their ability to pull data has outstripped their ability to analyze it. That’s the next big growth area in transport: data analytics.”
This will become even more important when new transport modes are deployed, such as drones. “Real-time information is more important with drones than with trucks, where at least you have a driver,” he explains. “You also need to gather more information, such as where they are and their ability to perform what they need to perform.”
A particular drone might have a low battery charge and not have the range to reach the target warehouse, but it could have enough power left to reach a different warehouse. “So you need to have predictive analysis between the fixed nodes, the warehouses, and the mobile nodes, the drones,” says Dewey.
But solving this problem is merely a matter of time. For Dewey, there is no doubt about the power of this technology. “The integrated logistics is the killer app,” he says. “It is already changing the business. The future is here.”
