I had the pleasure of meeting Mr Xu Shuibo, CEO of Tian Di Hui last week in Shanghai. He runs an “Internet Plus” company that applies ICT to reform conventional industries, in this case the logistic sector. The name Tian Di Hui literally means ‘Sky Earth Connection’ and that is for a reason. He saw how China faces an oversupply of small carriers and 87% of them only carry freight in one direction, which is killing the sector. Competition is so high that there is no collaboration and no money to spur desperately needed innovation. Mr Xu saw the need for a neutral party to help this sector survive and make a profit again, and zoomed in on long distance freight first.
Inspired by his work with TNT China in the past, he coined the word ‘road ports’ with a vision to operate these like airports, whereby passengers are the loads, airplanes the trucks, airlines the carriers, and Tian Di Hui the control tower. Customers offer freight volumes that Tian Di Hui arranges to be transported by a network of thousands of carriers via more than 30 transport hubs that connect over 100 Chinese cities. This network set up allows for greater flexibility to combine loads of different customers and to find return volumes.
So what is needed to make this work? In the first place ICT: trucks are equipped with GPS to collect data and communicate with a centralized operating system and platform – a wall-sized screen showed the full network and could zoom in on single trucks, backed with data that governments are dreaming of. Only articulated trucks may join in, because tractors can this way drop off one trailer and pick up another, significantly reducing waiting times for unloading and loading (did you know that loading can take 3-6 hours because few trucks in China use pallets to save space?). Volume and a balance in volume in both directions is essential. And finally a competent management team who understand how to optimize supply chains.
Costs per tonne-km are close to one fifth lower, trucks are about twice as much on the road, more than doubling the km driven per month. Combined with higher filling rates, all the sudden carriers can increase their profit margins and breathe a little easier. Logistics service providers and customers that join the platform benefit from lower prices too. With a monthly growth rate of 30% (yes, you are reading this right) he must be doing something right!
Any carriers can join the platform as long as they meet set quality criteria. Surviving in this new world depends on how well a carrier can manage his own equipment and operations. There is a gap because many carriers simply don’t have the time or capacity to optimize their management systems and figure out what technologies and measures to adopt to improve efficiency and reduce operating costs. You see where I am going: Smart Freight Centre aims to fill this gap where the market does not. We are developing a Smart Trucks Platform that links carriers with technology suppliers and others who can help them improve efficiency and reduce environmental impact. Not that different from the road ports of Tian Di Hui!
30 November 2016
Sophie Punte, Executive Director SFC
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