Good logistics thinking – customers investing in better trucks

Roger OakdenGlobal Logistics

Trucks are worth money to your business.

Transport can represent the single largest component of materials movement costs within your supply chains. Many businesses have outsourced all their transport operations, with the danger of a ‘set and forget’ attitude, where all they need to do is negotiate lower priced contracts.

But if transport is a high cost element in your supply chains, should you take a more active interest in how total costs (not just the price) can be reduced as part of your supply network optimisation review?

Supply network optimisation used to be a complex project, done every five to eight years, to answer the question ‘what is the ideal configuration of my supply network’. The availability of  network planning tools and the evolving challenges to business means this exercise should now be considered as an annual event.

One of the challenges facing business is the requirement of an increasing number of countries for improved fuel efficiency and lower emissions from trucking fleets. For example, heavy vehicles make up four percent of vehicle traffic on American roads but account for twenty percent of carbon pollution in the transport sector.

Heavy duty trucks under development in America have achieved fuel consumption figures of between 9.9 mpg (4.21 kpl) and 13.4 mpg (5.7 kpl), which is substantially above the current consumption rate of 4-6 mpg (1.7-2.55 kpl).

Your actions to reduce fuel and emissions

The US National Academy of Sciences identified in 2010 that to reduce fuel consumption in a transport business, only the improvement in driver behaviour is within the company’s direct control. This accounts for about four percent of potential savings, given the drivers have sufficient training and in-cab information.

The major areas of improvement are found in the design of the truck and trailer, with the major savings being in engine efficiency (about 15 percent) and design of the truck and trailer aerodynamics and weight. Overall, the Academy considered that fuel efficiency could be improved by 50 percent through to 2020.

If the major savings are attained before the truck leaves the assembly factory, should major transport companies and their customers wait for the truck manufacturers to develop better trucks or work with the truck companies and invest money into truck design?

An example of the latter approach is the development of a new truck and trailer (WAVE) design in America, funded by Walmart. The retailer has a fleet of 7,000 trucks in the US and for this major cost centre, the company developed a cost reduction program in 2005 to double its fleet efficiency by 2015.

By 2013, it had achieved 84 percent of the objective through purchasing more fuel efficient trucks and delivering more goods in less space with fewer trucks.

With this example in mind, should your contract negotiations with logistics service providers (LSPs) concentrate on how to reduce total costs, not just obtain a lower price?

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About the Author

Roger Oakden

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With my background as a practitioner, consultant and educator, I am uniquely qualified to provide practical learning in supply chains and logistics. I have co-authored a book on these subjects, published by McGraw-Hill. As the program Manager at RMIT University in Melbourne, Australia, I developed and presented the largest supply chain post-graduate program in the Asia Pacific region, with centres in Melbourne, Singapore and Hong Kong. Read More...