INFORMATION FLOWS IN SUPPLY CHAIN MANAGEMENT

Are Road Transport Companies Involved with Supply Chain Planning Processes?

Jarkko Rantala

Senior Researcher, D. Sc. (Tech.), Department of Business Information Management and Logistics

Tampere University of Technology, P.O. Box 541, 33101 Tampere, Finland

Keywords: Supply chain management, Transportation, Information management, Partnership.

Abstract: Businesses are increasingly facing global competition and therefore they meet growing demand for cost

efficiency and customer responsiveness. Time-based competition is more a precondition than a source of

competitive advantage at present business environment. At the same time companies are concentrating on

their core business and outsourcing supporting operations to network partners. Logistics and transports are

typical example of outsourced functions. Information management is one key element for effective and

reliable supply network operations. This research clarified the role of road transport companies in the supply

chains and identified discontinuations of information management and partnership operations from the view

point of transport companies.

1 INTRODUCTION

Globalization and integration of markets have risen

to a significant role in today’s logistic business

environment. Businesses are operating in a global

marketplace and the demand for cost efficiency and

customer responsiveness has increased. Therefore,

global location of production and distribution

facilities and time-based competition are the major

driving forces in today’s business environment. At

the same time customers increasingly demand for

wide variety of products with minimal lead-time.

(Bhatnagar and Visswanathan, 2000), (Childerhouse

et al., 2002) Also unpredictability of material

demand is constantly increasing and therefore sets

pressures for decreasing logistics lead-time even

further. Therefore supply chain management has

become an essential source of competitiveness and

its significance has continuously increased (Singh,

2004).

In addition to many opportunities, globalization

also brings along various demands. E.g. the current

global economy demands the highest quality

products at the least cost regardless of where the

product is manufactured. Operating in a global

market may also increase the uncertainty in the

company’s operations, which may in turn lead to

considerably increased inventories and longer lead-

times through global supply chains. (Bhatnagar and

Viswanathan, 2000), (Bhutta et al., 2003) When

globalization increases and becomes more important

in the business environment, companies will take a

more global view of their operations and the

importance of distribution and logistics functions

will increase. Efficient logistics performance is

recognised as an important source of competitive

advantage and a crucial strategic imperative for the

success of companies (Bowersox, 1990), (Rantala,

2006). In addition, competition will be increasingly

between sets of networks based on deep partnership

rather than individual firms or supply chains. This is

often represented as one major trend in today’s

logistics, but interesting question is, whether road

transport companies as part of the network are

treated and operating as genuine partners in supply

chain management.

Outsourcing is one major trend in today’s

business environment and logistic operations belong

typically to the outsourced operations. The reason

for outsourcing is mainly to achieve competitive

advantage for the core business of companies. The

extent of outsourcing has been gradually increased

to larger entities and outsourcing has become a more

strategic factor in companies (Brewer et al., 2001).

One obvious development trend in the business

environment seems to be an attempt to keep

inventories in motion in order to avoid capital

investments in product inventories and a tendency to

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Rantala J.

INFORMATION FLOWS IN SUPPLY CHAIN MANAGEMENT - Are Road Transport Companies Involved with Supply Chain Planning Processes?.

DOI: 10.5220/0001818505590562

In Proceedings of the Fifth International Conference on Web Information Systems and Technologies (WEBIST 2009), page

ISBN: 978-989-8111-81-4

push inventories onto other partners in the supply

chain. On the other hand this trend is due to a lead-

time decrease in the whole supply chain. A key point

in supply chain management is that the entire

process must be viewed as one system, but still the

performance of each member of the supply chain

affects the overall performance of the supply chain.

(Christopher, 1998), (Bhatnagar and Viswanathan,

2000)

All the perspectives described above emphasise

the significance of supply chain management for

business operations, dynamic nature of logistics and

imperative of partnership relationships through

whole supply network. There are certain differences

between business areas and all the operations does

not have strategic role for other business partners,

but in general the transportation companies have a

critical role in success of supply chain operations

and collaboration is a basic element in supply chain

management.

The purpose of this study was to identify the role

of transportation companies in supply chain

management and to clarify the relationship between

supply chain planning and management processes

and road transports. Main research questions were:

• How are road transport companies involved

with supply chain planning processes?

• What is the role of road transport

companies in supply networks?

• Are road transport companies strategic

partners for trade and industry?

Hertz and Alfredsson (2003) emphasised

creating networks and acting in networks as primary

approach in outsourcing logistics activities. By using

3PL (third party logistics) providers’ services,

companies can be both directly and indirectly related

to other firms and they develop thorough

relationships with other companies. These

relationships exist not only between customers but

also with suppliers, partners and customers of

companies’ own customers. Trust between

companies is especially important when network

development involves economic, technological and

knowledge exchange. This also describes well the

nature of networking and partnership.

Collaboration is closely related to partnership

and the presented research questions. There are

various elements of successful collaboration, which

are not examined in detail in this paper. As the road

transport companies may be in various positions in

supply chain networks, the elements of collaboration

may be different and the significance of elements

may also vary. Road transport companies may carry

out single assignments or they may be involved as a

strategic partner in supply chain planning and

operations taking complete responsibility of bigger

entities in supply chain. The different roles are taken

into account in this research.

One basic element in this research was the fact,

that in order to meet the increasing demands set by

trade and industrial companies, transport service

providers will have to broaden their service supply.

These requirements necessitate networking with

other service providers. The networks should be

capable to perform both planning and management

of logistic processes according to agreed needs of

transport customers and also to provide physical

transports and inventories reliably and in time.

Offering enough capacity to take responsibility for

larger entities of the logistic chain requires at least

bigger company size or a network of transport

companies. (Rantala, 2006) Interesting approach

from this point of view is to clarify the actual role of

road transport companies in this kind of strategic

partnership cooperation.

The research work can be divided into two parts.

Theoretical background is based on research process

in 2002–2006 leading to a doctoral thesis focused on

heavy industry and its transportation systems in

Finland (Rantala, 2006). Empirical part is based on

research project conducted in 2007, where the focus

was to examine the logistic system-level factors

affecting the systems of road transportation, traffic

safety and the attractiveness and development of the

road transportation industry. The goal was to find

system-level development targets in order to

enhance the operation models in the industry. This

research project focused on three areas of

transportation in Finland: consumer goods, forest

industry and food industry (Salanne and Rantala,

2007).

The theoretical part of research work is based on

both literature survey and material from interviews

with experts carried out in 2002–2005. These

interviews consist in total 99 interviews with 120

representatives in Finland and abroad. The empirical

examination is based on 23 interviews with

representatives of Finnish trade, industry and

transportation companies. These empirical results

were presented and developed further at a workshop,

where 30 representatives of interest group of road

transportation industry were participating in

development work.

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2 FINDINGS

Company size is very small in Finnish road haulage

industry, on average only 3.4 trucks per company.

Therefore road transport supply is quite dispersed in

Finland and usually transport companies are

specialised in certain business area. Capability to

serve wide variety of customers and transportation

or logistic needs is limited. Therefore it is necessary

for Finnish road haulage industry to increase

company size by networking or organic growth in

order to provide more sophisticated logistic services

to satisfy the increasing demands of trade and

industry. International road transport systems are

already mainly based on networking with

multinational logistic corporations and their service

supply. In general, the small average company size

seems to be a reason for road transport companies

not achieving a strategic partnership position

although their role often constitutes critical phases in

supply chain operations.

Main finding of the study is that the supply chain

includes enough information for the effective use of

transport capacity and transport planning, but

transport companies are usually not involved in

these information flows. Lack of information is not

due to technical restrictions. From information

management perspective the transportation

companies appear not to be considered as genuine

strategic partners regardless of their important

position in the supply network. Thus the basic

feature of true partnership does not realize in this

part of supply chain. The absence of true partnership

is rather unexpected, because physical

transportations constitute critical phases in supply

chain operations. Figure 1 describes the connection

of supply chain management and transportation

companies.

There are also exceptions in the road transport

related information management flows. For

example, transport flows of raw wood are well

planned and accurately controlled, utilising

effectively modern ICT technologies and navigation

systems. Possible deviations are also reported real-

time in both directions.

3 CONCLUSIONS AND FUTURE

RESEARCH

Better information system compatibility would be an

important development target for the communication

systems between transportation company and

transport customer. This would enhance deviation

management in the supply chain and enable

proactive planning of resource allocation in transport

companies. Deviations usually reflect on the next

phases of the supply chain depending on the type of

transportation.

Information flows of

possible deviations

(usually unworkable)

Not in same planning system with group

level

Temporary

subcontracting due to volume

variation

Logistic / transportation companies

(group level)

Networking partners in the

transportation system

Same planning system and

resource optimisation

Order by phone – information flows of supply chain is not usually

available for transportation companies, demands manual data input to

the operational planning system of logistic/transport company

Information flows – real-time demand information from EPOS systems

Material and information flows

Supply

network

Industry

Central

corporation

Terminal Shop

Figure 1: Information flows as an example in grocery supply chain from transport company point of view.

INFORMATION FLOWS IN SUPPLY CHAIN MANAGEMENT - Are Road Transport Companies Involved with Supply

Chain Planning Processes?

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Planning of resource allocation is increasingly

significant for road transport companies due to

tightened EU regulations related to drivers’ work

and rest time legislation, increasing number of

product-specific special requirements and increasing

control by digital systems. Therefore transportation

chains and single operations must be based on

detailed plans, follow-up and information exchange.

Proactive planning is essential also from

environmental and economical perspectives.

Continuously rising fuel costs forms increasingly

significant cost item, which presuppose effective

resource planning and utilisation. Transportation

industry is a significant source of emissions, too.

Climate change discussion emphasise the

clarification of carbon footprint for supply chain

operations and the proactive planning of transport

operations in order to reduce fuel consumption and

emissions.

Results indicate that road transport companies

are usually not in a genuine partnership position in

supply chain operations. There are a plenty of other

features related to partnership relationship, which

are not discussed here in detail. For example,

cooperation in business planning toward common

target, shared interest in profitability of cooperation,

and reliable and open discussion connection between

supply chain partners are fundamental collaboration

forms that occur relatively seldom in the supply

chain management between industrial or trade

partners and road transport industry in Finland.

Purpose of the study was to examine the logistic

system level factors that affect the operation of road

transports. Attractiveness, competitiveness and

development of road transport industry have been as

a main interest. The main purpose has been to

examine the partnership relationships related to road

transports. Results indicate that there are many

requirements for reorganising the transport industry

in Finland in order to provide wide variety of high

quality logistic services. Changes anticipate a

development towards a genuine partnership position

with trade and industry. A further study of basic

conditions of genuine partnership operations

between road transport companies and its customers

would be needed to define, what kind of elements

are essential, how information exchange and

management should be solved and how the goals for

cooperation could be set. This approach would

provide deeper analysis of the role of road transport

companies in the supply chain management and the

development process towards a genuine partnership

role.

This research work will continue with next phase

studying the future development of road transport

industry specialising in operation models and

availability and qualifications of work force. This

research phase has started in March 2008 and will be

completed at the beginning of 2009.

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Hertz, S., Alfredsson, M. (2003), “Strategic development

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Rantala, J. (2006), “Operations Model of Future Transport

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