The magic of logistics
As consumers, when we order something from a store or online store, we expect the delivery chain to work magic. We want the product delivered if not already today no later than tomorrow. In addition, we want to know precisely when it will be delivered or to be able to reroute it if our plans change.
If companies order supplies for production, materials or products must arrive just in time (JIT) and just in sequence (JIS) to optimize production flows. In addition, we expect the material or products to be secure and undamaged during transport (we may even expect documentation of conditions during transport, for example, if the products must remain at a certain temperature level ). Of course, we want the deliveries to be carbon neutral.
Organizing logistics flows according to these high expectations is extremely complex and often underestimated. This may require experts in certain parts of the supply chain and collaboration between different payers. A number of incidents ranging from accidents and traffic jams to unforeseen weather conditions and thefts require a quick and agile response. And all this with minimal operational costs.
A surprisingly large number of trucking companies still work primarily with phone calls, even paper, pen and eraser. It’s a bit difficult to do magic in such conditions.
But there is a way to work (perceived) magic in this industry, and it has three main components, well described by Jan Höller of Ericsson Research.[1]
- Global connectivity, as seamless as possible
- Sensors embedded in all elements of the supply chain, from warehouses to vehicles, as well as in the goods to be delivered
- Systems based on artificial intelligence (AI) and machine learning (ML) to understand what is happening, optimize flows based on key performance parameters, including minimizing environmental impact and addressing challenges if things go wrong somewhere
And I would add the packaging of the above into advanced digital services, as provided by industry players such as ZF.
Yet from the perspective of most of the more than one million trucking companies today, much of the above may look like visions of the future as they face daily challenges. .
The daily challenges of a trucking company
Between 2021 and 2022, diesel costs have increased by 42%. [2] Imagine the business impact on a trucking company. The shortage of drivers is currently a major issue. A friend of mine who runs a small trucking company in Germany recently told me that he could currently easily triple his turnover. But he can’t because he doesn’t have enough drivers, and every order counts for a small business like this. Unplanned stops of trucks due to technical failures is another daily challenge that seems unavoidable. The daily cost of an out-of-service truck can be as high as $760. [3] Increasingly stringent regulations require trucking companies to comply with various rules ranging from hours of driving to reporting fuel taxes. Such regulations usually serve a good purpose, but they create additional operational challenges.
Above, we see disturbing pressure companies entering the market based on new business models such as crowd-sourced delivery services or tech giants leveraging their digital capabilities to build tightly integrated end-to-end supply chains.
There is technology available today to address many of the above challenges, and IoT in transportation and logistics enabled by cellular IoT connectivity is one answer. However, the hurdles are more about how to implement things and secure the corresponding business case. The best way to answer these questions is to study how the market leaders in this segment do things, and that’s what we did.
The business value of IoT use cases in logistics
ZF is a global technology company providing systems for passenger cars, commercial vehicles and industrial technology, enabling the next generation of mobility. With its Transics portfolio, ZF is one of the largest providers of fleet telematics solutions connecting more than 200,000 vehicles to more than 1,600 customer fleets in 23 countries.
Two of the most important IoT use cases behind ZF’s wide range of digital services for the transportation industry are truck and trailer monitoring and IoT-enabled truck driver assistance. While the functions of these two use cases are already implicitly explained in the naming, the business impacts are not so obvious. In partnership with ZF’s Transics product group in Belgium, we therefore quantified the business benefits and came to the following conclusions:
For a medium-sized European trucking company operating a fleet of 50 trucks and with an annual turnover of approximately 15 MEUR, the deployment of monitoring of trucks and trailers can have a commercial potential of around 600 kEUR. This is due to reduced costs related to downtime and unplanned repairs, but also to reductions in insurance and other costs. Assistance to truck drivers can add an additional 260 kEUR depending on reduced administrative costs, fuel savings and others. This represents 860 kEUR per year, which represents a very relevant cost saving for a company of this size in such a competitive industry segment. These are just two of many use cases; the overall potential for business benefits from introducing IoT in transportation and logistics with cellular connectivity enabled IoT use cases is, in fact, significantly higher. And assistance to truck drivers will also increase the attractiveness of the workplace in the ongoing fierce competition for drivers.
Detailed analysis of the business value of the above can be found in our Connected Truck Transport report carried out in collaboration with ZF, Orange Belgium and Arthur D. Little.
Some thoughts and conclusions
It goes without saying that strong, resilient and efficient supply chains are vital to us, but sometimes it’s worth remembering what it takes to get there. However, ensuring that our supply chains are or become even more robust, resilient and efficient is not a given. The challenges are enormous and digitization is (as in any industry) the key to success. However, the digital transformation in this industry is still at a very early stage compared to its full potential, and IoT in transport and logistics can play a crucial role. By implementing the IoT, it reduces fuel and insurance costs and automates administrative tasks such as report writing and time tracking.
The digital future of transport and logistics will evolve towards digital models of logistics flows, digital twins of transported goods and transport vehicles. This includes on-demand warehouses, autonomous vehicles, digital platforms enabling collaboration between all specialists in the logistics industry ecosystem, predictive and self-healing supply chains, etc. [4], [5]
Much of this is vision, but many of the immediate and pressing problems in transportation and logistics can be solved with cellular connectivity-enabled IoT use cases, such as truck monitoring. and trailers, assistance to truck drivers, etc. And if done strategically rather than ad hoc, it also lays the foundation for future fully digitized supply chain logistics. Some of the cornerstones of a more strategic approach to this are consistent digital process design, ecosystem thinking, selecting well-established, highly standardized and open technologies, and ensuring scalability across all layers of the enterprise. architecture of the solution. The latter must include a scalable solution to manage the cellular connectivity of trucks, trailers and cargo in real time and around the world, which is often taken for granted but not at all trivial in the highly fragmented cellular connectivity market. .
Sources
- Logistic challenges and the impact of a pandemic
- Y Charts. US Diesel Retail Prices
- Menzies, Frank. “Dealing with downtime.” Truck News. February 1, 2013. Retrieved 23 January 2022
- The future of logistics is predictable. Here’s how.
- Preventive logistics – the way forward
Find out more in the Connected road transport report
Comments are closed.