People in the industry complain about a lack of resources; there are not enough drivers and cargo space. However, as Marek Prószyński, Chief Customer Officer at Trans.eu, convinces in an interview with Trans.INFO, the resources are sufficient, we just need to release them. The key to the proper use of resources is digital technology and changing the attitude of the TSL sector employees. A key role is also played by the leaders of transport and logistics companies, whose task is to anticipate the upcoming changes in the industry and implement appropriate solutions in advance.
Trans.INFO: Do you know what word has recently disappeared from the freight forwarder’s dictionary? Marek Prószyński: No, tell me.
That’s not surprising. The lack of drivers affects the whole of Europe. This is a structural problem – drivers are ageing and the number of new drivers is almost non-existent. Today, almost every transport and logistics company faces a challenge: how to find drivers and secure the resources to transport goods. Not just in peak periods, but all season long.
So how do we deal with the problem of shrinking resources? Demand for transport exceeds supply, especially in terms of the number of drivers.
I would argue that the best way we can do this is to use existing resources. It is impossible to extend indefinitely the length of semi-trailers, to seek new methods of training new drivers, etc.
Nowadays, one can often hear complaints in the industry that it’s increasingly difficult to say “it’s loaded!”. This is due not only to shrinking resources but also, and above all, to their allocation and lack of proper management. A real breakthrough in this area can only be achieved with information technology that will free up resources and enable more efficient management.
Where are these resources hidden?
We checked this. We spent one week in August, the middle of the drivers’ holiday season, and asked the smallest carriers, who had no more than 5 trucks, how their vehicles were driving during that time. 5 days, hour after hour – how much time they spent on what. And it turned out that even in this hot period – literally and metaphorically – when everyone says that there are no vehicles, 15% of them stood in parking lots or bases because of the lack of orders. Nearly the same number got stuck waiting for loading or unloading. There are very large losses of resources there. Next, nearly a third of trucks were parked due to drivers’ holidays, which is understandable during that period. Only one-fourth of the trucks of the analysed companies were used to their full capacity.
As you can see, there are a lot of resources even in high season. All you have to do is know how and have the tools to free up their productivity.
So how can we make better use of available resources at a macro level?
The solution is two words. Flexibility and technology. The business has changed a lot in recent years. Digitalization and automation have turned many a large and stable business upside down. What was Nokia 10 years ago and what is it today? Who even remembers Kodak? The companies that only a few years ago were leaders in their markets ceased to exist. Why? Because they did not notice or ignored the upcoming digitisation trend. Today, it is no longer a trend, but an inevitable force that blows the door open to the TSL industry. Those who do not open on time will be out of business.
Don’t misunderstand me, I don’t intend to scare anyone, on the contrary. In Chinese, the word crisis (‘weiji’) has two meanings. The first one means danger or threat, the second one is the beginning of a new road or an opportunity. I believe that digitisation is, above all, an opportunity, but only for those who are capable of accepting forthcoming changes and are flexible enough to respond adequately to them.
So the sine qua non is a change in attitude?
Yes. Without a change of attitude, there will be no development. Workers in the TSL sector in Europe need to get out of the comfort zone, off the beaten track and start working differently. This, in turn, will be helped by more and more interesting and advanced technology such as algorithms and automation.
Nowadays, a lot of freight forwarding is just a matter of intermediaries, cargo dealers. Of course, this does not apply to contract logistics. This typical trade intermediation will soon end because there are already tools on the market that match the relevant subcontractor to the order using algorithms. In practice, this means the end of intermediaries who do not offer added value. This is what Logistics 4.0 is all about – to replace an intermediary who offers only a limited database of contacts.
So what will this transformation of freight forwarding look like?
Freight forwarders acting strictly as intermediaries are likely to fall out of the market. Those with a broader view of business will become larger or smaller logistics operators offering value-added services.
Some of them will become a kind of outsourcing team for shippers, a bit like an external logistics team. Shippers need a partner who will settle all their forwarding activities in the form of a single collective invoice or optimise the processes related to transport management. For those who will not act as intermediaries and work on commissions but on a lump sum for specific services, there will be a place on the market.
There will also be some freight forwarding companies that will focus strongly on specialisation. They’ll find a niche big enough to make money from it.
Which specific technologies will help to make better use of resources and how will they work?
95% of Polish transport companies operating internationally have up to 20 vehicles. These companies have about 60% of fleet resources in Poland. The conclusion is simple: huge fragmentation. It is similar abroad, by the way.
Fragmentation means that we have thousands of scattered units on the market – resources. The big challenge is to organise these units and find a way to work with them optimally in a situation where each of them uses different work tools, communication and management style. You can’t grasp all these elements without technology.
Fortunately, there is already technology in place, operating within the so-called logistics 4.0, which eliminates the problem of dispersion and scarcity of resources by merging the so-called data islands. Such tools allow, for example, to automate decision-making processes. An example is a situation where instead of a human being, it is the technology that selects the best carrier for the order on the basis of predetermined criteria. Imagine how much it speeds up the work. A man needs an hour or two to choose a carrier. Technology will do it in seconds.
After all, there are contracts that provide logistics operators, or sometimes directly producers, with access to transport resources.
And this is one more very important element in this puzzle, which is expressed in the constant search by the logistics operator and shippers for a kind of golden mean in handling resources and costs. On the one hand, we have customers and we have to secure our resources mainly by signing several contracts for permanent routes, i.e. the so-called loop closing. However, apart from the benefits, contracts have their drawbacks.
Transport is a derivative of the state of the economy, which is subject to seasonal fluctuations, which have a direct impact on transport orders. As a result, the supply of resources and cargo space varies considerably in certain periods. And when it’s harder to find a carrier, there are two consequences. Firstly, the price is rising because the rates in the contract are fixed, so there are weeks when you simply overpay for transport. In another period, the price could be reduced, but this is also not allowed under the negotiated agreement.
Secondly, when the contract is not enough, the cargo lands on the so-called spot market, operated by freight exchanges, which are used by the whole market – both small and large operators. This means that the contract is not able to secure demand and it is not the fault of the operator. It’s just the market.
So how can we optimally connect these worlds and find a balance at a reasonable price?
This problem is solved by the technology already available, namely TMS class 4.0 tools used by the so-called digital shippers. They boast that a large part of the processes is automated with algorithms, which allows them to organise transport faster and have lower processing costs. Now almost everyone wants to be a digital freight forwarder and it is not difficult at all. What is needed, as I mentioned before, is the willingness, change of attitude and the technology provided by TMS 4.0.
What is the advantage of TMS 4.0 over previous versions?
In the short term, their advantage is that these are open applications. Version 2.0 was prepared for use within a company and was helpful in managing transport orders in a specific company. Version 3.0 allowed for a bit more, e.g. occasional communication with another entity, e.g. a driver, who could send some confirmation or status.
TMS class 4.0, however, is a different dimension and it brings a huge change in comparison to previous generations. Firstly, it enables two-way communication at every stage of cooperation with the carrier and driver in real-time. Secondly, thanks to algorithms, it optimises tedious processes that have to be performed while organising transport. Do you know how long it takes to arrange transport in a production company on average? 44 e-mails and 2 hours. Digital freight forwarders need 2 e-mails and 30 minutes. This is a huge difference that gives a big advantage in business.
Algorithms have one more great advantage. They create something completely new on the market – they combine the flexibility of the spot market with the stability of contract orders, giving much greater opportunities. TMS class 4.0, e.g. Trans.eu platform, is able, on the basis of a huge amount of data that is uploaded to it, to suggest several best carriers for the order, meeting the predetermined criteria. The freight forwarder decides for himself how deep the algorithm will go, i.e. whether he will look for carriers among those from the contract or those outside the fixed contract, e.g. from defined groups or from the spot market from the exchange.
You can now ask yourself whether the customer will be loyal to his operator, or business is simply business and will go where it will have easier access to resources?
Today, every operator works like it were an island. It has its own TMS, its own database of carriers and exchanges data with them. It cooperates with the outside world by e-mail, phone, etc. It’s actually cut off from external resources. TMS 4.0 allows access to a huge database of resources from outside the contract. This is its great strength because it is able to combine dispersed islands of data and resources, combine them into a platform and give the forwarder what is needed at a given moment in time.
It is not about giving up contract services, but about wider possibilities and flexibility in the selection of carriers who are reliable, proven, who meet high safety standards, but who despite operating on the market have not previously cooperated with a given forwarder or logistics operator.
This means that it is part of the process of digitisation of the economy. Companies that share resources such as BlaBlaCar, Airbnb or Wareh.com operate on the market almost in the same manner.
Exactly. BlaBlaCar doesn’t have a single car and provides thousands of trips. Airbnb doesn’t have a single hotel, and thanks to this service, thousands of people a day have a place to sleep. And Wareh.com allows you to find buffer spaces in your warehouse with a dedicated service….. without owning a single cubic metre of space.
This is the strength of the digital economy and sharing economy – opening up to resources that until recently were closed in many dispersed centres, e.g. shipping companies with their own database of contacts. I am convinced that nowadays, with such difficult access to transport resources, there will be no sentiments. The customer will go where his needs will be met as easily and safely as possible.
The key role of a real manager is, therefore, to understand, anticipate and implement appropriate solutions in advance. Jeff Bezos, Amazon’s CEO, summed it up recently by saying that the manager of the company is actually managing three years into the future. If he manages what is today, he is not the right person. It is the role of the manager to introduce a change in the attitude to the company at the right time so that technology will become the reason for the development of the company, and not its bankruptcy.