New routes to success

29 Jul 2004

Residents of our capital who sit in their cars on the quays watching articulated lorries struggling through the traffic to Dublin Port could be forgiven for thinking that the transport and logistics sector from Ireland is a resolutely low-tech business.

While the public face of transport and logistics in this country – heavy goods vehicles on our roads – doesn’t smack of cutting-edge technology it’s just the tip of a supply chain iceberg that in some cases leads the world.

Ann Potter, a senior manager in Deloitte’s strategy and operations consulting division, sees the sector in Ireland breaking down into three distinct groupings. Leading the way are multinational manufacturers such as Dell, which is a global leader in supply chain management. Below these are indigenous companies who interact with the multinationals and whose procedures and technology have been developed to a much higher level as a result. The third and largest grouping consists of the smaller companies that don’t interact with the supply chain leaders and as a result haven’t developed their processes to the same level.

Effectively managing the supply chain is not just a matter of operational efficiency. A recent worldwide study of 600 manufacturers by Deloitte found that just 7pc of companies are effectively managing their supply chains.

“The survey clearly indicates that effectively managing a complex, global supply chain has a positive impact on a company’s financial performance,” says Potter. “Those companies that manage their supply chains well are, on average, 73pc more profitable than their peers. There are many examples of world-leading supply chain management in Ireland. However, a large proportion of Irish organisations under-emphasise the importance of their end-to-end supply chain in favour of a functional focus on silos such as inventory, sales, production, distribution and purchasing.”

Edward Sweeney, director of learning at the National Institute of Transport and Logistics (NITL), believes the focus on silos, particularly in terms of IT spend in the sector, is changing. “Three to five years ago the focus was on point applications that provided a very limited functionality,” Sweeney explains. “These were very good at what they did, things such as GPS, satellite navigation, route planning, distribution network optimisation but they were only point solutions. Now the big trend is that you need a higher level of integration across the supply chain. There’s an awareness that transport is only one link in the supply chain. You can optimise a sub-system in the chain and inadvertently end up making the total system less effective.”

The upshot is that logistics companies are now diverting their spend towards integrated systems invariably based on the large enterprise resource planning (ERP) packages. SAP seems to dominate the sector – Sweeney recently spoke to one logistics company that estimated 70pc of its clients were using SAP – but PeopleSoft (nee JD Edwards) and Oracle are also popular choices depending on what sector the company’s clients are operating in.

One Irish company that has successfully become a world leader in supply chain management is SerCom Solutions, which provides manufacturing and logistics to clients in the hardware, software, medical devices and consumer electronics sectors. According to group sales director, Declan Reilly, the company has made a significant investment in logistics over the past number of years. While it still operates a number of vans for local deliveries it has heavily invested in systems that allow it to closely integrate with international delivery companies such as FedEx, UPS and TNT. It also has a worldwide partnership with global freight player Kuehne & Nagel.

Underpinning its interaction with clients and partners is an integrated ERP system based on SAP 4.6C that allows it to interface with the IT systems of its customers and their suppliers. Customers are provided with 24-hour access to SerCom’s systems over the web and can track products throughout the supply chain. The system is built on WebMethods, using a native adapter for SAP and many other leading ERP systems, with end-to-end security based on HTTPS, SSL encryption or X.509 digital certificates.

The warehouse operation is a particularly good example of the level of integration as radio frequency technology links directly back to SAP in real-time. “Some operations have a different warehouse and ERP system but we wanted them integrated,” explains Reilly. “We scan all products in and out and the information is uploaded in real-time for the wireless handheld scanners.”

Another area of significant technology investment is relating to security – the US Federal Bureau of Investigation estimates the annual worldwide cost of freight crime at US$75bn. One of the country’s leading transport and logistics players, Walsh Western International (WWI) has invested almost €2m in security for its transportation services throughout Europe. The technology underpinning the investment is based on satellite shipment tracking technology.

“With WWI’s new secure service we are eliminating the chance of goods being stolen,” says John McDunphy, general director of transportation at WWI. “Constant monitoring throughout the whole transportation process will ensure the highest standards of security are in place throughout the entire supply chain.” The satellite tracking monitors the exact location, speed and direction of each working trailer in the WWI fleet. Once loaded, the trailers become a totally sealed and alarmed unit and any movement of the doors or separation of the cab from the trailer will trigger an alarm.

WWI is currently seeking the Technology Asset Protection Association certification that recognises best practice in high security total logistics service. The investment certainly seems to be paying off – WWI recently won a multimillion euro contract from PC World to handle the logistics for its e-commerce component business in the UK.

Orlagh Nevin, head of business services with O2, is seeing a huge uptake in demand for its wireless solutions aimed at the transport and logistics sector. The software solutions are generally offered by its partner network with O2 providing the carrier mechanism, but it has begun to offer its own branded solutions with O2 Instant, which attempts to eliminate paper from the supply chain by enabling drivers to capture orders, signatures and other information on PDAs and seamlessly linking this to back-office systems. “With vehicle management it’s great to have the just-in-time information about where a vehicle is, what speed it’s going, the temperature of the load and so on,” she says. “The biggest benefit though is at the end of the week when you do the reporting. That level of information allows you to do much better planning.”

One of the most high-profile transport projects O2 has been involved in was a vehicle tracking system it provided to Aircoach in partnership with WS2. Passengers can see where the buses are on screens in the arrivals hall at Dublin Airport or log on to the internet before leaving home to view the real-time data. “It’s a great example of how this technology can make your business more competitive,” she says. “There’s so much information that you can get into the public domain; you just have to make sure it’s an application that people want,” she says.

While Ireland needs to continue to develop its expertise in transport and logistics if it is to compete against low-cost manufacturing locations, the challenge, according to Sweeney, is that the sector is dominated by small companies. “It’s a big issue for them just staying on top of what technology is out there,” he says. In response to that problem, the NITL publishes an annual software directory for transport companies as part of its remit under the National Development Plan. But Sweeney firmly believes the pay-off for companies that make the investment in IT will be more than justified.

“It’s a globalised market and as a result the big international players need a footprint in each market,” he says. “They will acquire that with strategic alliances and joint ventures with local companies for whom it’s a very attractive option. That has very serious implications for their IT infrastructure.”

By John Collins