News / Ceva unveils global 'think tank' to reduce logistics spend and refine supply chains

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Global logistics provider Ceva has unveiled a new “business process excellence” division to push cost savings and productivity improvements.

The move was in response to continuing demands from shippers to reduce their logistics spend.

In a special question and answer session at last week’s eft 3PL event in Amsterdam, chief executive Xavier Urbain said the key to deploying innovative ideas was having the right people “on the ground” to implement them.

“You have to be sure that you have the right conditions and the right staff for successful innovation – what matters are information and creative ideas, and how the people can be part of the process. It’s not what we do at headquarters but what we do on a daily basis. We can have plenty of ideas at HQ but we can’t implement them.

The new division would employ hundreds of people, he said, as it focuses to improve on the returns that its six sigma programme had delivered.

“We are now implementing a business process excellence (BPE) department, which means these people around the world – some 264 of them – using the same processes in terms of KPIs, and developing new ideas, which can cover things like IT, materials handling equipment, such as electrically powered forklift trucks, and last-mile deliveries.

Mr Urbain – a former senior executive at Kuehne + Nagel, in charge of its road and rail until his appointment at Ceva at the beginning of this year, when he took over from Marv Schlanger, who returned to his previous role at Ceva’s private equity owner Apollo Management – added that the new department would also be set to work on customers’ supply chains.

“Our customers are looking to integrate processes that aren’t fully integrated, and to help them do that we will use our BPE department,” he said.

The development of the new division comes against a backdrop of stagnating freight prices and escalating costs, which has required Ceva to develop new cost reduction methods for itself as well as shippers.

“Pricing is going down rather than up, but inflation, labour and insurance costs are all going by up day by day, so we have to fix cost reductions. One way is doing e-auctions for our vendors. We have some €1.6-1.7bn of spend per year which is done though e-auctions,” he said.

He said Ceva was, additionally, looking to automate as many processes as possible to eliminate waste, with a highly ambitious annual productivity improvement target of 10-15%.

“We can get 5% without an audit. Bang, like that!” he claimed, admitting that going beyond that level represented a considerable challenge – one that often required substantial investment

“I’m not afraid of investment,” he said, “Because cost is fine as long as there is a return – both in terms of internal returns for us and external returns for our customers.

“And we want to keep our customers for 50 years” he said.

On example of this was the creation of a mobility suite for e-commerce customers which looked to rationalise home deliveries in the US through integrating real-time information and dynamic supply chain planning on mobile devices.

“It was good for our customers because of the efficiency improvements, while for us we reduced the number of stops per day by 6%, we eliminated a lot of waste in terms of driving and in the call centres – it had internal and external returns because we could deliver shipments.”

Mr Urbain also shared the experience of redesigning the pan-European freight flows of one of its largest blue-chip customers, which he declined to name but which had demanded an overall 10% decrease on its logistics spend.

“We have a lot of data on this customer – we manage the land, air, ocean and contract logistics for it in Europe,” he said, revealing that this amounted to 180,000 SKUs (stock-keeping units) annually – equating to 100,000 tonnes – of which 50% went by truck, 45% by air and 5% by ocean.

“We set two employees to mine the data and analyse which SKUs are critical, which were moving on a monthly basis and which were very slow. Some shipments took up to two years,” he said.

In the first category were 5,000 SKUs; in the second, 50,000, and in the third was 100,000 SKUs, “which meant we had to reconfigure not one but three supply chains”.

The use of air freight decreased 28%, he said.

“So that took out a lot of cost. But we also asked why some SKUs were in their system for up to two years and tying up working capital. We saved them €150m in working capital by reducing this two-year inventory.”

It was also found that some 20,000 tonnes was moving around the EU because of “bad stock planning and wrong allocation”.

Mr Urbain said: “The 10% was achieved by two guys data mining. That’s not innovation per se, but the ability to do something that we didn’t do before.

“It is one thing to see it on a screen, but quite another to deliver it on the ground, and you need entrepreneurs to accomplish it.

“We have to identify our customers’ strategy for the next five years and how we can help them. You can’t do that with just having managers; you need entrepreneurs, and it means our business model as a 3PL moves from being transaction-based to solution-based,” he claimed.