In the first part of this article, presented in the previous edition, the importance of cargo transport management in the current situation was highlighted. This importance can be evidenced when observing the set of decisions taken by professionals working in this area, the services offered to clients and the costs involved.
The main difficulties and the various problems related to transport in the national scenario, which have been inhibiting the growth of companies and the economic development of the country, were also presented.
Some alternatives adopted by shipping companies to make road transport more efficient were pointed out, such as improving third-party management, collaboration in transport, planning logistics networks and investments in Information Technology. Third-party management was detailed and the other alternatives will be described in this second part.
Most of the information presented throughout the text comes from the survey “Road Cargo Transport Management in Companies – Practices and Trends – 2007”1, carried out by CEL/Coppead. This survey was conducted with 111 shipping companies belonging to the largest group in Brazil. Organizations from different sectors of the economy participated in the research: agro-industrial; food and drinks; automotive; retail business; apparel, textiles and footwear; electronics and computing; pharmaceutical; hygiene, cleaning and cosmetics; construction material; Paper And Cellulose; automotive parts; chemical and petrochemical; steel and metallurgy; and telecommunications.
Collaboration in transport
Collaboration in transport allows joint planning of processes, promoting synergies, maximizing the use of assets and reducing transport costs. In the research carried out by CEL/Coppead, there is a trend towards the adoption of collaborative processes in the management of cargo transportation.
In an initial phase, companies have sought to identify opportunities in the integration between their own activities and units. In a more advanced stage, other opportunities are sought, with the sharing of vehicles between different companies.
Below are some collaborative management measures identified in companies:
Centralization of selection and contracting processes for carriers. Of the 111 shipping companies interviewed, 68% carry out selection and contracting processes for carriers centrally, for all their units. For the remaining 32%, hiring is decentralized, segmented by region or facility.
Centralization is a form of internal collaboration for contracting transport. This system has some advantages over decentralization: it reduces the amount of duplicated activities in the various units, increases the supply of routes and volumes to be transported, and facilitates obtaining synergies in transport, providing better use of assets. As a result, there is a greater participation of transporters in the selection process, with an increase in the bargaining power of the contracting company and a reduction in the tariffs proposed by transporters.
Centralized decisions, however, bring some disadvantages: due to the fact of not participating directly in local operations, the team responsible for selection may not detect some particularities of the system, in addition to responding more slowly to urgent and specific questions from the units.
The trend is that, by the year 2009, there will be a greater centralization of the processes of selection and contracting of carriers, raising the percentage of companies that operate centrally to 74%.
Integration of procurement, transfer and delivery activities: Between 2003 and 2006, 26% of companies sought to integrate their inbound (supply) and outbound (delivery) flows, and the expectation for the next three years is that this percentage will increase significantly: 46 % of companies intend to seek synergies to maximize the use of transport assets and/or improve the use of vehicles that arrive with raw materials or transfer loads and leave with finished products.
Furthermore, in 68% of the largest Brazilian companies, the planning of supply, transfer and delivery activities is under the same management, which means that there is no functional division between these areas. This form of centralized management facilitates greater synergy between transport activities. In practice, however, this integration is still incipient and does not always materialize in actions that result in greater efficiency gains.
Collaborative transport: it is an alternative to increase the productivity of assets and reduce freight costs. It follows the same logic as the search for internal synergy between inbound and outbound, as its main objective is the optimal use of vehicles. However, it uses loads from different companies.
Collaborative transport can be carried out with companies in the same logistics chain or with shippers from different chains. The companies involved must have loads compatible with the transport equipment available and/or capable of being transported together.
Among the large shipping companies in the country, 24% claim to adopt the practice of collaborative transport. Of these:
– 16% make agreements with other shippers to obtain return cargo, forming a closed cargo handling cycle. Thus, instead of returning empty, the vehicle used to make a delivery returns with loads from another shipper.
– 14% make agreements with other shippers to consolidate loads in the same vehicle.
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| Figure 1 – Collaborative transport |
There are numerous advantages brought about by collaborative transport, such as increasing the vehicle utilization rate, reducing its downtime, the number of hours the vehicle runs empty or with incomplete load and dilution of fixed transport costs.
However, for the successful implementation of a collaborative operation, careful planning of the process is essential, in order to guarantee volumes in the long term and achieve synchrony in the operations of the different companies participating in the agreement.
The occurrence of a problem, such as cancellations or delays in delivery, can impact service and costs. For better control of the process, it is important to carry out monitoring and invest in Information Technology. In addition, it is essential to establish contingency plans.
Another delicate issue is how to share the gains between the companies involved. How to decide the amounts to be paid by each shipper, since they have different services and different costs? And what gains should be shared with the transporter?
In Brazil, in general, the process of identifying partner companies and negotiating is carried out by the shippers themselves; carriers often have a secondary stake.
Logistics network planning
More and more companies operating in the Brazilian market are structuring themselves to meet the requirements of a highly dynamic and competitive environment. Defining the most appropriate policy and structure for customer service is a critical factor for a company's success, in addition to being a way to obtain sustainable competitive advantage in the long term.
The results of the survey carried out by CEL/Coppead indicate that 78% of the large industries and retailers in Brazil made changes to their logistics network between 2003 and 2006. The forecast is that 74% of the companies make changes to their network by the year 2009 .
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| Figure 2 - Changes in the logistics network |
The configuration of a logistics network is intrinsically related to a company's production, inventory and distribution strategies. In general, policies that minimize total costs (operating, inventory, storage and transport costs) should be chosen, respecting service levels and customer restrictions.
In addition to logistical gains, changes to the network can also take into account fiscal aspects. The current tax system in the country has numerous peculiarities and a detailed study, with the aim of obtaining benefits, optimizing debtor and creditor balances, can generate substantial gains for the company. Often, to obtain these tax gains, shippers increase their transport costs, carrying out so-called “load tours” or even allocating an installation at a point far from their customers in order to reduce their total cost.
In a logistics network redesign study, trade-offs must be analyzed, as shown in Figure 3.
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| Figure 3 - Analysis of trade-offs in a logistics network redesign study |
Several measures can be taken to make the system more effective. The CEL/Coppead survey identified the main changes made by shipping companies:
- 68% made changes to the number or location of their installations (factories, distribution centers, warehouses, etc.);
- 50% reallocated flows between factories, DCs and customers;
- 23% made modifications to the network due to tax replanning, aiming to optimize their debit and credit balances;
- 21% implemented cross-docking and transit-point operations, processes in which consolidated loads in vehicles arrive at the distribution center or another appropriate location, being separated and dispatched quickly, without being stored.
IT investments
Information Technology is seen as the main priority of the transport area in companies. According to the survey carried out by CEL/Coppead, investments in IT are a high priority for 74% of large Brazilian industrial and retail companies. The results indicate the significant importance attributed to Information Technology by the country's large cargo shipping companies, which seek greater control, organization and integration of activities related to the transport area.
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| Figure 4 – Priority level of Information Technology companies |
Among the existing technologies, stand out – due to their use and importance in the transport area – vehicle tracking systems, transport cost management, load status information for the customer, EDI, routing, load assembly and freight audit. Of the large shippers, 89% have at least one of these systems.
Currently, the most implemented system is vehicle tracking. In Brazil, these systems are mainly used for reasons of security and prevention of cargo theft. Its use to improve the planning of logistical activities is usually a secondary benefit.
The increase in required service levels has made IT investments practically indispensable for modern organizations that wish to obtain high levels of performance. It should be remembered, however, that isolated investments in technology do not guarantee process improvement. For the implementation of a system to be successful, it is necessary that the procedures are well defined and structured and that the team involved is committed and qualified.
It is noticed that some organizations have adequately prepared themselves for the implementation and operation of these tools, but there is still a lot to be done. An indication is the percentage of companies' satisfaction with the systems used: on average, 51% are satisfied, 38% are regularly satisfied and 11% are not very satisfied.
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| Figure 5 – Satisfaction with information systems in companies |
MAIN CONCLUSIONS
- In order for companies to be able to sustain themselves in the market, reduce their costs and improve the services offered, it is necessary to take several initiatives to increase transport efficiency, such as, for example, better management of third parties, the adoption of collaborative practices in transport, network planning and IT investments.
- There are several processes related to the management of third parties that affect the performance of services and costs. Among them, the selection of carriers, the requirements imposed on service providers, the formalization of agreements, performance evaluation and forms of remuneration stand out.
- Collaborative transport is already a reality for 24% of companies, which carry out at least one joint vehicle sharing initiative.
- Most industries (78%) made changes to their logistics network between 2003 and 2006 and the expectation is that these restructurings will continue in the coming years.
- Among the major priorities in the transportation area of shipping companies, the adoption of Information Technology tools stands out.
Bibliographic references
COMPSUR/NTC&LOGÍSTICA – Permanent Security Commission / National Association of Cargo Transport & Logistics 2005. Risk Management. Available in www.ntcelogistica.org.br/gris/canal_gris.asp, March, 2007.
CNT – NATIONAL TRANSPORT CONFEDERATION. Highway Survey 2006. Available at www.cnt.org.br, March, 2007.
CENTER FOR LOGISTICS STUDIES – CEL/COPPEAD. Logistics Overview – Management of Road Cargo Transport in Companies – Practices and Trends, 2007.
CENTER FOR LOGISTICS STUDIES – CEL/COPPEAD. Research Accidents in Road Cargo Transport in Brazil, 2006.
COPPEAD. Transport Services Outsourcing Practices in Brazil, Paulo César Pereira Júnior, 2002.
1 – The complete report of the Cargo Road Transport Management Survey in Companies is part of the CEL/Coppead Logistic Panorama Collection. The report is available for sale www.ilos.com.br
