I have received questions why I do not write more about transportation. It certainly is a critical part of successful logistics. Therefore, here is some of my thoughts about transports.
Like warehousing, transport efficiency is growing in importance. The main reasons is e-commerce flow with lot of packages but low fill rates in transports and bigger focus from government agencies because of climate change. All in all, road transport encompasses around 20% of the total carbon dioxide emissions in Europe, with heavy-duty vehicles standing for a quarter of these emissions (EU Climate Action).
Both government agencies and scientific community’s agree that a large portion of heavy vehicles could be removed from road network with more efficient planning that increases fill rates (Piecyk & McKinnon 2010)
It is almost impossible to write about transport business in general and global terms. Every market has its own unique conditions mostly because of geographical and political reasons. In Sweden where I live 80 percent of transport routes are shorter than 200 km. A significant part of the transports is roadwork and construction material (Swedish Association of Road Transport Companies 2013)
The efficiency of a transport system is dependent how resources is utilized. In Sweden the freight transport sector is fragmented composed mostly of small operators affiliated with intermediary companies that handles sales and contact with customers. Most innovations in transport business have been of technical nature like better engines and fuel types for example. We have not seen organizational developments leading to changed behavior in business. One important reason for that is the transport buyer’s ambitions in a procurement of transports.
For companies that work with e-commerce and omni-channel, transports is a very “heavy” financial budget post. Transports is one of the most important competitive tools for e-commerce companies both regarding costs and service to customers.
To get transports with the right service at a competitive price, the most important factor is by far the actual procurement. It is critical you have a tender that contains the absolute right data and that you are completely transparent to your presumptive suppliers of transports. The most common challenge in transport procurement’s is the lack of information. If you want the best prices and the best service to your customers an unconditional requirement is digital information in all stages of supply chain.
You as a buyer need to work very closely with the transport companies. Build trust and exchange information in very early stages of supply chain. You need to get the statistics right. Don’t use “estimates” if it is not absolutely necessary. Facts is a must, otherwise you will have prices that make room for all uncertainty in your information.
The most successful companies collaborates with transport companies very closely, make situation analysis and often use route optimization programs to simulate most cost-efficient routes with best service. It is very important you as a customer is in the forefront regarding digitization and have systems that collect data and can exchange data with transport companies in real time. In that way you can make trustfully tenders and procurement’s in transports.
I am sure we in near future will see more complex collaborations between transport companies. The freight transport sector is so complex with countless senders and receivers using a large variety of vehicles with different ownership’s. The freight transport sector lacks a unified business model for transport services with general applicability where the business model affects the transport system in general. I believe we will see disruptive business models connecting different transport networks and companies to increase fill rates and decrease the amount of heavy vehicles in that way we will have a higher cost-efficiency and positive environmental effects. The challenge is the lack of digitization right now regarding both transport buyers and transport companies.