Particularly in the field of fine and specialty chemicals, we still encounter in our project’s special solutions for last mile logistics which are operated by our customers themselves.
In a recent example, the distribution in Germany was organized via a network of several logistics hubs owned and operated by our customer all over Germany. Each location manages a local delivery fleet, whereby the vehicles and drivers are partly provided by local service providers and partly are their own fleet. High service level requirements in terms of order processing lead time made the setup expensive.
To make it even more challenging, we observe a continuing trend towards a higher delivery frequency while total delivery volume remains constant resulting in smaller shipment sizes. This drives up the cost per shipment on the last mile significantly as it does for the pick and pack at the warehouse. In combination with the general increase in transport prices caused by bottlenecks on the driver and resource side, efficient delivery is becoming more and more complex. Efficiency in this environment can only be achieved through a high degree of professionalism. State of the art IT systems are a central prerequisite for this, but this is precisely where we see a need for chemical companies to catch up. In the project example mentioned, customers were supplied in fixed daily recurring tour areas. These tour areas have grown historically and were planned locally from every logistics hub itself, often with the help of printed maps and pins. Analysis of historic shipment data revealed huge deviations in trip utilization between the different tour areas as well as on the different days of the week. In cases of underutilization this leads to inefficient tours while an excessively high utilization leads to missed time windows and displeased customers.
Keeping those limitations in mind, it is becoming more and more difficult to keep up with highly specialized service providers and distributors. In the recent past we saw a strong trend towards consolidation among distributors and wholesalers driven by private equity. This results in network-related synergies with the possibility to efficiently run more delivery hubs and thereby reduce the distance driven on the last mile. On the other hand, those companies are currently investing heavily in processes and specialized IT solutions. To stick to the example above, their strong Transport Management solutions offer system support for planning of tactical tour areas or even dynamic route planning considering actual utilization.
Improved visibility by using superior systems of service provider
Customer proximity as well as better control are often mentioned as important arguments for an own setup when dealing with high (short) lead-time requirements and a very service sensitive customer base/ business. However, the particular example showed that the advantages were not as significant as they were perceived.
Because of missing logistics information in the local TMS/ WMS system, the Customer Service team had no information about delivery quality and reliability on customer level. Therefore, it was not possible to track customer satisfaction related to logistics service quality making it hard to initiate countermeasures and to really take control. Dissatisfied customers who don’t give voice to their complaints might silently take their business elsewhere or in a more dangerous scenario might even start spreading negative word-of-mouth.
Additionally, certain information like for example stock levels were only available in local systems. In case of backorder situations stock information from nearby distribution centers must be requested tediously by phone to arrange emergency shipments.
An approach to enable customer service to perform countermeasures can be found among the state-of-the-art Transport Management solutions of wholesalers and distributors. Here, they offer improved visibility beyond existing possibilities in own systems. Standardized reports based on electronic proof of delivery (ePOD) give a clear picture about the actual delivery quality. In this way, systematically delayed deliveries to certain customers can be identified and corrective measures can be taken. Additionally, by using live coordinates and current traffic information service providers can reliably forecast an estimated time of arrival (ETA). This enables the customer service team to inform customers upfront about critical delays.
As long as requirements are clearly defined, and right communication channels are established proximity to the customers may even be improved by the involvement of service providers.
New trend towards 4PL service providers
We are currently seeing a new trend towards outsourcing of Transport Management Services. A few years ago, the Fourth Party Logistics Provider (4PL) was in fact nothing more than an outsourced, customer-dedicated logistics department. Actually, 4PL Services offer today a multi customer state-of-the-art Transport Management System (TMS) in combination with process excellence knowhow. This enables a higher degree of professionalism in this area. As a result, the Control Tower services offer no longer only a labor cost advantage, but also show significant efficiency gains through automation and shared services. As a result of enhanced planning functionalities of their TMS, transport partner networks are utilized more efficiently bringing cost down and service level up.
It is therefore an excellent time for chemical companies to consider the optimal degree of outsourcing, to challenge their own logistic management setup and to answer the question whether an in-house IT platform or a well-established IT solution from a 4PL service provider should be favored. CAMELOT and Professor Dr. Kille from the Wuerzburg University of Applied Sciences have jointly developed a guideline which can provide guidance on “make or buy” decisions in the field of chemical logistics.
Who can assist to identify your potential?
The selection of the best solution – that should fulfill compliance requirements, offer the most synergies and enable you to sustainably develop your business – is difficult and distracts you from your core activities. CAMELOT Management Consultants provide decades of experience in logistics and supply chain management, deep knowledge across many industries, IT solutions and highly adaptive methods.
We would like to thank Sebastian Scherer for his contribution to this article.