SmartTrucking

There is something quite different, almost disconcerting, about having a discussion with someone who kicks off the conversation stating that the best way to cut supply chain costs is to reduce and even eliminate the transport side of the distribution operation. Andrew Parker speaks to Martin Bailey, MD of Industrial Logistics Systems, a professional consulting firm specialising in supply chain logistics, on how road transport operators can improve turnaround times, reduce costs and improve customer service. 

According to Bailey, road transport companies need to broaden their thinking and realise that transport is just one of many tools in the total supply chain that moves materials through the production and distribution processes to the end user and as such it must work in co-operation with all the other links in the total chain to provide as seamless a process as possible. 

Baileys says that transport is the most expensive part of the supply chain and, depending on the product, accounts for between 30% and 80% of its final cost. “Being the most expensive link in the total supply chain means transport holds the greatest number of opportunities to reduce costs or, if you like, boost savings.” 

Bailey notes that while many road hauliers can be commended for reducing operating costs by improving fuel efficiency, the greatest savings are achieved by removing as many transport links or legs as is feasible and optimising those distribution links that remain. “It is no secret that optimising transport operations provides better savings than trying to reduce the monthly fuel bill,” Bailey comments. 

Bailey says a real problem is that many road hauliers are still too “truck focused” while many users or customers of road transport are too “price focused.” 

“Few are looking at the total supply chain as a process in which each player or link has a role and a function. Very few players can be seen to be working together to achieve the most optimum results.” 

Location

He says real savings in transport and distribution start by ensuring transport hubs and/or warehouses are situated in the right location. Bailey says it is not generally accepted that the location of distribution hubs dictates the size and shape of the vehicle fleet, a situation that has resulted in a number of road transport operators using vehicle combinations that are incompatible with the task at hand. A clear indication that the days of one size fits all, when it comes to vehicle selection, belong in the history books. 

According to Bailey, the slowing down of the economy will accelerate the optimisation of existing supply chain resources and will bring greater co-operation between the various players in the supply chain. 

“More companies are looking at how and where they can save costs,” Bailey explains. “When they were making money many companies didn’t tamper with their existing supply chains preferring not to rock the boat as such,” Bailey says. “Now finance is tight we can expect quite a few companies willing and in fact eager to rock the boat and we can expect to see a significant “re-engineering” of many existing supply chains.” 

Bailey says a modal split with trailers being loaded onto rail cars sent across the country and re-hitched to trucks at the other end is not only a logical solution to expensive long haul road operations but is a national imperative. “Cooperative road-rail distribution is working successfully in the United States with entire trucks or the trailer being shipped on long haul routes while in Europe, the preferred method is to load and tranship containers." 

Bailey says this type of modal split should be pursued as a matter of urgency: “It is time to remove the emotion from the road versus rail argument. The customer does not care how his goods are delivered as long as he gets them on time. In today’s distribution arena an efficient rail system would be a major boon to optimising South Africa’s logistics landscape.” 

Adding to this, Bailey says there is a pressing need for the supply chain to become more visible, something that requires greater communication and co-operation between all players, hauliers, suppliers and customers. “There needs to be more transparency in terms of responsibilities and, in particular, costing. All players should realise and accept that each link must be profitable and therefore sustainable." 

As an example of how this can work he cites how Tesco’s (Britain’s largest supermarket chain), resolved a serious problem by tweaking the supply chain. In this case, while it resulted in more trucks pulling up to the backdoor, significant savings resulted further down the line. 

“A study of Tesco’s supply chain revealed that 40% to 50% of its supply chain costs occurred in the last 100m of the supply chain – that is from the back door to the front of the store,” Bailey explains. 

“A closer examination revealed, among other things, some serious inefficiencies in order picking and instore distribution of delivered goods. 

“The end result was a dramatic change in Tesco’s supply chain philosophy, particularly in the warehousing and order picking methodologies which saw the introduction of rolltainers which obviously had a direct impact on the transport side of the logistics operation.” 

The lesson here is obvious. In the Tesco’s case, while it requires more vehicles to deliver the same amount of product to the store, the resulting improved efficiencies and reduced total supply chain costs rationalise the additional cost in the road transport leg. 

Skills

A further challenge is a severe shortage of competent supply chain skills and an excess of shortsighted managers.

Adding to the management’s woes an exorbitant amount of time, effort and expense is used to combat fraud and theft. Bailey says in some instances this absorbs up to 50% of a manager's day. 

Engineers

It is Bailey’s opinion that engineers make the best supply chain professionals and not the B.Com graduates, as is commonly accepted: “Engineers adopt a more innovative, scientific and practical approach to logistics,” he says. 

“The main problem with attracting engineers into the logistics arena,” he continues, “is that they are in such demand they are difficult to pin down", something Bailey says is an ongoing challenge in the global logistics fraternity and not restricted to South Africa. 

In spite of this, he says, supply chain management and logistics courses at both local and foreign universities and colleges are largely “commerce-focused.” 

“Given the significant technological developments in supply chain equipment and IT systems, this has led to a situation where available study courses have lagged behind what is taking place at the coalface and is creating a serious skills problem for the future.” 

Bailey says that a number of institutions and industry allied organisations used to offer a number of valuable courses and seminars but these have largely fallen away under the onslaught of restrictions and bureaucratic rules and regulations imposed by SAQA. 

“These courses filled a valuable niche in the market,” Bailey says, “and while SAQA’s motivation was to eliminate fly-by-nights and substandard training courses it seems they have thrown the baby out with the bathwater.” 

Bailey notes that even some industry allied associations have lost or are losing track of the core issues. He cites an example where some annual conferences have become nothing more than a money-spinning exercise. “Great networking opportunities, but there is little value in the papers and presentations,” he comments. 

A perennial challenge facing supply chain professionals, is the lack of recognition by many companies of the importance of the role of the supply chain. 

“While you find finance directors, marketing and sales directors, you do not often find supply chain or logistics directors,” Bailey says, adding that while this is currently the norm the situation is slowly changing as top management come to grips with the realities of not only the important role the supply chain plays within the company’s day-today activities but also how much it costs. 

He says there are a lot of pluses in the overall logistics mix: South Africa as an acceptable road infrastructure; a good measure of our  transport and warehouse operators are world class as are the many of the industry consultants; we have all the necessary technology readily available and the logistics arena is relatively free of restrictions, red tape and bureaucracy. 

“We really need to examine our resources and expertise and work together towards a common goal of providing customers, with the best benefits and service we possibly can.”