Philip Evans, secretary general of the European Freight and Logistics Leaders’ Forum, gives his view on smart innovations in the sector.
The European Freight and Logistics Leaders’ Forum (F&L) is an international organisation providing members with the opportunity to debate and share best practice in the international supply chain industry. F&L is comprised of senior business leaders operating across the 47 Council of Europe states, spanning end to end supply chain from the manufacturing sector through to retail and consumers, including logistics service providers and others, meaning that it has an important role to play as a platform for discussions about shaping the future of logistics and the movement of goods in an international environment. Its aim is to inform, challenge and debate relevant issues and drivers for positive change in the supply chain.
One of the topics currently dominating the agenda is smart logistics, which involves the introduction of new technology and practices to enhance efficiency, improve safety and reduce environmental impact. In efforts to transition towards smarter practices which enhance efficiency across the logistics network, the forum has a new debate to deconstruct – smart logistics.
Pan European Networks spoke to secretary general of the European Freight and Logistics Leaders’ Forum, Philip Evans, about the adaptation to new technologies within the supply chain sector, the cross-European legislation to regulate these systems, as well as the potential repercussions in terms of human resources and efficiency.
What level of demand are you seeing for the introduction of smart technologies by the stakeholders you represent?
There’s quite a lot of interest in terms of the potential of smart technologies, but I think that there is also a certain amount of reticence because it isn’t clear how quickly they will become commercially viable. Therefore, there’s a gap between two thought processes; we can see the introduction of smart technologies into the sector nearing, but what we can’t see is how quickly these practices and systems will be operable commercially. There is a lot of indecision amongst the network on when to invest.
Our membership is slightly unusual because it spreads throughout the entirety of the supply chain. For example, we have some automated and vehicle manufacturer members, such as Volvo and Mazda, but we also have quite a significant number of logistics service providers, and as a result we have members who fall into different camps in terms of their position within the supply chain.
For that reason, our membership and dialogue with companies tends to be all the way through from a manufacturer – for example, fast-moving consumer goods companies like Mars and P&G – through to heavy goods manufacturers – operators such as Krone and SKF – and service providers. At the other end of the scale, we have retailers, so it’s what we call an end-to-end supply chain membership.
Smart technologies are evident in our membership in a number of varying ways. On the one hand, we are concerned with topics such as how vehicle technology could change or advance automation. Yet, on the other hand, there is also a discussion about how technology is used in retail businesses and how this could make the supply chain more efficient, and the pressures which this could put on the supply chain. Therefore, we see technology all the way through, and one of the current dominant debates is how logistics providers make use of technology when they interact with numerous stakeholders. Though it’s quite a complex area, some technologies are nearing readiness, and everyone is eager to see how best to invest. Interestingly, that also means how investment decisions are made, as well as the training of employees.
Are you concerned that increased automation and efficiency will lead to problems of over-capacity in logistics, similar to those currently being found in the maritime sector, or to loss of jobs?
The structure of maritime shipping is very different; firstly, because of the limited number of global operators who dominate the market, as well as the use of large cargo ships which are able to operate with very limited personnel. You can move freight across the world in a large container ship, with very few staff members on board, whereas to do the same on land, a great deal more human intervention would be needed.
Nevertheless, technology is coming to the maritime sector at a rapid pace, and there are a number of organisations already trialling and using that technology. In terms of competition, there are bigger issues in the land-based shipment arena because, for example, within Europe there are lots of issues with capacity constraints and reliability, which are probably the biggest pressures on logistics operators. Earlier this year, the Rastatt Tunnel collapsed, and that meant that all rail shipments using that route had to be diverted. As a result, companies working with just-in-time inventory systems and working down to the last hour and minute of each day found that they simply couldn’t get the stock to factories and warehouses on time. Consequently, the issue has raised the question of how to build greater flexibility and certainty into these systems; an element of better contingency planning.
There’s also a simple but critical problem with land-based road and rail freight transportation, which is that the average age for drivers has increased to around 56 years old. Effectively, this means that there is currently an issue with recruitment. Clearly, technology is going to have an effect on this, but in the short-term it will not solve the problem.
On the one hand we have the potential of technology and the need to retrain staff and on the other we have huge pressure for drivers to fill the gaps and ensure logistics capacity.
Because logistics means crossing borders, there are challenges in terms of ensuring that new technologies are interoperable. At what level do you think discussions around regulations need to take place?
One of the issues at the moment is that there is diversity of opinion in terms of whether this should happen at European level versus at individual state level. Logistics operators are saying that they want consistency and even regulation across Europe, but understandably, that is difficult to bring about, as different governments have slightly different views and different regulatory requirements. As a result, an operator moving across Europe simply won’t get absolute consistency, with both financial and time cost implications, and this will be even further complicated when Brexit happens. In an ideal world, we’d have a Europe-wide, reliable and consistent network.
When it comes to technology, I think that most stakeholders have the view that it will provide benefits: improvement (and ultimately replacement) of driver capabilities, and the substitution of paperwork for regulations, health and safety and so on. It should also help with the issue of planning for better use of existing load capacity. All round technology could potentially provide a significant uplift in efficiencies, but our view would be that we’re uncertain of the timeline for that, owing to both economic viability and the concerns about consistency across Europe.
How is the European Freight and Logistics Leaders Forum supporting this push for more innovative technologies?
F&L is a not a lobbying organisation, but we have several key themes on our agenda, and there are two big areas that seem to encapsulate almost everything. Firstly, there are certain constraints across Europe that are making logistics less efficient than it could be. There are bottlenecks in the system, issues around displacement and the ability to find alternative routes when complications arise, an ageing driver population, the difficulty on the timeline of investment in technology and when to invest, lack of interoperability and differing regulations across different countries, and pressures in relation to price versus the efficiencies and values of logistics operators. Those are big constraints and pressures in the system.
The other big theme that we are discussing is the extent to which different stakeholders in the supply chain can be more open to understanding what other members of the network require. If you’re going to become more efficient, you have to understand what the next player in the supply chain requires, and you need to be very good at providing that. In simple terms, is it only about price? The answer, of course, is no: people care about capacity, flexibility, and sustainability, too. Retailers become very concerned about what the consumer requires, and if the consumer needs to understand how the product is made, manufactured and delivered, then that needs to be tracked all the way back through the supply chain. All of these issues will only be solved if people are cognisant of what’s required, as well as having a good understanding of what other stakeholders deem to be important.
Technology can be an enabler for these requirements and our members are debating when that technology will be commercially viable. Decisions and the timing of investments will be driven by the pressures on all stakeholders in the international supply chain.
European Freight and Logistics Leaders’ Forum
This article will appear in Pan European Networks: Government 24, which will be published in January, 2018.