«Driving dynamic value creation»
Interviews with managing directors frequently touch on subjects such as quarterly figures, staff changes and industry milestones. Day-to-day business rarely leaves much room for the long-term view. Detlef Trefzger, who assumed an operational role as CEO of the K + N group in August 2013, bucked the trend to discuss what the future holds with the ITJ’s editor-in-chief Christian Doepgen.
Let’s fast forward 20 years, Mr Trefzger: Do you think logisticians will still be physically transporting goods then?
I assume you’re addressing technical developments such as tele-transportation and 3D printers. Of course such innovations represent a revolution for many an industry. Whether they’ll changes logistics processes over the long term has to be questioned at this point, however. In the past new logistics approaches generally complemented existing ones.
Customers are at the very heart of business. Where do you see the greatest changes happening amongst shippers, such as original part manufacturers?
A few decades ago regional production managers were the decision-makers who placed transport orders in freight forwarders’ hands. Today many customers have a centrally-directed pan-corporate international procurement department that wants to have a one-stop shop for all of its logistics needs. Since the downturn that started in 2008 / 2009 there has additionally been a trend towards regional so-called near-sourcing solutions as well as to smaller production units that are more appropriate to the actual requirements. These are challenges which companies will continue to face in the future.
What trends have you observed in manufacturing, for example?
Production processes are changing very fast. For a long time, car makers set the standards with their conveyor-belt manufacturing, automation and just-in-time production. Logistics providers have taken over ever more tasks, such as modularisation and minor manufacturing jobs, for car makers.
These concepts were adapted from other spheres. Today the car industry is also taking over logistics solutions from the pharmaceuticals and high-tech sectors. This makes logistics service providers drivers of a pan-sectoral dynamic value creation.
Do you expect, in the light of this comprehensive orientation, some industries to converge one day?
Of course there is a degree of convergence and some cross-industry standards, but the various industries and regions preclude standardisation. There remains some room for ideas.
Would specialising in individual shipping segments represent an answer?
That would not go far enough. Vertical economies of scale are not the only criterion. When you take over a firm’s logistics processes you need both customer relations managers with experience of the industry, as well as logistics experts who can establish a creative and comprehensive solution. What we’re dealing with is a trend towards the mixing of comprehensive solutions know-how coupled with industry-specific requirements. Our challenge consists of implementing these solutions.
What logistics approach do you believe holds most promise for the future?
Dynamism is the be-all and end-all of logistics. Today a warehouse, for example, simply represents tied-up capital. It can’t be a forwarder’s aim these days to simply lease out space or transport pallets. Genuine added value for clients as well as freight forwarders is created all around the product – for example, when we prepare, finish, package or sequence articles, etc., or when we consolidate them in the transport chain. The end result, then, is a more dynamic supply chain.
Can you avoid being involved in parts of your clients’ production processes in the medium term?
Two aspects contradict such a development. Firstly, companies’ internal production logistics are mostly rather differentiated and take place in a closed circuit. And secondly, customers sometimes ask us to take over a part of their logistics, for example to make spare parts such as car bumpers on demand. We draw the line there where a manufacturer’s product liability begins.
The increasing volatility of markets has been identified as one of the biggest problems since 2009. It is not expected to disappear in the next few years. How can this be countered?
Complementarity is called for. Without it economic cycles and risks can’t be absorbed. I’m a fan of having a broad portfolio. A multifaceted spectrum of business fields enables us to guard against sudden developments too, particularly on a global scale. Those who have this flexibility and consistently expand it will be fine in future too.
The introduction of the container was the last big logistics revolution. Can you see anything similar happening soon?
No. In fact, I have rather observed a retro-effect in this field, for example. Ever more freight, even bulk suction goods, is increasingly being transported by container again, and the final saturation point has still not been reached yet.
What is new in the old trend?
The timing, and the packaging. Additional value is created when the sequencing and distribution of customers’ goods is anticipated in a timely manner in the planning phase and the stuffing of a container is completed on time, for example. A lot depends on optimising utilisation rates.
Will packaging, which sometimes plays a rather minor role in logistics, become more important in future?
My answer is a clear yes. Operationally, packaging mostly represents a mere 0.5% of the costs of a transport project – but it can have a significant impact. We know the potential that this segment holds through the activities of our subsidiary Cargopack, which is based in Markgröningen (Germany). Displays or flexible load-securing methods will easily enable you to ship three car bodies per container instead of two, for example. This represents a significant improvement.
Have you noticed any substantial changes on the horizon for the individual modes of transport?
Airfreight will see a trend towards more cargo being carried on passenger planes, in temperature-controlled transport boxes, for example. In maritime shipping and overland haulage there is an ongoing trend towards more modern engine technology.
What about the broader social context in which our industry operates?
We don’t operate in a vacuum. The overall framework for logistics remains largely predictable for every player – including ever-more administrative and ecological requirements, rising fuel prices, growing public resistance against large infrastructure projects. This is what we have to deal with.
Our industry frequently complains about its poor public image. Does the problem concerning the public’s perception actually start with the poorly-defined term logistics?
You’re absolutely right. It’s an ambivalent catch-all, and almost everyone thinks of something else when using it. I consider the term supply chain to be far more important and to the point. Today a corporation such as K + N has to think in terms of process chains and solutions along the entire length of the transport chain – and beyond – in order to fulfil our clients’ expectations.
People are one of the key factors that sometimes get forgotten when analysing the future of the industry. Where do you think the logistics sector’s employees will stand in 20 years?
Without practical experience and the commensurate experts no one will get anywhere. I think this is good news. The comprehensive automation of logistics is inconceivable. We should focus on process stability, as well as on our ability to adapt flexibly. This is where people will always be superior to machines. It nevertheless has to remain our top priority to permanently optimise our processes.
How do you do that?
Every quarter we hold an optimisation round with the employees in the operational field in our warehouses, for example. Employees and management discuss improvements and run through ideal solutions, to speed up goods handling processes, amongst other things.
Where is IT more important than people?
IT is a crucial element and one that comes into focus most when we address the exchange of data with our customers, of course. We operate centres where as many as 1 million order lines a day are processed.
What is your message for the future?
There will always be a role for the classical transport and logistics activities. But packaging units will become less important, with the article to be transported becoming more important. It’s vital that we operate in a customer-specific way and simultaneously stay focused.
Detlef Trefzger’s biography
Dr Detlef Trefzger (born in 1962) first worked for Siemens and Roland Berger. From 1999 to 2012 he worked for Schenker in various board positions, and was last the global head of the corporation’s contract logistics, sea and airfreight activities.
He has been the managing director of Kuehne + Nagel International’s contract logistics division since March 2013. In August 2013 he was made the CEO of the Kuehne + Nagel group.