One of the key industries in the global economy is the automotive sector, which, in 2011 produced a record of nearly 78 million vehicles worldwide. Vehicle manufacturers use multiple modes for transporting their finished vehicles internationally en-route from factory to dealership. The most widely used mode due to its speed, flexibility, and ability to serve dealerships directly, is the over the road car transporter. These carriers typically handle varying quantities and types of automobiles and trucks safely and effectively. For automobile manufacturers, the key to optimizing trucking efficiency is to balance the crucial elements of cost and customer service.

Cross-border transportation of finished vehicles requires adherence to the regulations of the transit or destination country such as a car transporter’s dimensions, which can be challenging if there are different restrictions among the countries. For shippers, advances in operations methodology and technology are enabling them to work more effectively with their car carriers and other logistics service providers. Among the priorities of vehicle shippers are to maximize the percentage of available space used on a carrier (known as the load factor) and to reduce the lead-time from the factory to the dealership.

At Volvo Logistics Corp., Christ De Baere, SVP, global logistics operations outbound, says that its main objectives are improving its costs, lead time, and quality. Quite often, there needs to be a tradeoff among these parameters, and that depends on what the customer puts forth as its first priority. Transport providers are limited by their requirements for delivery precision and lead-time.

Maximizing load factors

One way that Volvo Logistics tries to improve its trucking efficiency is by maximizing its load factor. For example, De Baere says that from Ghent, Belgium to Germany, its carrier has empty capacity. If it had more yard dwell time, then it could increase its load factor. Conversely, if a manufacturer requires vehicles to leave its premises within 24 hours, the transporter has few possibilities to combine or balance that with incoming volumes in the same area. Some OEMs link their invoicing to when the vehicle departs the gate; thus the financial process influences the distribution chain.

“OEMs focus on optimizing their assembly but not their outbound logistics,” explains De Baere. “We plan our distribution by ensuring that vehicles that are destined for low volume areas are built on the same day.” He says that for low volume routes, such as from Belgium to southern Italy, optimizing loads involves the distance between the drop off points and the number of empty kilometers before the truck is emptied.

Mazda North American Operations depends on its carriers to build its loads and to maximize its load factor. This entails combining its imports with domestically produced Mazda vehicles on the same truck or perhaps with vehicles from other manufacturers. “For example, the route from Los Angeles to Phoenix would not contain a full truckload of Mazda vehicles; there would be two to four Mazdas and other vehicle manufacturers on the same truck,” says Scott Mize, manager, national transportation. “We consider where the assembly plants are located and try to match up shipments.”

One of the leading ways to improve the load factor is to reduce empty miles—that is trucks traveling without cargo. Mazda tries to achieve this by putting together backhauls. “Our plant in Flat Rock, Michigan ships to the East Coast and then picks up imports from the Port of Newark going west. However, in most case, backhauls are a challenge because we tend to ship one-way shipments,” explains Mize.

Standardization efforts

Another way to improve trucking efficiency is through carrier standards. Konrad Zwirner, SVP, international sales and business development at German vehicle carrier Hoedlmayr International, says that it is trying to harmonize the length and measurements of its trucks that transport finished vehicles between Western Europe and Eastern Europe. “It is important to harmonize truck lengths in order to reduce the number of trucks on the road and improve the environment,” he emphasizes.

“For example, from Central Europe to Eastern Europe, our trucks that carry nine cars need to reduce their loads to seven or eight cars upon entering Eastern Europe. That causes us to lose 15% to 25% of our efficiency,” he explains. As an example, this situation would apply to unloading and reloading vehicles from Hungary to Serbia or from Hungary to Romania.

Hoedlmayr’s solution is to purchase permits to load higher on the truck and thus fit the additional cars. Zwirner points out that these permits not only improve load factors and cost efficiency, but also reduce CO₂ emissions by requiring fewer transporters to carry the same number of cars.

The problem is that the maximum height restriction for car carriers is only four meters in Eastern Europe. Says Zwirner, “Carriers from Western Europe are stopped for heights of 4.01 or 4.02 meters. In these situations, local carriers receive more flexibility than do foreign carriers. The issue is about finding one number—say 4.1 meters for all of Europe—not just a country or a region.”

Regarding carrier length, although 18.75 meters is a common standard, Zwirner says that it is possible to increase it to 20.75 meters. A length of 25 meters is impractical, except for dedicated routes such as port to plant or highways between two cities such as Amsterdam and Frankfurt. Then, the carrier would unload the larger truck and deliver to dealerships in smaller trucks.

Zwirner says that the use of 25-meter trucks is growing and that Scandinavia already has a successful model. “An increase from 18.75 to 20.75 meters is easy to lobby for in Western Europe. The target should be Romania and Bulgaria. On highways, there is no problem, but the condition of other roads and bridges is a problem. For example, the route from Vienna to Budapest has a new highway, but the last mile to the dealer can be difficult,” he says.

High-density corridors

In North America, Mazda imports new automobiles to the ports of Tacoma, San Diego, Newark, and Jacksonville. Mize says that its main objective for truck transport is to provide fast and consistent service from the port of arrival to its dealerships. This means positioning its trucking fleet in high-density, fast-moving corridors. For Mazda, these include Tacoma and Seattle, New York and New Jersey, and Jacksonville to Atlanta and South Florida. Another is from Los Angeles to San Francisco or to Phoenix or Albuquerque.

Says Mize, “Outside of these corridors, we encounter problems with trucking. If we cannot achieve high-density loads, we would use rail to the Midwest or Texas, and from east of the Rocky Mountains, we would ship by rail to the Mississippi River.” Recently, Mazda has been increasing its efficiency and is also achieving lower trucking rates. On the East Coast, it changed from one carrier to multiple carriers from Newark and Jacksonville due to service issues. “We found that we could reduce costs. Due to the fragility of the truck industry, we did not want to invest too heavily in one carrier,” explains Mize.

Forecasting accuracy

An essential factor of trucking efficiency is forecast accuracy. De Baere says that for new releases, or if a part is missing, it goes down. If the manufacturer produces less, it goes up. Furthermore, financial holds placed when cars leave the plant are not part of the forecast. “Thus, it is volume driven instead of process driven. The financial process is terrible for the distribution process,” says De Baere.

Another issue is that forecasts are not precise enough. Says De Baere, “Say that we receive a forecast for distribution to France for 100 vehicles. The forecast does not say whether it is northern France or southern France, which is a big difference in terms of mileage. Thus, the three problems in optimizing lead time that hinder carrier planning are quality holds, financial holds, and forecast detail level. This means that some carriers can plan only when the vehicle is available.”

Output forecast from the factories remains an action point with a lot of OEMs. Sometimes the vehicles are coming out fairly on schedule, but because of several reasons, vehicles are on hold and are as such ruining the forecast from a carrier perspective, according to De Baere. He says that confronting the plants with the facts would enable open debate on how to improve the forecast.

Lead time issues

A primary objective for Mazda is to reduce its trucking lead time. Imports are on board the vessel for fifteen to thirty days, which makes efficient delivery that much more important. Mazda identifies high-priority vehicles and relays this information to the port contractor. Mize says that it provides consistent and early communication with the port contractor and carriers.

Recently, Mazda launched its e-Port System which schedules vehicles through the facility and out to the truck carriers. The goal of e-Port is to reduce lead time. “e-Port makes our vehicles much more accessible to the carriers. Then, the carrier is consistent on delivery and provides reliable ETAs to the dealerships,” says Mize. Mazda has implemented e-Port at two ports: Jacksonville in May and Tacoma in August. San Diego is next in January, followed by the Port of Newark. Reveals Mize, “the key to success is standardization among facilities, which we did not have in the past.”

For Volvo Logistics, not much can be done about reducing the lead time, except securing a good releasing forecast from the factories or compounds, according to De Baere. He adds that for multi-leg distribution set-ups, real-time arrival reporting and automatically booking the transport for the next leg is crucial to squeeze out waste from the process. “We are prototyping an application for smartphones to speed up reporting in certain circumstances and reduce waste in the process, especially for multi-leg set-ups,” he reveals.

Technology developments

As logistics players focus on reducing lead time, Hoedlmayr implemented a storage management system using RFID to locate cars within a storage yard, thus saving time and money. Zwirner says that its goal is to implement standards so that vehicle manufacturers are using the same type of RFID technology. Among current RFID users are Ford in Cologne, Germany. Zwirner notes that Ford wants to use RFID all the way through from factory to logistics hub to dealer.

In 2011, United Road Services, Inc. purchased more than 200 new tractor-trailer combinations for which it has purchased soft tie, over-the-tire securement systems on all new equipment. These new carriers load from ground level as opposed to units purchased previously that secured vehicles using chains and had its drivers maneuvering around on elevated decks. Furthermore, United Road is a partner in the EPA’s Smartway Transportation program, which focuses on carriers that purchase and install idle-reducing technology along with other filtering systems that lower emissions. “United Road’s capital expenditure last year enables our trucks to operate at much lower maintenance costs and at higher productivity standards,” says Kathleen McCann, president of United Road.

McCann says that the flexibility of its ERP system, OVISS, enables United Road to integrate its solution with its customers’ platforms and with those of other finished vehicle logistics providers. “This gives us visibility into the upstream pipeline such that our asset position and utilization is efficiently planned and deployed,” says McCann. Additionally, its systems provide real-time reporting at the location of the events such as pre-inspection, loading, and delivery.

“We have patented technology specifically around vehicle transport load optimization. Our system takes into account variables associated with finished vehicle transportation and continuously analyzes existing inventories and other physical constraints in order to create the most efficient load factor possible in real time,” says Matt Cartwright, CIO at United Road. He says that the system considers the plurality of inventory at multiple ports or a single port and the various assets available. It recommends how to build loads based on how quickly the vehicle must ship, how best to fit on a vehicle, and the profitability of a group of vehicles. “We must consider the entire network,” he points out.

Consistent visibility

To ensure compliance with international trade regulations, United Road provides information to both OEMs and customs agencies prior to border crossings so that documentation requirements are streamlined, prepared, and sent prior to border arrival. OVISS automatically generates and sends the data. McCann says that automating these procedures enables United Road’s delivery professionals and dispatch teams to focus on delivering its customers’ vehicles on time and damage free.

For the majority of United Road’s customers, the flow involves the movement of new vehicles from assembly plants on either side of the U.S.-Canada border to consolidation points, rail ramps, and direct delivery to dealerships on the other side. Cartwright says that visibility is the biggest issue for United Road, especially for imports, because it does not have as much insight on production. A crucial component in streamlining the cross-border process is receiving advance information of pending vehicle build levels so that the planning for and deployment of requisite equipment is made to provide capacity as needed.

McCann points out that for ocean imports, one does not have the level production releases that it has from plants. “There could be disruptions if vehicles in transit are placed on hold. This means that our fleet is available, but 20 percent to 30 percent of the shipment has not been released,” she says.

For Volvo Logistics, the solution for optimizing trucking efficiency for finished vehicles requires it to find a good balance between reengineering the flows and robustness of the entire system. “We have achieved the cost savings targets of our customers almost every year. By focusing on quality and delivery precision, we have been gaining efficiency. Changing your flows too often leads to other problems. If you change your trucking partner too often, new EDIs must be set up and the beginning delivery level is not as high,” says De Baere.

Whereas transporting finished vehicles by truck is a fast and flexible method, it is also a complex process that is even more challenging for international shipments. The goal for most vehicle shippers is to maximize carrier efficiency while also optimizing service to the dealerships through a combination of planning and technology.