Agoratrans: Transportation's Clearinghouse of Choice
The attractions of Europe's Iberian peninsula are obvious. Spain and Portugal's combined population is over 50 million people, constituting a major European market. Industrial output, as a percentage of Gross Domestic Product in both Spain and Portugal, is 33% - ahead of Germany, Italy, France, and the United Kingdom. Include the 60 million tourists that the region attracts each year, and it is not surprising that businesses from all over Europe - and beyond - see Iberia as a rich export prize, but one that remains tantalizingly hard to grasp.
The Iberian population and visitors are scattered across the region where distances are significant, over a thousand miles from the major industrial centers of France, the Netherlands, Germany, and the U.K. This very factor, that makes it such an enviable tourist destination, also turns it into a market that is hard to serve economically. The temperate climates of Spain and Portugal make Iberia a major agricultural producer of fruit, vegetables, fine wines, and spirits - but again, one that is hundreds of miles away from the rich concentrations of consumers in northern Europe. On the industrial front, the factories of Spain and Portugal face the same difficulties. It's ironic: with a stroke of the pen, politicians can create Europe's single market, declare it free from internal tariffs and trade barriers - but the practical problem of moving goods to that market remain.
Figure 1 - The value proposition materializes in transportation management services, complemented by additional services targeted to the different types of clients.
Battling Ineffiency
And costly problems they are, too. Shippers, whether of agricultural produce heading north or consumer goods heading south or simply trying to deliver to every single point in the country, have become resigned to incurring high direct freight costs, and also to bearing higher-than-normal fixed costs. Often, trucks are on the road for days at a time, making a single shipment, and returning.
Inefficiencies are rife. A higher than average percentage of vehicle miles are incurred running empty, as vehicles make their long journeys home. Part-loads are endemic, resulting in lower than average utilization metrics. For some companies, the combined effect is to create a market that is forever tantalizingly out of reach - profit margins and volume levels are such that the economics of the Iberian peninsula are prohibitive.
Maximizing Loads
But the real problem is a communication problem. While companies recognize the impact that low utilization levels have on their operating costs and profit margin, they also understand that the answer to problems such as empty running and part-loads is to locate other companies with the same problems - others with whom consolidation and "backhauling" opportunities exist. Together loads can be maximized and shipping costs sharply reduced.
At it simplest, such communication is what a new e-marketplace, called Ágoratrans, aims to achieve: to put shippers - who have goods to move into or out of the Iberian peninsula - in touch with either carriers or other shippers in order to reduce costs and eliminate some of the transport inefficiencies. Accenture, British Telecom, and brewer Damm have so far signed up as equity partners, and many others will follow.
An Industry-Specific Solution Of Choice
The intention is to turn Ágoratrans into the services provider of choice for anyone with an interest in transportation into or out of Spain or Portugal, providing the means of overcoming the usual obstacles of collaboration.
Take load matching, for example. In theory, load matching in order to reduce empty miles or boost utilization is a simple task. Simply find another part-load going to the same place at the same time. The problem is solved - in theory. In real life, things are not so simple - which is why it is important that this e-marketplace be more than just an electronic freight brokerage. Agoratrans is based on the concept of private forums structured around partnerships between shippers and carriers who execute end-to-end processes through Agoratrans. These processes range from load planning to tendering and delivery confirmation.
Suppose that there is a load available going one way or part of the way. Or perhaps the required volume can be made up by two (or more!) part-loads, further complicating the destination issue. Now throw cost considerations into the equation. Different expectations regarding freight prices, for example. And costing problems with fixed assets, for another - carrying other goods on behalf of a third-party helps reduce the direct cost-per-mile, but impacts the overall journey duration.
The potential to use carriers instead of a company's own dedicated or outsourced vehicles further complicates life. Direct costs may be increased by trunking on a dedicated vehicle most of the way, but then delivering to a local carrier for the final multi-point deliveries. Although the carrier must be paid, the trunker vehicle spends fewer miles running part-empty, and returns a day earlier. And so on, and so on.
And ironically, the more participants in an e-marketplace, the more complicated the decisions will become. Invariably, several potential solutions will present themselves, but finding the right solution can become a mind-numbing process of iteration.
Figure 2 - Ágoratrans offers global transport solutions to shippers, managing much more functions than the "traditional" freight exchange.
Problem-Solving in Real Time
Enter Ágoratrans partner Manugistics, a specialist supply chain and distribution resource planning company that provides a number of planning and simulation tools to help companies quickly sift through the solutions - nearly in real time - to identify on a load-by-load basis the best solution from those proffered.
What is more, it is possible to judge the effectiveness of potential solutions not just against past experience but also against the key performance indicators of other participants. Such benchmarks will not only help individual participants drive up their operating efficiencies, but also improve the performance of the whole industry, as sub-optimal metrics are highlighted and eliminated. Overall, it is estimated that Ágoratrans members will be able to reduce their empty-running miles by at least 25% - no easy accomplishment in these days of high fuel costs.
But what's in it for the carriers? What is their incentive to participate, given that the function of any marketplace is to provide greater price visibility and consequently generate lower prices? It is a good question.
The Benefits
And the answer is surprising. Obviously, there is a benefit coming through in the shape of a reduction in empty miles in carriers' own routes and vehicles. Equally obviously, there is the opportunity to win more business; despite the greater price visibility, each carrier will have its own specialties and route opportunities, and Ágoratrans will be an ideal place to fully leverage those.
Ágoratrans also offers carriers a more direct spur to encourage them to participate: a package of services designed to lower costs - which, in turn, should manifest lower costs for the community of shippers who use them. E-procurement, for example, can lower the price paid for fuel, consumables, vehicle spares, and a host of transport-specific and business-specific services. Individual carrier companies may be either too small or possess insufficient IT resources to render e-procurement a viable opportunity - but not as part of Ágoratrans.
The provision of carrier-specific financial services, too, will prove an inducement. Load insurance is an obvious area where the collective power of a group of carriers as part of Ágoratrans can be expected to deliver significant insurance premium savings. Prompt electronic payment, too, is part of the package - an attractive inducement to many Iberian carriers, who are accustomed to waiting 120 days or more for payment.
