Chapter 5: Segments of Road Transportation Flashcards
Please explain, based on the attached chart of transport market segments, what the markets of CEP, sea transport and air transport do have in common!
Start your answer by explaining the chart first!
The chart shows the size of different market segments for logistics services in Germany. The blue bars stand for the absolute volume in the specific market segment, the red bars for the outsourced volume (performed by logistics service providers). Therefore the difference between both bars shows the theoretical market potential between still “insourced” services and already outsourced services (red bars).
The comparison of the bars for CEP, sea transport and air transport indicates that from the total market volume almost everything is outsourced already. What these markets do have in common:
- they are network-based services (need for consolidation) with the need for very high fix-cost investments (vehicles, depots, hubs etc.);
- the average shipment size and the chance for consolidation for private haulage or private services is small resp. low;
- the market concentration is high because only a few competitors are able to provide the necessary investments
Please name and explain the object and transport characteristics of three FTL market segments!
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National Bulk Logistics:
bulk transports with raw material (e.g. construction material, stone, minerals). The transport is characterized by the usage of special equipment (e.g. tipper trucks). Because of the low value-to-weight-ratio, the freight is often transported by rail. -
General Truckload / Carload:
dry goods, which can be stapled and transported without specialized equipment. The loading unit is often the pallet. Greatest challenges are the empty runs in backloads -
Tank and Silo Transports:
an FTL segment which is characterized by the use of specialized equipment for transporting liquid and gas-based products. Empty runs on the backload are mostly unavoidable because of the need to clean the transport equipment after usage.
How would characterize the market of Groupage and General Cargo Load in Germany?
The market for LTL transports in Germany can be characterized by:
- a high degree of market concentration because the fixed cost investments for the needed infrastructure (trucks, depots, hubs) is very high
- a high degree of outsourced transport activities to LSPs (fix costs; seasonal fluctuations)
- a few “big players” like Dachser, Schenker or DHL on one site and strategic alliances of SME like Systems Alliance, CargoLine or 24 plus on the other side
What are the operational characteristics of LTL transports?
Network structure:
multi-stage, „spatial“ (just like CEP!), but: bigger, more heterogeneous “objects“
Object Structure:
“palletized” structure; weight-limit per shipment: 70 kg – 2.500 kg
Critical resources:
motivation/productivity break-bulk and P&D-driver personnel, tracking- and tracing-technology
Activity level:
typically relatively stable
What are important success factors for the business of LTL-transports?
- Reaching a high „Stop-factor“ (shipments/stop – industry consolidation potential),
- Network density (km/stop and share direct-depot-to-depot line-haul connections)
- Load balances in network
- Pricing policies – ability to balance lanes
Describe the principle of LTL-transports!
The principle of LTL transports is based on the need for a pre-haul consolidation and a post-haul delivery process. It consists of three main components / steps:
- Pre-haul [Vorlauf] transport by the groupage agent [Versandspediteur] or Co-loader [Beilader] to the depot of the grouping agent, followed by a handling process
- Long-Haul transport by the carrier (rail, sub-contrator or with own trucks): transport in FTLs to the depot of the break-bulk agent [Empfangsspediteur], followed by a handling process
- Final delivery to the consignee by the break-bulk agent or receiving agents [Briefspediteure].
What are tasks and roles of the “Co-Loader” and “Receiving Agent” in groupage transports?
Co-Loader and Receiving Agent are external participants in a groupage transport. They are carriers or other forwarders which are used by the groupage agent to maximize the capacity usage in the main haul FTL transport.
The Co-Loader and Receiving Agent are responsible for the transport of their freight to the depot of the groupage agent and the pick-up of the freight from the depot of the break-bulk agent.
Which kinds of pre-carriage to the depot of the groupage agent do you know?
- Collection by groupage agent or its sub-contractors in a tour
- Direct collection order [Direktabholung] using trailers of carrier / groupage agent
- Self-collectors [Selbstanlieferung] by co-loaders and or shippers
What is the “Bordero” and as an important document in groupage transports?
The Bordero includes all orders of he groupage forwarder which have to be shipped in long-haul transport.
It contains all the information about each individual item in the groupage transport, but also a total pallet number and possibly a total weight of the freight. In particular, it contains instructions for Cash on Delivery and serves as a document of proof.
CargoLine is a strategic alliance of regionally organized forwarders. What are the main reasons to join such a strategic alliance?
Groupage collaborations are a strategic opportunity against the dominating market leaders like DHL, Schenker or Dachser. This is reached for example by:
- A potential enlargement of the customer base (you can offer inter-regional or non-domestic transports to your customers)
- The members gain more purchasing power in buying infrastructure (IT, vehicles, depot infrastructure etc.)
- The often smaller members get being support through consolidated marketing activities and a brand building
- The alliances offer an internal knowledge sharing - for example about important KPIs, market prices, continuous improvement activities etc.
What is E.L.V.I.S.? Explain its functions and the business model!
ELVIS (Europäischer Ladungs-Verbund Internationaler Spediteure) is a strategic alliance and involves, therefore, the cooperation of small and medium-sized freight carriers and shippers in the FTL and part load market segments who have recognized that they are stronger in an association.
The purchasing benefits alone enable ELVIS members to secure cost savings which significantly exceed the moderate membership fee. Wide-ranging operational benefits are possible for every member, but entail active collaboration in the ELVIS association.
The focus of the business model is on full-truck-load and part-load segment.
How would you characterize the market of Courier, Express and Parcel Providers?
The market of CEP providers is characterized by:
- a high market concentration in the international business. Only a handful of companies are able to provide and put the high fix-cost investments in international, time-based CEP services (e.g. DHL, UPS, FEDEX). Because of their international orientation and the need for the use of different transport modes they are also called “Integrators”.
- a high degree of outsourced transport activities to LSPs (fix costs; small shipment sizes)
- A very high degree of automation and standardization in accepted freight, IT, service products, and processes
What are the operational characteristics of the CEP business?
Network structure:
multi-stage, potentially, multi-level, „spatial“
Object structure:
small, weight limits per shipment: 2 - 31,5kg (up to 70 kg for integrators)
Critical resources:
sorting/handling technology, motivation/productivity, P&D-driver personnel, tracking- and tracing technology
Activity level:
typically relatively stable („B2C“ → Christmas season)
What are the main success factors in the business of CEP?
- To reach a high „Stop-factor“ (parcels/stop – industry consolidation potential),
- to provide a high network density (km/stop and share direct-depot-to-depot line-haul connections)
- Automation of order-processing and „Tracking & Tracing“ of objects
- Standardization – objects, processes
What are advantages and disadvantages in the implementation of Hub-and-Spoke-Networks - like in the CEP market?
Advantages:
- Realization of EoS on the relations by the possibility to offer a higher service frequency with consolidated transports
- Realization of EoS in the hubs because of high consolidated shipment volume in time and space
- Realization of Economies of Scope because of a higher degree of equipment utilization in goods handling.
Disadvantages:
- Additional transport movements because of fixed standard operational procedures with interrelated connections
- A sensitivity of the whole system against interruptions of the standardized processes
- High fixed cost level
