During the last decade especially, globalization has resulted in stretched supply chains and increased risk. Because of the inherent lack of control across the multiple external partners, time zones, and greater distances, supply-chain managers need to find new ways to master the steadily increasing complexity of their job. Therefore Camelot Management Consultants and Duale Hochschule Baden-Württemberg in Mannheim have conducted a study that provides insights into the complexity of transportation management. The results show that many international companies today still lack a global harmonized transportation management strategy. CHEManager International asked Andreas Gmür, partner and head of Logistics Practice at Camelot Management Consultants, and Joachim Getto, head of CC Logistics Excellence at Camelot Management Consultants, about the significant and main results of this survey.

CHEManager International: You discovered in your survey a strategic gap between the actual and the required preparedness of chemical companies for future challenges. What is the reason and what are the consequences, especially for transportation management?

A. Gmür: This is correct. We had considered a number of recent studies, which had researched the chemical logistics trends. We have recognized that an increasing complexity in transport management can be observed for the future. Within our study, we then asked transport managers of chemical companies about their expectations on key trends for transportation management and their planned initiatives.

Comparing these results, it becomes apparent that many of the chemical companies are not sufficiently prepared for these future challenges - and many supply-chain or logistics responsibles know that. The risk for these companies will be not to be able to efficiently manage transportation in the increasingly complex environments or only with significant cost increases.

What are the most important trends in the chemical industry with the most impact on logistic activities - and why?

A. Gmür: We see four major trends in chemical logistics: increasing requirements on compliance, sustainability and customer expectations, as well as limited logistics capacities.

J. Getto: Transportation has become a critical bottleneck in the supply chain for many globally active companies in recent years. While the overall transportation volume has increased significantly as a result of ongoing globalization, the transportation modes are of particular importance for the chemical industry. Specifically, they are limited regarding their capacity in the short term. This is especially true for railway infrastructure, inland waterways and seaports. Limited availability of transportation slots and routes suggests there will be additional limitations on transportation planning.

There is a shift toward customized products even in the chemical industry. How does this affect the supply chains in the chemical industry?

J. Getto: Increasing customer expectations are mainly related to higher demand for product differentiation regarding physical product attributes as well as spatial and temporal availability. Important consequences for transportation management (TM) are, e.g., smaller shipments with a higher frequency and an increase in product variety, which requires greater coordination efforts. Both miniaturization of shipments and the growing variety of products increase the system's complexity.

Why is it so important to master complexity in transportation management?

A. Gmür: Being able to master the increased complexity will ensure the competitiveness on the market, by being able to lower freight and process costs, to increase companywide transparency in your global distribution network and with this also being able to react faster to changing market conditions.

It is also a trend that chemical producers are moving their supply chain downstream. What are the reasons and is this observed worldwide? How can transportation management deal with it?

A. Gmür: That is right. Many chemical producers have been moving their supply chains downstream, either by acquiring producers of specific products or by performing additional activities themselves to have a higher share of value added.

This phenomenon has a variety of causes, e.g., internal growth, reduction of volatility, etc., whose relative significance differs across regions: Companies in the Middle East have proactively been seeking to invest more in downstream activities to add more pillars to their industry base and thus enlarge their business.

In contrast, downstreaming in Europe is mainly driven by events in North America: American companies are currently investing tens of billions of dollars within their established business models in the petrochemical and polymer industry, backed by the boom of fracking technology in North America. This puts some European players under pressure and forces them either to move to new industry segments or to find alternative commodity opportunities. Thus a key challenge is the resulting need to reassess their whole supply-chain organization and to tackle the rising complexity resulting from their additional activities.

What did you find out about the tendencies to outsource transportation management activities? Globally speaking, did you get the same results everywhere?

J. Getto: No, comparing the different regions, it is apparent that in North America the attitude towards transportation management outsourcing is by far the most positive, followed by the Europeans. More than 78% of the respondents in North America prefer to buy transportation management activities, whereas in South America more than 57% of the respondents prefer to "make."

In general, this is not too surprising because a low degree of vertical integration has long correlated with the degree of development. For EMEA - Europe, Middle East and Africa - an ongoing trend towards expanding collaboration with external parties - and thereby transferring additional TM activities - may be observable. Some of the respondents explicitly noted that a conservative approach was a reason for a lower level of outsourcing - compared to North America - in combination with the large number of legal restrictions and regulations that had to be managed in their own organization and accounting.

Did you get an understanding in your survey of the key factors in the different regions of the world that might be useful to optimize transportation management?

J. Getto: We asked the participants about their expectations separating out different regions. Most respondents share the perception of an almost-saturated market in North America. The biggest overall growth is anticipated in the Asian/Pacific market, with Europe and South America in between.

More interesting is the anticipated increase of smaller shipments, mainly in Europe, complicating the respective logistics processes. The significantly higher number of stock-keeping units (SKU) in Europe due to the variety of languages and an ever-growing number of country-specific regulations must be recognized as a primary driver, making adaption to single markets necessary.

What major steps should be taken in general to get transportation management in shape?

A. Gmür: Our survey points out that companies' current transportation management setup is not fully able to master the upcoming challenges of increased complexity, mainly due to inadequate TM harmonization and standardization.

Our recommended approach derived from this study therefore consists of three parts:

1. Reconsider collaboration concepts in transportation management critically.
2. Consider transportation management as a service to internal and external customers.
3. Define corporate objectives to lead executives to the right targets.

How can chemical companies close the gap mentioned at the beginning?

J. Getto: The design and implementation of a global TM strategy will enable companies to master complexity and provide potential for improvement in the respective areas. The structure of the strategic blueprint needs to follow the three dimensions of organizational placement, process-oriented aspects and IT architecture.

A. Gmür: Our study has shown that over 80% of the participating companies are planning or already executing projects to harmonize their transportation-management system landscape. In our view it is paramount that these projects are going hand in hand with the mentioned strategic blueprint and are aligned with organizational and process aspects.

The study results were presented first on Oct. 13 at the meeting of the Rhein/Neckar chapter of Bundesvereinigung Logistik (BVL) at BASF in Ludwigshafen, Germany. Other presentations included "BASF's Journey to Developing a Transport Management Process Strategy - A Case Study" and "Global Supply Chain Operational Design@BASF." Order a free copy of the study here!