News

By Sosthéne Evina / Translated by Kerkhoff Consulting

Single points are flashing up red, green and yellow on the world map: in Asia, Europe, America. Again and again it flashes and sounds. That way, scientists from the Fraunhofer Institute for Material Flow and Logistics (IML), located in Dortmund, are visualizing the flow of logistics: a modern logistics cinema.

In these days, companies must be proficient in managing supply chains across continents and time zones. "A company must be able to capture the total costs of its value-creation chain", says Oliver Weirauch, Managing Partner at the management consulting firm Droege & Comp. "And it's all about due dates. What can you do if a ship does not arrive on schedule?"

The "logistics cinema" of the Fraunhofer Institute shall give answers for the 3 Mio. Euros aid money provided by the German Ministry of Economics. During this year's Intralogistik fair Cemat in Hanover, the experts have introduced their project "LogNetAssist" at which data is being collected and processed with the help of RFID technology. An intelligent assistance system is controlling the logistics networks.

The Radio Frequency Identification (RFID) tags have been utilized since the Metro Group started its first pilot projects in 2004. The mini-transponders enable logisticians to identify the location of goods within the supply chain at any time. "This provides for precision within the logistics network", says expert Weirauch.

Meanwhile, red lights keep flashing on the Fraunhofer world map: a warning signal. Says André Alberti who took part in the project: "If the operator recognizes a problem shortly after its emergence, there are good chances to reorganize production and avoid stoppages." However, this also puts into perspective the costs for the RFID tags, says management consultant Weirauch. These tags account for a cost share of 0.50 Cents to € 1 per piece; leaving alone the additional costs for RFID readers and software.

For example, a department store would need to equip all its articles with RFID labels, introduce RFID readers and tool up the checkouts with reader technology. Additional specialists and experts would be required to maintain the software and to deal with potential failures. The costs to retrain the staff also need to be taken into account, Weirauch emphasizes.

The assistance system developed by the Fraunhofer Institute has already been piloted in projects at "Bosch and Siemens household appliances" and at the commercial vehicle manufacturer DaimlerChrysler. It is supposed to enable a multi-media overview of the status of a shipment. Axel Wagenitz, expert from the Fraunhofer Institute, has noticed "a trend towards simplified processes" also in logistics.

However, it will be necessary to overcome another important hurdle before a complete supervision of the supply chain becomes reality. Ulrike Grünrock-Kern from the German Logistics Association (BVL) explains: "It is quite amazing to hear how often logistics fails due to limited communication between departments." Fraunhofer expert Wagenitz agrees: "People strongly think within their department boundaries. Production thinks about the degree of capacity utilization whereas purchasing focuses on the most favorable supplier."

Hence first companies are utilizing IT interfaces and integrated software systems to interlink the different company areas. UPS Germany, the package delivery service provider, is one example. "Being an international company, UPS utilizes a system that is compatible with SAP", says UPS speaker Georg Leusch. "This way, a line of business does not need to leave its system and work environment to be able to use our tools."

The U.S. logistics giant additionally relies on a web-based system which is managed from the head office; the "UPS Campus Ship". "UPS belongs to one of the first companies which have trusted in technology at an early stage to make the logistics supply chain more transparent", Leusch promotes.

Matthias Rüter, logistics expert from the management consultancy Kerkhoff Consulting, adds: Who manages to efficiently integrate the logistics supply chain by using IT can yield additional cost savings in another area: in procurement management. "On average, German companies are overspending nine per cent on their logistics service providers", he says. Missing data transparency, excessive scopes in call for tenders, no clearly defined target group - these are all major deficiencies causing unnecessary spending. Professional buyers should recognize that they are more than mere "Administrators of the Sales Department" and that "they are adding value to the company." This would perhaps make another little green light flash up.