Supply Chain Frontiers issue #39
A web-based communications platform called the Collaborative Platform for Transport that cuts truck transportation costs and eliminates costly freight delays in Colombia will enter the implementation phase in December 2010. In addition to making the country’s supply chains more efficient, the project offers valuable lessons on how to introduce new technology to an emerging market.
Backed by GS1 Colombia, a member of the global nonprofit GS1 standards organization, and SENA (Servicio Nacional de Aprendizaje), a Colombian government agency that supports innovation, the platform was developed by the Center for Latin-American Logistics Innovation (CLI), headquartered in Bogotá, Colombia. The pilot project also involved Almacenar-Almagrán, Colombia’s largest third-party logistics services provider (3pl), 23 corporate customers of transportation services providers, and seven trucking companies.
Navigating the trucking business in Colombia requires infinite amounts of patience and telephone time. The industry is incredibly fragmented and trading partners “act like islands,” says Julian Lasso, head of the project at CLI. “In Colombia we have a culture of not sharing information, even in transportation,” he says.
Consider the example of a manufacturer that needs to ship an order to a customer. The company contacts a 3pl by phone to organize the shipment. After determining which carriers are appropriate for the load, the 3pl makes calls to the selected truck owner. The transportation company confirms what equipment it has available and calls its drivers to identify a vehicle for the load. This flow of calls is then reversed when a truck is assigned.
Truck brokers also take part in these myriad conversations. The demand for trucks outstrips supply in Colombia, partly because fleet utilization rates are relatively low. In addition, many carriers went bankrupt during the recession, explains Jorge Eduardo Baracaldo, Transportation Manager at Almacenar-Almagrán. The shortage of carrying capacity has generated a lot of business for brokers who function as intermediaries between transportation buyers and sellers. A typical transaction can include as many as three brokers, and each one charges a commission for finding a truck, adding substantial cost to the supply chain.
As if this scenario were not complicated enough, personal relationships also have to be factored into the transportation equation. For example, drivers tend to have close working relationships with brokers whereas 3pls usually work with truck owners. This pecking order influences the allocation of vehicles.
The above scenario represents only the first leg of a shipment; when the load is in transit it can take hours for a shipper to check the status of a delivery. The task is not made any easier by the lack of an audit trail, since record-keeping along the chain of custody is largely manual and haphazard.
The freight industry needs to untangle this bundle of conflicting interests as costs continue to rise and shippers become more frustrated over inferior customer service. Moreover, truck owners, who traditionally have not been overly worried about maximizing vehicle utilization, are now much more focused on how to increase fleet productivity. These factors set the stage for a solution such as CLI’s web-based communications platform.
“With this technology we can integrate transportation data and encourage the various players to share information and to collaborate,” explains Lasso. Each player uses the platform to share logistics information, removing the need for expensive middlemen. The amount of telephone traffic is also reduced dramatically because the system provides a real-time window on the status of shipments and the assets needed to deliver product to end customers. According to Baracaldo, the most important payback for Almacenar-Almagrán is that the 3pl receives reliable, up-to-date delivery confirmation, a degree of supply chain visibility that is unprecedented in Colombia.
A combination of three technologies is used to achieve these improvements: GPS (global positioning system), mobile phones, and radio frequency identification (RFID). CLI determined that this was the most cost-effective technological mix to deliver the visibility and efficiency gains needed to attract freight companies to the platform.
Cell phones bring the mobile work force — the drivers — into the system. As part of the pilot program, CLI also supplied RFID tags and readers in freight facilities such as distribution centers, as well as GPS receivers on trucks. The latter devices not only provide regular updates on the whereabouts of vehicles, they also help truck owners to analyze fleet productivity. Another benefit is that the channels of communication can be used to crosscheck logistics information. For example, even when driver inputs are less than reliable, a 3pl can use GPS to ascertain whether a vehicle has actually arrived at a destination as reported via the driver’s cell phone.
Above all, the three-pronged approach represents the best blend of technologies for an emerging country such as Colombia. “Keep it simple and very user-friendly,” advises Lasso. The cell phones are cheap — they are basic models with no data transmission capabilities — and easy to use. CLI created a set of instructions based on eight types of messages for drivers. For instance, they press the 4 key to confirm a delivery. Interestingly, the older drivers have proved to be more accommodating than their younger coworkers. Young drivers were comfortable with the technology from the beginning, but continue to question the value of the platform. The mature truckers needed more time to adapt, but after mastering the technology, they proved to be more accepting of its worth.
A huge benefit is that the platform frees up freight managers to carry out more productive work, because they no longer have to make endless phone calls and are able to manage by exception. The time spent on daily activities that are part of the transportation process was reduced by 43% for shippers, 50% for logistics operators, and 60% for carriers. These savings also imply a corresponding reduction in labor costs.
The pilot phase comes to an end in December 2010, and the project team is now deciding how to make the technology available to the wider freight community in Colombia. The team is considering an “on-demand” service for any company that wants to become a user.
CLI is already thinking about future improvements to the platform. “Maybe we can eliminate the cell phones because GPS and mobile technology will eventually merge and we will be able to send text messages by GPS,” explains Lasso. The introduction of smart phones is another possibility, although at present these devices are too expensive for this application.
Lasso believes that the platform will streamline supply chains in Colombia. By cutting operational costs and improving productivity, the technology will make the cost of moving product cheaper for companies. At present transportation represents about 45% of total logistics costs in Colombia, very high by international standards, according to Lasso.
For more information on the communications platform and the project, contact Ana María Prieto, CLI Public Relations, at email: aprieto@logyca.org, or telephone: +57 1 4270999, Ext. 191.