Heard at Breakbulk Europe shippers' panel where event attendees get first-hand information to grow and improve their business operations.
BY GARY BURROWS
Shippers and engineering, procurement and construction companies need their logistics partners to be more proactive, and to buy into information technology systems to improve visibility and reduce costs.
That was the conclusion of a panel of industrial project owners and EPCs speaking at Breakbulk Europe in Bremen.
“I see a trend where we have 40 percent of logistics suppliers who rely on us and what we want, instead of coming up with other solutions we may not have thought of,” said Thomas Skellingsted, vice president, global head heavy-lift and project operations for ABB, who moderated the panel.
“Maybe it’s because they don’t have the staff. Maybe it’s because it’s the cheapest and fastest way to quote us. They simply follow our lead instead of thinking outside of the box once in a while,” he said.
“Sometimes we feel we are giving the solutions to them,” agreed Cesar Martin Pereda, global logistics manager, Initec Plantas Industriales. “Sometimes we’re expecting the logistics provider, our partner, to come with answers to questions, with solutions.”
“I’d like to see more proactive acting on the (logistics) side to provide alternatives, to offer best-case. You are the experts,” said Ruediger Fromm, senior director global project logistics for Siemens AG.
WORKING TOGETHER ON I.T. SOLUTIONS
Shippers and EPCs should work with their logistics partners to be able to anticipate problems prior to execution, Skellingsted added. One way to accomplish that is through improved IT usage.
Skellingsted spoke of a global system that ABB is developing, using SAP, in which they are cleaning up master data to share with the transport and logistics group.
“It’s a huge task and we expect that it will take a year, but it’s definitely something where we’re optimizing packaging, vessels, containers and trucks,” he said.
Unified systems will benefit carriers in load planning. As design changes can take place with large project cargo up to the last minute, altering dimensions and handling – and even the order in which pieces are delivered – carriers can adapt, participants said.
Use of IT and digitalization is a two-way street, Skellingsted admitted. “We’ve made transport management centers around the world so that everything is now digitized, which is also putting huge pressure on our plants around the world because they haven’t been using the IT tools as much as they should.
“But it’s giving us huge transparency into the future,” he added.
Along with IT, key performance indicators, visibility tools and key metrics should be part of the logistics provider toolkit, the panel agreed.
“I think we should stop talking about it and do it,” Pereda said. “It has been more a sales tool than a performance tool, unfortunately.”
He added that the industry should consider standardized KPIs. “I know everyone has their own, and that’s fine, but some KPIs should be common to everyone so that we can talk about performance. I know the carriers are maybe more advanced than EPC contractors” in their use of standardized KPIs.
ALL OR NOTHING?
One place where panelists differed, however, was in whether logistics service providers should aim to be a one-stop shop, or to focus on niche markets and services to have a competitive edge.
“My advice is for logistics suppliers to specialize,” Pereda said. “At the end of the day we have a portfolio of logistics suppliers, but breaking down that portfolio, we know which ones are more specialized on one area of the world or handling one type of cargo.”
Fromm disagreed. “I think logistics suppliers need a broad base of services, not only the forwarding part or the warehousing, but transport engineering, and probably own some of their own equipment. We need that flexibility.”
While complaints rise from freight forwarders and other service providers regarding compensation, the panelists largely downplayed emphasis on price over service.
“Everyone should be allowed to make money,” Pereda said. “When we squeeze the one that’s helping us, we have the same problem with our clients.”
“The most important thing is definitely service, but the price has to fit,” Fromm said.
“It depends on the project,” Skellingsted said. “If I’m competing against Ruediger on the business for the transformer, that would be price; on the major project, it might be the whole service, the whole setup.”
“It’s the elephant in the room,” Pereda concluded. “It depends on the project and the cargo. When you’re moving containers, pricing is very important. When you’re moving a cargo that costs US$2 billion and it takes 15 months to remanufacture, price comes second.”
Like most companies, the panel participants saw a sliver of optimism looking ahead, strongly tempered with the failed promises of recent years.
“The good news is there is a market,” Fromm said. “The bad news is it has dropped a little bit this year and probably next year too.” Though Fromm, whose focus is on Siemen’s power transmission, added: “There’s definitely a need to transport power here in Germany from the northern part to the southern part.”
Pereda said that, as an EPC contractor focusing on oil and gas, business has suffered the past few years due to the price of oil and lack of investment. However he sees tenders coming from the oil companies and anticipates some improvement in 2019 but mostly in 2020 for oil and gas projects.
Following some “bad experiences” with one EPC contractor, BASF’s strategy in 2016 changed “and we moved away from EPC contracting and we do our actual business ourselves,” said Dieter Busam, procurement global forwarding industrial projects. “So we split the EPC contract into parts, and then we have the engineering part, the construction part, the onsite logistics part, the worldwide forwarding part …”