Logistics pilot pulls transport firms together

IT tool matches empty trucks with idle goods to save on fuel costs, writes Gabrielle Monaghan

IT tool matches empty trucks with idle goods to save on fuel costs, writes Gabrielle Monaghan

Spiralling oil prices are boosting transport costs for Irish companies, compelling many to devise new ways of trimming their distribution overheads. One group of businesses, including Guinness brewer Diageo, is putting competition aside in a bid to reduce transport costs.

InterTradeIreland and Elupeg, the European Logistics Users, Providers and Enablers Group, has developed an IT tool called Logistics XP to help companies trim transport costs. They tested the tool on eight companies operating in Ireland, including Diageo, Argos and Royal Numico, and are now seeking businesses for a new programme.

The companies involved in the pilot saved a combined €1.5 million in distribution costs, or as much as 20 per cent in some cases, according to Caitriona Regan, operations director at InterTradeIreland. The results were presented to an Elupeg conference in Milan last year.

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"We realised that for companies to become more competitive internationally, especially with Ireland at the periphery of Europe, we would have to be able to get products to market more quickly," Regan says.

"This way, if an Argos lorry is coming to Ireland, instead of returning to Britain empty, a company from Ireland could move goods to Britain."

More than 40 per cent of trucks travelling across Europe are coming back to base empty, InterTradeIreland says.

This is an unnecessary waste at a time when fuel prices are near a record high, a predicament that culminated last year in Irish truckers forming a 90-mile convoy from Monaghan to the centre of Dublin to protest at the extent of Government duty on fuel. The Irish Road Haulage Association had sought a rebate for fuel duty in the Budget to compensate for rising oil prices, a measure that was denied.

In addition to higher transport costs, distribution of goods and raw materials from the North and the Republic has been complicated by increased competition from cheaper manufacturers in new European Union states and legislative changes such as working time directives, road charging and environmental issues, according to Elupeg.

"In our business, not only have transport costs gone up, but raw materials have too, because paper prices have risen," says Malcolm Reid, the logistics manager at SCA Packaging in Warrenpoint.

"We have a small fleet of vehicles, and they are empty on the way back. We are interested in what kind of collaboration we can form on the island of Ireland."

SCA Packaging UK and Ireland, a subsidiary of Swedish multinational Svenska Cellulosa Aktiebolaget, makes corrugated fibreboard for the food and drinks industry, which it distributes throughout Ireland. It is considering linking up with another company to help reduce its transport costs, Reid says.

Logistics XP works by creating a profile for each company involved, with details such as inbound and outbound movements, temperatures used, volumes, the number of vehicles, and vehicles' destinations. The database then reveals where there are opportunities to share transportation.

The data, which remain confidential unless companies choose to share them, are analysed to identify opportunities for collaboration between different companies in a variety of sectors. The companies in the pilot run attended a series of workshops designed to help develop relationships and seek further areas to work together.

The pilot project also identified €700,000 worth of business opportunities that were not even related to transport, according to InterTradeIreland, a cross-border body set up under the 1999 Belfast Agreement. The organisation aims to increase the global competitiveness of the country's economy to mutually benefit the Republic and the North.

Henderson Group, the owner of Spar in the North, and Irwins, the North's largest independent bakery, are two of the eight companies that teamed up to share delivery loads. "It is about utilising existing spare distribution capacity and improving distribution activities in all markets," Kieran Harney from Irwins says.

However, the Logistics XP programme requires a leap of faith from all involved. The biggest barrier to companies sharing information is trust between competitors, though many of the businesses working together come from different sectors, according to InterTradeIreland.

"We're finding that a lot of companies that are not direct competitors are coming together," Regan says. "You have companies like Argos sharing transport with bread companies."

While any company can participate in the Logistics XP programme, only small and medium-sized enterprises employing fewer than 250 people will receive funding from InterTradeIreland. The trade body is looking for at least 12 small companies to participate in its latest programme.

"We are particularly interested in smaller companies, because they could benefit by piggybacking on large companies' transport," Regan says.

"The larger companies charge for smaller companies using their empty lorries, bringing down overall costs for everyone."