The goal of JIT is to achieve a continuous flow of materials through the supply chain in an effort to keep inventory to a minimum. The synchronization of transport with the production process and time-criticality of JIT deliveries often results in supplies being delivered at short notice and in small quantities. Under these circumstances, efficient utilization of transport capacity can be sacrificed for lower inventory and more flexible production. Low-inventory policies and JIT delivery are now the norm across many industrial sectors. It is hardly surprising, therefore, that JIT receives much of the blame for the under-utilization of trucks and consequent growth in freight traffic. As discussed in Chapter 1, it is generally portrayed as being bad for the environment.
The adverse effects of JIT on transport efficiency can be eased by rationalizing the inbound logistics system. For example, some car manufacturers, like Nissan (DETR, 1998a), have employed logistics service providers to collect components from suppliers and consolidate them at a hub prior to JIT delivery directly to the production line. The clustering of suppliers’ plants, vendor hubs and warehouses around car and computer assembly plants has also minimized JIT delivery distances. In the retail sector, the equivalent ‘quick response’ pressures, have resulted in the insertion of an additional ‘primary consolidation’ tier between the factory and the distribution centre where different manufacturers’ products are aggregated into viably sized loads.
Lack of inter-functional coordination
Poor truck utilization can be a consequence of the departmental ‘silo’ structure in many businesses, which inhibits communication and coordination between functions. Lack of liaison between purchasing and logistics staff often results in potential opportunities for backloading being missed, while sales staff can make commitments to customers that entail the delivery of goods in poorly loaded vehicles. This problem can be alleviated by the application of good business practice, involving the replacement of silos with more effective cross-functional management of core processes, one of which is the fulfilment of customer orders (Christopher, 2005).
Priority given to the outbound deliveries
Companies naturally give priority to distribution of their products to customers and are reluctant to backload a vehicle when they fear that it may not return in time for reloading with the next outbound consignment. This fear has been identified as one of the main constraints on backloading, particularly where delivery schedules are unreliable (McKinnon and Ge, 2006). The main way of addressing this concern is to improve the reliability and ‘visibility’ of road freight operations so as to give managers greater confidence in distribution schedules. This is discussed in the next section.
Lack of cooperation across the supply chain
There is a limit to how much any individual company can do on its own to improve the utilization of vehicles carrying its products. The decisions of companies upstream and downstream in the supply chain can limit the opportunity to improve load factors and cut truck-kms. If supply chain partners are prepared to collaborate, much higher levels of utilization can be achieved. A distinction can be made between horizontal collaboration, where companies at the same level of the supply chain work together, and vertical collaboration, which involves collective action by trading partners at different levels in a supply chain. In both cases, logistics service providers can play a key role.
Horizontal collaboration
Newing (2008) has estimated that where two competing firms merge their logistics operations and vehicle deliveries they can cut their combined transport costs by 15–20 per cent. Such cross-company/ industry collaboration can take various forms. In the petroleum sector, for example, swap agreements between oil companies allow refineries to supply all the filling stations in a local area regardless of brand, maximizing drop density and minimizing empty backhaul distances. In the fast-moving consumer goods (FMCG) sector there are examples of firms merging their logistics operations at a shared distribution facility and combining vehicle loads. This is well exemplified by the consolidation of Unilever and Kimberly-Clark products for the Dutch retail market at a distribution centre operated for them by Kuehne and Nagel in Raamsdonksveer (Cruijssen, 2007). As a result of this collaboration the companies have been able to cut their logistics costs by 12–15 per cent while responding to retailers’ demands for faster and more frequent delivery. In the UK, Nestlé and United Biscuits, which are competitors in
the biscuit and confectionery markets, have worked together to cut empty running of trucks between Yorkshire and the Midlands (Clements, 2008). This is part of a wider food industry initiative involving ‘37 of the UK’s leading food and consumer goods companies’ that has ‘removed the equivalent of 53 million journey miles from UK roads’ (IGD, 2008a).
Vertical collaboration
There are also several different types of vertical collaboration. One of the most common is the collection of inbound supplies by a returning delivery vehicle. This is now common practice in the retail grocery sector where lorries returning from supermarkets make a triangular trip to pick up orders from suppliers and transport them to the distribution centre. This form of ‘supplier collection’ substantially reduces empty mileage (DfT, 2005a). A variant of this scheme, known as ‘onward delivery’, involves suppliers’ vehicles delivering to the retailer’s shops on their way back from the distribution centre to the factory. Through these forms of vertical collaboration with upstream suppliers, the UK supermarket chain Tesco was able to save around 3 million journeys per annum (DETR, 1998b). Where trading partners in the vertical channel adopt a vendor-managed inventory (VMI) strategy, the supplier assumes control of the replenishment process and can then phase the movement of products in a way that optimizes the use of vehicle capacity. Disney, Potter and Gardner (2003) used simulation modelling to demonstrate the potential transport benefits of VMI over a ‘traditional supply chain’. Although VMI can result in more inventory being held at the customer’s premises, they would typically only be charged for supplies as they are actually used (or ‘called off’).
Higher transport efficiency can be achieved in local distribution to homes and commercial premises through the use of ‘unattended delivery’ (see Chapter 16). When customers install a reception box, the carrier can exercise much greater control over the delivery schedule, improving the efficiency of vehicle loading and routing while virtually eliminating the risk of failed delivery. Research in Helsinki has suggested that the use of reception boxes can cut transport costs, delivery distances and related externalities by as much as 40 per cent (Punakivi, Yrjölä, and Holmström, 2001).
Vertical collaboration in the field of reverse logistics can maximize the return flow of waste, damaged and unwanted products on backhauls. This offers considerable potential for reducing empty running and would contribute to the 20–40 per cent savings in transport costs that could be achieved if retailers were to rationalize the reverse flow for returned products from shops (Cranfield University, Sheffield Hallam University and CILT, 2004). Reverse logistics is the main focus of Chapter 11.
