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27 mar 2019

Digitise or go home: Transforming your operations

A look at the technologies that logistics companies need to implement

Lasse Jiborn - Commercial Director of Intelligent Optimisation

Rutt- och verksamhetsoptimering

Europe’s roads are busy, with 70% of all goods being transported by trucks. Unfortunately, the industry is fraught with inefficiencies – for example, 20% of all trips are without a payload.

Sub-optimal route planning is at the root of the problem, and it’s costing operators dearly. They already have to contend with high costs. On average, EU operators are spending around €40,000 alone on fuel per truck, and that’s only 20% – 33% of their total costs. Empty runs stretch margins thin with wastage in fuel, time, and labour. Another problem is the damage this causes to the environment. Heavy-duty vehicles, which also include buses and coaches, generate around 25% of CO2 emissions, and 5% of total greenhouse gas emissions, in the EU. (And as emissions standards tighten, the pressure on operators does too.)

Truck dispatchers have it tough when deciding routes. They have to consider the length and pricing of trips, empty miles, and whether to have a driver wait for a load at a destination or get to the next shipment. Their jobs are filled with uncertainties and the complexity of co-ordinating with moving elements.

The solution to inefficiencies within the industry is obvious. German-origin strategy and management consulting firm, Roland Berger, points out, “Technological advancements offer major opportunities for players in the industry to achieve higher efficiency and lower operating costs.”

These advancements come from digitalisation, which exposes the industry’s vulnerabilities. Embracing digitalisation can dramatically reduce the cost of operating a vehicle by up to 40%, Roland Berger reports. Many of the big players are already on board. For others, the good news is, there’s still time. Here’s a look at the technologies that operators need to implement.

Solution #1: The cloud
If you haven’t yet, migrating to the cloud is long overdue. It saves IT costs while improving your customers’ experience – and it’s scalable, growing with your company. The cloud also allows you to customise. Think of the ‘Amazon effect’, as it’s called. You can check the status of your order in real time, for example. That’s the cloud at work. Now consider how that translates to your business, and what you can do with that technology.

With the cloud, you can create KPIs for Business Intelligence (BI) tools and reporting. It enables you to get centralised visibility into your operations and so much more. This is the foundation of actionable intelligence that can help you deliver a better customer experience.

In transportation management, you need the infrastructure of the cloud with its connectivity, which in effect, gives you a reliable data centre that you can tap into from any device anywhere. For example, Intelligent Optimisation allows operators with complex logistic processes to work smarter. The heavy lifting is done for you, so to speak.

Another benefit is that you’re using remote servers hosted on the internet. Disaster recovery is quick and simple. You never have to worry about software updates, either. All of that is done for you. The cloud is also more secure, as regular security audits are done for you.

Solution #2: Data and the Internet of Things (IoT)
Companies with transportation and logistics processes that embrace analytics can generate an additional 3 to 5% return on sales, McKinsey reports. But before you can analyse your data, you need to collect that data.

Data isn’t rocket science. It’s valuable information about your operations. This is where the IoT comes in, and this, too, is simple. Things are connected to the internet. This might mean a coffee pot, a home thermostat, a factory’s machinery, or in our context, vehicles.

 IoT as applied in transportation can collect data via software or sensors on your fleet and then send that information to a cloud-based fleet management system. That data can be anything: the measure of fuel efficiency in real time, how drivers handle their trucks, the amount of time spent loading and unloading, and whether drivers are keeping to their routes, just to name some examples. That information can form your strategies and next steps.

 IoT can help in other ways too. Drivers can carry mobile devices that connect them to your planning and optimisation systems. Take route planning, for example. The right tool can plan the most efficient routes and drivers can download that information onto their mobile device, or it can be sent to them online (both pre-execution and in real-time). This can lead to significant efficiency gains: up to 50% less time spent on planning and up to 25% less time driving.

Solution #3: Artificial intelligence
Another opportunity to reduce costs comes in the form of artificial intelligence (AI). It’s AI that enables predictive maintenance, which uses statistical models, analysis in real time, and algorithms to spot patterns in data from sensors, maintenance logs and other sources. 

According to Market Research, AI can raise asset productivity by 20% and reduce maintenance costs by 10%. This is especially important, considering the cost of operating a truck. In the UK alone, costs rose 4.7% in 2018 due to fuel prices and the uncertainty of Brexit. Across Europe, trucking rates are rising, also due to fuel prices, and because of the lack of qualified drivers.

AI, in fact, has many applications for the industry, such as image recognition. It can allow you to extract data from a parcel, such as size and weight. In addition, there’s anomaly detection, predictions of delivery times, and fraud detection, just to name a few valuable benefits.

AI isn’t a solution for everything. You need to be specific about what you want from it before it can be successful. AI analyses a dataset to come up with an algorithm to predict outcomes of similar datasets in the future. You’re not programming the algorithm. You learn the algorithm from the data.

This is how it can detect fraud events. Take drivers who use company fuel cards. If anyone uses their cards to put petrol in their personal vehicles or enters wrong odometer readings at the pump when purchasing petrol, you’ll know about it. AI’s algorithms, knowing the vehicles’ average miles per litre and tank capacity, will spot the fact that the litres of petrol bought don’t align with the distance between fuelling events. AI could also detect if someone takes longer breaks and stop times, or in general takes longer completing a route than it should.