Collaborative logistics management boosts profits and transparency

Status:

Customer A: A fastener wholesaler maintains a large inventory for its industrial customers to ensure delivery capability. IOT devices on the shelves of industrial customers automatically detect inventory limits and trigger an order to the wholesaler. This order is delivered the very next day and put away via onsite service providers. Depending on demand, further orders are automatically sent to the wholesaler.

Customer B: A book wholesaler provides book retailers with supplies to secure inventory. If a bookstore does not have a retail customer's desired book title in stock, the merchandise management system sends an order to the wholesaler for delivery the following day by 6 p.m. Subcontractors of the wholesaler take over transportation to the book retailer from an area hub and even store the ordered books on the designated shelves.

Similar scenarios exist for A and B's business models:

  • The fastener retailer (A) uses 3PL companies for logistics and subcontractors for shelf service.

  • The book wholesaler (B) uses its own fleet for the main run in 30 hubs and subcontractors for the onwards run and shelf service in the distribution areas

  • Both companies use subcontractors to deliver to customers in the distribution areas with their own delivery vehicles and to provide shelf service in a specific time window. The subcontractors of the book wholesaler (B) have keys to each bookstore and guarantee to replenish the shelves until 8 a.m., before the stores open.

  • The subcontractors use their own vehicles, and they work exclusively for the book wholesaler (B) or the fastener wholesaler (A)

Challenges:

1. Price:

  • Lack of efficiency due to exclusive contracts with subcontractors.

  • Lack of understanding and knowledge of subcontractors' cost structure

  • No possibility to compare

  • Mutual dependency and thus limited room for negotiation


2. Reliability:

  • Lack of quality control

  • Lack of information about punctuality, traffic situation, driver performance, vehicle condition

  • Knowledge gap between wholesale and retail customers

  • Independent planning by subcontractor without integration into wholesaler's IT infrastructure



3. Risk Management

  • Absence of the subcontractor's dispatcher

  • Discontinuance of the subcontractor's business

  • Financial difficulties of the subcontractor

  • Dependence due to lack of knowledge about distribution routes, time windows, locations

  • Dependence due to lack of transparency in case of impending price negotiations

  • Lack of knowledge about infrastructure (vehicles, service technicians)


Solution:

Wholesalers provide subcontractors with a cloud-based scheduling system to increase efficiency and productivity. Subcontractors contribute to the cost in the form of software as a service.

Which functions are covered to improve subcontractor performance and provide more visibility?

  • Capture of all shipping and operational data

  • Creation of fixed route schedules

  • Mobile driver app for work procedures, receiving signatures, proof of delivery

  • Provision of route planning and rescheduling in the driver app

  • Reporting of driver positions with geo-positions

  • Geofencing, i.e., time stamps for entering and leaving delivery locations

  • Ticketing in a control tower for alerts in case of delays

  • Real-time information to planners for quick response options (e.g., alternative vehicle, customer information about delay, etc.)


Persuasion through Win-Win Situation

Comprehensive digital transformation with multiple parties involved is difficult and it is essential that all partners and their employees are convinced of the benefits of digitization.

In this case, the wholesalers provide a solution that gives you more information and transparency. The subcontractors, on the other hand, benefit from reduced manual planning effort and greater efficiency, faster processing of orders and optimized routing.

There are numerous advantages for all parties:

  • All master data in one system: Subcontractors, Territories, Delivery addresses, Time windows, Attributes

  • Automatic geocoding of addresses

  • Optimal planning of fixed routes and tours by algorithms, even with seasonal fluctuations (e.g., holidays)

  • Fixed routes and tours are filled and matched with orders: Sufficient vehicles?, Sufficient drivers?, Sufficient time window?

  • All planning data in the driver app

  • Permanent feedback from driver app about status (orders on time, interruptions, delays)

  • Simple rescheduling (postpone subsequent orders, schedule additional drivers)

  • Control tower with ticket system supports quality management and continuous improvement process

  • Recognition of optimization potential in case of recurring disruptions

  • Transparency through KPI's for retail customer, subcontractors, and wholesalers


Result:

Benefits for the subcontractor with a distribution area:

  • System support

  • Securing of processes

  • Margin maximization possible due to higher efficiency, since fixed payment by volume

  • Avoidance of penalties due to inferior quality (delays)

  • Higher resilience (also in case of employee absenteeism)



Benefits for the wholesaler:

  • All data in one common system

  • More transparency about quality and cost structure of subcontractors

  • Higher reliability of subcontractors

  • Limitation of risk

Collaborative logistics management boosts ...