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Optimised transport planning: reducing truck fleet costs and gate congestion: Karsten Horn, INFORM GmbH (Germany)

Filmed at Cemtech Asia 2015, 21-24 June, Grand Hyatt, Bangkok, Thailand

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Wow! That is amazing, people waiting and queuing in front of the store, having a big smile on their face when leaving. Unfortunately, products from our industry aren't as fancy as smart phones, so nobody is happy to wait, nobody is freaking out when leaving the plant. If waiting and queuing is part of your business module, I'm afraid I can't tell you anything new within my presentation, but if you don't like pictures like these from your plant, I think it's worth to join my presentation.

My name is Karsten Horn. I'm working as a Business Development Manager at Inform, and we're an optimization company, and I'd like to give you an impression what possible concepts, approaches, ideas of optimization could look like. So, if you look at tools like this, I'd say the main buzzwords of my presentation are management, organization, and tools, and tools like geographical information system, or ERP system, warehouse management systems, or systems for tracking and chasing, they're absolutely necessary to have in place, but they can't solve problems regarding those skate congestions alone on their own.

So, there're three other things that you'll need for that, that's on the one hand, the time slot management, means that you should give your customers, especially preferred customers certain time windows to appear at your plant, to receive the orders that they ordered. The second, tactical scheduling, this is about planning. So, you should know what tomorrow might happen at your plant, so doing a kind of pre-planning.

Planning is always good, but you also need to get in, or you also need to know about the changes and the incidence that happened during the day, so that is what real time optimization is for. What do I need this for? Why do I need this optimization thing for? From a producer's point of view, we're talking about lost sales, that is an example I figured out, so I simplified the figures a little to make it easier for me to calculate it through. So, let's assume we've a production capacity which's at 100%, we've 4 million tons per annum as an output, and 5% which's 200,000 tons lost due to waiting times. Then, we're talking about, that's why I made the figure so easy, let's assume that a ton is at $50, we are talking about 1 million ton of a loss just by queuing of trucks.

So, what kind of services shall we bring into as an industry? For example, if you look at or if you remember the first picture, what kind of people you would like to see in front of the line? Usually, you'd like to see those who want to buy the expensive smart phones. So, you should care for premium customers.

So, customers you're doing on going business with them or you should prefer your own truck fleet or if you have contract holiars, with them you're doing on-going constantly business instead of preferring maybe just one time shoppers. But also, expert deliveries and if you have specific product promotions, you should try to bring them up front and try to do kind of preference and prefer them to make sure that you get the right things up front.

Regarding safety, it's obvious, the less the better. Means, the less trucks or the less people are outside the trucks on your plant, the better it is. I mean, usually it's all about safety, if you look at the plants. I've been recently to a plant where it was allowed to drive 15 km/h, and as soon as I drove 16, so 1 6, a red light flashes at me and told me, "Well mate, you're going too fast!" I mean too many trucks at a plant, mean you create a much higher risk of accidents, for example, if you look at the parking situation, so what's optimization help you in this case?

Well, you could expect from a truck driver to stay inside his truck if it's a waiting time of 15-20 minutes. If we're talking about two to five hours or even more waiting time, you can't expect that. It's simply impossible. Looking at the financials, what're the potential cost saving or if you turn it the other way around, what are the potential turn over boosters?

Those are figures from one of our customers, one is without optimization and one with optimization. So we're talking about an annual transport volume of 3.375 million tons, number of trucks is a 100, that means the truck productivity as mentioned here. You have fixed cost per truck, you have arrival cost per truck, and there's certain margin.

So, you have annual cost per truck per year which leads to cost per ton of $4. If you put in the optimization, it is possible to do the same transport volume with less trucks, means, you have a much higher truck productivity, fixed costs for sure stay the same, the variable costs are increasing because more productivity means more fuel et cetera.

Margins stay the same and the annual cost per truck are surprisingly increasing, but the most interesting figure is the cost per ton which is the U.S. $4.16, which leads to annual savings of more than 1 million U.S. dollars or if you put it the other way around, if you still use your 100 trucks, you can do more turnover. So, how to achieve higher volumes? It means more output with existing infrastructure, and how's that being realized? Due to this better plant utilization if you've proper systems in place could mean that you've a smooth loading process flow, because everything is planned quite well. From an organizational point of view, you've a reduced number of equipment changes because you're in control of what you want to sell in which sequence, and you also can make sure that you only take orders for those products where you can make sure you have the availability.

So, your ERP system gives you quite good numbers regarding planning, so you know what's on stock and what can be sold. Looking at resources, you also can make sure that things like fork lift trucks etc. are in place and also that regarding the employees that we have the right people to fulfill all those orders. Overall it means, less trucks, less people running outside, less stress, less hustle, so you can avoid those loading errors.

Now that we have a plan which is quite good, but we all know reality bites, so it's important to also get those information and what happens during he day, the changes, the incidents, and so on, and that should be put into the optimization as well, that's why it makes sense to run such an optimization calculation every minute or maybe every two minutes. You can compare it to e-business you all know, if you buy something Amazon or Alibaba and it will be delivered to you by FedEx or UPS, you can track, you can see what's the current status of your delivery and believe me, the data that you have in your system are much, much better than what FedEx has, so it's also possible for you do this. And the other option is to use this ATP, Availability to Promise, which simply means, a customer calls you and asks, well, I need a truck tomorrow, 10 AM and if you look at your graph, you see 10 AM is pretty bad timing because it's quite busy, if I take this order, I will have trouble anyway. But you can see in the graph in the afternoon it looks much, much better, and ask the customer, well, I can give you the delivery at 2 PM. He said, yeah, that's fine! Problem solved.

Also, you're able to give your customers, especially the preferred ones access to to a web portal where they are able to also choose their time slots on their own, so which I mentioned earlier that you have kind of a preference to those ones. And from a management view, it's quite important that On Time In Full, so this OTIF, somebody has to care for. So you can work pro-actively to get this goal and to fulfill the customers' wishes.

I've talked a lot about optimization. If I would ask you, what is your definition of optimization, most of you would I assume answer, well, it's to improve something which is usually the colloquial definition. From a mathematical point of view, it's the selection of best elements from a set of available alternatives and then our INFORM definition, we're combining the mathematical with real world domain knowledge where in this case means, construction or building materials.

What kind of products are optimizable? Honestly, with the system it doesn't matter if you're having cement of fly ash, asphalt aggregates, ready mix concrete, other concrete products, or dry silo products, it's all possible. And what is also important is, it doesn't matter if you're talking about your own fleet to optimize or if you're talking about contract hauliers, so the system is also able to optimize asset and non-asset based logistics. And what does it look like?

That's one graph, you see, there are the trucks, there are your customers with the orders, and this is the planning grid where you see for each truck, what fulfillment is for the next day or the next shift. So you see there's my customer, I've two hours to drive there, or whatever, I've this time to unload and then get back to the plant or maybe get to another plant, so it's also possible if you've a network in place to do this whole network planning and the optimizer is then looking which is the best route to fulfill those orders. If you look at the Global ATP, what I've mentioned before as you see the yellow one, that's the capacity line, those are the trucks you can use.

You see the orders in different colors which're the confirmed orders, the reserved orders, the projected orders, and you see quite good where're my picks, and where're the possibilities to put in new orders. You've also a map in place where you see where're your plants, where're the customer locations, how do the routes look like, and you also see the snail trail of the truck with all the information that you get. And information usually come from telematics on a GPS base that could be traffic information, that could be geofencing, but also sensors form the truck could send you data to make sure that in this real time optimization, everything is taken into account to show you the perfect route, the best route that you can get.

So, if you want to find the route of further services, please follow the snail-trail, we're at booth number 23 in the exhibition hall. My colleague and I will be very happy to answer your questions, listen and talk to you, thank you very much.

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