11-04-14 - Anthony Coia:Template.qxd - VEGA International Car

Commercial vehicle logistics: more than
trucks moving trucks
By: Anthony Coia
Published on Thursday, April 14, 2011
http://www.automotiveworld.com/news/commercial-vehicles/86729-commercial-vehicle-logistics-more-than-trucks-moving-trucks
Although they share the same basic principles of finished vehicle logistics, the distribution of commercial vehicles such as medium-duty and heavy-duty
trucks follow a different dynamic compared to the delivery of passenger vehicles. Chief among them is that the load factor is much lower - less than three
on average - compared to between eight and ten, on average, for passenger cars. Of course, since the value of commercial trucks is much higher than of
passenger cars, the total value per transporter balances out. What is unique compared to passenger vehicles is that commercial vehicles are sometimes
driven on their own wheels from plant to destination, which is uncommon for passenger cars.
The logistics network for delivering commercial vehicles is also different from passenger cars because not all vehicles travel from the plant to the storage
yard or dealership. Some trucks go through an additional manufacturing stage by going to the body builder before being delivered to the dealer.
Transport methods
Volvo Trucks, based in Gothenburg, Sweden, manages its own order and distribution
process, which involves delivering its new trucks directly from the factory to the dealer
or body builder. Anders Lindstrom, General Manager, Logistics, for Volvo Trucks'
European Manufacturing, says that Volvo Logistics provides transportation using two
delivery methods within Europe - either truck on truck or jockey transport - in which
the truck to be delivered is driven directly. Lindstrom says that the majority of deliveries
are jockey deliveries, although the volumes are fairly balanced between each
method.
Lindstrom points out that the longer the distance, the more efficient it is to haul
commercial vehicles on a transporter. Another factor is the vehicles' distribution channels.
For long stretches in which the entire volume follows the same route, such as from
its facility in Ghent, Belgium to Spain, truck on truck makes sense. On the other hand,
for distribution within Sweden for example, jockey transport is more cost-efficient for
volumes that are dispersed over a broad area. Similarly, for shorter distances, such as
distribution within Belgium, jockey transport is also optimal.
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Volvo Trucks uses a service for European distribution that consists of six sea transports per week between its facilities in Ghent and Gothenburg. "We
co-load trucks built in Gothenburg and Ghent. We combine volumes in order to make transportation to Southern Europe more efficient from a cost and
an environmental perspective," says Lindstrom.
Volvo Trucks normally owns the truck until arrival at the dealer or body builder. Lindstrom says that this practice is also to enable its industrial operation
to take full ownership of the entire lead-time from order to delivery. The dealer can thereby indicate its desired delivery time without adding time
for safety or buffer reasons. When the truck is ready for transportation from the factory, Volvo Trucks notifies Volvo Logistics, which in turn notifies the
transporter. The transporter reports the departure and the arrival of the truck back to Volvo Logistics which in turn forwards the information back to
Volvo Trucks. This is the trigger for Volvo Trucks to invoice the recipient. Volvo Logistics also uses its information technology system to evaluate the
performance of all of its carriers and to initiate corrective actions when necessary.
Lean objectives
Volvo Logistics and Volvo Trucks together practice a Lean Distribution concept in which all parties have agreed on a delivery date to the dealer or body
builder. Lindstrom says that the purpose of the Lean Concept is to maximise delivery precision. "Sometimes we ask the transporter to stretch the delivery
time - in other words not to rush it. This may allow more time to optimise the load. Other times we ask them to speed up delivery," he explains.
Volvo Trucks and Volvo Logistics balance and optimise demands regarding cost, lead-times, low damage frequency, delivery precision and environmental
impact. Lindstrom says that Lean Distribution has brought shorter lead times, increased precision, and reduced capital cost.
Furthermore, Volvo Logistics contributes to Volvo Trucks' long term environmental objectives by setting requirements when purchasing transportation
for Volvo Trucks, including the use of specific Euro Class engine types in its flows. Staffan Jufors, president and chief executive of Volvo Trucks, has challenged
the organisation to reduce CO2 emissions from the company’s logistics operations by 20%.
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Optimisation challenges
Among Volvo Trucks' challenges is that in Europe, it operates two large plants that produce a product range that is overlapping to a great extent. "We
constantly monitor the order mix in terms of product type and market in order to combine operational and logistic efficiency. We need to maximise product
conformity on the assembly lines as well as the shortest possible distance to the customer," states Lindstrom.
For new or changed logistics set ups, Volvo Logistics issues a tender, including an analysis of cost, lead times, damage frequency, and delivery precision.
Based on this input, Volvo Logistics also makes a calculation of the environmental impact by evaluating different transport modes. The customer, Volvo
Trucks, then makes a decision based on a recommendation from Volvo Logistics.
Pan-regional distribution
Among the established carriers of commercial vehicles in Europe is Vega International Car Transport and Logistic, based in Salzburg, Austria. This carrier
serves markets in Europe, the Middle East, and North Africa. Its hub facilities are located in Salzburg, Ulm in Germany, Ghent, Bucharest in Romania,
and Istanbul in Turkey. Approximately 70% of its business is medium duty (7.5 to 18 tonnes) and heavy duty (above 18 tonnes) trucks.
Franz Blum, Managing Director, says that Vega International uses a multimodal approach for delivering commercial vehicles. Approximately 40% move
by short sea as the primary transport mode, 15% by rail, and 45% by truck. Of the latter, 80% move on their own axle and 20% truck-on-truck for precarriage
to the main transport mode. The average load factor is 2.2 vehicles per truck, which has been declining since the growing height of the cab makes
loading higher quantities more difficult.
Fuel price challenges
For Vega International, Turkey is its fastest growing market. It also serves Russia throughout the country. Other markets such as Poland, Romania, and
Ukraine, are recovering more quickly than expected, but they have less financial power, and thus lower demand.
The biggest challenge for Vega International is to make sure that deliveries occur on time, cost-effectively, and damage-free. Another pressing challenge
that relates directly to costs is the volatility of fuel prices. "The fuel clause in our contracts must be able to compensate for rising fuel prices. We are losing
two to three percent just on fuel," says Blum.
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Blum admits that his company needs to improve its cost structure, while also maintaining high-quality standards. "However, we are forced to argue external
factors, such as fuel prices, which we cannot control. There needs to be a fairer method for adjusting for fuel costs or allowing us to charges higher
prices," he declares.
The distribution of commercial vehicles in Europe and the surrounding regions is about accommodating a growing base cost-effectively while maintaining
a satisfactory customer service level. Whereas these underlying goals are common for both commercial and passenger vehicle delivery, the process
for achieving optimisation may vary broadly.
Automotive World Ltd Company registered No: 04242884
Registered Office: 14 Great College Street, Westminster, SW1P 3RX | Registered in England and Wales