Greg Toornman, Vice-President, Global Materials, Logistics, and Freight Management, Agco Corporation
Traditionally logistics service providers were viewed as support players performing services around significant strategies. There are a couple of ways that companies are looking at this today. One facet is around the work or solution streams called track and trace. Within that track and trace, you as the customer would have the ability to find out where your shipment is (across the globe) in a near real-time format. Based on the latest milestone update that the service provider performed, you will be able to see where that shipment is, and from there they carry out predictive analytics on when that shipment is estimated to arrive versus when it's supposed to arrive taking into account weather conditions, traffic, port strikes, and other real-time aspects. But you can't build that into your logistics network without that real-time visibility as an update.
The second approach that we take to manage or drive the performance is through our transportation management system. This can check the actual departure time from the shipments origin location, map that to the defined transit time, and then have the carriers confirm when they drop it off at the destination location. We are able to manage the pickup and drop off times and with this information we can drive a high level of performance execution. The approach that we utilize is to define the performance expectations and then measure to those expectations. This would then lead you to the question of why do you need to spend the money developing this track and trace functionality that in our view has some level of risk and that in the end would lead you to have to manage the performance levels. So there are two different ways that companies are evaluating its needs—need to have real-time data or drive their network performance to a level that they have a very high level of competence so that they don't need to be spending money on track and trace development.
How can we meet the challenges in track and trace or actual logistics?
In terms of the track and trace methodology the way that the service providers are able to get the data is in one of two ways: going into the Freight Management carrier’s network and match the actual shipment bill (a transportation I.D. number) or having a physical transponder that’s attached to the shipment physically. The former would be the specific shipment number in your TMS, and from there they access the carriers’ network to see the last milestone reported. When carriers, when they pick up they have a milestone reporting update as they do when they unload on a cross dock.
Some carriers will do a milestone update when they reach a certain number of miles or kilometers they may update their geolocation. The challenge that we see is that the daily updates are only as good as the carrier’s milestone updates. If you have a complicated network say, for instance, we have with over 180 carriers across the globe then you will have a wide range of variability because not every carrier will do their milestone updates in the same way at the same frequency.
The second challenge with that is having access to a carrier’s network is something that we, as the end customer don't control. If the carriers wanted to stop allowing access, then your whole track and trace solution is no longer a viable solution as it's outside your control. With innovation continuing to happen we’ll see more autonomous vehicles into the market in the future, and with autonomous vehicles that are managed within a carrier's infrastructure, security will become a major issue. The level of network access that carriers will be granting will become more stringent and as a result, we view that the carriers we'll be locking out or no longer allowing access into their networks from the service providers that are doing the track and trace methodology. This would be the first or extreme set of challenges within the carrier track and trace.
The second element (having a transponder)—ones that are applied by the shipping source onto a pallet box and within that shipment. Then the customers can access the location of the shipments via a service provider’s software via an App or an online portal. The ability to pick up a geolocation somewhere in the world is going to cost relatively high. These devices can go anywhere from twenty to a hundred dollars depending upon how frequently you want to be able to ping and battery life is a big driver of that. And the challenge with that is the reverse logistics of the transponders, so we have in our network some three thousand one hundred and fifty plus origination points shipping to somewhere around 82 destination locations. So I would need to manage a reverse logistics process or have a service provider do it in that combination, and that becomes quite expensive.
Could you talk about your methodology to identify the right partnership/ solutions provider from the lot?
Within our contracts that we write, for an RFQ (request for quotation) the use of our transportation management system is must within the contract. The way it works is we introduce the process to the carriers, teach them how to do it and share what are our expectation levels are for those carriers in terms of what and when, and how frequently they have to do it. Then provide them with real-time online performance feedback to how they're performing.
How would you see the evolution a few years from now with regard to disruptions and transformations within the arena?
One of the future things that we're looking at is, together with our 4PL and TMS partners, is how we can aggregate multiple customers working together. So think of it as a reverse 3PL; 3PL looks for multiple customers so that they can leverage their either truck network to support. We look at developing something future state that would be reverse of that. Let’s say company ‘A’ AGCO and company ‘B’ and ‘C’ we've got goods that are going in a common direction or opposite directions. This would allow us to leverage our volumes, weight, and lanes mean origin and destination point with the carrier to optimize that carrier's assets. Because the key risk area is not shipping empty trucks but rather ship them as full as possible. So that's the trend that we're starting to investigate now in terms of new innovative ways of working in order to optimize the network better. Because we benefit the other partners in the network, shippers, and the carriers benefit as their loads are fuller and more consistently pulled.
What would be the advice that you would like to impart for your fellow colleagues?
For us, the key thing in logistics is the repeatability of performance and cost. For instance, if a company plans to invest five hundred to one million dollars, within that they should check on the robustness of the processes and the tools that they are utilizing in the current state as it is important from wherever they are today to a future state to have a solid understandingof the variability of will be inside of your control versus what's outside of your control. Based on what knowledge you have today and things you don't know that could be an issue in the future which that could have a negative impact on your investment into any new tool or process.