From flying shuttles to rolling robots, automated supply chains are almost here

Emerging technologies prepare the ground for the autonomous world, including the unmanned supply chain with many benefits but also risks to be mitigated. The main challenge and responsibility for the leaders of today is to capture the benefits while finding meaningful activity for all of us.

ASCFrom Amazon’s delivery drones to self-driving cars, autonomous factory equipment to Elon Musk’s 760 mph vacuum tubes – automated vehicles are on the rise.

Even beyond the grounds of private companies, tests of automated transport have been successful. A truck platooning system, in which groups of two or three “smart trucks” travel closely behind one another communicating wirelessly, arrived in Rotterdam in April. The Ministry of Transport in Singapore seeks proposals to develop something similar.

Also in Singapore, Airbus is pursuing an autonomous air taxi project to deliver parcels to ships in the port. On the water, the cargo ships of the future are expected to be crewless and remote-controlled.

The so-called “last mile”, delivery to the doorsteps of businesses and consumers, is probably the most complex task in the supply chain – especially in busy urban environments full of cars, bicycles and children playing in the streets. Intelligent self-driving vehicles can transport up to 100 pounds. In Paris, two entrepreneurs are building a flying river shuttle that will bypass traffic by travelling above the Seine.

Raw materials can now be extracted in automated mines; they then reach the smart factory 4.0 and are transported from there by wireless truck or delivery drone to the automated distribution centres of retailers or the smart boxes of individual consumers.

The point? The autonomous end-to-end supply chain is almost complete.

Automatic benefit

Automation in the world of logistics will create enormous opportunities when it comes to making the flow of goods safer, more efficient and more environmentally friendly. Self-driving cars alone would reduce accidents by 70%, improve fuel efficiency by 20%, and save about 1.2 billion hours of driving time over a period of 10 years. Less congestion will make the flow of goods and people faster – and those countries with driver shortages, such as the United States, United Kingdom and Germany, will find relief.

The improvements do not come without challenges, however. One key concern is cyber risk. We need to ensure that autonomous units cannot be hacked. Also ethical questions need to be answered – how to decide whom a vehicle is supposed to save in case of an accident, for example. Policy-makers also need to consider the impact on jobs: where to start, where to slow down the autonomous economy to avoid unwanted consequences, starting with unemployment.

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The autonomous movement, which began in the early 1950s, is now in full swing. Of 1,433 consumers surveyed in the US, 70% think they will order the first drone-delivered package within the next five years. The majority of policy-makers (88%) expect autonomous vehicles to gradually become a reality within the next 10 years, based on a recent worldwide self-driving vehicle study by the World Economic Forum.

According to the same survey, 60% of policy-makers expect a ban on private cars in cities over the next 15 years. And this might not be limited to private vehicles: over time cities will further regulate goods deliveries, which are one of the main causes of daytime congestion. Therefore, not only transportation companies, but also shippers need to prepare for an autonomous future.

Capturing the full potential of the automated supply chain requires rethinking entire logistics systems. There will be an evolution from the fixed “collect in the evening and deliver during the morning” approach to a fluid system of continuous movement and supply. Platoons, drones, tunnels, tubes, rolling robots and automated warehouses make the constant flow possible.

But this requires flexibility and innovation on the operator level, as well as investments in technology and infrastructure. It requires close collaboration between not just manufacturers, retailers and developers, but policy-makers and the citizens themselves.

Image: REUTERS/Wolfgang Rattay

This blog was originally posted on the World Economic Forum Agenda.

Working smarter – innovative port solutions

The world’s most innovative ports are using ‘smart’ solutions to improve revenue sustainability, explains CVA’s Wolfgang Lehmacher

Every professionally run company aspires for value creation through revenue increase, new growth engines, cost reduction, heightened efficiency and sustainability.

In the constant search to boost profits they continuously seek a competitive advantage through product and behaviour differentiation, an aim increasingly compatible with carbon footprint reduction and other green initiatives.

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In terms of their general aims and ambitions ports are not at all different to any other business.

Managers seek to maximise strengths and minimise weaknesses. But the unique position of ports as facilitators of global and regional trade and often also as integral parts of cityscapes, makes the simultaneous improvement of efficiency, revenues and environmental performance even more desirable.

Meeting these varied goals, opening new markets and securing the long-term viability of ports and the employees, traders, cities and areas that rely on them in a rapidly evolving global economy can be driven via the application of smart thinking and processes. In this sense, smart stands for different and responsible behaviour enabled by new, at best holistic, concepts and modern technology.

Ports must be efficient enough to fit into the modern world, and into modern global and just-in-time supply chains. This can mean customers need multi-modal interconnectivity with a port’s hinterland, or with a certain geographic region or even an entire economy.

 

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The smart concept can be rolled out so ports can become the pivotal point of a region. This can be as the core part of a bonded logistics park as we have seen in Yantian, China, for example.

More efficient container yards, better rail access and taking steps to ensure full integration with regional and national transportation plans are just some of the smart moves port businesses and local governments can examine to ensure they are offering the services and facilities their customers – businesses and people – need. And that they are offering them where they are needed.

Many port customers also have increasingly sophisticated niche requirements. A smart solution could mean the port supplying special temperature-controlled storage, handling and personnel for cold chain products such as pharmaceuticals and food stuffs. Or it could mean facilitating sea-air onward shipments options for cargoes that need to be shipped at least part of their journey as air freight, a solution that involves close cooperation by port managers with customs, quarantine, airports, forwarders and airlines.

Customer shareholders and the port’s own management – particularly for ports near cities – may need increasingly to prove show their sustainability, which can mean implementing green port solutions to meet stringent noise, water and air quality standards. Shippers and other port users and stakeholders need not only to be reassured, but need jointly to reassure civil society that adequate risk mitigation and security procedures are in place to ensure business continuity and safety for humans and the environment.

Indeed, there is no reason why ports cannot manage the total water cycle not only in relation to ships docked in port, but also in relation to the surrounding community through better ballast water treatment, desalination of sea water, water purification for potable water etc.

 

Healing hands

Ports could also act as facilitators of medical services. At present most commercial and passenger vessels have their own medical services, often entirely disconnected from global medical ecosystems. If someone gets sick or ill on board, instantaneous connection with medical doctors located off-site via a ‘virtual clinic or hospital’ could speed diagnosis and better enable preparation of the correct medical treatment before the vessel arrives at port and the patient is whisked to a local hospital.

For a port manager, all of these customer and stakeholder demands can easily be viewed as a regulatory burden, or an unnecessary drain on finite resources. Smart managers should instead view them as opportunities, opportunities that can sustain a port business over the long-term. Professional port managers should determine the smartest ways of meeting these changing requirements to maximise returns within budget restrictions. The world’s leading port managers are already grasping this truth.

In the port of Sydney in Australia, for example, various actions have been taken to illustrate just how important the port takes its green credentials. This has seen the installation of leakage proof technology, improved supervision of dangerous goods, waste reduction initiatives and a collection system for flushed water.

On the US West Coast, the ports of Los Angeles and Long Beach have been leading the way in reducing emissions by both trucks and vessels, while in Germany the port of Hamburg has introduced railcars with noise-reducing ‘whispering brakes’. These efforts benefit both the local community and customers keen to demonstrate their embrace of carbon footprint reduction initiatives while also differentiating each port’s product.

The port of Antwerp has embraced many of these smart ambitions to establish its position as one of the world’s leading ports. Rail, waterway, pipeline and road connections guarantee hinterland transport options, while the port’s future-oriented energy policy includes a biomass power station and wind turbine.

In Sweden, the city port of Stockholm has taken the green and sustainable end goal a step further and is differentiating itself in a highly competitive market by pledging to become fossil-fuel free by 2030. The Royal Seaport project will see systems installed that carefully manage and preserve energy across the port using an automated grid to improve asset utilisation and a cold ironing solution that will enable vessels to plug into the local grid while at dock.

As well as appealing to port users, city planners and regulators, many of these measures can help grow revenues and reduce costs in the long-term by minimising at the same time the environmental burden, for example in the area of energy consumption and safety at work.

The lesson from the world’s leading ports is simple: Smart strategic actions can help port managers thrive in an ever changing world.

Wolfgang Lehmacher is partner and managing director (Greater China & India) at CVA, a global strategy business.

Image: Pavel Kavalenkau, Bildagentur: 123RF

This article was originally published on 12 February 2013 in Port Strategy.

Collaboration in the World of Transportation Networks

In the today’s world of global commerce and supply chains, reliable and efficient delivery services are essential. The transportation networks that provide these services are cornerstones of successful economies and nations. Transportation networks at their most fundamental level are made up of people and policies, products and processes. For a network to provide consistent and optimized delivery services, its policies and processes must ensure precision and excellence and elicit a passion to perform amongst the people underpinning the network. Additionally, the components of the network need to work together efficiently and smoothly ensuring that goods are delivered within the promised timeframe, while at the same time providing a seamless and coherent experience to customers.

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With countries and markets around the world becoming more interconnected and interdependent, transportation networks face major challenges. The volatile environment, in which businesses operate, requires resilience from logistics solutions. At the same time the needs of customers are becoming broader, and in particular the precision in service delivery is becoming more critical for the increasingly complex supply chains. Few players today have the reach and coverage to satisfy these demands, using traditional sole ownership-based network models. Ownership networks are limited by the financial resources to establish the assets and structures these networks are built upon. Furthermore, building ownership networks takes time.

The more flexible model of a transportation network that can meet these challenges and cope with the demands of the modern world is a network based around collaboration – that is a network where the assets are not owned by one company, but instead belong to multiple owners. Such a network is about sharing – sharing of vision, sharing of investments, and sharing of risks and gains. It is also about frameworks, about flexibility and about focus. The collaborative model allows companies to offer services and reach beyond their own borders and means. At the same time, each partner can focus all efforts on the specifics and dynamics of its market, while the network or lead entity and partner is ensuring network coherence. The result is a network that responds very well to local requirements and rapidly adapts to changing demand patterns.

In order to better understand the collaborative model, it is best to contrast it against the traditional model for network businesses – the sole ownership model. At a conceptual level, the difference between the sole ownership model and the collaborative model can be described as integration across the value chain versus value added.

 

How does the collaborative network differ from the traditional sole ownership model?

Sole ownership networks are built around a single asset base, whilst collaborative networks are built around a shared vision. Sole ownership networks seek differentiation predominantly through “hardware” (e.g. trucks, planes, buildings…), whilst collaborative networks do so predominantly through “software” (e.g. processes and relationships…). Consequently, sole ownership networks seek advantage through controlled own assets and sometimes feel constrained by a shortage of “hardware” in the form of capacity. Collaborative networks, on the other hand, seek advantage through combined knowledge and capabilities and sometimes feel constrained by a shortage of “software” in form of partners.

Looking at it in more detail, sole ownership networks are built on the underlying belief that quality and an efficient operation can best be ensured by owning in one hand as many network components as possible. The key integrating factor here is total control and clear direction through the sole ownership of assets. The ownership network is focusing on harmonizing through standardization and training. Collaborative models are built on a different paradigm. They are driven and differentiated by design and efficiency of process rather than the assets that underpin the network. The network or lead entity and partner in a collaborative network taps into the capacity and capabilities, talent and knowledge of various players and needs to manage diversity in an inclusive way.

In practice, most transportation networks are a mixture of ownership and collaboration, though they do have tendency towards one particular model. Consequently, there are predominantly sole ownership networks, with most assets on a single balance sheet, and there are predominantly multiple owner networks, with assets spread across several balance sheets.

The approach to product offerings and meeting customer demands varies across the two types of network. The needs of customers vary from market to market, as a result of local geography, culture, infrastructure etc. These variations need to be factored somehow into the product offering of the network. Sole ownership models tend to adopt a single centrally developed offering in all markets across the world. This ensures a high level of coherence globally, at the detriment of showing less adaptation to the intricacies of local customer demand. Collaborative models tend to set a broad global product concept and a minimum set of global operating standards, and then allow the local entrepreneurs within the network to respond to specific customer needs within this framework. This enables tailoring of product offerings to local market needs, but may sacrifice on the global harmonization of the offering. Both models have their own strengths and weaknesses and each appeals to different types of needs and customers.

For both network types, local operations and their offerings are connected by a common network architecture. Ultimately both, the local operation and the network operator are responsible for ensuring that goods are delivered on time and in good condition. In order to achieve this, both models require IT systems that can manage massive information to support the steering and monitoring of cross-partner processes. Due to their standardized product offerings and the fact that only a single party accesses the systems, one can imagine that the IT architecture for sole ownership networks are relatively simple. However, they are often heavy systems as they have to cover all needs of all entities – a closed shop and system approach. In contrast, collaborative networks require a more complex core element, which can support greater interfacing capabilities, the flexibility to integrate the various partner systems, and the ability to adjust to tailored local product offerings. While the smaller core is a rigid module, the interfaced partner systems remain flexible and can be well tuned towards varying local market needs – a more open system approach.

The most significant difference between the sole ownership and collaborative models is their management culture and philosophies. Sole ownership models have a general tendency towards top down shaping and a “command and control” culture. For collaborative networks, no partner, not even the network or lead entity has total control over the network assets. This makes this “command and control” approach unfeasible. With this type of model, only strategic vision and operating frameworks are introduced top down, ensuring a coherent business model and that all partners are moving in the same direction. Beyond this, operational decisions are generally taken bottom up, though this is within the common framework developed by the network or lead entity and partner. This ensures consistency, while enabling effective adaptation to local markets. Thus rather than a “command and control” approach, the leadership approach in collaborative networks can be characterized by “teamwork and entrepreneurship”.

 

What are the key factors that ensure the success of collaborative networks?

The key factors that are essential to the success of the collaborative model can be described on three levels: the “leadership and strategic” level (why), the “operating” level (what) and the “management” level (how).

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In respect to leadership and strategy, integration and alignment are key factors. Integration in collaborative networks starts with alignment between partners, which in turn comes through shared visions, beliefs and concepts – the jointly accepted strategy. This alignment within collaborated networks can only be achieved, when the leaders and often owners of the participating companies are willing and able to align themselves with each other. Leadership is crucial for ensuring a collaborative network is well integrated, which drives the success of the business community and the success of each individual partner.

In respect to network operations, common references are needed. These can be provided for example by a franchise concept. A franchise provides common frameworks, standards and common and individual targets. It outlines the rights and obligations of parties involved and fosters an entrepreneurial drive amongst franchisees. Consequently, the franchise concept is an effective tool to integrate collaborative networks and ensure that seamless processes exist across the network. This ensures a coherent and consistent customer experience, while the entrepreneurial spirit of the largely autonomous franchisees ensures the most commercial approach to the business and different markets.

Making a collaborative network work in day-to-day life and requires a management style that supports “teamwork and entrepreneurship”. The contracts and cultures of the different network members have to support this approach and spirit. At the beginning and more importantly as the collaboration progresses, a constant dialog between partners is essential to prevent and address concerns and tensions that may emerge. Effective communication skills and an ability to understand and adapt to different cultures (whether that be a corporate culture or the culture of a country) is key to enabling this dialog and bridging the gaps between the different partners.

The warrants of success in any kind of collaborative model are first of all strong leadership and a clearly defined strategy. Successful collaborations are built around shared vision and ambitions and a common set of value shared by all partners involved. They can be sustained over time by mutual benefits and joint prosperity. Achieving this requires clarity and alignment in terms of the respective strategies of the individual partners. Collaborations should be a core element of the strategy, endorsed and announced by the top management of each partner organization. This canon of aligned messages needs to filter down through all levels of the collaborating organizations. In their early stages, collaborative partnerships need to focus on realizing “quick wins”. This can be about ensuring agreed financial and operational milestones are reached, as well realizing softer achievements such as rapid knowledge transfer and sharing of best practices. This allows all partners to see the benefits of the collaboration early on, thus cement the partnership. In collaborative transportation networks, brand is also an important strategic factor. While its brand is often the core value that the network or lead entity and partner of a collaborated network brings to individual partners, this does not mean the network or lead entity brand becomes the common brand, or that local brands should be replaced. The network may well wish to respect the existing local partner brand and leverage the goodwill it has built up in its community. However, some sort of commonality is helpful as the reference for customers, for example co-branding with a shared alliance and network brand. The brand functions as a common signature for customers and the network and business community, standing for the coherent customer experience that is provided.

At the operating level, integration is driven by product concepts and standards, aligned processes, and interfaced IT systems. Customers demand a coherent offering, which requires the same broad product concepts and standards to be used across the common platform. Aligned processes and flexible reliable IT interfaces enable this by making effective and efficient network management possible. While local processes have to be tailored to support local offerings, common standards across the network ensure the seamless flow of goods.

At the management level, alignment of governance mechanisms is a key enabler of successful integrations. Contracts with collaboration partners underpin the network and are undoubtedly the most critical governance mechanism as they summarize all critical factors. A prudent approach to forming a collaborative network is to gradually upgrade contracts as partnerships evolve and strengthen. Beginning with a “lighter” collaboration agreement (for example some sort of agency or service arrangement), and then eventually progressing through to a fully-fledged franchise contract minimizes risks and ensures, the suitability of partners can be thoroughly assessed before they become fully entrenched in the network. Participations cement the relationship. Road maps attached to the contracts serve as useful reference points for the discussion amongst the partners.

 

Which is the better model: collaboration or sole ownership?

The case can be made for either of the two network models.

The sole ownership model clearly has the advantage of robustness, as well maximizing profits since they do not need to be shared between various partners. While the model is very rigid, it allows for a clear global standard – one company, one brand, one offer – suiting those who believe in a high level of standardization. Through its tendency towards central command and control, the ownership model usually provides greater confidence to shareholders, management and employees and enables the faster implementation of new ideas and concepts, policies and procedures, processes and systems. However, this often comes at the cost of high investments in assets and ramp-up phases.

The collaborative model, on the other hand, enables each partner to focus on their core activities and strengths. Although profits are split amongst numerous partners, collaborative models enable expansion beyond financial and knowledge barriers of individual companies, through shared investments, expertise and risks. While decision making and implementation of new ideas may be slower, due to the numerous partners involved, this is offset by the natural tendency for collaborative networks to allow for greater operating flexibly and tailoring to the needs of local markets and customers. Instant reach is possible when fully-fledged operations are connected. However, this comes at the cost of less cohesion.

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In summary, while the sole ownership model is a very effective and coherent way of running a business, applying the collaborative partnership concept to a supply chain eco-system and logistics value chain is a smart and responsible way to run a business as existing capacity is combined and used – in fact, the collaborative culture promotes the creation of value beyond the organization, for partners and customers alike.