Options – when markets are volatile
Paul Wittenbrink, transport and logistics professor at Baden-Württemberg’s Cooperative State University in Lörrach and a partner in the hwh Gesellschaft für Transport- und Unternehmensberatung in Karlsruhe, spoke to Christian Doepgen recently about the opportunities as well as obstacles facing the logistics industry.
Mr Wittenbrink, many industry sectors are complaining about increasing market volatility. What makes the developments in logistics different?
We’re in a secondary market, where we suffer the effects not only of volume fluctuations but also of an ongoing stagnation in prices. We’re also subject to higher fuel costs and bottlenecks, such as the occasional shortages of drivers, for example, or growing traffic and vehicle density.
How do you assess the reaction of the logistics service providers?
There are signs that they’re starting to respond more flexibly. They’ve adopted a diesel floater mechanism, for example, which dampens the effect of fluctuating fuel prices. But many medium-sized enterprises do not look to the future clearly enough. Often they’re very well placed operationally, but don’t work sustainably or strategically enough, that is to say they don’t follow clear entrepreneurial targets. Over and above this, many companies are also too asset-heavy.
What do you base this lack of strategic orientation on?
Some firms make below-cost offers, for example, also due to inadequate estimates. The situation has reached a stage where many shippers manage their risk by establishing what we call shadow calculations, to ensure the sustainability of their delivery chain. If a service provider suddenly drops out it is the shipper who takes the hit.
What other major new trends have you observed?
Having optimised distribution infrastructure over the past few years, it is now procurement logistics that have to move to centre stage. Here the core issue, in the final analysis, is whether shippers or receivers can be bundled more effectively and thus transport costs can be cut.
Which basic conditions have changed?
Complexity is a core cost driver and makes systems ever less manageable. We have to rediscover the simplicity principle in logistics, simultaneously increase the degree of transparency concerning processes and also approach matters more systematically and in a less «rough and ready» manner.
Where do you see potential for this?
A 24-hour delivery service in the non-food sector may be dictated by the market – but it’s not always really necessary. The structured temporal and spatial pooling of orders can increase truck utilisation rates, or allow a provider to integrate railway options.
Is this a plea to slow down traffic?
Yes, wherever it makes sense. The point is for logistics providers and shippers to cooperate to find the golden mean for delivery cycles, depending on the goods.
Do shippers listen to logistics service providers?
In fact it’s the other way round. I hear complaints from shippers who wait in vain for suggestions from their service providers. Dialogue is possible, the partners simply have to apply the right levers.
What is the best way to new relationships?
One way is to raise the subject of «green logistics». Besides the potential to cut costs and reduce CO2 emissions, the effect of «green logistics» lies in moving to more cost and resource-intensive logistics structures.
Many medium-sized enterprises are banking on cooperative alliances.
Many networks first have to find the right degree of centralisation. Such structures are advantageous on account of their flexibility and of partners’ proximity to customers. But high-value and comprehensive services will only work if headquarters has the expertise and the power to act. Many partners are afraid of the latter. And of course, there is also the challenge of finding – and keeping – good partners for the network.