Anton Oparienko (COO, Upsilon): So, today I'm pleased to be joined by Wouter Brouwer, the supply chain management consultant currently working at Alders Transport Group. Can you tell a few words about yourself and your professional road in the logistics industry?
Wouter Brouwer (Supply Chain Management Consultant a.i. at Alders Transport Group): I'm a Dutch native. I have a 30 years career in procurement, logistics and supply chain, and innovation and change management have run like a golden thread through my career. My first job was in the chemical industry, where I executed seven or eight different roles within the 18 years that I spent there. After that, I transferred to the other end and started working in the logistics industry. I held various senior management roles in different companies; one of them was a manufacturer and supplier of parts for the tank container and tank trailer industry.
I was COO and was responsible for business process management as well as business development within that sense. At the end of that career, I started working as an independent consultant or so-called interim manager, basically offering my experience to those in need, either on a project basis or on an interim basis in case of managerial issues.
I am now involved in a project for Alders Group that is focused on building up and implementing a supply chain control tower. This work requires knowledge of IT development, innovation, and supply chain. And during my career, I have gained experience in all these fields. My expertise and my ideas are the reasons they invited me for this project.
Anton: You have a lot of experience with chemical transportation, so let’s talk about it a bit more. Are there any specific requirements for transportation when it comes to chemicals?
Wouter: The word "chemicals" is most of the time associated with danger and accidents or something bad for your health. Because of the nature of the product, there are many specific requirements you need to take into account from a legislative perspective. If you transport chemicals based on the UN or European rules, for example, ADR (Transport of Dangerous Goods by Road), you're bound by the type of equipment you use and the nature of the product. If you have corrosive products, you can't transport these in any equipment. So, you need to be very specific. The loading and discharging methods also relate to the nature of the product. Because of that, you have specific legislation that you need to keep in mind as far as equipment is concerned.
But also the chemical companies themselves have very strict requirements with regard to transport. We have a lot of drivers from Eastern Europe, and the language barrier can often cause a problem. So, you can imagine if you have an incident at a chemical plant in Germany, and we have a driver that doesn't speak German or English, you may have a potential risk. That's why the requirements imposed by the chemical industry themselves are quite strict.
Another thing that is typical for the chemical industry is that the largest customer of the chemical industry is the chemical industry itself. It's different when you compare it to retail or food. Food is probably more linked to chemicals because of specific requirements when it comes down to, for instance, GMP (General Manufacturing Practice) or HACCP, but retail with online shopping and all these small vans moving around, that's a completely different nature of transportation.
So, when you look at requirements on the industry, chemicals are probably the most severe ones, and rightly so, because if you are on the motorway and one of the tank containers has a spill, you don't want to be behind that truck when it's a nasty chemical. It's mainly around requirements because of the nature of the products that impact chemical transportation.
Anton: How do software solutions for chemical transportation differ from the regular logistics ones?
Wouter: There is not that much difference. A lot of add-ons are related to IoT that's all database driven. Just another database with more information that you can include in that. Maybe when you look at digitalization in the retail industry, it's probably more recalls than any chemical industry when it comes down to transportation, which, probably due to legislation, is still a, what I would call, relatively conservative industry.
And if you take the modes of transport or a tank container design, there is not much that can be changed. Some things have changed as far as material choice is concerned. But when you look at software, there's not much difference. But what you see more and more is that the chemical industry is stepping up on digitalization when it comes down to transportation and the whole logistics industry.
And there are several front runners who are pretty advanced when it comes to technology, for instance, DHL, but I am not talking about the entire company but some particular areas. But when it comes to companies with one or two trucks offering good service, the right thing is to invest in software. But it can be pretty challenging. There are a lot of small companies that work as subcontractors for the big companies. So they can get investments from the parent company or at least the main carrier. And that's a hurdle for a lot of these companies to do.
Anton: Do you see any differences in the approach of large and small logistics companies to emerging technologies?
Wouter: On the one hand, we see a trend, rightly so, for digitalization in the logistics industry because it's absolutely necessary, and therefore, the pressure on the smaller companies to keep up with the pace of change. On the other hand, they are struggling with investments for innovation, as already mentioned before.
But what we see in general is that there is a shortage of drivers. So, you do need these small companies as subcontractors to fulfill the demand for drivers. And within Cefic, which is the European Association of Chemical Procures, you have a, what's called SQAS program safety called basically an add-on to the ISO registration. According to the program requirements, if you are the main carrier with a lot of these small subcontractors, you have an obligation to manage their quality and safety performance.
Now, I envisage that more and more of these small companies are more embedded into the overall IT structure of these carriers. They don't need to make big investments because the main carrier bears the costs for the technologies and implementation. The downside is that they lose their independence to a certain extent and be absorbed by more prominent companies. And big companies will become even bigger.
Anton: You have mentioned the shortage of drivers. Is it the tendency that appeared during the COVID-19?
Wouter: It was already there before COVID. And COVID didn't help, to be honest. During the first months of the pandemic, the whole industry collapsed, and the business dropped significantly. A lot of transport companies were forced to idle equipment and release drivers. There was still a demand for staff and personnel in other areas of the industry and economy, in general, so someone who used to be a driver went to be a carpenter or found another job, at least they didn't return as a driver anymore.
And also, because of the strict requirements imposed by national governments on traffic in-between countries, the problem became more visible, because before COVID, certainly in Western Europe, we could see a lot of drivers from Poland, Romania, Bulgaria, and for a while, they were not allowed to enter these countries. It was only for a limited period of time, but it was sufficient to highlight a problem, which was already there. Now we see that the economy is booming and people start to buy things again.
Take the UK as an example, there was already a shortage of drivers, and COVID, with its working permits and restrictions on movement, and Brexit complicated the situation. In the UK alone, they're talking about 50,000 drivers short, which is a lot, and that impacted the whole supply chain and chemical transportation.
It makes digitalization an even more important thing to consider in the logistics industry. For example, you take a product from A to B. But when you discharge, you don't have a backlog in B to go back to A again. So, there is a lot of empty mileage. Once a transportation company delivers from A to B, and a truck is going from B to A empty - that’s a lot of inefficiency in the supply chain. Software and technology can help improve the situation or at least improve the driver shortage in that sense.
Anton: What are the other challenges companies face in chemical transportation?
Wouter: There is a move from what I would call the traditional linear supply to the circular supply chain. So, the EU's remains are also more and more focused on ecology. We were aware of climate change and that natural resources are getting more and more scarce. And it reflected on the whole supply chain regarding the purchase, production, usage, and waste disposal. The throwaway element is getting less of an issue in the sense that its industries are focusing more on reuse. And the automotive industry, car manufacturers like Volvo and Audi started using raw materials from a reuse perspective.
And that's also a completely different dimension to the landscape of the chemical industry. On the one hand, there is legislation that is forcing them. On the other end, companies are not only looking at the effects of the product but also how they can make sure that their product doesn't end up in landfills or being incinerated. And it's a public opinion. What I can do and need to do as far as household waste, splitting glass, paper, and the food stuff and then having the rest because you also get penalized if you have too much waste for landfill or incineration. And that's going to be difficult for the chemical industry, and, therefore, it will have a knock-on effect on their supply chain and the way they will have their logistics filming in the future. So, these are a lot of challenges logistics companies face.
Anton: You said you're working on the big project regarding the control tower. Can you explain what it is and what is the main difference between the control tower and the traditional freight and distribution management?
Wouter: Transportation, not just given the issues already mentioned, is a business margin, and you're not able to make millions of euros by just doing transportation. So, you need to have some value-added activities. Either you can do that by offering warehouse services with value-added services, like drumming, feeling, and so forth, or you can look for solutions in technology, for instance, a digital freight fulfillment platform. And the decision has been made to look at technology.
So, from one side, the new generation of tank containers, apart from specific technical features on the tank itself, will also be equipped with sensors. So, at least you have data available that can be used to improve visibility and to allow for optimization. So, from another side, it's an optimization of their own assets to serve more efficient use, eliminating the human element as much as possible. So, it's very much data-driven. But that's more transportation plus, I will say. The emphasis on the control tower will be that we will also integrate with customers.
You have all the transport-related data coming from the IoT, for the sensors IoT data on the equipment, and you will integrate with the software systems and the platforms of our customers, where you will have inside information on their inventories, their sales and operations planning, their carrier data, those are cost elements. Basically, to put it very simply, you put all this data in a big blender, and you get an optimized situation. And you start with supply demand. There is more than one product, therefore it is inevitable that you need to have AI technology to work with that. We also have a bit of machine learning because there are some repetitive actions in place.
It's still a dynamic world because things happen. Your demand will change, your supply will change because of shutdowns, planned or unplanned, at your customer or supplier side. You will have issues in the supply chain. So, you need to have a system in place, which can deal with such events. That's where the visibility part starts. You can continuously optimize your supply chain based on changes in data. Now, the longer you are planning the horizon, the better. As a result, you are able to optimize your assets to the maximum, and your customer will get the most efficient supply chain, which means the lowest inventory levels and the lowest cost. Moreover, you will be able to avoid major supply chain disruption because you can plan it in advance, based on the data available, you can steer.
For instance, if a manufacturing site has a problem that you can act proactively, rather than always looking at it from hindsight when the truck has already arrived, you can do anything. So, that's the benefit. It's about optimizing and creating visibility over your supply chain. If you have visibility, you can act. If you don't have visibility, you need to wait for things to happen.
Anton: What is the future of the transportation and the chemical industry? You also mentioned that you're trying to remove the human element and the human error as much as possible. What do you think about the possibility of using autonomous vehicles for chemical transportation, and how much can it change the industry?
Wouter: Well, eventually, we will go to more autonomous transport means, but that will still take a while. In essence, transportation will always be needed, and it will continue to develop. Also, when it comes to sustainability and really new technology, things like Hyperloop, as an example, are still in an early stage of development, but the principle itself is very interesting. And particularly, if you have set links where you can move your product fast and safely, without intervention, it's almost autonomous driving, and the landscape as such will be completely different in 10 to 15 years from now.
For example, in Dubai, they will have a Hyperloop in the next ten years. If you can move passengers, you can move cargo on short distances, whether that will apply for chemicals, I don't know because of the legislation you need to consider. But it is completely clear that digitalization will continue and certainly in the next few years will almost have exponential growth, and more and more supply chains will be data-driven.
COVID and the current situation in the shipping industry are also making people rethink globalization. Do we need to source everything from there or do we need to go back to the regions? I’ll give you an example, at my previous company, we basically had a big manufacturing site in Asia. But in the end, we said, "Well, why do we need to move these parts on a long distance if we can try to build a plant in Eastern Europe, for instance, so we can shorten distances and have a more sustainable supply chain". And in the past, cost was one of the main drivers for a lot of companies to invest in China.
Currently, transportation costs are going through the roof and you probably will follow the news as well. Around one and a half years ago, I would pay $1500 USD for a container to be shipped from Shanghai to Rotterdam then, currently it's $10,000 for the same container. It has an effect on the supply chain, effect on rail. The railway from China to Europe was not really attractive in the past because of the cost, for rail, some of these are becoming attractive, and now you see a lot of problems in Belarus. It makes the rail between China and Europe completely blocked at the moment. So, that will make a lot of people think about where they source their material. You'll see some changes there as well, again, which will impact the way we transport. But that can only be done by available and allow people to act on that, either people or simply AI technology in place to make the decision for you.
Anton: It was a very interesting conversation. Thanks for your time and best of luck and success in all your future business endeavors!