Newsletter #2

13 February 2008

In this edition read amongst others about how the low-cost-airline business model will work for the shipping & transport industry, about the use of mathematical algorithms for efficient deployment of transport vehicles, and get an introduction to ARLs new visual Berthing Planner solution for terminals and their e-Business engine for transport providers.

Berthing Planner, for general purpose and container terminals

A solution for terminals with a busy quay side and a corporate need to plan the berthing and distribute the plan to stakeholders. Suitable for container, tank, bulk, car-carrier, gas, ferry, cruise and multi-purpose terminals.

click here for higher resolution

 Key functionalities:

· Berth position visualization
· Drag & drop vessel berthing
· Berth unavailable zones (berth positions and time from-to)
· Flexible graphics settings
· Multiple scenarios in parallel
· Change of arrival/ departure time
· Distribute PDF berthing plan to stakeholders
· Colour code individual operators for visual recognition
· Determination of berth planning clashes

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Low cost airlines, part 2: Examples of LCC model in real life

Airline and shipping line examples:

· airasia.com
· airarabia.com
· easyjet.com
· airberlin.com
· youship.com

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LCC FAQ: The Low-Cost-Carrier Model for Transportation Companies

Common concerns and issues in the cargo transport industry, when applying an LCC model addressed:

For how long is a quote valid? Freight quotes have instant validity due to the fact that market conditions -which are the assumptions for the current quote- may be changing. The customer is presented with a freight quote and need to confirm his booking right away, if to accept the quote. If the customer doesn't accept the freight quote by booking cargo, price for the same transport may be quoted differently the next time the customer ask, due to changed demand or supply of space.

How can I give space guarantee? You can give space guarantee in return for your customer's cargo guarantee! If the customer doesn't show up with the cargo prior to departure service point closing, you still get paid, as it is the customer's responsibility to bring the cargo on time -or to have the cargo available for warehouse loading, if you offer door-door services. It is only reasonable, that in response to the customer's cargo guarantee, you give space guarantee!

How are exceptions managed? Exceptions are either not supported, or only supported against an extra fee. The extra fee reflects additional effort on the transport provider's side, or additional value created to the customer. Rather than spreading the costs across all cargo, you request an extra fee from the customer who require/benefit from the exception. In the airline industry, exceptions like flexible tickets, meals, priority boarding, extra leg space hardly ever comes for free. Why should no-show, early cargo pick-up or similar exceptions be provided for free in the transport industry?

Can't the customer call me? The clean LLC model entails full self-service, even there are examples of human customer service offerings, like e-mails, online chat or centralized call centers. It is commonly accepted that agreessive pricing comes at the 'price' of less personalized service. You can consider a centralized end-customer service center only supporting a single or a few languages, rather than an 'expensive' distributed and highly localized customer service function.

Can I still work with commercial intermediaries (like forwarders or NVOs)? Yes. Intermediaries are also customers, and all customers are equal. According to the LCC model, no commission or kick-back are offered to intermediaries. All customers have access to the same quotes and are treated the same way, under the same circumstances. This means that the intermediary no longer can charge for access to the transport provider -as the transport provider already offer his transport service to all end-customers directly- and the intermediary will need to charge for other values added to the transport; we all know there are many to offer!

How do I give special customer rates? All customers get same quote under the same conditions. The benefit of large volumes from the customer's perspective are harvested by the customer by a combination of getting the needed space many times -on popular departures- and an agressive price many times -on less popular departures.

How come I can book without login? As all customers anyhow are treated the same way under the same circumstances, and as payment is done as part of the booking process, there is no point in asking for login prior to giving quotes and accepting bookings. Administration of login's are against the principle of simplicity and of self-service, which benefits both the customer and yourself. After a booking is accepted, it is the customer -not you-, who has the responsibility for showing up with the cargo prior to closing -or to have the cargo available for warehouse loading, if you offer door-door services-. Before the booking, all information provided by you can be considered public knowledge.

Can I still offer extra services to my customer? Yes you can, as long as these services can be managed efficiently and can be valued and paid for seperately. Imagine f.ex. that you charge the customer for early availability of cargo at destination -say 4 hours prior to regular availability. This entails additionals value for the customer, as he f.ex. can meet a retail store sales campain. It also entails additional costs on your side, as you have to plan for priority unloading at cargo destination. So it is only reasonable that the customer pays an extra fee for this value-add service.

Will my customers be satisfied even they get less service? Your customers will be satisfied if you deliver what you promise. It is all about setting expectations and meeting expectations. If you set your customers' expectation high and deliver low, you will have a mismatch and dissatisfied customers. If your transport and customer service is crystal clear to the customer up front, and you deliver exactly that, your customers will be satisfied. Let us use an example: Say the cargo availability at destination is Thursday at 16.00 hours. Your customer has specifically de-selected a Euro 50 value-add offer for early availability at 12.30. Will your customer be disappointed that he can't pick up his cargo when his truck arrives at 13.45? You know the answer: He will be perfectly happy as expectations and reality are visible and aligned.

How will my utilization be more balanced by using flexible pricing? Assume you have a Saturday and a Monday departure from the same service point offering a certain transport at the same price. The Monday departure is always full because it is a working day for the customer. The Saturday departure is never full because it is weekend. Imagine that you introduce diffentiated pricing depending on market forecast and actual booking volume/ utilization; Monday is higher, Saturday is lower priced. This will motivate some customers with price sensitive transports, to book on Saturday instead of Monday. You will have even (=balanced) utilization across popular and less popular departures if the price diffentiation is correct. If cargo volumes in the market is definate, you might be able to operate the same service with the same total amount of cargo with less capacity transport vehicles than before; you might be able to free up transport assets to enter new markets without any further investments!

How do I pre-allocate to my VIP customers? You don't. The space guarantee (allocation) is related to the customer accepting the quote at the specific time of giving you his cargo commitment. A long term volume commitment is not sufficient for a space guarantee on popular departures. You can, however, choose to only offer part of your available capacity via the LCC model, and reserve the remaining capacity for contract customers. If your contract customers have downfalls, you can increase the LLC capacity, which will instantly be reflected in the pricing (price will be reduced if capacity is increased/ current utilization decreased).

How can yield be higher, if price is lower? First of all price is only lower under specific market conditions; under certain market conditions -high demand- the price might be higher than the traditional market. If you offer space guarantee (and traditional market doesn't offer space guarantee) a higher price is fine. Secondly the yield is related to a combination of price AND utilization. If you have high utilization, your unit costs are low due to the nature of -high-fixed versus low-variable costs. Thirdly, by operating an LCC model, you are expected to operate efficiently and with a high degree of self-service entailing lower costs at your end, equal to higher yield!

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eyefortransport.com Middle East 3PL Summit, e-Business round-table lead by ARL

During the eyefortransport.com event for the 3PL and forwarding community in Dubai, UAE, the round-table focused on e-business in 3PL and forwarding, was facilitated by Rene Bendt, Director of ARL Consulting.

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Second solution in ARL commercial e-Business Suite

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Let your quote desk staff spend their time on something more valuable than reading up standard rates from a spreadsheet to your customer on the phone!            

ARL e-Quote is automatically generating standard prices for all corridors defined in ARL e-Schedule. By combining the defined service or service point additionals -and possibly pick-up and delivery costs, if you offer door-door transport services-, e-Quote is able to produce an online freight quote to your customer upon the customer's self-service request on your web-site.

 Product website  |  Flier  |   More

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e-Business solution for receiving bookings and managing capacity

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Offer your customers self-booking on the internet. Manage your capacity online. An easy-to-deploy e-Business solution for your transport offering! Your business; powered by arl-shipping.com e-Book.

ARL e-Book is accepting customer bookings as the next step after schedule and quote is selected and accepted by customer. Bookings are automatically offered for all corridors defined in ARL e-Schedule with a price defined in ARL e-Quote and space available as defined in ARL e-Book.

 Product website  |   Flier  |   More 

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Transport Provider version of the LCC Low-Cost Airline Model: Flexible Pricing to Optimize Yield and Utilization

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Do what low cost airlines have done for years - introduce flexible transport price to balance utilization across popular and less popular departures. The ultimate self-service offering!

ARL e-Yield is using a sophisticated pricing engine driven by market forecast profiles and utilization triggering parameters, allowing transport provider to utilize assets as much as possible, and thereby drive unit costs down

Prices offered are adjusted automatically by the platform, and alternative products to the primary products are released for booking, taking expected market conditions and actual booking status compared to expected booking volume relative to closing time into account.

 Product website |  Flier |  More

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Powered by. What does it mean?

A personal computer might be powered by Intel, even it is produced and marketed as Dell, Lenovo or HP. Powered by signifies that the 'engine inside' -in the case of the personal company, a central processor- is provided by a trustworthy engine supplier, who specialises in the engine and not in the final product. A powered-by-provider is an 'enabling provider', not a provider of the final product.

ARL's e-Yield, e-Book, e-Quote and e-Schedule are 'powered by' solutions, which allow a transport provider to focus on the transportation product and let ARL provide the IT-engine. This is technically done by integrating the ARL solution into the transport providers own website.

See how this is done here.

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Efficient transportation by applied math force - Part 2: Fleet Management

ARL is planning for the release of a three commercial transport packages. The most significant contributor to the benefits created, is the extensive use of mathematical algorithms. Here the objectives and intentions of the solutions are shared –together named the e-Fleet Suite:

  • ARL Deployment Planner, for visual deployment of transport assets in a network and automated impact calculations of expected performance and costs
  • ARL Network Optimizer, for automated trimming of deployments, and later definition of services and full network
  • ARL Fleet Manager, monitoring and tracking of performance and costs comparing with initial calculations, including interaction with internal and external business partners

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Current Situation

You already have defined your transport network, organized in services with a published transit time and loading capability, provided by a set of close-to-similar transport vehicles (deep or short sea vessels or ferries, trains, barges of truck) deployed for servicing a sequence of repeatable service points, thereby creating a consistent and predictable corridor (point-to-point) loading capability and transit time. Also you have defined vehicle running costs and service point operational costs, and you have set constraints in the network like channel or lock passage slots, high/low tide quay access time slots, border crossing customs points opening hours etc.

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Market & Goal Driven Deployment

Imagine if you rather than deploying the transport vehicles yourself, instead describe the market requirements over time for the individual services, and set and prioritize the goals for your network and for individual services. The goal might be:

  • Maximum covering of market demands
  • Generation of highest yield
  • Maximized use of own transport assets
  • Lowest cost
  • Minimize use of chartered/ leased transport assets

Based on these criteria the rest is math! Deployment of vehicles to meet the set goals best possible, calculating concrete measures for achieving the prioritized goals, as well as calculating any other metrics, like transit times and costs.

Scenarios in Parallel

Imagine a number of scenarios calculated in parallel each meeting different priorities of goals, giving you the ability to compare the characteristics –costs, transit times, capacities, market coverage- and make a deliberate choice of the best deployment plan for you!

Re-Deployment to Reflect Fluctuating Market

Let us go a little further: Imagine your market demands are fluctuating over time, with a variation in the demand for individual products, for example seasonal refrigerated market demands.

Rather than deploying the same set of vehicles over a longer period of time on the same service, let the optimizer deploy assets dynamically using the hubs in your hub-and-spoke network to minimize costs for service re-deployments, meeting the goals optimally not just as an average yearly consideration, but each and every week.

No more Services

And finally: Do you really need to organize you network in ‘services’? Or is this a concept you have applied for the sake of keeping overview yourself? Your customers are interested in specific corridors for a certain period of time. What if you could organize your network to meet your customers’ demands best possible, with no consideration for internal organization, as all that is done by a software math algorithm, which in parallel can consider many more options, than you can do possibly do manually; which can calculate multiple parameters like costs, transit times, capacities without sweating; which can re-do the calculation dynamically and continuously in order to adjust for operational and commercial realities like delays, weather conditions and ad-hoc market opportunities.

What if your network and deployment would be driven solely by market demands and goals set by you yourself?

This is what math algorithms can do for the transport industry. This is what the ARL guys are doing.

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More solutions coming soon, amongst others for forwarders, terminals and transport providers.

About ARL Consulting

ARL Consulting, a Rotterdam headquartered IT developer with insight in the shipping & transport industry, adds value to the supply chain from its Siberian IT centre. Solutions are hosted on the arl-shipping.com portal, provided on license terms, or exclusively built on consulting terms to transportation companies on the sea, road, rail or inland waters, to ship managers, terminals, cargo facilities, agents, forwarders and NVOs.

Areas of expertise include vessel chartering, scheduling & deployment, capacity management, equipment distribution, reefer monitoring, environmental, security and C-TPAT support, customer relationship management, freight quote, booking, documentation and yield management. For terminals and yards, berth, crane, resource planning and inventory management. For forwarders, NVOs and cargo facility operators, interaction with shippers, consignees and shipping lines, standard operating procedures (SOP), and cargo consolidation support.

EDI/ ebXML and technical integration experience with leading technologies.