Transport and logistics are facing a number of challenges: from the increasing pressure on cost optimization, labor market imbalance, legal uncertainties, through to the technological arms race and environmental awareness. WBJ met with Janusz Anioł, General Director of Raben Logistics Polska, to talk about the transformation the industry is going through
Interview by Beata Socha
WBJ: The Logistics market is undergoing a continued boom thanks to the growth of e-commerce in Poland. What should we expect over the next six months, as well as beyond 2018?
Janusz Anioł: It would seem that the impact of e-commerce is seen mainly in the courier industry. However, online shopping also fuels the warehouse industry, with an increasing demand for storage, parcel preparation (individual, bundled, palleted, involving re-packaging and other), servicing returns/complaints as well as payment management.
The interconnection between e-commerce and logistics is increasingly visible in the B2B market. Until recently, B2B e-commerce practically didn’t exist. The need to optimize distribution costs and eliminate intermediaries, as well as the generational change, are forcing the development of online B2B sales. Today, B2B e-commerce is growing rapidly on a global scale. According to Frost & Sullivan, the value of this segment will grow quickly over the next few years and become similar to the B2C model. One automotive manufacturer has recently been testing distribution channels that circumvent intermediaries, which is a great example of the trend.
Experts expect B2B channels to expand and feature a lot of functionalities that have thus far only been used by private consumers. According to Forrester Research, in 2017 companies expected that over half (56 percent) of their B2B purchasing will be done online, a marked growth compared to 2014 (30 percent).
There is growing pressure on cost optimization. How competitive is the market now?
Our business operates on low margins, and at the same time requires high investment outlays and takes on a lot of liability (particularly for goods storage). High labor costs and the increasing burdens on the transport and logistics companies are driving them, Raben included, to focus on cost optimization. We continue to look for solutions that will allow us to render services better and more efficiently.
One of the key values of our company is entrepreneurship. We put a lot of weight on perfecting our processes. We’ve been redeveloping our culture to be more inclusive and we continue the lean “Better every day” project. It encourages every employee to try to make their working space more efficient and manage resources in a sensible way. It is at the “front line” of our warehouses and transport that we get ideas on how to improve service quality, optimize processes and thus lower our and our clients’ costs. We work with clients individually, as far as possible. We organize lean management workshops and we look for savings together. It can produce really unexpected results.
How is the regulation on drivers’ minimum wage in the EU affecting the profitability of logistics operators? Will Polish companies continue to be competitive in Europe if it takes effect?
In June the Council of the European Union is set to vote on the mobility package and excluding transport from posted workers regulation. Thus far, the significant differences between member states have made it impossible to reach a common stance on the matter. But all of us in the industry hope for a positive solution to the problem. For now, each country has submitted their view on the matter asking for further negotiations. There have been many sensible points made and we can see a greater understanding of the transportation matter than in 2017. All the grassroots work is showing the first results, similarly to what we’ve seen in the European Parliament.
Polish companies dominate in European international transport, with a market share of 28 percent according to trans.info. However, if transport is not excluded from the restrictive regulations on posted workers, it will affect small transport companies in particular. It is a peculiar situation. On the one hand member states are waiting for the final resolution of the matter, on the other they are implementing their own regulations. This leads companies to have to interpret the law on their own or get their partners to agree to cover all the consequences of the potential problems.
I am afraid that it will turn out that these interpretations are not in accordance with the official letter of the law and all the interested parties will jointly pay for their infringements. Creating a barrier for Polish transport companies does not mean that German or French firms will automatically take over the market. They have a severe shortage of drivers and mounting formal barriers on competition will not change that.
Is price all that matters in logistics? Some industry analysts go as far as to state that there is no brand loyalty in the industry. Would you agree?
Naturally, price is a very important factor and every sensible entrepreneur calculates operational costs carefully. That said, if the partner fails to deliver a quality logistics service or if it falls short of the expectations, it is often not the price, but the stability, quality and experience of the operator that is the deciding factor for future or continued cooperation. In the B2B sector, recommendation and relations matter.
Of course, if we are talking about the simple matter of getting goods from A to B, the best prices, delivery times or any other feature that is important to the client can make them choose one provider today and another tomorrow. There is no loyalty there, clients simply focus on the lowest price.
However, when more complex and complicated services are involved, the more clients think of risk assessment and credibility. We can see that in our clients’ portfolios. Some left us but then came back. Others come because they have heard that we can offer them professional and safe cooperation. There are also companies that have been with us for many years. This year we are celebrating 20 years of cooperation with Nivea and we are signing a contract for more.
How big a role is technology playing in optimization and raising efficiency?
Just as technological development is making our everyday lives easier, it is also impacting efficiency and costs. According to Deloitte’s report (“The connected worker. Clocking in to the digital age”), the vast majority of employees look favorably on applying modern technologies in their companies. Even though you can’t compare logistics to automotive in that regard, it is one of the segments that are most eager to support their employees with technological advancements. After all, the job of drivers and warehouse workers is particularly demanding. That’s why innovation is implemented from the ground up: from individual employee level to the entire company’s management systems.
Today, I cannot imagine a warehouse without computers helping people manage logistics processes. Without digital-human cooperation, the sheer volume of orders would make it impossible to meet any reasonable deadline.
We use advanced warehouse software, such as WMS Red Prairie, to optimize complex logistics processes. Automated packaging, wrapping and shipping lines make warehouse work much easier at Raben. Modern grid picking lines increase work efficiency, improve the quality of completed pallets and significantly increase the efficiency with which they are used.
To successfully implement high-tech solutions, the Rabenroup created a dedicated R&D team. It deals with innovation in process optimization, as well as creating entirely new operation models. Transport and logistics are almost entirely “paperless.” Some of the tasks of our Genius Lab include implementing “early warning” mechanisms to foresee where delivery dates might fall through, using advanced algorithms for image recognition to e.g. measure a parcel’s size before it enters the warehouse, and many others.
How automated is the logistics industry? What Industry 4.0 solutions are being implemented?
Logistics processes are under heavy influence from innovations such as autonomous trucks, interconnected vehicles and delivery drones. You can also expect rapid progress in M2M (Machine-to-Machine) communication, which may simplify the automation of logistics processes in the warehouse and contribute to spreading drivingsafety mechanisms. All these novelties are on our radar. We are already testing some of these solutions, e.g. drones.
And while we relish automation, we need to keep in mind that these solutions are costly, and implementation often takes years. It makes sense to focus on solutions that will be used by more than just one client in one warehouse. Let’s not forget that each process, particularly in customer service, starts and ends with people. That’s why we continue to develop our employees.
How important is employer branding in logistics in this employee’s market that all industries are confronted with?
Apart from competing on products and services, there is an increasing rivalry between organizations in the labor market. Building an employer’s brand is increasingly important. A very common mistake firms make is focusing on outside promotion and marketing, while forgetting to ensure the satisfaction of current employees. A company’s image on the outside very much depends on how it is seen on the inside. That’s why monitoring the sentiment and opinions of employees is a key component in building an employer’s brand. Raben routinely carries out engagement and fulfillment surveys, and based on the results we implement activities to increase employee satisfaction.
One of Raben Group’s responsible business goals is taking care of the health and safety of our employees. We have a whole range of initiatives aimed at improving safety, including a “Safety Month” that we’ve been organizing for three years now. It involves a series of educational meetings that show our employees potential safety risks and motivate them to create a safe working environment.
Environmental awareness is a major trend in all industries. How does the logistics business approach eco-friendliness?
As a leader in eco-friendly solutions among logistics operators, we are aware of the impact the industry has on the environment. We try to minimize our footprint and we engage employees, suppliers and clients in our efforts. We set increasingly ambitious fuel consumption and CO2 emissions targets each year. To meet them, we continue to invest in a modern car fleet that is more environmentally friendly. We’ve introduced recycling policies that have allowed Raben Logistics Polska to recycle as much as 93 percent of our waste.
The growing demands from our clients, a constantly increasing volume of goods to deliver, labor shortages and the rising expectations of our employees – these are the challenges that the entire transport and logistics industry has to face. We put our money on innovation: both in terms of car fleets, technological solutions and improving our employees’ and drivers’ working conditions. That is our idea, as an industry leader, for our business in the next few years.
IOT AND GOING MOBILE
Technology is making inroads in the logistics industry along the entire delivery chain. Here are a few examples of the latest apps and gadgets that are either already in use or will be implemented soon.
Real time monitoring
- The Internet of Things offers new possibilities for increasing efficiency, e.g. monitoring a parcel in real time from the moment it leaves the warehouse up to when it is delivered to the client’s door. This would give customers exact information on the delivery time and thus increase the percentage of parcels delivered at the first attempt.
- It also allows the further improvement of goods management: by installing sensors in vehicles you can monitor temperature fluctuations and control cooling systems to adjust for them. In case of a failure, both the driver and the dispatcher will receive an alert, which will allow them to solve the problem more quickly.
- Additionally, data stored throughout the delivery chain allows the company to monitor how standards and legal requirements are being met: from the number of hours drivers work, through to vehicle speed and fuel consumption to name but a few. The biggest gain is a gradual improvement in delivery times and the efficiency of the delivery chain.
- Mobile technologies used by drivers and dispatchers to determine location more precisely will allow for failsafe last-mile delivery. That is of particular importance, as independent research shows that as much as 40 percent of new drivers quit their job within the first few months just because they cannot reach their destination despite using the best navigation systems. Globally, an app called What3Words is gaining in popularity. It identifies locations somewhat differently from regular systems, allowing drivers to reach places that do not have an official address. In Poland, a new, free app is being developed under the working name Ariadne’s Thread. Initiated by the Polish Trucker Club association, it will not only allow users to pinpoint the exact location of delivery and recipients but also collect data on real road conditions (e.g. road blocks and shortcuts) and parking options (including parking duration and safety issues).
- Raben is currently working on an ETA (Estimated Time of Arrival) app that will provide its customers with information on the current location of their parcel, as well as the estimated time of delivery. Online communication (GPS/eGPS) between the driver and the system equipped with a tailor-made algorithm and a map will enable the firm to estimate when the driver will reach each of his stops and potential delays due to traffic. It goes without saying that this sort of information will increase transparency, reduce costs and increase customer satisfaction.
In the warehouse
- The range of high-tech solutions in warehouses is growing quickly, too. For instance, a device called Cubiscan allows for very precise measurements of goods without having to weigh them. It uses infrared light for small objects and ultrasound for larger ones. Information about the weighed objects is then transmitted to the warehouse management system.
- Warehouse workers have a lot of useful gadgets at their disposal. For instance, wristband RF scanners keep their hands free while scanning, barcode readers allow them to identify each product quickly and flawlessly, and later also trace its history. Other warehouse “helpers” include mobile printers fitted on forklifts, which puts them as close to warehouse operations as possible.
- Some gizmos are even smaller, but equally useful. Raben is preparing to launch intelligent employee IDs, which will not only monitor entries and exits to fairly assess working time, but also improve safety. Combined with a helmet sensor, the system will remind workers to wear protective gear whenever they are exposed to safety hazards by sending them personalized messages and signals. The company is going to implement the technology within a pilot program for 50 workers (both physical and office employees) in one of its locations. The program will start soon and last until the end of 2018.