Optimised groupage service in EuropeOptimised groupage service in Europe
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Optimised groupage service in Europe

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How Rhenus makes its customers more efficient with clever solutions for groupage freight transport

When it comes to shipments by road - such as groupage service - it is often difficult to achieve efficiency and just-in-time deliveries: Interruptions in the supply chain are more than just a buzzword here; in fact, they can have a huge impact on day-to-day logistics operations. Examples include bottlenecks in the infrastructure, the consequences of Brexit, the shortage of skilled labour and rising fuel costs. The leading international logistics service provider Rhenus has developed a solution that enables its customers to transport groupage freight even more efficiently and transparently.

In the latest episode of "Logistics People Talk", Carsten Hölzer, Managing Director of Rhenus Freight Road Sales & Management, and Lee Hammond, Head of General Cargo at Rhenus Road Freight UK, present the challenges that their customers are facing. In this interview, they explain how the new network for groupage freight "Groupage 2.0" can eliminate bottlenecks, facilitate daily shipments throughout Europe and optimise supply chains for the last mile. 

Another challenge is the constant change in customs formalities - and not just for UK-EU trade lanes. “We’ve seen a huge acceleration of customers converting to our smart border and fiscal representation products, where customers just want that seamless integrated solution,” explains Lee Hammond. This need has prompted Rhenus to develop the Groupage Network 2.0. The result: shorter transit times due to the daily departures, greater transparency thanks to a digital dashboard and an overview of the consignments. In addition, costs are reduced thanks to more efficient route planning and the avoidance of empty runs. The reason why groupage freight is predestined for such optimisations lies in the nature of the transport itself.

info_outline

What exactly is groupage service?

Consignments from different clients that fill less than a full lorry load are combined to form groupage freight.

The further development of this service with regard to the most important industrial routes and new destinations was the logical next step for Rhenus. If you want to know more about groupage service and Rhenus' plans for the road transport sector, listen to the latest episode of Logistics People Talk.

Please note: this episode is only available in English at the moment. You can find the German transcript here.

Podcast
31.01.2024

Logistics People Talk | Episode 11

Carsten Hölzer and Lee Hammond of Rhenus Road Freight present smart solutions to European challenges in road freight transportation, such as changes to customs formalities and the need for efficient groupage shipments.

Transcript of our podcast episode

00:00:02
Andrea Goretzki: Hello, and welcome to Logistics People Talk, the official logistics podcast of the Rhenus Group for all logistics experts and fans. Today, we are going on a road trip to discover disruptions and solutions for the European road freight network. We are your hosts:

00:00:22
Gwen Dünner: Gwen Dünner.

00:00:23
Andrea Goretzki: and Andrea Goretzki.

00:00:26
Gwen Dünner: Today we are talking to Carsten Hölzer, Managing Director of Rhenus Road Freight Sales and Management, and Lee Hammond, Head of General Cargo at Rhenus Road Freight UK. Welcome both of you, it’s good to have you here.

00:00:37
Andrea Goretzki: Hi.

00:00:38
Carsten Hölzer: Hi both.

00:00:39
Lee Hammond: Hello everyone.

00:00:41
Gwen Dünner: The road freight business faces some of the most disruptive challenges in the whole logistics sector, from delivery delays due to traffic jams that all of us face daily to complex customs processes due to geopolitical changes and ailing motorway and bridge infrastructure, not just in Europe, but across many countries worldwide. In this context, managing efficient supply chains and optimising deliveries in order to avoid bottlenecks has become an essential need.

00:01:08
Andrea Goretzki: Carsten, as a podcast veteran from our solution-selling episode, we last talked about how challenges such as the Ukraine crisis and the pandemic affected the markets. What has changed and what challenges does road transport in particular face today?

00:01:25
Carsten Hölzer: Well, some things have changed since the last time when we heard this. Sincerely, we are still, and that’s a statement I also gave the last time, in a challenging environment. COVID has passed. Thank God, that’s the thing which we are living with, which we’re used now to dealing with. Nobody needs to go around any further with masks and so on. Economics-wise, it’s still something that is challenging us every day. Even the fuel prices have been experiencing an upward trend for a few weeks again, and that is leading to disruptions in the fuel market, where we see that the prices are going upwards again. So this is having an impact. Furthermore, we have the situation, since the 1 December, a road toll increase in Germany, a massive one, with an impact on road freight transportation all over Europe. Why? Because Germany is one of the most important transit countries.

00:02:32
Carsten Hölzer: Most of the transports are touching Germany, and that will have an impact on cost levels as well in an environment where customers are trying to reduce their cost levels due to reduced volumes. Everything is overstretched. They have been going through two years where we, as logistics providers, have been increasing cost levels because, as a matter of fact, the driver shortage still exists and it was a matter over the last two years, and we still need to increase costs in order to be able to work in a profitable way. All this is somehow contradicting, and that’s the reason why we needed to do something in our road freight network. Furthermore, we want to position ourselves in a better ranking in the road freight market. Where we are nowadays is somewhere among the top 10 providers, maybe. We believe we are. We want in the future to be definitely among the top five providers in the market. That means you need more share of the market. You need higher volume, and that is one of the reasons why we thought about a new strategy on how to work on that.

00:03:56
Andrea Goretzki: Lee, you specialise in the network aspect, customs and partner management of Rhenus road freight. In your opinion, to what extent do Brexit and other customs changes still affect the market today?

00:04:10
Lee Hammond: Thank you, Andrea. As we heard from Carsten, the B-word didn’t happen in isolation. It’s been an incredibly challenging environment for everybody the last few years. I’d say one of the highest impacts is probably from a HR perspective. The B-word created a lot of new job opportunities, which was positive. However, in a tight labour market, investing in new staff, which quite often come from outside of our industry in bigger numbers, and probably we’ve been used to being able to handle in the past, has put a huge pressure on our onboarding process. This led us to invest in a new training and development manager, and she was quite a game changer for us and really improved the process of bringing new employees in. What I also found interesting, our partner is opening a customs academy in Germany, not only aimed at logistics professionals but also manufacturers and traders so that they can impart some customs knowledge into every part of the supply chain.

00:05:20
Lee Hammond: Saying that, customs isn’t new. Switzerland, Türkiye, Ukraine, all key markets for Rhenus. Where it’s still influential in the market, I would say, is the speed at which the customs environment itself is still changing. Coming up, we’ve got a new safety and security process with ICS2. We’re just in the process now of converting to a new transit process with NCTS5 and, imminently, we will have NCTS6 next year, which is also coming along quite quickly. At the same time, UK customs are changing their software from CHIEF to CDS, and other countries are planning to do similar updates, I believe, in Holland and in Germany. That changing environment has been really challenging, and people that have a fragmented clearance process, maybe with external parties involved in the supply chain, are finding that really hard. We’ve seen a huge acceleration of customers convert into our smart border and fiscal representation products, where customers just want that seamless integrated solution. A lot of change, but also a lot of new opportunities.

00:06:37
Gwen Dünner: Absolutely. Taking all of that into account, as you’ve already mentioned, it kind of leads to the next question. As you’ve just summarised, the customer demands towards logistics service providers such as us and our solutions have changed, what has Rhenus done to meet that demand or to create new solutions?

00:07:02
Carsten Hölzer: Lee, if you don’t mind, I’m just going to start. Of course, meeting the challenges of the customers and the demands of the customers. We have thought about what the major benefits might be with this project. We are thinking about Groupage Network 2.0. Well, some of them are in, for example, shortened transit times. Why shortened? Because the distance is not getting lower than what we currently have in place. The mileage is always the same. Eventually using one Central European hub, even being higher in the future than we had in the past, but being very much quicker on the road than waiting for a consolidation opportunity inside the shipping depot, we strongly believe, with that daily departure, we are shortening the transit times on average massively to our customers. That will be one of the major benefits. Besides additional and higher visibility, more information, more transparency the customers will get, the transit time is definitely something that will lead the customers to more attractivity within this network.

00:08:21
Carsten Hölzer: We are trying to consolidate shipments wherever we have a depot, to consolidate them into one single track for a certain destination. Depending on the volume, and this is again depends on the industrial environment where this branch office is sitting, where it is located, depending on the volume, we have a departure from once a week up to daily frequency to the different destinations in Europe. Truck optimisation means we need to fill it up as maximum as possible in order to be profitable on the way because the truck costs one single amount and we get the income from our customers together with the different shipments which are loaded onto this truck.

00:09:08
Carsten Hölzer: Do we not have sufficient volume in place to provide our customers with a daily departure? We need to screw that down towards a departure up to once - a minimum once - a week to the destination if the volume is not sufficient. That’s exactly what we are talking about. We would like to be more attractive for not the customers to wait for the next departure, which is eventually just in about one week to go. We want to offer our customers a very attractive product. That means daily departure to each and every single destination.

00:09:54
Gwen Dünner: Just for any listeners who, of course, are interested in logistics but may not know all the terminology. Groupage means the combination of different shipments by different customers, but that is especially challenging. Why? Can you just elaborate a little bit on that? Why does it need an update in Groupage?

00:10:16
Carsten Hölzer: We were thinking about how to manage this demand from the market. We have been thinking about working on a project called GN 2.0 for more than a year. This is about Groupage Network 2.0. We love abbreviations inside Rhenus, so therefore there’s the first one that comes automatically. It’s about renewing and restructuring our Groupage Network. Groupage is the most classical product we have inside the road freight network. We thought, what do we need for our customers? We need to be more attractive. We need a higher geographical coverage, and as cost leadership is one of the most dominant requirements from customers, again, that has changed over the past two years because, again, the overstretched logistics costs have been leading now, again, to a higher priority to cost leadership decisions from customers. We need to be more cost-effective, and we need to be more attractive to customers. Therefore, we said it’s necessary to restructure our Groupage Network, which was pretty much heterogeneous.

00:11:39
Carsten Hölzer: Growing over the past years with mergers and acquisitions, we took over some companies here, and some companies over there. We grew organically and we have a very heterogeneous landscape inside the road freight network, where we said, what it needs is a common highest possible geographical coverage on the one hand. On the other hand, the same product promise to customers from all countries. This is why we elaborated on this GN 2.0, Groupage Network 2.0. But this means we need more volumes because otherwise we are going to transport air through the highways of Europe and that needs to be avoided, of course.

00:12:29
Lee Hammond: We built on the experience from our existing daily lines. For our main industrial connections, we have daily lines already, and we saw how that brings a benefit to our customers, that they can adapt their production around their order schedule, and not necessarily around the departure schedule on the lines. And what we’re looking to do now is bring a European hub into that structure, which acts as an enabler for us to open up those main lines to more new countries for us, both inbound and outbound. And that’s a really exciting part for us that we can expand what works for us well on the main industrial lanes into new destinations, which is really quite exciting. And also I think we can’t overlook how beneficial it’s going to be on the inbound process and the way that the network can eradicate trade imbalances between different countries. Sometimes the outbound from one country is a very regular service, and the inbound can be irregular. With this new set-up, we can rebalance that and offer the same services both inbound and outbound to customers, which I think is quite unique for the new set-up that we’ve got.

00:13:47
Andrea Goretzki: Now, Carsten, we know that Rhenus prides itself on always keeping the customers’ wishes or needs in focus. How did Rhenus react to these challenges and what role does the Groupage product play?

00:14:00
Carsten Hölzer: Adding to what Lee said and what I said before, we are constantly trying to expand the network, to extend it wherever it is possible because we have quite a fit network across all of Europe. But there are still some points of interest where we are not yet present with our organisation, and where we are collaborating with external partners, which are extremely good, which are embedded into the network. But what we are doing with Groupage Network 2.0 is something that is, in the first instance, especially focused on the owner organisation.

00:14:45
Carsten Hölzer: In order to develop this further on the market, we have been doing it in the past and we are doing it currently, and we will also do it in the future for opportunities. Rhenus is an opportunity-driven company and opportunity in terms of we would like to find companies which we can embed further into the network and make them become a known Rhenus presence in the different countries. If we look at Scandinavia, we are just present in Sweden. We recently took over one smaller company in Denmark. These new colleagues are very welcome to the Group, but we are still missing some kind of footprint in Finland and in Norway, the same as well for Belgium.

00:15:41
Carsten Hölzer: In France, we do have a very good ongoing cooperation with MTA, with a minority share that we are keeping currently. In Germany, we recently made an agreement with MTG, who are our new colleagues in the Mannheim area, where we did really not have a known footprint yet. There are still many points, especially looking at the Balkans, etc., where we still need to extend our footprint in order to definitely increase our geographical coverage. That is something that will come over the next few years and that we are constantly working on.

00:16:23
Gwen Dünner: Finally, Lee, in terms of customs declaration and managing freight forwarders and other partners, customers’ demands for digital and automated solutions are, I guess, stronger than ever. What features does the new Groupage solution offer in this regard?

00:16:40
Lee Hammond: Yes, I guess the digital journey starts the same whether you’re a customer or a partner. The question is what data are they able to provide? Does it include customs data or not? Can they send it either on EDI, enter it into a portal or provide it on PDF? In the network, we then have a validation step where we check the data based on the exporting countries’ regulations. Then what we’re able to do in the new set-up is calculate our network routing rules. In the new set-up, using our network routing rules, we’re able to then calculate where and where that data needs to be delivered. We can make that available even before the shipment arrives, which then allows us to speed up the process, but it also allows us to recycle that data and avoid any double entry that we might have in our internal processes.

00:17:34
Lee Hammond: In future, we plan to use some machine learning and AI to help us automate some of these tasks, and that will continue to improve the efficiency of the process for us. Once the customer is in our portal, it gives them access to a lot of digital services. They can get their own prices and price requests. They can use our track and trace, PODs, and they can follow shipments and receive notifications each time a shipment reaches a certain milestone. What we’ve also got in addition as well, in the new set-up, is kick-started a trial for a real-time transportation visibility provider. The aim is to get real-time ETA calculations for our international trucks and line hauls with live truck positions, which we can then feed into our IT platform.

00:18:29
Lee Hammond: And it kind of repeats on the theme again, the potential of this pilot is really interesting for us because if it’s successful, it won’t just apply on our main trade lines with Germany, UK, Spain, Italy, where some of these technologies have already been tested, but we would be able to apply it throughout our European network, in all countries, in all directions, so quite an exciting time to be in Groupage really.

00:18:55
Andrea Goretzki: Carsten, if we look at the international scale, what does the strategy of Rhenus road freight look like for Europe?

00:19:04
Carsten Hölzer: Well, of course, we want to stabilise our network. That is what I meant when I said we are currently operating around about 85 to 90 of our own depots across the European landscape. That needs to be extended if we want to be very, very much in a position to offer a stable process, and a stable product to our customers across all of Europe. The countries that are missing still need to be embedded into that. Extending the footprint is surely one of the things we are looking to do once we see opportunities coming down the road. The next point is to be as much as possible independent also from other networks and to have, at the end of the day, a bigger share of the market. The market is very much fragmented, is extremely fragmented compared to other markets. Looking at that, I think there is not even one single provider who is able to say we have a market share of 15 or 20 per cent of everything which is on the European road freight market.

00:20:21
Carsten Hölzer: We strongly believe there will be additional consolidation in the market also in the near future. Then we want to be attractive and competitive. And last but not least, everything that we are doing in road freight is not standing alone for itself. It is somehow also combined with all of our other divisions, units and products. It means, in our matrix organisation, we are trying to combine road freight services, e.g. also with air and ocean services, with special deliveries, with, Lee just said it several times, customs services, customs brokerage, and so on and so on. There are so many opportunities to develop this, but mostly to be really attractive to our customers and to say we are one of the best providers in the market.

00:21:19
Andrea Goretzki: Lee, as Carsten mentioned, how do the new Rhenus road freight systems interact with those of our other services such as air and ocean freight transport?

00:21:30
Lee Hammond: Yes, so the challenge has always been that the data exists. It just exists in a number of different operating systems, and this data historically has been provided to the systems by EDI, which is one-way transmission. In our new set-up, we’ll be focusing on more API connections that will allow the data to be pushed as well as received, but while in the system, that data is still being used, updated or enriched for very different purposes, and this can create discrepancies between the two data sets, which then makes comparing or sharing data really difficult. With our Rhenus application platform, we use the single point of truth or SPOT, another acronym.

00:22:14
Lee Hammond: This allows us to store the data in one place, and then the different software can access or update that data record, meaning that the SPOT is always the latest version of the current data, no matter how many systems are connected to it. This is then how we can provide that single view for the customer in the future and connect the different services like home delivery, air, ocean or road.

00:22:37
Gwen Dünner: Now, finally going back to something that you said in the beginning, Carsten, of course, road transport has become very expensive during the pandemic as well as due to the rising fuel costs. First, during the last few years, during the Ukraine-Russia conflict or crisis, but then again, recently, as you said previously, while other transport modes have seen a renewed decrease in prices since then, the road freight prices kind of remain high while the general demand for road freight transport is decreasing, although from an exceptionally high level during the last few years. Now how does the Groupage service address these challenges, and is it helping you and the customers to save money?

00:23:21
Carsten Hölzer: Yes. Although, I have to say, this is not the primary purpose of why we are doing this project. The primary purpose is to improve the product, to improve our network and to improve the approach towards the market and our customers. But, yes, the target is surely that, after the invest, comes a return on investment. In the first instance, we are talking about one of the biggest investments we’ve ever made in the road freight organisation over the last decades. That’s for sure because somewhere volumes will be missing. Somewhere investments will be needed in terms of additional equipment to be rented, etc. in order to keep the schedules in place which we have planned. But on the other hand, as it always is with investments, you need an ROI, a return on investment, and this is what we are looking for. We have a business plan in place, where we would like to get some kind of return on investment also with that project.

00:24:35
Carsten Hölzer: Will we save money with that project for our customers? Here and there, eventually, yes, but I do believe the major cost drivers we’ve had over the last few years for increasing cost levels overall in the market inside road freight are not gone. One of them is the driver shortage, which is an enduring matter, which is still ongoing, which is not yet resolved, and which I do not see being resolved until when we have purely autonomous trucks driving over the European roads. This is one topic. Another one is CO2 emissions, where countries are going to practically penalise road transport with higher CO2 emission costs such as road tolls. Germany is one of these examples, which is starting now on 1 December with an increase, which is probably somewhere between 85 and 100 per cent compared to the road toll we currently have in place.

00:25:52
Carsten Hölzer: Other countries have been giving signs that they are planning to do exactly the same. So these are surely cost drivers which will be continuing over the next few years as well. Then currently we are in a recession phase, where the economy is driving down, where inflation is extremely high, higher than over the last 30 years, and which is also a cost driver for everything, for every single product. Every one of us who goes into the supermarket and buys vegetables, etc. sees everything has been becoming more expensive. Wages, and this is also a consequence also of this, have been increasing as a result. There are so many drivers driving the costs upwards, more than they are going to be driven downwards.

00:26:46
Gwen Dünner: Not a solution that only Rhenus can provide probably as well.

00:26:50
Carsten Hölzer: Sure. No, of course.

00:26:52
Gwen Dünner: Eventually, it could save customers money.

00:26:55
Carsten Hölzer: It could save customers money in terms of more efficiency, in terms of having a more attractive product for their customers, selling more volumes to their customers, having a better product and being able to control their supply chain in a better way. This might then also lead to an economic benefit for our customers.

00:27:25
Gwen Dünner: Best closing words that we could have hoped for. Thank you for this in-depth look at what goes on behind the road freight curtain. It is at least reassuring that there is a well-thought-through system behind what others may perceive as chaos on the motorways or in the news. Thank you both for bringing light to this aspect of logistics, and it was a real pleasure to have you as our guests.

00:27:47
Andrea Goretzki: Thank you also from my side.

00:27:49
Carsten Hölzer: Thank you very much.

00:27:51
Lee Hammond: Thank you. Very nice to be invited.

00:27:55
Andrea Goretzki: So, and also to our listeners, thank you for listening. We hope you have enjoyed this episode and, if so, don’t miss the upcoming episodes of Logistics People Talk and subscribe to us on Spotify, Google or Apple Podcasts. We are your hosts.

00:28:11
Gwen Dünner: Gwen Dünner.

00:28:13
Andrea Goretzki: and Andrea Goretzki.

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