A dangerous border closer and closer
The article was published in Puls Biznesu on 9th of October 2014
The statement of Mr. Arkadiusz Andruch, Director of National and International FTL Freight of ROHLIG SUUS Logistics.
The problem with peaks in domestic transport of shipments increases from year to year, and the phenomenon is further driven by the development of economy, the growth of consumption, and thus an increase of the number of transported goods. On the other hand, even in developed European economies the peak phenomenon does not occur in such intensity as in Poland. Can we therefore accept the thesis that it is the specificity of Polish transport market, which can not be avoided? Maybe. But almost all the facts indicate that the reduction of the peaks is only a matter of determination of the supply chain participants, in particular, the senders and the receivers of the shipments, in the implementation of solutions, not short-term, but structural and common for all, which will cause a long-term reduction of the peaks or at least inhibit the power of the phenomenon year to year.
The impact of transport peaks is visible on each stage of the supply chain, generating costs in the dimension of logistics, warehousing, and finally in the costs of transport, such as a reduction of the quality of logistic services several times as a result of growth in the volume of goods transported, including unpunctuality, damage and errors in supplies, which in turn has a negative impact on relations with customers.
In a situation where the high volume market is increasingly struggling with deficits of vehicles and rising costs of hauler services, additional irregularity caused by transport peaks contributes significantly to reducing the viability of the road transport services. High volume is obviously a positive trend in the market, but only if it is regular. The situation in which for three weeks of each month, haulers do not have a job, and suddenly in the last week receive three times more orders, is a prerequisite for the deepening of their losses, because such action requires the involvement of major means of transport and capital. As a result of the lack of stable employment, haulers often are forced to move in the so-called gray area, which, in turn, negatively impacts the labor market and the quality of services.
In a moment it will turn out that there are no alternative scenarios or plans B, and the need to reduce the phenomenon of peaks will be the road with no return. Because if a sample client of a logistics operator generates an increase in the number of shipments by 300% in the last days of the month, or another client realizes half of his orders at the end of the month and in addition he is a customer who carries around 50 000 pallets, it is easy to imagine what happens when there is an accumulation of 10 or 20 such clients. It would seem that the solution may be higher budgets for logistics at end of the month, which will compensate the operators more work. In fact, it is a temporary solution that indeed can contribute to a higher quality of service during the peaks, but in the long run will not benefit neither the customer nor the operator.
But relax. Changes are possible, and the environment is favorable and it is confirmed by the results of the study. As many as 64% of the directors of logistics said that their companies' Boards are fully aware of all the consequences related with the peaks, both at the level of logistics costs and lost sales and difficulties in relations with customers. And with proper awareness, we can discuss and implement appropriate practices that will reduce the negative effects, which is the purpose of our actions.
A half of the respondents also assessed that the sales management is aware of all the consequences of the peaks. At the same time, as it is known, the sales policy is in large part responsible for the increased purchases before the end of the month, and thus the accumulation of supplies to the customers, which is why the head of sales and logistics of a production company should become key partners in the talk about the peaks, and only such an approach will allow to reduce costs.
It is worth noticing that the chiefs of logistics feel strong enough to lead such cooperation – according to 46% of respondents the logistics department has a voice in the Administrative Board and is able to get the support of the Board for initiatives related to the impact on cost reduction of the peaks at the end of the month, and the next 41% said that the Board sees the essence of the problem.
Let this be a good starting point for action.