Chain Reaction

Environmental management and the cost of transporting raw building materials are becoming ever more important, and many bitumen suppliers are now increasingly focusing on supply chain efficiency as a key factor in business success

Moving products from A to B, in a cost-efficient and environmentally responsible manner, has become a huge logistics challenge for many businesses across the world.
How do companies contain and reduce escalating costs, such as those caused by continual increases in oil prices? How do they respond flexibly to fast-changing consumer demand? And how do businesses minimize their carbon footprint, as industries now have a greater responsibility regarding the environment and CO₂ emissions.

Part of the solution is effective supply chain management, which can bring a host of benefits, including: reduced transportation costs; major reductions in waste and inefficiency; greater certainty of repeat orders; better distribution services; improved profitability; and satisfied customers.

DHL – one of the world’s leading logistics providers – have further developed their ‘control tower’ concept aimed at meeting such customer needs in the wider aggregates sector. The approach sees DHL Exel Supply Chain, part of DHL’s logistics division, act as a fourth party logistics provider (4PL), co-ordinating and managing the customer’s third party carriers, and drawing on the specialized abilities and expertise of each individual provider to deliver a cohesive and efficient outsourced logistics operation.

‘As companies grow, their supply chains will become wider and more complex,’ explained Adam Franklin, managing director of DHL’s specialist oil, gas and chemicals team.

‘That means the management and cost of distributing materials will increase, and aggregate companies will need to have flexible and highly responsive supply chains in place, to respond to market trends quickly and efficiently. Our control tower proposition has been developed to ensure the fundamental principles of visibility, integration and quality management are embedded in each client’s supply chain.’

The company offers innovative logistics solutions to various market sectors, and the control tower approach, as a prime example, has been embraced and successfully put into practice in the asphalt sector, for companies such as Shell Bitumen, BP and ExxonMobil Bitumen.

Applying the concept in a demanding and time-critical logistics operation makes good business sense; the control tower helps creates a more agile supply chain, with reduced lead times, inventories and storage costs.

The control tower is essentially a centralized logistics management service in which DHL, working with their clients on the planning, visibility and execution of delivering transport services, can take control of the complete supply chain.

The control tower methodology is about managing a client’s assets, resources and delivering their product to the market as cost-effectively and efficiently as possible,’ said Mr Franklin.

‘The control tower is a flexible service; we can manage the customer’s distribution services on their behalf, or take a far more integrated approach and become a supply chain partner to optimize their transportation activities.

‘Our service is also technology driven; we have information systems providing a customer order-taking capability. We can then manage the scheduling and delivery, as well as the administration, giving our clients a single point of contact for all logistics operation enquiries.’

In the bitumen industry, DHL Exel Supply Chain have been operating the control tower service for Petroplus, one of Europe’s leading suppliers of petroleum products. The business currently owns and operates two refineries in the UK – the Coryton facility in Essex; and the Teeside refinery.

Operating 365 days a year, on a 24/7 basis, DHL Exel Supply Chain’s customer service centre in Whitwood, near Leeds, ensures supplies of Petroplus bitumen products are delivered to customers in the asphalt sector within half an hour of their allotted delivery time.

The control tower handles all incoming orders and manages the scheduling and delivery of products to any location in the UK. DHL currently deliver over 95% of consignments as part of their agreed key performance targets. The control tower service also takes account of environmental issues, bringing greater visibility to the supply chain and encouraging better planning and fleet scheduling, as well as reduced carbon emissions.

Peter Clements, supply and logistics manager at Petroplus, explained: ‘By taking a lot of the burden of driver management away from us, including, for example, overseeing our compliance with the EU Working Time Directive, DHL’s control tower helps us to improve efficiency and reduce cost in the supply chain.

‘Having better visibility of a tanker’s progress and schedule saves transportation costs through improved vehicle utilization and minimized fleet commitment. This seamless transparency between the Petroplus and DHL ordering and logistics planning systems is just one factor that has created a strong partnership between the two organizations.’

While the asphalt sector recognizes that effective management of the total supply chain is an essential ingredient for business success, most of the quarrying industry has yet to realize the benefits of the control tower.

Mr Franklin explained: ‘The aggregates industry, in general, has been very good at managing its logistics and the price it pays for transportation services. However, the price of fuel has gone up by 20 to 25% in the last 12 months and, as cost pressures continue to mount, the question is: what is the next logical step for the sector in terms of value delivery in the supply chain?

‘Effective cost management has always been a critical component for the supplier, but it shouldn’t just be about driving the price down. DHL’s core competence is based on value delivery; we focus on good service, flexibility and overall cost.

‘This logistics philosophy has been successfully adopted by other industries, such as automotive, retail and chemical. And I believe if companies are not committed to value delivery and logistics capabilities, then there is no case for change.’

Supply chain efficiency is becoming ever more critical as businesses continually strive to improve service reliability and reduce escalating costs. The control tower service has proven to be a vital logistics management process that can contribute positively to a company’s success, and only time will tell whether the control tower approach will be embraced by the aggregates industry.