Logistics meets Innovation

November 22nd, 2016

Vlerick Business School, Brussels, Belgium

About the conference 2016

Over the past few years, with the proliferation of ERP, TMS, WMS and BI systems, supply chain organizations have seen an exponential increase in the availability of real-time data from almost every aspect of the operations. While turning the raw data into a relevant insight is an increasingly difficult task, analyzing this data in a smart way can help logistics companies reduce their operational costs.

Although it is often claimed that the “data is the new oil”, the reality is that most supply chain organizations are ill-equipped to deal with the substantial volume of data. Very few logistics departments have the required knowledge, resources, or tools to make the most of the available information. The ability to transform “Big Data” into “Smart Data” is quickly becoming one of the most needed skills in the logistics industry. Innovative application areas in this new domain can range from computer-assisted freight flow visualization, network modeling, and simulation, to demand forecasting, scenario planning, and risk management.

The second Logistics meets Innovation conference on “Big Data in Logistics: Forecasting, Optimization, and Planning” was held on the Brussels campus of Vlerick Business School. During the event, the speakers and the audience shared best practices of how shippers, freight forwarders, and carriers are deploying “Smart Data” strategies to gain a competitive edge.

The conference was organized by Transmetrics and Ahlers and was moderated by Prof. Robert Boute. The partners of the conference were the European Logistics Association (ELA), Council of Supply Chain Management Professionals (CSCMP Benelux Roundtable), and the business books publisher Kogan Page. The conference was sponsored by Vlerick Business School and McKinsey.

About the Presentations

“NXP: From Forecasting & Demand Sensing Towards Big Data”

Evelien Klein

Director Global Demand Management

NXP

Evelien Klein presented the case of transforming NXP’s S&OP planning process by using systems integration. NXP is the 5th largest semiconductor manufacturer with the mission to contribute to a smart and connected world. In the past, NXP had decentralized planning organization without a dedicated demand manager. This prevented the company to capture on time the demand signals and supply the right products at the right time. After the transformation of its forecasting process, the company has integrated systems with a central data repository. NXP is now focused on strategic and holistic ways of forecasting. The new approach of forecasting allows the company to account for real-time demand changes in case of market changes such as the recent product failure of the Samsung Galaxy Note S7. The integration across departments and systems allows the company to account for demand changes based on the forecasting of other products that may overtake the market share of the failed product. The usage of a common data repository across information systems increases the volume of data used and adds complexity to the statistical methods used to analyze it. NXP’s case is an excellent example of successfully handling the complex process of unifying business systems. The process of integrating complex business systems poses threats such as decreased profitability, increased IT costs, and increased complexity, all of which suffocate innovation. Therefore, the companies have to ensure agility and room for further improvement in their systems.

“Leveraging Data – A CFO’s perspective”

Jim Fredholm

CFO

Agility

Jim Fredholm presented his experience in dealing with an increasing amount of data from the CFO’s perspective. Most of Mr. Fredholm’s experience has been at the C-level suite of logistics companies. During his professional experience, data served a different role than the one at NXP and its volume represented different challenges. In the supply chain business, from financial perspective, data poses two challenges. Firstly, data is supposed to serve as a business decision-making tool. However, the greater the volume of data and the higher the complexity of the algorithms used to interpret it, the more difficult it becomes for business decision-makers to verify the accuracy of the information they have. According to Mr. Fredholm, management meetings are often not about making decisions, but about arguments on whether the information to base the decision on is correct. Secondly, the more the volume of data increases, the more expensive it becomes to manage it. Therefore, the question for the financial department is whether to invest in data and information technology or whether to invest in the core competence of being a supply chain or logistics company. The increasing data volume drives a new focus of the logistics companies on information technology. Focusing on information technology will help logistics companies improve automation of processes and introduce disruptive technologies such as the Internet of Things and blockchain. Therefore, information technology is the main tool to bring logistics companies to Industry 4.0 and make their supply chains more agile, efficient, and integrated with customers and business partners.

“Improving Air Cargo Through Data Intelligence”

Alban Francois

Vice President Cargo

Brussels Airlines

Alban François, Vice President Cargo at Brussels Airlines, presented the success story of how the company managed to turn around its business with better capacity utilization based on information technology. Brussels Airlines was not profitable in 2013 but managed to turn around in two years and make a substantial profit in a very competitive industry, known for a low-profit margin. The key to profitability in the airline industry is ensuring high load factors for airplanes. Therefore, the airlines overbook the capacity to mitigate the risk of “no show”. However, air cargo customers have conflicting interests and do not want to be on the overbooked list. According to an IATA report, air cargo represents 35% of the total value of the transported goods and only 1% of their volume. When transporting high-value products, speed is the most important logistics factor. Brussels Airlines successfully optimizes capacity without hurting customer experience by overbooking flights. The strategy of the company is to make short-term and long-term capacity forecasts by using trend-analysis. The company achieves high capacity forecast accuracy by using external and internal factors in the two types of forecasts. The accurate capacity forecast ensures full airplanes and short wait times for its customers.

“Demand Forecasting and Optimization at DPD Bulgaria, Case Study”

Alexander Petkov

Director of Operations

Speedy (DPD Bulgaria)

Transmetrics and Speedy (a member of DPD Group) presented a case for linehaul capacity optimization. Speedy is the largest courier company in Bulgaria. It has multiple distribution centers across the country and in neighboring Romania and Greece. The purpose of the case is to optimize linehaul capacity utilization for routes between the hubs of the company. A major problem the company faces is forecasting demand variability effectively in real-time. The Bulgarian market is unique in terms of demand changes based on winter peak season, e-commerce growth, and public holiday-peaks. The Transmetrics software deployed at Speedy allows the company to use internal and external data sources to forecast demand accurately. Based on the demand forecast, the software will apply the network optimization model to plan the total capacity needed to support the linehaul routes on a daily basis. The optimized network will allow the company to utilize the capacity of its trucks by allowing for better fullness and decreasing the number of trucks to fulfill demand.

The Key Takeaways

In conclusion, the success of logistics companies will increasingly depend on the reinforcing causal loop created between data and technology. Improvements in information systems make access to data easier. Easier access to data motivates companies to gather more data inputs. More data requires more complex information systems to manage it. The improved systems and data help companies make better decisions for more efficient and effective supply chains. The accuracy of data and the cost of investment in complex information technology are new challenges that logistics companies will have to manage. Integrating already complex business systems into even more complex technology or embracing one end-to-end system may be a good solution for some companies.

However, the introduction of disruptive technologies such as blockchain, Internet of Things, robotics, and autonomous vehicles requires agile information technology that allows very fast adoption of innovation. As the companies are moving towards Industry 4.0, they will be giving up complex integrated systems and adopting specialized micro-services that will facilitate innovation through flexibility, low cost, better data management, and short life cycles.