Logistics Trends
A Flawless Flow of Goods
In a global market, companies with international operations face a real challenge in coordinating streams of materials and information. An optimally organized logistics system is increasingly becoming the key to survival.
Like termites, companies, and in particular their warehouse and ditribution centers, need tightly linked logistics chains
Smoothly supplying a metropolis of two million inhabitants is no easy feat. In fact, it's something of a miracle especially when the community lives in a structure 2,000 times the size of the residents who erected it. In this particular case, the inhabitants are African termites genus Macrotermes and they build their seven-meter mounds in the African savanna. The secret of their success is a flawlessly organized flow of goods. Supplies run without interruption from the system's multi-branch network to its main traffic arteries. Each termite is always in the right place at the right time to pick up a delivery and transport it to its ultimate destination. And all of them are highly motivated to carry out their tasks.
Rolling Jigsaw Puzzles. Logistics specialists can only dream of such working conditions. They are more accustomed to facing congested highways and interruptions in the flow of materials caused by such factors as delays at cargo-handling facilities. Nevertheless, in Germany alone logistics specialists have to ensure that approximately ten million tons of goods are transported on time every day by truck, train, ship and plane (see insert, below). In their efforts to do so, they have managed some major achievements.
Today's automotive industry is one good example. A car in the BMW 3 series can consist of up to 15,000 parts, making it something akin to a rolling jigsaw puzzle. Every day, up to 850 vehicles, each built according to a customer's individual order, roll off the assembly line at the BMW factory in Regensburg, Germany. Up to 70 % of the parts are produced outside of Germany, creating a huge wave of materials that BMW logistics specialists have to manage each day. An alternative approach would be longer-term storage, but the company would have to build huge warehouses, which would require employing large numbers of people as well as generating additional costs.
As a result, most parts are delivered to the assembly line shortly before they are used a system called "just in time" or "just in sequence." Over the decades, the auto industry has developed a perfectly synchronized, lean and highly flexible supply structure. Indeed, when it comes to logistics, the sector is considered to be a trendsetter. But today its available potential has to a large extent been exhausted.
Tracking the goods with telematics
Inside the Munich-Nuremberg Autobahn Traffic Management Center. The Center is fully equipped with systems from Siemens
It isn't uncommon for people to spend a couple of minutes placing an order on the Internet and then spend a couple of weeks waiting for the merchandise to arrive. The reason for such slow responses is that limited roads are deluged with traffic. Increasingly, the much-awaiteddelivery truck ends up in a traffic jam, especially in metropolitan areas. What's more, the problem is likely to get worse before it gets better. The Institute for Transport Economics at the University of Cologne, Germany, estimates that by 2015 there will be roughly a 23 % in rease in passenger traffic and a 63 % increase in freight traffic in Germany.
Targeting Traffic with Telematics. In Germany, one out of six newly registered cars is pre-equipped with a navigation system. Of those cars, over half accomplish their dynamic route guidance using TMC (Traffic Message Channel). Congested areas are identified by the navigation system at an early stage and factored into the choice of route.
In addition, Siemens has developed a concept for a comprehensive, integrated system under the SITRAFFIC brand. Traffic data is recorded by induction loops in the road surface or by infrared and video detectors. Then the data is sent via mobile radio to a central office, where the flow of traffic is mapped out and automatically evaluated. Depending on the situation, traffic can then be influenced in such a way that there are as few jams as possible. Telematics systems in Germany, such as those using familiar traffic-control equipment, manage traffic on roughly 3,200 autobahn kilometers and a host of tunnel routes. This helps protect the environment, and, according to the Federal Ministry of Transport, Building and Housing, reduces the number of serious accidents by up to 50 %. When traffic jams are imminent, these systems issue speed limits for individual lanes or specify no-passing zones and display these instructions on variable message signs large, programmable illuminated panels on highways. The current flow of traffic can be recorded by measuring stations, such as Siemens' "Traffic Eye." In this case, an infrared detector measures the traffic in each lane, identifying the number of vehicles, how fast they are moving and differences in speeds. Photovoltaic modules provide the required power, and data transmission is handled via radio. Similarly effective are intelligent systems that automatically record and analyze the flow of urban traffic and regulate it through traffic lights. Siemens' MOTION solution, for instance, which has been used effectively in Graz, Austria, since 2001, cuts average driving times by more than 10 % while trimming emissions by 15 %.
Another telematics solution is offered by so-called "floating car data" systems. Here, the vehicles themselves act as traffic sensors. The current position and speed of a vehicle is determined through its own on-board navigation system and transmitted automatically and anonymously to a colllection point via mobile radio. To model current and future traffic flows, between one and 5 % of all vehicles must participate in a system of this kind.
Eyes on Fleets. Fleet management systems help fleet operators control and dispatch vehicles in the best way possible. Siemens offers a system consisting of an on-board computer, navigation system and office software that optimizes communication between fleet managers and individual drivers. New jobs or destination addresses can be transmitted directly to the vehicle via text messages. With the push of a button, these jobs can be added to the vehicle's list of destinations by its navigation system's route planner.
The system also allows drivers to confirm job completions by sending messages to the main office through their navigation terminals. Dispatchers can continuously monitor their vehicles, and because they know the time required to reach a destination, can therefore reliably inform customers of the arrival of a delivery. Using this system, a fleet operator can wrap up its consignments more cost-effectively, dispatch its fleet efficiently, and reliably deliver products to its customers.
Unrealized savings. Other industries have a lot of catching up to do. "That is particularly true in sectors dominated by small and mid-sized companies, where logistics was looked on as a trivial detail in the past. It was even considered a burdensome necessity," explains Jörg Scharrenbroich of Siemens' Logistics Center of Excellence in Duisburg, Germany. Frankfurt-based PRTM, a management consulting company, reports that such sectors could realize a variety of potential benefits by improving their logistics. For example, implementation of appropriate measures could help:
Reduce a company's total inventories its raw materials, goods in process, products stored in company warehouses and branches by 50 to 80 %;
Improve the reliability of all deliveries by 10 to 25 %. The role model here is the automotive-industry supply sector. In this sector, more than 99.5 % of orders are delivered on time. Reduce overdue shipments that is, deliveries made after the agreed-on date by 90 %;
Cut order-processing times from receipt of the order by the company to delivery of the product to the customer by 40 to 75 %;
Reduce production-cycle time from the first value-creation step to the finished product by 30 to 90 %. To cut the time by more than 40 %, changes in the production process (and thus the factory layout) are usually necessary;
Lower total costs in such areas as administration and storage by 10 % to 30 %.
Key to Survival. Many companies have begun to tap into this potential. "But their efforts don't always achieve the desired results, particularly when they rely too heavily on software solutions," says Wilhelm Dangelmaier, a professor of business-data processing at the Heinz-Nixdorf Institute of the University of Paderborn, Germany (see interview). "The first priority should be to identify the company's goals and develop corresponding organizational concepts for suitable delivery structures," he suggests.
Today, logistics is not just a pure competitive factor. It is increasingly becoming a key survival factor, particularly for those companies that have to meet a range of different challenges. For example:
Customers are increasingly demanding tailor-made, high-quality products that must be produced and delivered quickly;
More and more customers are buying things on the Internet. Items ordered online, like books, are delivered to customers' homes, raising storage and transport costs;
Globalization continues to spread, and producers are buying increasing numbers of parts from foreign manufacturers.
Simulating automobile production at BMW. The auto industry is setting the pace in the exploitation of logistics
Custom-Made Products. In order to meet a customer's individual needs, products are increasingly being produced only after an order has been received. In some sectors, that's bringing an end to production stockpiles and the storage of enormous parts inventories.
"This departure from mass-produced articles has also split up supplier units. They are getting smaller even as the transport volume grows," says Dr. Carl-Udo Maier of Siemens Corporate Technology in Munich. Maier heads the Pictures of the Future project for Automation and Control.
"Nonetheless, transport and storage costs have to be kept down. At Siemens we're providing customers with comprehensive solutions in this area." A glance at the variety of products offered by Siemens Dematic explains why. The range includes automation technology equipment for warehouses, and equipment for mail-distribution centers and airport baggage-transfer systems (see articles Warehousing, Postal Automation, Baggage Handling).
Depending on the sector, logistics is a major cost factor. In 2002, logistics services accounted for nearly 28 % of total costs for German wholesalers and retailers (the graphic subdivides these costs in six major categories). Logistics spending totaled nearly 13 % in the consumer-product industry that is, for producers of home appliances, mobile phones, toys or writing materials.
"Increasingly, we are presenting ourselves as much more than 'just' a supplier of top-notch technology," says Dr. Alexander Gediehn of Siemens Dematic in Offenbach. "The customer also wants complete planning and outfitting of facilities. We're there to offer everything from a single source."
End-to-End Tracking. "Looking toward future developments in logistics, Siemens is focusing on three technological areas: end-to-end tracking systems, highly automated warehouses, and integrated software solutions," says Maier (see articles Warehousing, and Transponders). A visit to an automaker's production facilities shows just what these systems are capable of doing.
Such plants resemble a giant organism. Huge volumes of material are in constant motion, and they must arrive on time at the right spot in the assembly line. "End-to-end tracking systems organize this apparent chaos by tracing the path that the parts take through the labyrinth of conveyer belts to the assembly line and coordinate the resupply stream with software," Maier says.
This is the reason why many parts are now labeled with a bar code or alphanumeric tag that can be scanned and identified by a bar code reader or an OCR (optical character recognition) instrument. In these processes, the labeling and the reading equipment must always maintain line-of-sight connection. However, RFID (radio frequency identification) systems aren't affected by such a restriction. And that's why many people believe that RFID is headed for a promising future. Small, sturdy data storage systems, known as tags, are attached to all the parts to be scrutinized. Using radio, it is possible to conduct high-speed read/write operations with the tags (see articles Why transponders are making waves and Transforming Production with Tiny Transponders in Pictures of the Future, Fall 2002).
Intelligent Labels. "Radio frequency identification systems enable companies to continuously locate and follow every individual part," says Maier. "As a result, the entire materials stream from the supplier to the factory and finally to the consumer can be traced and in real time." The tags attached to the products store all of the important product data, as well as information about its transport route and destination.
The readers needed for data exchange with the radio labels are installed in all of the important locations in the supplier chain and on each transport system that carries them. They register the size and type of each delivery item and pass this information on to the next station in the supply chain via cellular telephony or satellite.
By keeping workers at cargo-handling facilities informed, for example, regarding the times and amounts of the next group of deliveries, the system gives them time to prepare. As a consequence, they can plan the optimal arrangement of trucks for the further transport of materials. "Radio frequency identifacation technology is gaining ground," Maier says. "Its breakthrough will come when the price of a tag for widespread use falls to one cent or less."
Thanks to shelving stackers produced by Siemens Dematic, this soft drink producer has rapid access to all the pallets stored in the warehouse's high-rise racks
RFID technology enables companies to conduct continuous, real-time inventory management. At the press of a button, all stocks, both in warehouses and along the entire supplier chain, can be registered and checked. Companies also can react quickly to any problems, including theft.
"In the future, the tags could be outfitted with sensors that could monitor the maximum permitted storage temperature of food and sound an alarm when the temperature rises above that level," Maier forecasts. "In warehouses equipped with the latest technologies, the tags can help coordinate the interplay of conveyor belts, robots and driverless transport systems. This accelerates processes, which is a make-or-break factor in logistical competition."
Smart Agents. But what good is the fastest supply chain if a truck is only half full and the logistics company suffers a drop in profits as a result? "In the future, small companies in particular could join forces for the last mile, and package all their goods into one common delivery for the customer," Maier says. "This could be performed very efficiently if such companies combined their intranets and integrated intelligent logistics software in other words, agents."
Software agents could determine, for instance, which orders could be combined and how transport vehicles could be optimally loaded. They could also work out the shortest route for the trip while taking a range of real time factors into account (see Agent Technology in Pictures of the Future, Fall 2001).
"In the future, there could be Internet-based logistics networks that have been programmed on the basis of economic theories. Such networks would be intelligent enough to coordinate and oversee the entire flow of materials and funds largely on their own," Maier predicts. The question is: will they ever be as efficient as the African termite?
Sebastian Moser, Ulrike Zechbauer