Flexible transport assistants wanted

Third part of our series on our customers: the logistics industry is considered to be a “bridge-builder between industries”. We spoke to representatives from two industry giants.

“I think we’ll be very surprised to see where we are in a few years’ time,” says Brett Bissell, Chief Operating Officer (COO) for Contract Logistics at the global supply chain company CEVA Logistics. By ‘we’, he means both the company and the logistics industry, which is currently being confronted with trends signifying great upheaval: online retail, automation, self-driving trucks, and Big Data. “None of these keywords will come as a surprise to you,” says Bissell, “but they are leading to significant changes in the warehouses.”

The logistics industry is very complex, because it transports goods, raw materials or spare parts from A to B for a broad range of other industries. To make matters more complex, a container ship has little in common with an express delivery postal service, for example. For an intralogistics company like the KION Group, two segments are of particular interest. The first of these is freight logistics, primarily via road, in which logistics companies manage various intermediate stations and reloading points. The second is contract logistics, in which customers outsource the operation of entire warehouses to logistics experts. With a European market of some EUR 400 billion and with a 40 percent share, this is by far the largest segment of the industry. The advantage for the customer is that they do not have to worry about staff costs, planning, or capital expenditures, and can instead sign contracts with logistics experts. In turn, these experts are experiencing ever-shortening contracts and are under increasing pressure when it comes to costs and innovation.

Total transparency

“We have been experiencing a huge shift over the last few years,” says Erik Wirsing, Head of Innovation at DB Schenker, which with a revenue of USD 16 billion, is one of the world’s five biggest logistics companies. “Business models change and logistics are both the driving force and the driver. They must identify optimisations at a time of enormously increased transparency. It is precisely this transparency which must be consistently expanded in order to establish a new form of additional value along the supply chain.” Thanks to various sensor solutions, networking on online platforms and big data analysis, today virtually everyone knows what is available and where.

This even ensures that the exact temperature, possible vibrations, humidity and other consignment conditions are visible at all times and that an active alarm issues notifications about any deviations. According to Wirsing, customers previously perceived logistics as complicated and non-transparent. Today, customers are not only vehemently demanding transparency, but the increasingly digital environment has also given rise to numerous innovative start-ups, meaning that established companies are up against more competition than ever before. “Everyone enjoys logistics,” says Wirsing – even big corporations like Amazon and Google.

Advantages due to technology

The industry giants are holding steady against the new competition, primarily thanks to their infrastructure, fleets of trucks and experience. “We often offer advice to our customers as well; for example, which innovation best suits their needs,” says Dennis Farwick, Head of Business Innovation Contract Logistics at DB Schenker.

This also means that customers are expecting an increasingly comprehensive service from logistics experts. “Customers no longer pay us to deploy a forklift truck, they pay us for service, transparent processes and delivery capability,” explains Wirsing. “For this reason, it our aim to develop digitisation, then automation and finally autonomisation processes.” This triad, this sequence, is important to Wirsing. Only the use of digital data can be followed by the practical use of automated machines - and only then, for example, an independently orienting vehicle can follow. “We need to obtain concrete benefits from the technology,” says Wirsing, “and gain additional value for our customers and for ourselves by using them.”

Desired: versatile forklifts

Brett Bissell from CEVA also sees a great deal of potential in automated forklift trucks: “They are very flexible, far more flexible than conveyor belts, for example,” says the COO. Flexibility is a central keyword in an industry that revolves around short-term contracts from a variety of customers and fluctuates according to the season. Logistics experts see a great deal of scope for further improvements when it comes to automated forklift trucks. “The AGVs must be able to move even more quickly,” says Farwick. Ideally, they would move just as quickly as those with a real driver, but without the associated risk factors. But before that can happen, there are still various technical and regulatory questions that need to be answered. Going forward, sensors must be fitted around the entire warehouse rather than just on the forklift truck, speculates Farwick: “The forklift truck should know that the crossroads 20 metres ahead is currently clear.”

Logistics companies are also looking for further optimisation potential, primarily by improving their ability to analyse processes. “If we take data from one hundred forklift trucks carrying out exactly the same tasks, we can draw conclusions about their optimal use and thereby establish more efficient operating procedures,” says Bissell. To him, that is why the industry is particularly focused on standard forklift trucks, which can be compared to one another and can also be moved quickly from one location to the next. “That’s more useful than a specialised forklift truck that can’t be used anywhere else,” says Bissell, adding: “Of course, the dream is to have a forklift truck that can be easily adjusted and configured to suit every task.”

“Have your say!”

When it comes to dreams, the two experts from DB Schenker also have plenty of ideas: “An automated forklift truck that immediately knows its way around a new warehouse,” says Wirsing. In general: even better sensors and scanners, which can automatically read bar codes, for example. “Each interruption reduces the added value.” In logistics, this includes all necessary scans, data entry and enquiries. Intelligent forklift trucks could be the solution to this problem. The same logic applies to the desire for an ‘ever-lasting battery’ – or at least for a drive system that can be charged as quickly as possible. Each of these suggestions ultimately aims to reduce costs and increase efficiency. “Transport logistics involves, for example, booking platforms and optimisations within the handling points. In contract logistics, however, an individual customer estimate can be demanded,” says Farwick.

However, people will not buy technology for technology’s sake. “An innovation must add value,” says Farwick. DB Schenker is very aware that it can be sensible or even necessary to invest in innovations at an early stage. “If we start off looking only at hard, key figures, we’ll be putting ourselves one step behind.” That would be damaging for an industry that is always looking for ways to increase efficiency. For the same reasons, Brett Bissell from CEVA has a message for manufacturers like Linde: “Have your say! We need your ideas about where we can make improvements and implement new technologies.” Or, as Wirsing puts it, “We need partners. The world is turning ever faster.”

Logistics, which is often reduced to ‘transport, handling and storage’, is actually an interface industry that focuses on planning and managing value-adding chains. Global turnover is estimated to be in excess of EUR 4 trillion. Germany has the largest market, with more than 3 million employees and a revenue of around EUR 258 billion in 2016 alone.

Logistics includes segments such as air freight, courier services and bulk goods, and in particular the organisation of entire warehouses and contract logistics. Among the top global companies are DHL, UPS, FedEx, DB Schenker, Kühne + Nagel and CEVA Logistics.

Low margins and forever narrowing contract terms: the logistics industry is in the midst of an era of strong competition fuelled by the appearance of numerous start-ups. Previously, five-year contracts were not uncommon in contract logistics, and yet today, 24 months is a standard contract term. France and Germany are examples of two highly competitive markets in which numerous customers are prepared to outsource their logistics to service providers. Logistics experts are therefore even keener to find optimisations and ways to increase effectiveness; they are watching automation very closely, and also analysis tools such as sensor technology, Big Data and networked systems. Standardised forklift trucks are particularly attractive, as they need to be able to act quickly and flexibly.

Current developments in technology and science are not quite at the level of logistics experts’ dreams yet: Dreams of a fast, autonomous warehouse that delivers data, allowing logistics companies to offer their customers real added value.

Because logistics includes ever-changing orders and warehouses, the industry is generally more interested in automated forklift trucks than most other industries, which are more focused on fixed systems. It is therefore an exciting market for AGV. And that is precisely why the KION Group is investing more in research and development.

When gifts become returns

Successful collaboration between neighbours