Tetra Laval’s European Road Freight - LTH · Tetra Laval’s European Road Freight ... which consists of Tetra Pak, DeLaval and Sidel, ... 3 Company presentation

ISRN LUTMDN/TMTP-- 5570--SE

Tetra Laval’s European Road Freight – Suggestions for Improving the Distribution Structure and Transport Supplier Base

Master thesis: 5570/2006 Authors: Marie Berglund

Malin Leander

Tutors: Robert Lindroth Department of Industrial Management and Logistics

Björn Lindahl Team Road Tetra Laval Group Transport and Travel

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Preface This thesis, written during the autumn 2005, marks the end of our eventful lives as students of Master of Science in Industrial Management and Engineering at Lund Institute of Technology. The thesis has been conducted at Tetra Laval Group Transport & Travel (TLGT&T) in cooperation with the Department of Engineering Logistics at Lund University. It has been 20 fascinating weeks, where we have gained deeper insight into the area of logistics as well as the transport industry. We have also realised how complex multinational companies can be and how surprisingly low focus on logistics they have. Furthermore, we have learned to appreciate each other’s company, during both happy and frustrated times, in a small room of four square meters. We would like to take this opportunity to thank those persons that have been extra valuable and important for the completion of this thesis: Björn Lindahl, our tutor at Tetra Laval, thank you for your guidance and patience with our sometimes too many and annoying questions. Your knowledge and experiences have been of crucial importance for our research. Robert Lindroth, our tutor at Lund University, thank you for your enthusiasm and support. Without you this thesis would not have been what it is today. You have, with your valuable feedback and tricky questions, continuously given us inspiration to keep up the good work, and helped us to stay motivated. Keith Hearne, our English expert and support, thank you for eliminating the swenglish from our thesis and also for questioning our conclusions and reasonings. We are extremely grateful for your inhuman patience during endless nights of reading. Mattias Persson, our test opponent and support, thank you for your valuable comments and advice. Furthermore, we would like to thank all the employees of TLGT&T and Team Road in particular. We also want to show our appreciation and thank Robert Ingvarsson at TLGT&T, Lennart Andersson and Patrik Johnfors at Frigoscandia, Kristian Pettersson at Transfargo as well as Thomas Johansson and Ulf Tobiaesson at Schenker for answering our questions. We are happy with what we have accomplished and hope that you as a reader will find it interesting and useful! Enjoy! Lund, February 3, 2006

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Summary Tetra Laval Group, which consists of Tetra Pak, DeLaval and Sidel, has a central department, purchasing transport and travel solutions, called Tetra Laval Group Transport and Travel. This department consists of different divisions, one of which is Team Road, who is responsible for the contracting of road transport solutions in Europe and currently has 55 contracted suppliers. Tetra Laval has a considerably large volume of goods flows within Europe, and the lack of coordination between the business units implies that the group is probably in a good position to implement a more efficient flow system, with the end goal being to reach some form of synergy among the groups’ transport flows. Furthermore, Team Road lacks a holistic view or map of the current situation, which is a necessity in order to identify potential areas of improvement. This thesis is commissioned by Team Road and is focused on mapping the current European truck flows, as well as identifying possible areas for improvement with regard to distribution and supplier base management. The mapping and analysis is based on statistics of transports carried out in 2004, which were submitted by the transport suppliers. This data has been compiled, updated, and thereafter analysed thoroughly, resulting in a comprehensible picture of the current flows for the three industry groups. The largest flows on a country and a city level have been identified, with respect to weight as well as number of transports. Existing return flows, both on a country and a city level, have been abstracted and could be useful to highlight during negotiations with suppliers in order to reach more favourable agreements. The analysis of co-loading, between and within the three industry groups, indicates that the possibility to utilize co-loading is complicated by the three different distribution systems as well as the diversity in the actual products they are shipping. Team Road strives to reduce its supplier base, which would imply lower administration costs and facilitate the important establishment of closer relationships with existing suppliers. The analysis of the transport market indicates low complexity, with low supplier dependency as well as low switching costs. This means that a reduction of the supplier base could be attainable.

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One of the reasons behind Team Road’s high amount of suppliers is the sub optimised distribution structure of Tetra Pak. Even though a smaller amount of suppliers would imply lower total costs, the reduction of a particular supplier may not be possible. Each plant has its own interests in mind, and wants to contract the cheapest supplier possible for its business need. However, Team Road needs to look at the overall picture in order to lower costs. Each additional supplier implies increased administration costs, which should be compared with the cost savings achieved by contracting a cheaper supplier. ABC and Kraljic analysis of the supplier base have been conducted and provides Team Road with a suggestion of 17 suppliers that could be of interest in a potential pruning process.

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Abstract Title: Tetra Laval’s European Road Freight – Suggestions

for Improving the Distribution Structure and Transport Supplier Base

Authors: Marie Berglund Malin Leander Tutors: Björn Lindahl, Team Road, Tetra Laval Group

Transport and Travel Robert Lindroth, Engineering Logistics, Lund

University Problem: Tetra Laval has a considerably large volume of goods

flows within Europe. However, the lack of coordination and communication between the various business units implies that the group is probably in a good position to implement a more efficient flow system, with the end goal being to achieve synergies among the groups’ transport flows. Team Road is responsible for contracting the road transports from the majority part of Tetra Laval’s European factories. Since each contract is acquired, negotiated and developed individually, the company is in a position where it has a sub-optimized transport structure with as many as 55 transport suppliers contracted. Furthermore, Team Road lacks a holistic view or map of the current situation, which is a necessity in order to identify potential areas of improvement.

Purpose: To map Tetra Laval’s European road freight, and

provide suggestions for improvements with regard to the distribution structure and the transport supplier base.

Methodology: The research is based mainly on large volumes of

data, submitted by different transport suppliers. Furthermore, to get an insight into Tetra Laval and the transport market, meetings with Tetra Laval

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Group Transport & Travel employees and interviews with transport companies were conducted. In addition, theoretical studies were carried out to obtain a broad, but at the same time, deep understanding of the relevant areas. An analysis of the problem was conducted, using the theoretical and empirical study. Finally, based on the analysis, conclusions and recommendations were formulated.

Conclusions: The conclusions reached from the analysis are as

follows: • Team Road could benefit from the information

gathered about trade balances during negotiations by highlighting the return flows on a country level that might even up the transport companies’ imbalances.

• Identified return flows on a city level could be beneficial when trying to negotiate a lower price from the transport company.

• The possibilities to implement a roundtrip are limited, since it requires even flows with high volume utilization in both directions.

• The possibility to utilize co-loading is limited, and has not been investigated further.

• A reduction of the supplier base is possible, and would imply lower administrative costs. The analysis indicates that the supplier base could be reduced by as many as 17 suppliers.

• It could be beneficial for Team Road to develop close relationships with the most important suppliers, since a close cooperation with suppliers who provide additional services could increase the overall performance.

Key Words: DeLaval, Distribution, Sidel, Supplier Base

Management, Supplier Reduction, Tetra Laval, Tetra Pak

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Table of contents 1 Introduction.......................................................................................... 1

1.1 Background .................................................................................... 1 1.2 Problem Analysis ........................................................................... 3 1.3 Goal and Purpose ........................................................................... 5 1.4 Focus and Delimitations................................................................. 5 1.5 Target groups ................................................................................. 6 1.6 Definitions...................................................................................... 6 1.7 Outline of the thesis ....................................................................... 7

2 Methodology ......................................................................................... 9 2.1 Methodology approaches ............................................................... 9

2.1.1 The Analytical Approach........................................................ 9 2.1.2 The Systems Approach ......................................................... 10 2.1.3 The actor’s approach ........................................................... 11

2.2 Choice of methodology................................................................ 11 2.2.1 Purpose of the research ....................................................... 12 2.2.2 Induction, deduction and verification .................................. 13 2.2.3 Quantitative and Qualitative methods ................................. 14

2.3 Working model............................................................................. 15 2.3.1 Step 1 – Problem Analysis ................................................... 15 2.3.2 Step 2 – Data gathering and mapping the current situation 16 2.3.3 Step 3 – Theoretical and Empirical work ............................ 16 2.3.4 Step 4 – Analysis .................................................................. 16 2.3.5 Step 5 – Results and Conclusions ........................................ 17

2.4 Information gathering................................................................... 17 2.4.1 Interviews ............................................................................. 18 2.4.2 Literature study .................................................................... 18

2.5 Data processing ............................................................................ 19 2.6 The principal’s influences ............................................................ 20 2.7 Criticism of sources...................................................................... 21

2.7.1 Criticism of primary data..................................................... 21 2.7.2 Criticism of secondary data ................................................. 22 2.7.3 Validity and reliability ......................................................... 23

3 Company presentation....................................................................... 27 3.1 History.......................................................................................... 27 3.2 Tetra Laval Group today .............................................................. 27 3.3 Tetra Pak ...................................................................................... 28 3.4 DeLaval ........................................................................................ 31 3.5 Sidel ............................................................................................. 33 3.6 Tetra Laval Group Transport and Travel ..................................... 34

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4 Market description............................................................................. 37 4.1 Tetra Laval Group ........................................................................ 37 4.2 Tetra Pak ...................................................................................... 37 4.3 DeLaval ........................................................................................ 38 4.4 Sidel ............................................................................................. 39

5 Distribution......................................................................................... 41 5.1 Direct distribution ........................................................................ 41 5.2 Multi-terminal distribution........................................................... 43 5.3 Single-terminal distribution ......................................................... 44 5.4 Hub and Spoke distribution.......................................................... 45 5.5 Loop traffic distribution ............................................................... 47 5.6 Comparison between the distribution system .............................. 48

6 Third-party logistics (3PL)................................................................ 49 6.1 What is 3PL? ................................................................................ 49 6.2 3PL Requirements........................................................................ 51 6.3 Advantages with 3PL ................................................................... 52 6.4 Disadvantages with 3PL............................................................... 52

7 Supplier Management........................................................................ 53 7.1 Supplier Selection ........................................................................ 53 7.2 Supplier assessment ..................................................................... 54

7.2.1 Levels of assessment............................................................. 54 7.2.2 Assessment methods ............................................................. 55

7.3 Supplier Classification ................................................................. 56 7.3.1 ABC classification................................................................ 56 7.3.2 ABC classification with several criteria .............................. 59 7.3.3 Kraljic classification matrix................................................. 60

7.4 Supplier Relationship................................................................... 62 7.5 Supplier Base ............................................................................... 65

7.5.1 Supply risk and single sourcing ........................................... 66 7.5.2 Buying on contract or buying on spot basis......................... 67

8 Empirical study .................................................................................. 69 8.1 Data processing ............................................................................ 69

8.1.1 Completion of the data......................................................... 69 8.1.2 Important delimitations and assumptions ............................ 70 8.1.3 Formatting the data ............................................................. 72 8.1.4 Identification of goods flows ................................................ 72

8.2 Plants ............................................................................................ 73 8.2.1 Tetra Pak.............................................................................. 74 8.2.2 DeLaval ................................................................................ 76 8.2.3 Sidel...................................................................................... 78

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8.3 Tetra Laval’s distribution pattern and strategy ............................ 80 8.3.1 Tetra Pak.............................................................................. 80 8.3.2 DeLaval ................................................................................ 81 8.3.3 Sidel...................................................................................... 84

8.4 The transport industry .................................................................. 85 8.4.1 The transport market............................................................ 85 8.4.2 Regulations and factors affecting the transport industry..... 86 8.4.3 Route planning ..................................................................... 88

8.5 Transport companies .................................................................... 90 8.5.1 Easy Transports ................................................................... 91 8.5.2 MM Logistics........................................................................ 93 8.5.3 WWL..................................................................................... 94 8.5.4 Fast Spedition ...................................................................... 91 8.5.5 LMS ...................................................................................... 92 8.5.6 OptimLogistics ..................................................................... 94 8.5.7 Overview of the transport companies .................................. 95

8.6 TLGT&T’s supplier selection process ......................................... 97 8.6.1 Sourcing ............................................................................... 97 8.6.2 Contracting ........................................................................ 100 8.6.3 Ordering............................................................................. 102 8.6.4 Supplier base management ................................................ 103

9 Analysis ............................................................................................. 105 9.1 Map of current situation ............................................................. 105

9.1.1 Overview of the three industry groups ............................... 105 9.1.2 The largest flows on country level ..................................... 106 9.1.3 The largest flows on a city level ......................................... 107 9.1.4 Volume utilization .............................................................. 111 9.1.5 ABC classification of flows ................................................ 112

9.2 Return flows ............................................................................... 114 9.2.1 Current return flows on country level ................................ 115 9.2.2 Current return flows on a city level ................................... 116 9.2.3 Potential future return flows .............................................. 119

9.3 Triangular flows ......................................................................... 122 9.3.1 Current triangular flows .................................................... 122 9.3.2 Potential future triangular flows........................................ 124

9.4 Trade balances............................................................................ 125 9.5 Complexity of the transport market ........................................... 127

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9.6 Analysis of the transport suppliers............................................. 130 9.6.1 Current supplier base......................................................... 131 9.6.2 ABC classification.............................................................. 133 9.6.3 Kraljic classification .......................................................... 136 9.6.4 Reduction of the supplier base ........................................... 137 9.6.5 Supplier management......................................................... 144

10 Conclusions and recommendations ............................................ 147 10.1 Current situation......................................................................... 147

10.1.1 Benefit from trade imbalances ........................................... 148 10.1.2 Utilize return flows on a city level ..................................... 148 10.1.3 Investigate possibilities for co-loading further .................. 149

10.2 Supplier management................................................................. 150 10.2.1 Reduce the supplier base.................................................... 150 10.2.2 Develop close relationships ............................................... 151 10.2.3 Discussion of the recommendations................................... 151

10.3 General thoughts ........................................................................ 153 10.3.1 Improve the information system......................................... 154 10.3.2 Structure central logistics functions .................................. 155 10.3.3 Improve the contracting phase........................................... 155

11 Generalisation............................................................................... 157 11.1 Internal generalisation................................................................ 157 11.2 External generalisation............................................................... 158

12 Suggestions for future studies ..................................................... 161 12.1 Future distribution hub in southern Sweden .............................. 161 12.2 Standardised information system ............................................... 161 12.3 Increase the use of rail distribution ............................................ 162 12.4 Centralised logistics function at Tetra Pak ................................ 162

References ................................................................................................. 163 Appendices ................................................................................................ 167

Appendix A – Abbreviations and definitions......................................... 167 Appendix B - Description of the data .................................................... 169 Appendix C – Structure of pivot tables.................................................. 171 Appendix D – Covered area by current suppliers ................................. 173 Appendix E – all flows on country level................................................ 177 Appendix F – Country codes................................................................. 180 Appendix G – Return flows on a city level............................................ 182 Appendix H – Trade balances ............................................................... 183 Appendix I – Interview Questions ......................................................... 184

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Chapter 1 Introduction

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1 Introduction The introduction chapter aims at giving the reader an understanding of the background to the research, as well as a clear picture of what the authors want to achieve. In order to provide an understandable goal and purpose, it is critical to share the underlying problem analysis with the reader.

1.1 Background Previously, Supply Chain Management and Logistics weren’t given any major attention in industry. Companies were focusing on other areas such as improving the product development as well as reducing costs in most areas within the business.1 Over the past decades more and more attention has been given to the concept of supply chain management2. There are a number of factors which made companies begin to focus more on logistics, the main three being; higher focus on alternative costs, the changing competitive situation, and the development and advancements made within information and communication technology.3 In order to stay competitive with increased globalization and with companies realizing the importance of reaching the wide spread customer base in an effective and cost efficient way, more focus has been given to the area of logistics. Companies have also discovered the significant cost reductions that can be made by locating the production in low-cost countries. This has also been a major contributing factor for the increased amount of transports and a higher focus on logistics, all made more accessible by the rapid development of information and communication technology. Today’s transport industry is characterised by a higher amount of mergers, few but big players in extensive networks, capacity problems on some transport routes, uneven trade balances, inter modal transports and an increase of road taxes. All these factors lead to interesting possibilities to make a group’s transport flows more efficient.4

1 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för Konkurrenskraft – ett ledaransvar. 2 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise 3 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för Konkurrenskraft – ett ledaransvar. 4 PowerPoint presentation. TLGT&T

Tetra Laval’s European Road Freight

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Tetra Laval Group is a global organisation, focusing on systems for production and packaging of liquid food. The organisation consists of three independent industry groups; Tetra Pak, DeLaval and Sidel. Tetra Pak, which is the largest of the three, is one of the world’s leading companies within food processing and packaging solutions. DeLaval, on the other hand, manufactures and markets equipment and complete systems for milk production and animal husbandry. Finally, Sidel is one of the market leaders within the sector for machines producing plastic bottles, and is now about to introduce packaging solutions in metal and glass.5 Tetra Laval Group has a central function called Tetra Laval Group Transport and Travel (from here on referred to as TLGT&T), which among other things is responsible for purchasing of transports. This department, which works on a group level, consists of different divisions/sub groups; Sea, Road, Rail, Air & Express, Travel Management, Removals and Trade Compliance. This master thesis is commissioned by the road freight department of TLGT&T, Team Road. The department is responsible for European transport contracts, but also global support, logistics projects, trouble shooting, performance evaluation and supplier development. This thesis relates to the European transports of Tetra Pak, DeLaval and Sidel. All three companies are involved in distributing large goods volumes within Europe on a daily basis. In 2004, the global road freight reached an equivalent level of approximately 155 000 full truckloads for the whole group (85 000 within Europe). Out of these 155 000 truckloads, 70 per cent belonged to Tetra Pak, 25 per cent to DeLaval and the remaining 5 per cent to Sidel. The three industry groups have plants in numerous countries around the world, and Team Road is primarily working with the wide-spread European distribution flows.6,7 Team Road has 55 different road freight suppliers, within the European market alone. This is mainly due to the fact that each of Tetra Pak’s plants is considered their own independent business unit. Each plant has their individual results and performance as primary concern and not Tetra Laval Group’s total results or performance. Up until a few years ago, all plants were responsible for contracting the deliveries of their own goods and products, making sure to cover all the areas where their customers are

5 www.tetralaval.com. 2005-09-01. 6 PowerPoint presentation Team Road. 7 Informal meeting with Lindahl, B. 2005-09-19


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located. Each factory has taken their own interests into account and chosen the transport suppliers that best suit their needs and that give them the best offer. This has resulted in each factory having contracts with 5-10 transport suppliers. Generally, the managers and staff of each factory have extensive logistics experience within the operational field, but do not have much experience or time to get a complete picture of a broader perspective. It is important to ensure that the most beneficial strategic decisions are made, and also to make sure that for example the supplier selection is the most optimal solution for each plant’s needs. Therefore Team Road realised they could use their expertise and time to help and benefit each factory. They either approached the factories to offer help to find a better transport solution, or the factories contacted them for recommendations and help. After considering the factory’s situation Team Road comes up with suggestions of improvements regarding transport suppliers and together with the plant reach a mutual decision whether or not to relieve them from their contracting responsibility. The factories are still booking all transports themselves and are still responsible for the operational logistics tasks, but Team Road helps them with issues regarding contract negotiations and the supplier relationship.8,9 Today, Team Road is responsible for contracting the road transports from the main part of Tetra Laval’s European factories. Since each contract is developed individually, they now have a sub-optimized transport structure. With this kind of decentralized distribution system, Tetra Laval does not have an optimal situation from a group perspective. The current contracts that Team Road is responsible for will expire in the end of the year 2005. Therefore, Team Road is now in the phase of negotiating new contracts for the period of January 2006 – February 2008. The challenges are to achieve cost savings and reduce the supplier base, while at the same time ensure high quality and performance.10

1.2 Problem Analysis Tetra Laval has considerable large goods flows within Europe. However, today there is a lack of coordination between business units so the group is probably in a good position to implement a more efficient flow system, with the end goal being to reach a synergy among the group’s transport flows. If the transport volumes are consolidated and all taken into account during the

8 PowerPoint presentation Team Road. 9 Informal meeting with Lindahl, B.2005-09-19 10 Ibid.


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contract negotiation, the group may reach more favourable agreements. Further advantages could be found through the analysis and compounding of combinations that exist between different major flows in Europe. Another aspect that could be taken into consideration is the potential savings due to co-loading, where higher volume utilization could be achieved, and empty-leg transports avoided. This would lead to positive effects on efficiency as well as obvious benefits to environmental aspects. Trade balances between the different European countries also need to be considered. Analysis of the trade balances may also lead to some insight or knowledge, which would be useful in negotiations. Finally, to achieve effective supplier management, a reduction of the supplier base is critical and should be investigated further. To achieve good results in negotiations, the analysis needs to be focused on identifying potential improvements as well as risks, which could be encountered. Today, Team Road does not have a complete picture or map of the current goods flows, which is a necessity in order to identify potential possibilities for improvements. For us to reach solutions on above stated problems, we need to reflect on and analyze the following issues:

• Which flows are the major ones, concerning number of transports and weight, and what areas are covered?

• What possibilities of improvements exist regarding current and potential flows? - Can any existing and/or potential return flows and triangular

flows be identified? - Is there a possibility for future co-loading between different

plants and to different consignee cities? - Could improvements be achieved by combining the three

companies’ distribution flows? • How could Team Road benefit from the trade imbalances? • What does Team Road’s supplier base management look like?

- What does the supplier base look like? - How are the suppliers selected? - How are the suppliers evaluated?

• What possibilities does Team Road have to reduce its transport supplier base? - What advantages and risks are involved in reducing the supplier

base? - What does Team Road have to take into account before changing

the supplier structure?


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1.3 Goal and Purpose Our goal is to map and document Tetra Laval’s European road freight, and to suggest ways in which they can make their distribution network more efficient. We expect to identify if, and where, improvements regarding costs, quality and environment can be made. We also hope that our analysis and conclusions will be useful for Team Road in their coming contract negotiations, and that we can provide recommendations that will give positive and informed advantage to Team Road’s future work in the areas of distribution as well as supplier base management. The purpose of this thesis is to map Tetra Laval’s European road freight, and provide suggestions for improvements with regard to the distribution structure and the transport supplier base.

1.4 Focus and Delimitations This master thesis focuses on the goods flows from the European factories, whose transport contracts Team Road is responsible for. Throughout the report the European goods flows refer to Tetra Laval’s European road freight. It is important to keep in mind, when reading this report, that all transport companies have assumed names, since TLGT&T classifies them as secret. The statistics, which we have received from Team Road are inconclusive and incomplete, which leads to delimitations regarding the amount of factories that will be taken into consideration. This implies that only those plants, which have submitted information, are included in this research. Another important delimitation is to leave out all DeLaval’s domestic transports and Tetra Pak’s transports within Sweden. The domestic transports of DeLaval are left out of the research, since not enough accurate and complete information regarding these shipments exists. Tetra Pak has five plants in Sweden, which results in a very high number of domestic transports. To include these in the research would be too time consuming and also imply a change of focus and purpose.


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During the work with this research, Sidel acquired the Italian company Simonazzi. This is mentioned in the company description, but since it happened after the research started it won’t be included herein. In the empirical study further delimitations have been made. These are expressed in paragraph 8.1.2.

1.5 Target groups The target groups for this thesis consists of the employees in Tetra Laval, with the employees in Team Road in particular, and also students, professors, teachers and other people within the academic world that have an interest in logistics and supply chain strategy. An assumption made is that the reader already has some basic knowledge in these areas. Apart from our main target groups, we aim to write a thesis that is structured and documented in such a way so as to be useful to other companies who may find themselves in a similar situation as Tetra Laval and in need of a process or reference for change and optimisation of their distribution system and supplier base.

1.6 Definitions In this report we use a few concepts that might be unknown to the reader. These concepts are both our own definitions and technical terminology. To facilitate the reading of this report, and to avoid misunderstandings, a list of the definitions used is available in appendix A.


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1.7 Outline of the thesis The thesis consists of six parts, which can be seen in Figure 1.1.

1: INTRODUCTION

2: METHODOLOGY

3: COMPANY AND MARKET

4: THEORETICAL STUDIES

5: EMPRIRICAL STUDY

6: FINISHING PART

DESCRIPTION

Chapter 1

Introduction

Chapter 2

Methodology

Chapter 3

Company presentation

Chapter 4

Market description

Chapter 8

Empirical study

Chapter 9

Analysis

Chapter 10

Conclusions and recommendations

Chapter 12

Suggestions for future studies

Chapter 11

Generalisation

Chapter 6

Third-party logistics (3PL)

Chapter 7

Supplier management

Chapter 5

Distribution

1: INTRODUCTION

2: METHODOLOGY



5: EMPRIRICAL STUDY

6: FINISHING PART

DESCRIPTION

1: INTRODUCTION

2: METHODOLOGY



5: EMPRIRICAL STUDY

6: FINISHING PART

DESCRIPTION

Chapter 1

Introduction

Chapter 2

Methodology

Chapter 3

Company presentation

Chapter 4

Market description

Chapter 8

Empirical study

Chapter 9

Analysis

Chapter 10

Conclusions and recommendations

Chapter 12

Suggestions for future studies

Chapter 11

Generalisation

Chapter 6


Chapter 6


Chapter 7

Supplier management

Chapter 7

Supplier management

Chapter 5

Distribution

Figure 1.1: Disposition of the thesis

The thesis consists of different areas, or parts, which in turn are divided into chapters. The first part presents the background of the thesis and states the problem and purpose as well as the assumptions made. Thereafter, different methodological approaches and methods are described. The company and market description aim at providing the reader with a deeper understanding of Tetra Laval Group and its business environment. The fourth part describes the useful theories divided into the three chapters: distribution, third-party logistics and supplier management. These are later used in the analysis. In the empirical part, the transport market and Tetra Laval’s European plants and road freight distribution structure etc. are described. The last area that is covered consists of the analysis, conclusions and recommendations as well as our suggestions for future studies.


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Chapter 2 Methodology

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2 Methodology Methodology is an important part of a scientific report, and it also influences the researcher’s approach. Therefore, we find it critical to highlight important methodology areas, as well as describing our approach and working model.

2.1 Methodology approaches Depending on a person’s general view of knowledge, she can have various goals and ambitions with her research. This can be elucidated in different ways depending on the author. In the literature many different methodology approaches can be found. We have decided to focus on the three approaches identified by Arbnor and Bjerke; the analytical, the systems and the actor’s approach.11

2.1.1 The Analytical Approach The analytical approach is based on a “divide and conquer philosophy” whereby division of the main problem into different sub component problems, and the solving of each of these constituent parts, leads to the solution of the main or higher level problem. It is an objective approach, based on the view that the sum of the different individual parts always equals the total. Furthermore, it considers the research to be independent of the researcher, i.e. the observer does not affect the environment and consequently the results of the research. The aim of the analytical researcher is to explain the reality of the problem as objectively and as completely as possible, trying to find cause and effect relationships. This approach is useful when dealing with mathematics, physics and chemistry problems. However, it is not as effective when it comes to more complex problems where the reality and the whole of the problem is difficult to divide into individual parts.12,13 We have come to the conclusion that the analytical approach will not present the overall solution in the most conclusive manner and hence is not

11 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 12 Ibid. 13 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära


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the most optimal in all cases. Problems within for example supply chain management, logistics and freight management have a more complex nature, and we have learned to use a different, broader, perspective. We need an approach that does not consider only the individual parts separately.

2.1.2 The Systems Approach The systems approach is also an objective approach but unlike the analytical approach, it considers the whole to be different than the sum of the individual parts. In order to get a realistic view of the problem and to reach a more holistic solution, taking all different aspects into consideration, it is important to look at the full picture and not only the sub parts.14, 15 The main focus of the systems approach is directed towards the links or relations between the different parts. These links increase the complexity of the problem and create synergy effects that are central to the research. It is because of these links that the total system obtains a different result than the sum of all single parts. This implies that the overall system can achieve either better or worse results than the individual parts added together. Therefore, in order to reach the most optimal solution and conclusions the researcher needs to consider the complete system. 16 For the task of this research, we believe the systems approach is a better option than the analytical approach. When analysing a distribution system, there are various aspects that need to be considered. Currently, Team Road contracts about 55 different transport suppliers. In order to improve the total transport system, our focus has to be concentrated not solely on the constituent parts but rather on the full perspective of the distribution system. The interests of each independent plant also need to be taken into consideration. To reach an optimal distribution structure, where the synergy effects are utilized, the different underlying flows need to be considered and evaluated. Hence, the systems approach would be the most preferable one in our case.

14 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 15 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 16 Gammelgard, B. (1997) The Systems Approach in Logistics


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2.1.3 The actor’s approach Apart from the approaches described above, Arbnor and Bjerke also discuss a third, the actor’s approach; where reality is seen as a social construction that is affected and influenced by the human. This approach emphasizes the observer’s influence on the research and its conclusions and results. The research, as well as its results, is considered to depend on the observer’s experience and actions. Hence, the outcome of the same study made by different researchers would differ, since they all affect the research environment and the results with their actions and experiences. The overall picture is understood from the actors’ view on reality.17,18 Our experiences from previous projects and earlier education will probably influence the conclusions we will reach in this project. Hopefully, our results will facilitate the negotiation process that Team Road is about to enter, and we also hope our conclusions will be useful in the future structure of Tetra Laval’s road freight distribution system. To prevent us from making this research too subjective, we will describe all the assumptions and delimitations we have made, as well as the facts that we base our conclusions on. This way we believe that other researchers will be able to reach similar results and understand the justification behind our methods and conclusions. We are conducting our study in a separate room on another floor than Team Road, which means that our daily work does not affect their work apart from informal and formal meetings. Our presence might influence them in a sense that they are spending time gathering data for us and that we might highlight some issues that they have not focused on earlier. However, we do not believe that these factors influence their work or environment in any significant way. This way we believe that the study is not that dependent on us as individuals and that the actor’s approach is not applicable in our case.

2.2 Choice of methodology Once the purpose of the research is fully understood, the question is which of the methods are available to us? In many cases various methods are applicable, and the issue is then to decide which one to use. Different methods garner different results or present them in more applicable forms. 17 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 18 Informal meeting with Lindroth, R. 2005-09-19


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Generally, when writing a thesis, resources are scarce, which is also true in our case. Due to the fact that time constraints are an obvious concern in producing this report, time is the most obvious scarce resource. The deadline of the thesis is the most important time constraint, but the research work and choice of method is also greatly affected by the requests from TLGT&T. Since Team Road’s negotiations with their suppliers will ensue in parallel to our research, there is expectancy and aspiration for results as soon as possible. This, of course, also affects the choice of methodology. In other words, a method, which most efficiently utilizes time, has to be chosen. Secondly, money is another resource we are hampered by. The research is conducted with no, or very limited, capital resources. This affects the choice of methodology in the sense that no customised tools or software are available to facilitate the data gathering or the data processing and analysis.19

2.2.1 Purpose of the research A research can be conducted in many different ways, depending on the purpose of the study. What is known about the information at hand and the existing amount of knowledge within the current area is generally crucial when determining what form of study should be conducted20. Our research will be conducted within the area of logistics, which has generated and received increased attention and interest during the last decades. Hence, there can be many sources of information regarding logistics that might be helpful in this study. However, there is no existing map of Tetra Laval’s European truck transports and the company seems to be lacking sufficient information to get a conclusive picture of the goods flows. Based on these facts, we have decided to perform a descriptive research. A descriptive study means that we will describe, but not explain, the various existing relationships21. Hence, part of the purpose with our research is to describe and map the different goods flows. Furthermore, based on the analysis we intend to deduce suggestions for Team Road, which can improve the goods flows and supplier base management. From this perspective, the research can also be considered

19 Björklund, M., and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 20 Ibid. 21 Holme, I. M., and Solvang, B. K. (1986) Forskningsmetodik – om kvalitativa och kvantitativa metoder


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somewhat normative, which implies that the study aims to give guidance and suggestions when there already exists an understanding of the area22.

2.2.2 Induction, deduction and verification During the theoretical and empirical part of the project there are three different procedures that could be used; induction, deduction and verification (see Figure 2.1). The researcher can decide to work with one or many procedures, depending on what is most suitable.23

Theoretical study

Empirical study

Indu

ctio

n

Deduction

Ver

ific

atio

n

Theories Predictions Explanations

Facts

Theoretical study

Empirical study

Indu

ctio

n

Deduction

Ver

ific

atio

n

Theories Predictions Explanations

Facts Figure 2.1: Illustration of induction, deduction and verification24

Induction means that the researcher identifies patterns and/or formulates a theory or general conclusions using observations of the reality and the collected data. In general, the use of induction is most common within areas where no relevant or only a limited amount of theory exists.25 In the start-up phase of the research, we got access to a large amount of data, mainly in form of Excel files. We also received complementary information about Tetra Laval Group and price information, contracts etc. concerning the different transport routes. The first step of the research will be to map the current situation, using an inductive approach. We believe that this approach is the best one, considering our resource constraints. We will also use an inductive approach during the analysis, when identifying patterns of return flows and triangular flows. The second approach, deduction, means that a hypothesis is developed from current theory within the subject. Conclusions are drawn on single

22 Björklund, M., and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 23 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 24 Ibid. 25 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera


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occurrences, derived from existing theory and general principles.26 There are various articles and theories concerning logistics, freight management and supply chain management, which will be studied and adjusted and tailored to the conditions of Tetra Laval. In other words, also deduction will be used during the analysis phase. The last step is verification, which means that the hypothesis is tested on empirical material, and if there is a correspondence, the hypothesis is confirmed.27 However, this approach will not be applied in this research since it is out of the scope of the project. While it is outside of the scope of the research we hope that verification will be seen in the future results and cost savings that Tetra Laval may gain and see the benefit of, from the use of and application of the methods deducted from this thesis and documented herein.

2.2.3 Quantitative and Qualitative methods Quantitative and Qualitative methods are different techniques to gather, process and analyse information.28 Quantitative methods are studies conducted on information that can be measured or valued numerically29 Statistics are typically a good example of an area where quantitative methods can be applied to process the data.30 As mentioned earlier, the basis of our research is data, gathered in an Excel file format, which will be analysed from different perspectives. For this purpose quantitative methods will be used. However, not everything can be measured in quantitative terms, which of course is a limitation of the method. Qualitative studies are used when a deeper understanding of a certain subject or a certain occurrence is requested.31 Qualitative studies will be used to provide a full and comprehensive understanding of the problem. As stated above, quantitative studies will be the main method when mapping

26Holme, I. M., and Solvang, B. K. (1986) Forskningsmetodik – om kvalitativa och kvantitativa metoder 27 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 28 Björklund, M., and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 29 Ibid. 30Holme, I. M., and Solvang, B. K. (1986) Forskningsmetodik – om kvalitativa och kvantitativa metoder 31 Ibid.


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the current situation. However, in the empirical chapter, interviews will be used as a complement. Furthermore, in the analysis of the problem statement a wider perspective is needed which will also need to take the non-quantifiable variables into account. This implies that qualitative methods will also be used.

2.3 Working model In order to accomplish the intended goals of this study, we have created a structured working model containing five steps, which we plan to follow (see Figure 2.2).

InformationGathering

Mapping the current situation

Empiricalwork

Theoreticalwork

Results & Conclusions

Analysis

Problem Step 1

Step 2

Step 3

Step 4

Step 5

Figure 2.2: Our working model

2.3.1 Step 1 – Problem Analysis In the introduction we have tried to state the purpose, the problem statement and the goal of this research, which is based on the background and the current problems being experienced by Team Road. The first obvious step is to analyse the problem and identify different sub components of the problem that can be tackled in order to focus the interrogative process to reach the final solutions and conclusions. Thus, the first phase in our working process is to carry out a problem analysis, to clarify the task at hand.


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2.3.2 Step 2 – Data gathering and mapping the current situation

Step two consists of data gathering to facilitate a realistic and clear map of the current situation. To enable this mapping, we will produce a diagrammatic representation by studying and formatting the received statistical materials. The information gathering will also consider theoretical areas the theory, such as areas of methodology and models in logistics theory.

2.3.3 Step 3 – Theoretical and Empirical work Once we have created a clear picture of the present situation and gathered data pertinent to the areas of functional theories that can be applied to the situation, as well as presenting the empirical data, we will continue to the empirical and theoretical stage of this research. The empirical part of this study will focus on Tetra Laval Group and its three independent sub groups. We will, of course, also emphasize TLGT&T and specifically Team Road’s activity and responsibilities. Apart from these, more obvious areas, we anticipate performing a smaller market analysis and an identification of some relevant competitors. By doing so, we hope to establish a clear picture for the reader and give an insight in the current situation and environment, both considering TLGT&T but also considering the market that Tetra Laval is present within as well as the transport market. A market analysis could also facilitate a generalization to make this study more applicable to other companies in similar situations and markets. In the theoretical part we want to explain and discuss the identified appropriate theory models and how they could be applied to the problem.

2.3.4 Step 4 – Analysis With the theoretical and empirical basis laid down, we will be ready to proceed to step four; analysis. In this stage we need to combine the gathered information and apply the theoretical models, as well as our expertise and experiences, to reach useful conclusions and practical results. The aim will be to make Tetra Laval’s European goods flows more efficient and to identify areas of improvement, both regarding distribution structure as well as supplier base management.


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2.3.5 Step 5 – Results and Conclusions Last, but definitely not least, the fifth phase in which we will present our results and conclusions. Our goal is to be able to contribute to Team Road’s future work and give suggestions on possible improvements. We hope they can use our results as a base in their negotiation processes, and be able to enter more beneficial agreements that imply both cost reductions as well as a more environment-friendly distribution system. We also anticipate that Team Road can use our recommendations and conclusions as initiative for further investigations and projects, such as a future supplier base reduction.

2.4 Information gathering Data is often divided into two groups, primary and secondary data. Primary data is data, which is gathered with the purpose to be used in the research. This sort of data is important if you want to create an understanding for a certain research object. Collection of primary data can be done in different ways, such as observations, interviews and experiments.32 Secondary data on the other hand is data gathered with another purpose than the actual research. This type of data provides the user with more general patterns. When using secondary data, the researcher needs to be conscious of the information found, because it might be incomplete or inconclusive. Secondary data could also be misleading since the author might have different perceptions and purpose for the data other than the current research. Examples of this form of data are literature, articles and web pages etc.33 In our case we have received a lot of statistical data for transports carried out in the year 2004. This data will be the basis for our research and analysis, and can be seen as primary data since it is gathered by Team Road itself, with the sole purpose to be used when mapping the goods flows. Furthermore, we will carry out interviews and conduct literature studies, which can be seen as primary and secondary data respectively. There are several other methods of data collection, such as; questionnaires, case studies, observations, experiments, presentations, conferences, seminars, etc. But since we do not intend to use these methods in our

32 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 33 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera


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research, we find it unnecessary to explain them and highlight their advantages and disadvantages.

2.4.1 Interviews Interviews, a common method for data gathering in the systems approach, provide information with direct relevance regarding the purpose of the research.34 They also give an opportunity for a deeper understanding, since the questions could be customized to each interviewee. It is also easier to ask questions during the interview to follow up the previous discussion, or to further interrogate specific areas of interest. To get the best outcome from the interview, it is also important to motivate the person answering questions and to develop a rapport with the person being interviewed so they feel at ease35. The disadvantage with interviews is that they are very time consuming and could also imply high costs due to travelling.36 Apart from the statistics and the input from the employees working in Team Road, we will try to conduct several interviews to complete our understanding of the task and to give us more information that could be useful in our research. It is our aim to interview a number of employees within Tetra Laval, but also representatives from the transport industry to get a more comprehensive picture of the situation. Useful information will also be obtained through informal conversations and discussions with our tutors as well as other people engaged or affiliated within TLGT&T. All these sources of information will contribute to the primary data. When performing an interview we plan to have pre-defined questions, which in some cases even will be sent to the interviewees in advance, in order to make the interview as efficient and successful as possible. Furthermore, we will have to consider what information we need from the respondents, when designing the questions.

2.4.2 Literature study Literature is considered to be all kind of written material, such as books, brochures, articles etc. The advantage of this method of data gathering is that a lot of information can be received even with a small amount of resources. The disadvantage is that the data gathered through literature

34 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 35 Davidsson, B., and Patel, R. (1994) Forskningsmetodikens grunder 36 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera


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studies is mainly secondary data, based on research with another purpose in mind.37 Except for using statistical data and performing interviews we are also going to use relevant and available literature, which will hopefully result in an increased understanding of the distribution area, as well as what theories could be applicable in our case. From the literature studies we will also get a greater understanding of how a master thesis is supposed to be conducted as well as what parts needs to be included and filtered out.

2.5 Data processing The data and information that has been gathered can be processed and analyzed in various ways. The purpose of data processing can be different and is dependent on the purpose of the analysis. The choice of a method for data processing is crucial, since an unsuitable method could result in erroneous analysis and data processing38. There are mainly three methods for data processing; models of analyses, statistical processing and simulation and modelling. Models of analyses, which can either be existing models or constructed by the researcher, aim at structure and evaluate the gathered data. Statistical models process the information statistically and can be conducted either manually or by using various computer software solutions. Modelling and simulation can be used to process the data when for instance different scenarios are required.39 The empirical part of our research will mainly be based on statistical models and analyses, since, as mentioned earlier; a big part of the work is based on large amounts of data gathered in Excel files. In the analytical part of the research, models of analyses will be used when applying theory to our problem. What models we are going to use will be best decided after the theoretical research has been performed. Modelling and simulation will not be used in this study, due to our time constraint. However, it could be useful for Team Road to apply modelling and simulation when validating the results.

37 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera. 38 Wiedersheim-Paul, F., Eriksson, L.T. (1991) Att utreda, forska och rapportera 39 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera


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2.6 The principal’s influences The idea of a topic for a thesis can sometimes come from an external party, such as a company or an organisation. The company or organisation in question is then called the principal. Writing a thesis with a principal will affect various parts of the work and bring about both pros and cons.40 When a principal initiates a thesis, the start up phase is usually shorter since the problem is already formulated by the organisation or company. However, by having a principal, there is a risk that the work begins too fast, without having performed a clear reflection of the problem.41 In our case, this risk has been relatively big, considering the fact that Team Road soon will have negotiations with its suppliers and wants us to present some results before then. This result in us having a clear but somewhat rushed time frame, where we must to adhere strictly to the deadlines. A research with a principal has the affect of putting greater demands on the authors’ skills of independent work. A principal might affect the layout and the method of the work. These kinds of suggestions are of great value, but it is important to remember that it is the author that is responsible and therefore makes all the choices.42 Since Team Road wants to investigate as many areas and get as many solutions as possible, it has been very important for us to formulate clear delimitations. The purpose and the working strategy have been discussed with Team Road, but it has been our choice of method. Furthermore, throughout the project it is of great importance to communicate all delimitations, focus areas etc. with Team Road. By getting the approval of Team Road when certain choices are made, we can assure that the research focuses on areas that Team Road find interesting without compromising the integrity of our input and intended direction for the study and research being carried out. This is important because as was mentioned previously, we hope that this thesis could provide a basis for other organisations that find themselves in similar predicaments. If the focus were solely on what the principal wants, there would be no generalisation in our project, to be applicable to a broader scope and audience. If a project has a principal it usually also affects the character or nature of the results. The author could for example be affected by the expected results. Furthermore, there is a tendency to get results on a lower abstraction

40 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 41 Paulsson, U. (1999) Uppsatser och rapporter – med eller utan uppdragsgivare 42 Ibid.


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level, which from an academic point of view is a disadvantage.43 In this project, there are no certain expectations on the results that might affect us during the process. We believe that the results in this research will be possible to generalise. However, a good description of the organisation and its business is required to be able to apply the results on similar companies. Furthermore, we believe that having a principal stimulates the work and provides a focus. The possibility to find results that can be applied by Team Road is a good incentive.

2.7 Criticism of sources There are different criteria on how sources should be criticised. The sources should for example be evaluated according to age, tendency and dependency. When it comes to age, the source is evaluated and criticized regarding how old it is and whether it is still accurate and useful today. Criticism of sources regarding tendency implies that one should be aware of peoples’ inclination to give subjective information. It is important to reflect on what own interests the source has in the current issue. This could influence the choice of words and expressions or choice of facts that the source reveals. Furthermore, the criticism of sources regarding dependency involves scrutinising that the sources are independent of each other and that they do not stem from the same facts or research. It is essential to make sure that for example two interviewees do not reproduce facts originating from the same source.44

2.7.1 Criticism of primary data The evaluation and criticism of the primary data has to be conducted according to the above mentioned academic criteria. The data describing all shipments has been gathered in 2005, and is mainly statistics pertaining to the business year of 2004. Therefore, we consider the data to fulfil the criterion of age. Also the interviews that have been conducted and the received contracts fulfil this criterion. When evaluating the primary data with respect to tendency, the statistics can be criticised. The data covering all shipments for Tetra Pak, DeLaval and Sidel has been supplied by the transport companies. Many of the transport companies do not have all the required data and therefore information is lacking or is only partial in parts. This will have an impact on our study and 43 Paulsson, U. (1999) Uppsatser och rapporter – med eller utan uppdragsgivare 44 Eriksson, L. T., and Wiedersheim, P. F. (1991) Att utreda, forska och rapportera


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results, since basing our research on partial information means that our research is based on assumptions, which implies that our results may not necessarily be considered as 100 per cent accurate. Since the provided information has not been controlled, some of the companies might have supplied information that is not fully correct. They might have given information that is incorrect instead of admitting that there is no information available. All transport companies may not have the resources to enable full gathering of statistics and may not be able to give statistical reports on request, but instead of admitting this and risk giving a bad impression, they rather present some information than no information at all. The transport company obviously has its own interest in mind and do not want to lose their current contract with Tetra Laval or damage their relationship with Team Road. Also the tendency of the interviews can be criticised. The people that have been interviewed might have a self-interest that affects their responds. An example could be that rather than admitting that they are uncertain about the answer to one question, they want to give a professional impression and therefore provide an answer anyway. When evaluating the primary data with reference to dependency, some relevant criticism can be presented. The main part of the research is based on data describing the various shipments. The central role this data gets in the research causes a dependence on the sources. In few cases, when possible we have tried to control and update the data.

2.7.2 Criticism of secondary data When evaluating secondary data it is important to highlight that the information is selective. Secondary data never reproduces the whole story. Furthermore, secondary data always communicates a message since there always is a purpose behind the documentation and so this can create a bias, which needs to be taken into consideration and scrutinized appropriately. The material might also be personally or institutionally influenced.45 To avoid these problems we will always consider the purpose of the source, and try to find complementary information to increase the credibility. The secondary data used in this research is mainly literature within the area of supply chain management. We consider the information in this literature to fulfil the demands when evaluating it in accordance to age. This is based 45 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära


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on the fact that most literature used for the theoretical study has been written no earlier than 1998. However, the article written by Kraljic (1983) is an exception, but could still be considered relevant and of current interest since it is still widely used and accepted. Other literature has been used to complete the methodology chapter; these sources are somewhat older, with the oldest one dating from 1986. However, the methods and approaches used are still well known and applied today. When evaluating the literature according to tendency, the objectivity is important. In general, university literature and documents produced by researchers tends to be more objective than for instance reports produced by companies and consultants. Since we always try to use more than one source, the risk for tendency and dependency between sources is avoided. The information that has been used as a basis for the company profile has been gathered mainly through the companies’ external web sites, but also through internal company material. This information needs to be read and used critically, since all companies wants to advocate their own services and performances. However, the sources fulfil the criteria of age, since they are published not earlier than 2004. Since Tetra Laval Group is not listed on the stock market, the company does not need to follow all rules and regulations considering publication of losses and profits and other financial statistics. Tetra Laval Group can choose what information to make public, which complicates our study especially considering our anticipation to generalize it to also be applicable for other companies in similar situation.

2.7.3 Validity and reliability Sources should also be evaluated with respect to how useful the source is considering the purpose of the research. An important factor is credibility. An analysis of credibility is both external, comparing the correspondence between independent sources, and internal, focusing on internal correspondence, the subjective perspective of the author etc.46 When collecting data, there is always a certain degree of uncertainty. Therefore, when conducting an academic survey, there are two aspects that always need to be considered; validity and reliability. These two can be seen as a measure of credibility, where validity can be explained as to what extent you measure what is supposed to be measured and reliability means the degree of precision in the measurements. Reliability can also be

46Holme, I. M., and Solvang, B. K. (1986) Forskningsmetodik – om kvalitativa och kvantitativa metoder


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explained as to what extent you get the same values when repeating the measures.47 Validity and reliability can be illustrated by throwing darts, as can be seen in Figure 2.3. When hitting the board in the middle, high validity is achieved. High reliability on the other hand, is observed when the grouping is gathered or clustered.

Reliability

Validity

Reliability

Validity

Reliability

Validity

Figure 2.3: Validity and reliability48

In order to strengthen the validity of the research, different methods could be used to investigate the same problem. By getting different perspectives on the same problem, the study will be more reliable. To use two or more methods on the same study is called triangulation and can be applied in different areas within the research. By using different data sources, different evaluators and different theories, the reliability of the research is increased since different perspectives are given through various sources.49 To achieve a high validity in our project we will consequently try to use many perspectives and several sources. For example, when conducting interviews, one way to improve the validity could be to speak to people in different positions. It is also important to ask clear and not misleading questions to get a high validity50. We are also continuously in contact with our tutor in TLGT&T to make sure that the impressions we get and the conclusions we draw from our received data are in fact accurate and realistic.

47 Eriksson, L.T., and Wiedersheim-Paul, F. (1991) Att utreda, forska och rapportera 48 Arbnor, I., and Bjerke, B. (1994) Företagsekonomisk metodlära 49 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera 50 Ibid.


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In order to improve the reliability, we will be as precise as possible throughout the whole process. All calculations will be carried out with the exact numbers and when performing interviews, control questions can be used to increase the reliability. However, our main issue regarding the reliability is the data describing the various shipments. As mentioned earlier, some information has been lacking and it has not been possible to confirm all data. This might lead to less reliable results. However, the percentage of incomplete information is relatively low and therefore it will not significantly affect the reliability.


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Chapter 3 Company presentation

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3 Company presentation Since the organisation and culture of Tetra Laval affect the complexity of the problem, an understanding of these is important in order to follow the analysis. Therefore, in this chapter, we want to provide the reader with a more in depth presentation of Tetra Laval Group and each of the three sub groups; Tetra Pak, DeLaval and Sidel.

3.1 History As mentioned in chapter one, Tetra Laval Group is an organisation focusing on systems for production and distribution of food.51 The Group was founded in 1991 when Tetra Pak acquired Alfa Laval, one of the world’s largest suppliers of equipments and plants for the food industry. The name of the organisation was Tetra Pak Alfa-Laval Group. The two companies continued to conduct separate activities. However, the organisation realized gradual restructurings in 1992, and in January 1993 the group changed its name to Tetra Laval.52 In 2001, Tetra Laval wanted to acquire the French company Sidel, a market leader in the production of machines used for making PET plastic bottles. The European Commission first prohibited the merger, since it was considered to result in anticompetitive conglomerate effects. However, ruling on the appeal brought by Tetra Laval, the Court of First Instance annulled the Commission’s prohibition in October 2002, and in 2003 the merger became a reality.53,54

3.2 Tetra Laval Group today Today, Tetra Laval Group consists of the three independent industry groups: Tetra Pak, DeLaval and Sidel. Due to the independence of each of the groups it essentially means that each of the groups applies its own specific business model. The organisational structure of Tetra Laval Group can be seen in Figure 3.2.

51 www.tetralaval.com. 2005-09-01. 52 www.tetrapak.com. 2005-09-01. 53 http://crossborder.practicallaw.com/2-200-5556. Tetra Laval decision: good news for business?. 2005-09-10 54 http://www.freshfields.com/practice/comptrade/publications/pdf/10831.pdf. The Tetra Laval case. 2005-09-10


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TETRA LAVAL GROUP BOARD

TETRA LAVAL INTERNATIONAL

TETRA PAK DELAVAL SIDEL

TETRA LAVAL GROUP BOARD

TETRA LAVAL INTERNATIONAL

TETRA PAK DELAVAL SIDEL

Figure 3.1: Tetra Laval Group’s organisation structure55 Each industry group reports directly to the Tetra Laval Group Board, which has an overall responsibility for the group’s strategic development. The board, situated in Switzerland, consists of ten people of which Nick Schreiber (president and CEO of Tetra Pak) is the only representative from the three independent industry groups56. Tetra Laval International provides financing, risk management and investment support needed by Tetra Laval Group. It is also responsible for monitoring the overall legal structure. Today Tetra Laval Group is a global, decentralised organisation, with operations in more than 165 countries and it is one of the world’s leading food processing and packaging companies. In 2004, the group, which is privately owned, employed 29 540 people worldwide, and had a net sale of 9 060 million Euro.57,58 The Tetra Laval Group Board together with Tetra Laval International has developed a framework of corporate governance, which establishes the expectations of the boards of the industry groups. It is essential for such a decentralised organisation to have clear rules and guidelines, which this framework provides. Together, Tetra Pak, DeLaval and Sidel, offer solutions to problems within processing, packaging and distribution of liquid food.59

3.3 Tetra Pak Tetra Pak was founded by Ruben Rausing and Erik Wallenberg in Lund, Sweden, in 1951. The same year a new packaging system was presented, which attracted a lot of attention. Since 1954, when the first machine for packaging milk was exported, Tetra Pak has launched numerous new

55 www.tetralaval.com. 2005-09-01. 56 PowerPoint presentation Tetra Laval Group 57 Annual report Tetra Laval Group, 2004. 58 PowerPoint presentation Tetra Laval Group 59 Annual report Tetra Laval Group, 2004.


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products and expanded both nationally and internationally.60 During its development, Tetra Pak has gone through a number of phases with different focus; in the 1960’s the initiative and focus was on rationalisation of production, in the 1970’s it was reorganisation of distribution, the 1980’s saw the focus shift to the consumer, while in the 1990’s the environment was the key. Finally, this decade has seen Tetra Pak focus on integrated solutions. Today, Tetra Pak is one of the world’s leading companies within food processing and packaging. It develops, manufactures and markets food processing and packaging systems61. The company has expanded to include more than the packaging of liquid food products. Today, ice cream, cheese, dry foods, fruits, vegetables and pet food are examples of what is packaged in Tetra Pak packages. The company’s vision is “to make food safe and available, everywhere”. Tetra Pak, which is the largest of the three industry groups, had 20 905 employees and a net sale of 7 525 million Euro in 2004.62 Tetra Pak is a global company, active in 165 countries and has 58 sales offices. Tetra Pak’s headquarter is situated in Lausanne, Switzerland where the president and CEO, Nick Schreiber also is working. Dennis Jönsson will replace him at the year-end 2005.63 To be able to keep its leading position, innovation and R&D is very important for Tetra Pak. The company, employing 1000 engineers in 19 different research centres, currently has about 5 000 patents and 2 800 pending patents worldwide.64 As can be seen in the organisational chart, Figure 3.2, Tetra Pak is organized as a matrix organisation which consists of three different subgroups; Tetra Pak Carton Ambient, Tetra Pak Carton Chilled and Tetra Pak Processing Systems. Additionally, Tetra Pak Group also consists of seven supportive activities.

60 www.tetrapak.com. 2005-09-01. 61 PowerPoint presentation Tetra Pak 62 Annual report Tetra Laval Group. 2004. 63 Informal meeting with Lindahl, B. 2005-10-04 64 www.tetrapak.com. 2005-09-01


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Figure 3.2: Tetra Pak Group organisational chart 65

Furthermore, as can be seen in Figure 3.3 Tetra Pak Market Operations are divided into different clusters covering Tetra Pak’s markets worldwide.

Figure 3.3: Tetra Pak Market Operations 66

65 www.tetrapak.com. 2005-09-01 66 PowerPoint presentation Tetra Laval Group


31

Even though the European market has been stable, it is now becoming relatively mature, with Germany being one of the major sub markets. During the last years, China as well as the rest of the Asian region has developed extensively and Tetra Pak’s packaging solutions are gaining more and more interest. China is now the largest market and also the region, which is developing the most.67 In the year 2000 Tetra Pak had a goal to increase their net sales by 50 per cent by the year 2005. This was already accomplished in 2004, so new goals were developed and communicated to the employees. The initiative “Triple V” - value, volume and voice, was launched in order to continue its business growth. Value implies the value that is provided to the customers, expressed as net sales. Volume means what Tetra Pak actually delivers, expressed as number of packages. Finally, voice represents its voice for a particular market or category in relation to its competitors, expressed as market share. The targets for 2010 are; a net sale over €10 billion, over 150 billion sold packages and an increased market share by 10 per cent.68

3.4 DeLaval The history of DeLaval begins in 1883 when Gustav de Laval (who invented the first cream separator in 1878) founded the company AB Separator in Sweden. In 1963 the company changed its name to Alfa Laval AB. In 1991 Tetra Pak purchased Alfa Laval AB, and created a separate company Alfa Laval Agri, which in 2000 became DeLaval when Alfa Laval AB was sold.69 Throughout the years many patents has been filed and various inventions and new products have been launched by the company, such as the first sterilization processing system, “self-cleaning” centrifugal separator.70 Today, DeLaval is an international company, which can be seen as an organisation with a matrix structure (see Figure 3.4), conducting business in over 100 markets worldwide. The company has 4 200 employees and 39 local sales organisations.

67 Annual Report Tetra Laval Group, 2004. 68 PowerPoint presentation Tetra Laval Group 69 www.delaval.com. 2005-09-01. 70 www.alfalaval.com, 2005-11-08


32

Figure 3.4: DeLaval organisational chart71

DeLaval is a full-service supplier to dairy farmers. The company manufactures and markets equipment and complete systems for milk production and animal husbandry. DeLaval has manufacturing units responsible for different areas, such as milking, feeding and cooling. In these factories DeLaval is producing a wide variety of products, ranging from cream separators to rubber boots. By offering this variety, the company can satisfy the demand in different areas, covering operation systems, such as voluntary milking, herd management, stalling and milking automation, as well as after market services and products, for example maintenance services, electric fencing, water supply and milk filters. In 2004, DeLaval had a net sale of 690 million Euro in 2004 and its vision is to be the first company a dairy farmer thinks of when he has a certain need.72 Joakim Rosengren is the president and CEO of DeLaval, and is operating from the headquarters in Tumba, Sweden. The active market in which DeLaval operates is directly affected by the world’s agricultural politics, and there can be knock on effects and results from occasional events such as the foot and mouth disease and BSE crisis.73 Research and development, with emphasis placed on product development, has been essential for DeLaval’s steady progression. DeLaval’s objective is to improve the business’ financial performance whilst continuing to satisfy its customers. Within its business, DeLaval has two major obstacles; business complexity and unclear decision-making. It has too many

71 PowerPoint Presentation Tetra Laval Group 72 www.delaval.com. 2005-09-01. 73 Annual report Tetra Laval Group. 2004.


33

overlapping products, imbalance between products and markets and no single point of responsibility in portfolio decision-making. These areas are items for improvements and also areas that DeLaval is continuously working on.74 DeLaval focuses on streamlining its product portfolio in order to better serve customers.

3.5 Sidel Sidel was founded in France around 1960, with the first blow-moulding machine for plastic bottles manufactured in 1961. Sidel, which means Société Industrielles Des Emballages Légers (in English, Industrial company for lightweight packages), is today one of the market leaders within the sector for plastic packaging equipment. The company’s business area extends from the design of bottles to the engineering of complete bottling lines. They offer customers a whole plastic packaging solution, from bottle design, bottle blowing, barrier treatment for PET, to the palletised finished products. The machines produced by Sidel are developed for liquid food products, such as beer, water, carbonated drinks, fruit juices etc.75 Sidel has lately expanded its offering within its core business, liquid foods, by extending its areas of expertise to glass bottles and metal cans.76 Sidel provides service and expertise in order to adapt the products to the particular technical demands of each customer. By offering a tailored solution to the customer, Sidel create a stronger relationship with its customers.77 Sidel is a global company, with sales offices in 25 countries and machines installed in 184 nations. In 2004 the company employed 4 060 people and had a net sale of 825 million Euro. The acquisition of the Italian company Simonazzi, in 2005, implies that Sidel now can offer an even wider range of products. Apart from the earlier produced plastic bottle machines, Sidel now also manufactures solutions for manufacturing packages made of glass and metal.78 Sidel has recently restructured its organisation, and has now, as can be seen in Figure 3.5 the customer in focus. Gérard Stricher is president and CEO and is working in Le Havre, France.

74 PowerPoint Presentation DeLaval 75 www.sidel.com. 2005-09-01. 76 Annual report Tetra Laval Group. 2004. 77 Sidel - shaping your world, brochure 2004. 78 Annual report Tetra Laval Group. 2004.


34

Sales & Marketing

Services Engineering& Turnkey

Customer

Finance, Legal, IT

Human Resources

Strategy & Business Planning

Communication

President & CEO

Industrial Operations Integration Office Sidel Solutions

Blowing & Coating

Packaging Equipment

Conveying & Cap Feeding

Cermex

Alfa

Sales & Marketing


Customer

Finance, Legal, IT

Human Resources


Communication

President & CEO


Blowing & Coating

Packaging Equipment


Cermex

Alfa

Sales & Marketing


Customer

Finance, Legal, IT

Human Resources


Communication

President & CEO


Blowing & Coating

Packaging Equipment


Cermex

Alfa

Sales & Marketing


Customer

Finance, Legal, IT

Human Resources


Communication

President & CEO


Blowing & Coating

Packaging Equipment


Cermex

Alfa

Sales & Marketing


Sales & Marketing


Customer

Finance, Legal, IT

Human Resources


Communication

President & CEO


Blowing & Coating

Packaging Equipment


Cermex

Alfa

CustomerCustomer

Finance, Legal, IT

Human Resources


Communication

Finance, Legal, IT

Human Resources


Communication

President & CEO


President & CEO


Blowing & Coating

Packaging Equipment


Cermex

Alfa

Blowing & Coating

Packaging Equipment


Cermex

Alfa

Figure 3.5: Sidel organisational chart79

The market where Sidel is active is characterized by price competition, and the company is focusing on reducing costs and streamlining its activities.

3.6 Tetra Laval Group Transport and Travel About 20 years ago, the department Tetra Transport was founded with the purpose to take care of the strategic and tactical part of Tetra Pak’s transports and shipments. Earlier these tasks were handled by one department, which also had the responsibility of the operational transport assignments. When Tetra Transport was established, the operational part was delegated to each factory. In 1991, when Alfa Laval was acquired, Tetra Transport took the responsibility of contracting the transport solutions on behalf of what later became DeLaval. This was done despite the fact that DeLaval already had an existing logistics department that was responsible for all the operational, tactical and strategic logistics decisions. In the year 2003 the responsibility of Tetra Transport also included Sidel, and the name of the department was now Tetra Laval Group Transport & Travel (TLGT&T). The focus over the years has developed from only concerning transports by sea, road and rail, to include travels, removals and trade compliances. Furthermore, when it comes to transports, focus has changed to also include air and express solutions. The underlying reasons for the development of this department was mainly the possibilities to benefit from economies of scale. With big volumes, the department had opportunities to

79 PowerPoint presentation Tetra Laval


35

enter more beneficial agreements with better conditions for each of the autonomous industry groups.80 TLGT&T has now developed to be a purchasing department, with the mission to provide transport and travel solutions as well as trade compliance expertise to the Tetra Laval Group. There are 15 people working in the department. The different responsibility areas that fall under TLGT&T are among others: travel management, transport solutions, global contracting, performance evaluation, management reports, removals, supervision and quality standards.81 TLGT&T is a non-profit organisation, which means that its purpose is only to serve the stakeholders: Tetra Pak, DeLaval and Sidel, and not to make profit. TLGT&T finances its business with fees from each of the three industry groups. The size of the fees is based on how much responsibility and involvement TLGT&T has for the logistics issues for the company in question.82 The transport department of TLGT&T is divided into Road/Rail, Sea, Air and Express, where Team Road, consisting of three people, is the one that has commissioned this project. The divisions’ responsibilities are relatively similar and a future plan is to establish cross-functional teams for different projects to obtain better knowledge sharing83. The past three years, TLGT&T has focused on expansion and to increase the transport volume with the goal to be responsible for 80 per cent of Tetra Laval’s transport and travel contracts in the end of 2005. Currently the department has reached 75 per cent but is hopeful of succeeding by the year-end. The coming strategy will switch focus from volume to improvement of the existing business. The department will continuously strive to improve the supplier relationships and develop better communication with their stakeholders, since it’s important to understand their needs, strategy and development.84

80 Interview with Ingvarsson, R., TLGT&T, 2005-10-21 81 PowerPoint presentation Tetra Laval Group 82 Informal meeting with Lindahl, B, 2005-10-04 83 Interview with Ingvarsson, R., TLGT&T, 2005-10-21 84 Ibid.


36

Chapter 4 Market description

37

4 Market description In order to get a good insight into the market within which Tetra Laval operates, we will give a brief insight into and description of the markets where they are currently active as well as identify some of the key competitors. A description of the market would facilitate a generalization of the research and conclusions presented herein, helping to put the group in context with the market it is present in.

4.1 Tetra Laval Group There is no actual competitor that has the same group structure or organisation model, and which is present in all the markets that Tetra Laval is operating in. However, this does not imply that Tetra Laval is operating as some form of monopoly and without competition in these markets, but rather that there are key competitors within each sub sector of the market. A selection of the competitors that are prevailent within the three sub groups’ markets will be identified. When it comes to Tetra Pak and Sidel’s business, the competition lack the dominant position which Tetra Laval has secured in the packaging market. The SIG group, is the only competitor that is active in both the carton and PET market, but they only possess 10-20 per cent of the market shares for carton packaging machines and stretch blow moulding machines. According to the European Union’s official newspaper, dated the 13th Feb 2004, no other company offers both carton and PET packaging equipment.85 However, Elopak is now offering both carton and plastic based packaging solutions to the dairy, juice, and non-beverage industries.86

4.2 Tetra Pak For a long time Tetra Pak has been the dominant player in the food packaging solution market. Tetra Pak’s strong position is partly due to it’s longstanding history operating within this market sector. So even though some competitors can provide the same carton quality, innovation and pressure technique, they cannot match Tetra Pak’s large range of products.87 Tetra Pak’s size and wide spread recognition as market leader makes the 85 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04 86 http://www.elopak.com/site/cms.jsp?node=44, 2005-12-09 87 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04


38

company pretty secure in the market. This is further strengthened by the fact that the entry barriers into the market are sufficiently high to prevent potential entrants from significantly limiting Tetra Pak’s freedom of action. One of the many reasons behind these barriers is the fact that Tetra Pak owns many patents that are not available to other potential entrants. Another reason is the customers’ need of a reliable carton regarding sterility, i.e. the customers need to be able to rely on the packaging machines, so that they have high confidence that their product will in turn reach their customers unaffected. To ensure a reliable product, the customers will most definitely inspect if the company has a proven track record. Tetra Pak is considered to have such a track record, making it more difficult for a new manufacturer to enter the market. Finally, because of the complexity of the carton aseptic packaging machine, specialized resources and know-how are also needed to be able to enter the market. A potential entrant would face a considerable risk because of the maturity of the market, which serves as another entry barrier.88 When packaging liquid food, there are two distinct methods: aseptic filling and non-aseptic filling. Tetra Pak is active in both of these markets. As mentioned above, Tetra Pak is the major player and the barriers and obstacles faced when deciding to enter such a market are high and plentiful. However, there are some competitors that Tetra Pak is facing challenges from, such as: Swiss PKL, controlled by SIG (Société Industrielle Générale) and Norwegian Elopak, which produces both carton and plastic packaging and is therefore also a competitor to Sidel. Apart from the above mentioned competitors that are present in the same European markets as Tetra Pak, we should also mention that liquid food also could be packaged in glass or metallic. This means that there are more competitors, than the few we have stated above, which are challenging Tetra Pak in the packaging industry but with alternative solutions.

4.3 DeLaval Since DeLaval has such a wide range of products within equipment, systems, accessories and consumption material for dairy production and husbandry, there is no existing competitor that offers the same variety of products, and can fulfill all the needs of a dairy farmer. However, although no competitors offer a similar range of products, DeLaval has competitors in 88 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:31991D0535:EN:HTML, 2005-11-04

Chapter 4 Market description

39

each product segment. The strength and competitive advantage that DeLaval holds comes from the fact that they can offer complete solutions for the dairy farmer. The only competitor worth mentioning, that produces similar products as DeLaval, is the German company Westfalia.

4.4 Sidel Sidel produces both aseptic and non-aseptic machines for packaging of drinks, food, beauty and pharmacepticual products. It manufactures stretch blow-moulding machines which cater for both high (>8000 bottles/hr) and low capacity (>8000 bottles/hr). Sidel has a leading position in the market for stretch blow-moulding machines within all end product segments. It also has a strong position in other PET-packaging equipment, especially aseptic filling machines, additional equipment and adjacent services.89 Sidel’s competitors are somewhat different, depending on what market and what type of capacity you consider. There are more competitors in the low capacity segment, since a less advanced technique is used in these machines. However, Sidel has the largest share in the low capacity segment, although companies such as French ADS, Spanish Urola, Italian Sipa and Swiss SIG Group are challenging Sidel and Tetra Laval.90 At the high capacity end of the market, Sidel has an even stronger position. Sidel has produced stretch blow-moulding machines for over ten years with specialization in advanced machinary with high capacity and is now market leader. Compared to the low capacity segment, there are fewer competitors, since the technique is more complex. There are mainly three competitors challenging Sidel; German Krones, Swiss SIG and Italian Sipa. The market for stretch blow-moulding machines with high capacity is characterized by innovation and imitation cycles. Sidel has a strong market position but cannot act independent of their competitors since there are no important patents within the industry and the competitors can copy the machines once they are released. The technical barriers to enter the high capacity segment are insurmountable for smaller companies active in the low capacity segment.91

89 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04 90 Ibid. 91 Ibid.


40

In 1999, Sidel launched the barrier technique and aseptic combi technique which implied that Sidel could now enter the markets for sensitive products such as beer, milk and juice. This resulted in Sidel also gaining market shares within the segment of complete packaging lines and creating new markets for dairy products, juice and beer.92 As mentioned earlier, Norwegian Elopak is one of Sidel’s main competitors, since the company has introduced PET and HDPE plastic bottle packaging into its product range.93

92 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04 93 http://www.elopak.com/site/cms.jsp?node=108, 2005-11-04

Chapter 5 Distribution

41

5 Distribution Distribution is an essential step in making the finished products available to the customers. The need of fast and frequent deliveries between the producing plants and the customers has lead to the development of distribution systems. The time and frequency requirements cannot always be fulfilled, but through theoretical and practical methods, different systems are created where the problems are resolved with some compromises and simplifications.94 Companies have to analyze their supply chain and determine what distribution strategy to choose; different approaches are normally used for different products. Factors that influence the choice of distribution strategy are: customer demand and location, service level, demand variability, and costs, including transport and inventory costs. The relationship between inventory and delivery costs is important since both of them affect the shipment size but both in opposite ways.95

5.1 Direct distribution Direct distribution is a system based on direct deliveries between the producing unit and the customer. This is the ideal distribution method concerning reduction of lead-time. The producer also avoids the expenses of operating a distribution centre.96 Another positive aspect is the clear transport flows, where marking and follow up on goods do not have to be as extensive as when using other distribution methods. Despite these advantages, a direct shipment system also implies low frequencies in each flow, low resource usage, and great need of trucks, which leads to increased transport costs. Every producing unit manufactures different products, which implies that in worst case all customers will request products from all different producing units. It is important to stress the absence of time restrictions; all the transports in the direct distribution system are totally independent. This implies a possibility to customize the transports to the existing time constraints, given by the transport buyer.97

94 Lumsden, K. (1998) Logistikens grunder 95 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 96 Ibid. 97 Lumsden, K. (1998) Logistikens grunder


42

Producing units Customers

m c


m c


m c

Figure 5.1: Direct distribution system98

Figure 5.1 shows a conceptual model of direct distribution, with shipments from each manufacturing unit to all customers. As can be seen in the picture this structure requires many transport links, which can be stated by the following formula:99

cmR ·=

R = amount of transport links m = amount of producing units c = amount of customers Direct distribution is mainly used when the customer requires fully loaded trucks, since in this case a warehouse would not help in reducing the transport cost. It is often used when lead-time is critical, such as in the grocery industry where decrease of lead-time is important due to perishable goods.100

98 Lumsden, K. (1998) Logistikens grunder 99 Ibid. 100 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain


43

5.2 Multi-terminal distribution101 To decrease the amount of direct deliveries, a system with many terminals could be implemented. This implies that the goods always pass one or more terminals between the producing unit and the customer. Because of the use of terminals, the route inadvertently will become extended. Multi-terminal system is considered to be a customer oriented system, since a certain number of customers are connected to each terminal and this way each customer will get all deliveries from one and the same terminal. This system enables a higher efficiency since co-loading is possible both for the transport from the terminal to the customer and from the producing unit to the terminal. The amount of outbound and inbound transports will decrease and the flows will be concentrated, which gives a potential for higher efficiency in the form of higher frequency and better resource usage. The outbound flows from the terminals are dependant on the supplying goods flows transported into the terminal from each production unit. This implies that the outbound transports cannot be sent until all necessary goods have been received from each plant. However, the transports from each terminal are not dependant on each other. Due to the relationship between the inbound and outbound flows, time restrictions may be incurred in this kind of distribution system. These restrictions can be solved in two ways; either each truck leaves at certain predetermined times even though all the goods have not been delivered to the terminal, or the truck always wait until it is full before it departures. A conceptual model of a multi-terminal system with two terminals can be seen in Figure 5.2. The figure shows the various links between the producing units, the terminals and the customers.

101 Lumsden, K. (1998) Logistikens grunder


44


Terminals

m t c


Terminals



Terminals

m t c

Figure 5.2: Multi-terminal distribution system102

As can be seen in Figure 5.2, compared to direct delivery this structure reduces the required number of transport links. The amount of transport links needed can be calculated by the following formula:

ctmR +·=

R = amount of transport links m = amount of producing units c = amount of customers t = amount of terminals

5.3 Single-terminal distribution103 By continuously reducing the amount of terminals, the extreme case with only one terminal in the system can be reached. This single-terminal system will improve the service level, since the average amount of goods per transport will increase. The time restrictions are considerable in a single-terminal system; all deliveries into the terminal have to be done before any delivery from the terminal can take place. These restrictions can be handled in the same way as for multi-terminal systems.

102 Lumsden, K. (1998) Logistikens grunder 103 Ibid.


45

Figure 5.3 shows a conceptual model of a single-terminal system. As can be seen in the picture, all the manufacturing units are linked to one single terminal. From this terminal transports are made to all customers.


Terminals

m t c


Terminals

m t c

Figure 5.3: Single terminal distribution system104

As can be seen in Figure 5.3, a single-terminal system radically decreases the transport links needed. The number of links for a general system can be calculated by the following formula:

cmR +=

R = amount of transport links m = amount of producing units c = amount of customers

5.4 Hub and Spoke distribution105 The normal solution to a problem where there exists bad resource utilization and frequent direct transports to customer is to develop a co-loading and terminal design from a hub perspective. This way the single-terminal system can be developed into a hub and spoke system where each point in the distribution system has both in- and outgoing deliveries. All the transport flows are made through a transfer terminal, the central distribution point, called the hub. This terminal connects the plants in the region with direct transport relationships. The spokes are the transport ways out to each of the 104 Lumsden, K. (1998) Logistikens grunder 105 Ibid.


46

other units in the system. In this system there are no differences made between the producing and consuming units, they are both treated and approached the same way. The incoming goods are sorted and re-loaded and then shipped out again. The system has general time constraints in both directions; goods are delivered at any time to the central unit from all the distribution points, but no shipment can be delivered until all the incoming goods are received. This implies that all the incoming deliveries will be approximated to the same destination time and consequently all the outgoing deliveries will start off at the same time. This requires a large amount of trucks. The time restrictions mentioned can be avoided, the lead-time can be decreased and the frequency increased by not waiting on all the incoming goods before a shipment can be made. Figure 5.4 shows a conceptual model of a hub and spoke system, where all transport flows pass through the hub. The bi-directional arrows indicate that both the producing and the consuming units are treated the same way.


Terminals

m t c


Terminals

m t c


Terminals

m t c

Figure 5.4: Hub and spoke distribution system106

106 Lumsden, K. (1998) Logistikens grunder


47

In the same way as the single-terminal system, a hub and spoke system decreases the transport links needed. The total number of links can be calculated by the following formula:

1ncmR -=+=

R = amount of transport links m = amount of producing units c = amount of customers n = amount of distribution points = m + 1 + c A hub and spoke system is not always preferable; in some cases bi-directional distribution is necessary.

5.5 Loop traffic distribution107 Another form of distribution is loop traffic, Figure 5.5, which means that commodity and goods are distributed according to planned routes. Loop traffic is mainly used for part loads, a truck is loaded with different customers’ goods which is delivered according to a predetermined route. An advantage of this system is that no reloading is necessary, which means that the risk for damaged goods is decreased. Furthermore, the customer will always receive the goods at the same time. In that way the customer can adapt its production to the deliveries. The disadvantages with loop traffic are the low degree of utilization and the requirements of rational route planning.

= Delivery point= Delivery point

Figure 5.5: Loop traffic distribution system108

107 Lumsden, K. (1998) Logistikens grunder 108 Ibid.


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5.6 Comparison between the distribution system A comparison between the above mentioned distribution systems could be useful when deciding what situation and which application of the different types of distribution are preferable. Table 5.1 below provides an overview of the advantages and disadvantages of the different distribution systems. Type of distribution Advantages Disadvantages

Direct distribution

• Perspicuous flows • Short lead times • Less comprising marking and

follow-up on goods

• Many transports • Low vehicle utilization

Multi-terminal distribution

• High volume utilization • Co-loading • High resource utilization • Relatively low amount of

transports

• Extended transport routes • Time restrictions

Single-terminal distribution

• High volume utilization • Co-loading • High resource utilization • Low amount of transports

• Extended transport routes • Considerable time

restrictions

Hub and Spoke distribution

• Co-loading early in the transport chain

• Good resource utilization • Frequent transports • High flexibility • High capacity usage

• Increased number of handlings

• Longer lead time • Large transport network

Loop traffic distribution

• No co-loading • Same route every time,

enables the customer to adjust its production

• Decreased risk of injured goods

• Route planning is required • Low degree of utilization

Table 5.1: Advantages and disadvantages with different distribution systems

Chapter 6 Third-party logistics (3PL)

49

6 Third-party logistics (3PL) Logistics companies can be divided into three different categories. The companies in category one mainly supply transports, warehouse services and single operations. Companies belonging to category two are actors providing co-loading, shipping, and planning and organisation of logistics services. In category three, the companies also supply operative planning and operation of some, or all, of the companies’ logistics activities.109 The current trend is that more companies are delegating larger parts of their logistics responsibilities to a third-party. Already for a long period of time, most companies in Sweden have outsourced their transports. With the use of 3PL, this trend is taken one step further.110 The 3PL industry essentially began in the 1980’s, and has over recent years grown rapidly as a response to the increased need.111

6.1 What is 3PL? 3PL is the use of an outside company to perform all or part of the firm’s materials management and product distribution functions. Many definitions and explanations of third-party logistics exist. One explanation is given by Berglund (2000): “…a company, i.e. party three, acts between two primary participants (parties 1 and 2) in a supply chain, without taking title (ownership) or at least no commercial risk for the goods in the flow of materials in the supply chain.”112 This is clarified by Figure 6.1, where a third-party service provider is illustrated.113

109 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 110 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet 111 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 112 Berglund, M. (2000) Strategic Positioning of the Emerging Third-Party Logistics Providers pp 13-14 113 Ibid.


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Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”

Organizations’ part of a Supply Chain

Part 3Service Provider

Third-party

Organizations

”Providers”

Organizations that do not take ownership

Supplier

Supplier

Supplier

Second tier

suppliers

Service suppliers to part 3 without direct to part 1 & 2

First Tier Relationship Second Tier Relationship

Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”



Third-party

Organizations

”Providers”


Supplier

Supplier

Supplier

Second tier

suppliers


First Tier Relationship Second Tier Relationship

Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”



Third-party

Organizations

”Providers”


Supplier

Supplier

Supplier

Second tier

suppliers


Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”


Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”

Part 1e.g.

Producer or

Supplier

Part 2e.g.

IndustrialCustomer

The two primary

participants

”Shippers”



Third-party

Organizations

”Providers”



Third-party

Organizations

”Providers”


Supplier

Supplier

Supplier

Second tier

suppliers


Supplier

Supplier

Supplier

Supplier

Supplier

Supplier

Second tier

suppliers


First Tier Relationship Second Tier Relationship Figure 6.1: Third-party logistics provider114

3PL companies typically provide transport and/or warehousing and some value-added services.115 The arrangements are characterized by close relationships, which are typically more complex than traditional logistics supplier relationships. The relationships are no longer transaction based or single-function specific, but based on strategic alliances involving long-term commitment and often multiple-functions or process management.116 The relationship is seen as a win-win relationship for both parties.117 Currently, the use of 3PL is more established amongst large firms, although it could be very beneficial also for smaller firms.118 3PL exists in many different shapes and sizes, supplying a variety of solutions. When looking at the logistics processes there are three types of 3PL solutions; common solutions, industry solutions and dedicated 114 Berglund, M. (2000) Strategic Positioning of the Emerging Third-Party Logistics Providers 115 Stefansson, G. (2004) Collaborative Logistics Management 116 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 117 Stefansson, G. (2004) Collaborative Logistics Management 118 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain

Chapter 6 Third-party logistics (3PL)

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solutions. Common solutions employ the same system to serve many users, belonging to different industries. By using loading pallets and other standardized solutions the 3PL company can use the same handling system, warehouse equipment and transport modes. The second type, industry solutions, is adjusted to a certain category of products. This implies that the technical equipment, the warehouses and the transport modes are adapted to products of a certain type, and the administrative system fulfils the demands of the industry. Dedicated solutions are specially designed for the products and the demands from a certain user. This type of tailor-made and exclusive 3PL solutions is only used by companies with large volumes, covering large markets.119

6.2 3PL Requirements As with all strategic alliances, contracting a third-party logistics company is a complex business decision. There are many issues that need to be considered before entering an agreement with a certain 3PL company. First of all it is important to know the current costs, so that they can be compared with the costs of outsourcing. When performing this comparison, it is important to also take transaction costs for the outsourcing into account. Secondly, when selecting a 3PL provider, it is crucial to consider how the provider will fit into the firm’s strategic logistics plan. It is vital for the success of the alliance that the third-party logistics company has a strong ability to understand the needs and requirements of the hiring firm and can adapt its services to these. Finally, when choosing a 3PL provider, it could be beneficial to choose a company whose roots lie in the area of logistics that is most essential to the logistics requirements of the hiring firm.120

119 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 120 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain


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6.3 Advantages with 3PL There are many reasons why companies decide to use 3PL. The first one is that 3PL allows the companies to focus on their core competencies. However, if logistics is one of a firm’s core competencies, it should be kept within the company and 3PL should of course not be used.121 The second advantage that can be mentioned is that it could provide technological improvements. Today, requirements change and technology advances rapidly. A single company might not have the resources to constantly update their technology. Most 3PL providers on the other hand constantly update their equipment and their information and communication technology. Therefore, a 3PL provider can often meet the increased requirements quicker and in a more cost-effective way.122 A third advantage is that the use of 3PL also provides flexibility. One example of this, is that by transforming fixed costs to variable costs, it releases capital for the company. Furthermore, the flexibility in geographic location increases, since by using 3PL a company can meet customer requirements within new markets without committing capital for a new warehouse that might be required.123,124

6.4 Disadvantages with 3PL Before deciding to use 3PL solutions it is also important to be aware of the disadvantages of such a decision. The most obvious disadvantage is the risk of loosing control. This is highly relevant when for instance outsourcing the outbound logistics, where the employees of the 3PL company might interact with the firm’s customers. When outsourcing a certain function, the company also risks loosing knowledge. Therefore, it is of great importance for the firm to identify its core competences before outsourcing any logistics activities.125

121 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 122 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 123 Ibid. 124 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 125 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain

Chapter 7 Supplier Management

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7 Supplier Management Effective supplier management is a cornerstone for a successful business strategy. Large savings and significant improvements in the operational processes can be made through dedicated and effective supplier management. Suppliers are able to contribute to both maintaining product costs at a competitive level as well as being able to continuously work on product and process innovation.

7.1 Supplier Selection126 When selecting new suppliers, different functions such as; purchasing, design, quality, production and production planning, should be involved. The selection process contains a number of separate steps:

• Determining the method of subcontracting – The buyer needs to decide whether to choose turnkey or partial subcontracting. Turnkey subcontracting implies that the supplier is responsible for the execution of the entire assignment, while in partial subcontracting the assignment is divided into parts and contracted out separately. It should also be decided whether the work should be awarded on a fixed-price, lump sum or a cost-reimbursable basis. These decisions must be made together with the contract user and/ or budget holder.

• Preliminary qualification of suppliers and drawing up the ‘bidders list’ - First of all, prerequisites or criteria a supplier must meet need to be summarized. Furthermore, an initial bidders list, indicating which suppliers may potentially do the job, should be established. These potential suppliers should then be evaluated, and a short list of three to five prospective suppliers can be drawn up.

• Preparation of the request for quotation and analysis of the bids received - The first step is to draw up the request for quotation in such a way that comparison of the quotations, which are received at a later stage, is possible. The evaluation of these bids is both technical and commercial, and therefore the relevant aspects need to be acknowledged. Thereafter the suppliers’ offers are ranked according to technical, logistics, quality, and financial and legal aspects. The last step usually involves a supplier selection proposal, consisting of a decision to select a certain supplier, the underlying

126 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise


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ranking schemes and the underlying quotations that have been considered.

• Selection of the supplier – After having performed a risk analysis of the recommended potential suppliers, ultimately one supplier will be selected.

7.2 Supplier assessment127 The need for assessment of the suppliers’ performance is gaining greater importance since the suppliers are given a more central role in the purchasing company’s business. Due to the emergence of the supplier’s importance, it is no longer presumed that the supplier is able to meet the materials and service requirements. In order to decide whether or not to build a long-term relationship with the supplier, the purchasing company needs to determine the strengths and weaknesses in the supplier’s performance, as well as if the supplier can guarantee sustained continuity of supply.

7.2.1 Levels of assessment The purchasing company needs to perform the assessments on different levels such as: product, process, quality assurance system and company level. However, most supplier evaluation is limited to the first two levels. On product level, the purchasing company is focusing on the product quality. The goal is to decrease the quality variance of the incoming materials by performing quality inspections. The quality of the product is related to the quality of the manufacturing process. Therefore, assessment on process level is also important. The supplier’s machinery and quality organisation are inspected and evaluated, and the customer can be assured that the process is under consistent improvement through application of quality procedures. To ensure reliable quality inspections assessments on quality assurance system level is necessary. This implies that the entire quality organisation is subject of investigation. 127 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise


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The highest level of inspection, the company level, is based not only on quality aspects but also on financial aspects. On this level, the purchasing company tries to establish how competitive the supplier is, and will be.

7.2.2 Assessment methods There are two main types of assessments: subjective and objective. Subjective assessments are used when the suppliers are evaluated through the company’s personal judgements, based on for example employees’ experiences with the supplier. Objective assessments on the other hand try to quantify the supplier’s performance. Examples of assessment methods that can be used are spreadsheets, personal assessment, vendor rating, supplier audit and cost modelling. Spreadsheets are used to compare and assess quotations from the suppliers. The spreadsheet is constructed as a matrix where one axis lists the most important criteria for the evaluation and the other axis lists the supplier quotations. In order to create a clear and easily readable matrix, it is important to receive quotations that adhere to a particular format. To facilitate this, the purchasing company needs to use well-structured requests for quotations, with clear guidelines for the suppliers on how to submit the information. Personal assessment is a subjective method, which can only be used for those suppliers with whom the purchasing company already has an existing business relationship. Employees that have experience with this supplier can rate the supplier regarding predetermined factors such as quality control, production planning, manufacturing etc. Vendor rating is a quantitative method, which measures the aspects of price, quality and delivery reliability per supplier. Due to the fact that this method involves the administrations of large amounts of data, a computerized materials planning system is a helpful tool. The supplier’s price history is compared to the competitors’ price development. Quality could for example be measured by rejection percentage and the number of production line stops due to faulty materials. Evaluation of delivery reliability is based on the number of late, or early, deliveries. Supplier audit involves regular visits to the suppliers, during which the production process and quality organisation is scrutinized. In this way, specialists from the purchasing company can report and discuss the faults


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and weaknesses found. Measures for improvement can also be negotiated and established. Finally, the progress against the agreed targets can be verified during the following visit.

7.3 Supplier Classification Within logistics and supply chain management it can often be valuable to use classification of articles, suppliers, customers, transports etc. for various reasons. A common reason is to divide the articles in order to control the various groups in the best way. For example when considering inventory control, classification can be used as an efficient mean to divide the articles into groups or classes, to which different control systems are then applied. Another reason for classification is priority. When resources are scarce, it is important to use them where they are most beneficial. Thus, by differentiating for example the articles, the control of the most crucial products can be prioritized.128 For a company that has large amount of suppliers, it is difficult to spend an equal amount of effort on each supplier. Therefore, it is essential to have a system to structure the supplier base, which enables the company to differentiate the supplier management. Classification models are helpful but should be used while taking into consideration the existing supplier relationships. There are different ways of classifying the suppliers and we will describe two of these methods.129

7.3.1 ABC classification ABC classification is based on the fact that some products, suppliers, customers, transports etc are more valuable than others. A common concept is the so-called 80 – 20 curve. This concept which is also known as Pareto’s law, is derived from observations of product patterns in many firms, and implies that 80 per cent of the total turnover is represented by 20 per cent of the products.130 The same principle can be applied within supply chain management. Two examples are; a few of the suppliers represent a large

128 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet 129 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 130 Ballou, R. H. (2004) Business Logistics/Supply Chain Management


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part of the deliveries and a few customers represent a large part of the total turnover.131 ABC analysis is a tool that facilitates the differentiation of products, materials, suppliers, customers and transports, which is done to determine the groups that should receive different treatment.132 An ABC classification is usually based on the various articles’ (customers’, suppliers’ etc.) volume value. Depending on what type of classification is performed, the value can be based on the total purchase value, the capital cost in inventory or the total profit. Based on their share of the total value, the articles are classified into three categories; class A, class B and class C.133 There is no precise way the items are grouped into one category or another. This division can vary, dependent on the purpose of the analysis and is determined by the person who conducts the ABC analysis.134 However, in most cases the 80 – 20 curve is used as a basis for categorization, and the A items typically account for about 80 percent of the total value and represent about 20 percent of the items. The B items typically account for about 15 percent of the total value and finally the items in class C represent low-value items, whose value accounts for no more than five percent of the total value.135 Independent of which type of ABC classification is performed, or on what volume value it is based, the approach is the same. The following steps are applied136: 1. Choose a criterion for the classification, i.e. what volume value

should be used, and calculate it for each item. 2. Sort the items based on descending volume value. 3. Calculate each item’s percentage share of the total volume value. 4. Calculate the accumulated percentage share of the total volume

value. 5. Calculate each item’s percentage share of the total number of items. 6. Calculate the items’ accumulated percentage share. 7. Decide on suitable classifications.

131 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 132 Ballou, R. H. (2004) Business Logistics/Supply Chain Management 133 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet 134 Ballou, R. H. (2004) Business Logistics/Supply Chain Management 135 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 136 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet


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The result of an ABC classification is illustrated in Figure 7.1.

0

10

20

30

40

50

60

70

80

90

100

0 20 40 60 80 100

Items (%)

Val

ue

(%)

A B C

Figure 7.1: Illustration of ABC classification

When applying the ABC classification it is not the classification of the items that is of importance, but the use of the analysis as a base for differentiation. Differentiation can be used to increase the efficiency, since for example, more advanced control principles can be applied to the A items, while cost reduction will be central to the less important groups. ABC classification is a particularly useful tool when applied to a large amount of data, since the size of the dataset increases the complexity and the need for differentiation.137 Finally, there are some pitfalls when using the ABC analysis. For example, both an article with a high price and a low volume and an article with a low price and a large volume can be classified as B articles. In this case it might not be suitable to use the same control principles for these two articles, although they have the same classification. Furthermore, there is a risk that 137 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar


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articles that complement each other (such as screw and nut) are classified differently. This might result in different availability of articles that originally belong together.138

7.3.2 ABC classification with several criteria139 As mentioned earlier there might be some disadvantages by using an ABC-classification based on only one criterion, for example when dependency between the articles exists. An ABC classification that is based on several criteria usually provides better results. Apart from the value, also a possible critical factor could be considered in the analysis. The approach is very similar to the usual ABC classification. When the items are divided into A, B and C classes, for each category the items are also classified according to the critical factor. The division into new classes will then be relatively subjective, with a mixture of both quantitative and qualitative judgements. An example of an ABC classification with two criteria is the classification of products, both with respect to turnover and with respect to the strategic importance. The division of the articles can be seen in Figure 7.2.

Strategic Importance Turnover 1 2 3

A Article D Article C

B Article G Article A Article E

C Article H Article B&J Article F&I Figure 7.2: Illustration of ABC classification with several criterions140

The division into new classes is subjectively determined, and could for instance be that the groups A-1, A-2 and B-1 forms the most important class, the groups A-3, B-2 and C-1 forms the second class and the rest is the least important class.

138 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 139 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet 140 Ibid.


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7.3.3 Kraljic classification matrix Another classification method is to create a matrix in which the suppliers (or the purchased products) are grouped in two dimensions. This forms four squares into which the suppliers are divided. These four squares represent four different ways of managing the suppliers. The two dimensions can be chosen differently, but one common way is to use the dimensions suggested by Peter Kraljic (1983). He focused on how companies can develop supplier strategies by classifying procured material and components. The two variables he used were141:

• The importance of the procurement; for example the procurement’s proportion of the total costs and the degree of value adding.

• The complexity of the supplier market; for example supplier situation e.g. monopoly or oligopoly situation, pace of technological development and entry barriers.

An illustration of Kraljic’s matrix can be seen in Figure 7.3.

High

Leverage Items

Materials Management

Bottleneck Items

SourcingManagement

Non-critical Items

PurchasingManagement

Strategic Items

Supply Management

Importance for purchasing

Supply market complexity

Low High

High

Leverage Items


Bottleneck Items

SourcingManagement

Non-critical Items


Strategic Items

Supply Management



Low High

Leverage Items


Bottleneck Items

SourcingManagement

Non-critical Items


Strategic Items

Supply Management



Low High

Figure 7.3: Simplified Kraljic matrix142

141 Kraljic, P. (1983) Purchasing Must Become Supply Management 142 Ibid.


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By classifying the procured material in these four different procurement groups, also the suppliers can be classified. This classification facilitates the decision on how to differentiate the relationship with, and management of the different suppliers.143

• Leverage items are items with great financial importance and a low risk profile. The purchasing costs of leverage items can represent a large proportion of the total costs.144 The availability of these items is plentiful and alternatives are available. There is a standard product specification and substitution is possible.145 Also for this group of products a skeleton agreement with duration of one to five years can be developed to stabilize and simplify the supplier management.146

• Strategic items are items with high financial importance and high

risk profile. The procurement of these items is of great importance. Furthermore, they are strategically important and substitute is difficult to find due to the specialised nature of the product.147 Due to the importance of these, often customized products, it is crucial to work and develop long-term relationships with a few important suppliers.148

143 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 144 Ibid. 145 http://www.eraa.org/intranet/documents/43/495/051012BetterPurchsingTechniques.pdf, 2005-11-18 146 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 147 http://www.eraa.org/intranet/documents/43/495/051012BetterPurchsingTechniques.pdf, 2005-11-18 148 Kraljic, P. (1983) Purchasing Must Become Supply Management


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• Non-critical items are normally standard products with low financial importance and a low risk profile.149 The availability of these items is plentiful and a standard product specification exists, which implies that substitution is possible.150 Since these items have a rather low strategic importance, they should not be the focus of the purchasing department. Therefore, it is preferable to develop a skeleton agreement with a duration of one to three years, which regulates the price and volume.151

• Bottleneck items are items with low financial importance and a high

risk profile.152 In this case, substitution of the items is difficult, since it could be a monopolistic market or a market with high entry barriers.153 These items are often dedicated products with very few suppliers in the industry. It is important to secure a reasonable support of these products. Therefore, it is important to develop a good relationship with one or more of these suppliers.154

7.4 Supplier Relationship The area of procurement has gained greater importance, since the share of companies’ total costs relating to procurement of goods or services is growing and in many cases represents a majority of the total costs.155 This is mainly due to the increased importance of external sourcing. It is important for the organisations to focus on its core competencies. Activities, which are not adding value to the company, may as well be outsourced to a supplier. When outsourcing an important part of its production or business, it is crucial to develop a good relationship with the supplier.156

149 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 150 http://www.eraa.org/intranet/documents/43/495/051012BetterPurchsingTechniques.pdf, 2005-11-18 151 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 152 Ibid. 153 http://www.eraa.org/intranet/documents/43/495/051012BetterPurchsingTechniques.pdf, 2005-11-18 154 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 155 Kraljic, P. (1983) Purchasing Must Become Supply Management 156 Gadde, L.E. and Håkansson, H. (1993) Professionellt inköp


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The main reason for the existence of supplier relationships is that they are economically profitable, since they provide stability. Traditionally, the procurement focus has been on costs, prioritizing standard products to the lowest price. Therefore, when trying to make the business more effective, companies focused only on making their own production more efficient. However, this traditional approach has changed and today companies, especially within the area of logistics, are focusing on the whole supply chain and establishing long-term relationships with their suppliers. Relationships create a stability and increased knowledge about the supplier, which facilitate possibilities to improve the efficiency across the company borders.157 The supplier relationship is of different importance depending on what the company is producing, and what product or service it chooses to order from the supplier. In order to develop and manage supplier relationships, the suppliers need to be grouped into distinctive categories, such as for example:

• Commercial suppliers • Preferred suppliers • Supplier partners

The requirements for each of these supplier categories differ. The commercial supplier only has to deliver goods and services according to the agreed terms. The preferred suppliers have developed and agreed with the company on mutual objectives and various improvement programmes. When it comes to the supplier partners, these few suppliers work intensively with the company to develop new technologies, products and business opportunities.158 Once the suppliers are identified, it is critical for the purchasing company to work on building and extending relationships.159 A supplier relationship is characterized by factors such as: complexity, adaptations, long-term thinking, dependency, trust, conflict and cooperation.160 Some firms have found it useful to involve suppliers early in the design process, which often leads to greater gains than involving the suppliers after the design has been

157 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 158 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise 159 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 160 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar


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decided. Other aspects that also help building the relationship are to share future plans and technologies with the supplier as well as to have a joint continuous improvement goal. The purchasing firm aims at building long-term, effective relationships with trusted suppliers, which will result in more effective integration.161 Apart from all the advantages that a well-developed supplier relationship yields, it could also imply some problems162:

• First of all, it is important to find the right balance between conflict and cooperation. If there is not enough conflict in a relationship, the parties might experience complacency between each other and not enough constructive conflict or criticism, which would improve the relationship.

• Secondly, close relationships can decrease the flexibility in different ways. The customer may for example not accept an offer from another supplier even though the offered price is lower than the one with the existing supplier. It could also be risky to gather price information from other suppliers, since the price given by the existing supplier includes adaptations and may imply hidden extras. The decreased flexibility also implies that the vulnerability increases; if something happens to the supplier, which affects its deliveries, the customer will is also affected.

• In order to cooperate with the technical development, the companies need to exchange a lot of information. This exchange of information can be a problem if the information is classified as sensitive, and there is a risk of information leaking to competitors from the supplier.

161 Gadde, L.E. and Håkansson, H. (1993) Professionellt inköp 162 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar


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7.5 Supplier Base Organisation of the total supplier base is an important factor in order to achieve effective supplier management. There are two main structures of the supplier base, which can be seen in Figure 7.4. The figure shows that a company can choose to organize its supplier base according to direct handling or arranged in tiers.163

Buying company

Suppliers

A. Direct handling

Buying company

Systems suppliers

Component suppliers

B. Arranged in tiers

Subcontractor

Buying company

Suppliers

A. Direct handling

Buying company

Systems suppliers

Component suppliers


Subcontractor

Buying company

Suppliers

Buying company

Suppliers

A. Direct handling

Buying company

Systems suppliers

Component suppliers


Subcontractor

Buying company

Systems suppliers

Component suppliers


Subcontractor Figure 7.4: Supplier base164

Figure 7.4a implies that the buying company itself handles all the suppliers in the supplier base. This means that the company may have to deal with a large amount of suppliers. Differentiating between the suppliers depending on their level of importance is then a crucial success factor in effectively managing the whole supplier base. The main advantage of this structure is that it allows the buying company to keep close contact with smaller suppliers, which in turn facilitates information sharing. However, managing this structure is very time consuming, and it is hard to develop a good relationship with all the suppliers.165 Figure 7.4b shows that the buying company organizes its supplier base in tiers. A way of arranging this structure is by having system suppliers on the first tier. The relationship between the buying company and the systems supplier is usually characterized by partnership. These suppliers are

163 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 164 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 165 Ibid.


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responsible for gathering and assembling all the parts belonging to the system, which will be delivered. It is also common that the systems suppliers participate in the technical development. The responsibility for the component suppliers is also taken over by the systems suppliers. This implies that the component suppliers, who earlier delivered to the buying company, will now deliver to the systems supplier. However, on certain occasions, for instance when new technologies and components are developed, the component supplier might have direct contact with the buying company. This organisation of the supplier base gives the buying company more time and resources to focus on the important suppliers, since the systems supplier handles the less important ones.166 Having only a few suppliers also facilitates the establishment of close relationships.167 The desired effects of these relationships are cost savings and the possibility to use the relationships to improve the companies’ own technical development.168 However, the decreased contact between the buying company and the smaller suppliers might imply that the time before information and important decisions reach the buying company could be lengthened.169

7.5.1 Supply risk and single sourcing170 Purchasing companies have to decide if they want to purchase products from one supplier, or if it is necessary to have several suppliers. If the company would use only one supplier, there is a risk that the company becomes dependant on that supplier. This supply risk is measured against criteria such as number of potential suppliers, short-term and long-term availability, competitive structure in supply markets, make-or-buy opportunities, storage risks and substitution possibilities. Sourcing a product from one supplier without using any alternative sources represents a high supply risk. The risk is low when the product can be sourced from many suppliers and the switching-costs are low.

166 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 167 Kaminsky, P., Simchi-Levi, D., and Simchi-Levi, E. (2003) Designing and Managing the Supply Chain 168 Gadde, L.E. and Håkansson, H. (1993) Professionellt inköp 169 Björnland, D., Persson, G., and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar 170 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise


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Single sourcing is the deliberate choice for one supplier. This could be preferable in some situations, when it concerns for example:

• Production of a small series of complex components with high tooling costs.

• Contracting out small volumes of client specific products, which are produced under licence or with specific know-how.

• Products that need to be delivered with very short lead times. • When the technological knowledge is simply not available within the

company’s own organisation. When being the single supplier there is no fear of competition and the supplier can easier open up to the customer. Since the contractor is dependent on the supplier, it is often willing to involve the supplier more in the product development process. However, apart from these advantages, single sourcing could also imply a greater dependency on the supplier and result in the purchasing company losing contact with the supply market. Therefore, companies often prefer to have a multiple sourcing strategy, which gives them several alternative suppliers for a certain product. The purchasing company could also have the strategy to use a single supplier for each certain product, but not the same for all of them.

7.5.2 Buying on contract or buying on spot basis171 The purchasing company needs to decide whether the total volume of purchased products is to be covered by a contract, or if part of the volume will be bought on a spot basis at current market prices. The advantages of buying under contract are that the volume is bought at an agreed price, and that the buyer also is certain of delivery. However, the buying company might lose its contact to the market by buying through a contract. The prices on the market are fluctuating and buying on a contract basis is preferable if the prices are increasing, but in case of price decreases, buying on spot is a better option. Most companies choose to use a combination of contract and spot buying.

171 van Weele, A. (2002) Purchasing and Supply Chain Management, Analysis, Planning and Practise


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Chapter 8 Empirical study

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8 Empirical study The empirical study aims to describe the reality referred to by the research.172 The intent is to provide the reader with an objective overview, one where no interpretations have been carried out. However, by being selective with which data to present we have affected the objectivity of the study, since the reader does not get a complete picture of the current situation. Nevertheless, this selection is inevitable and the effects on the objectivity are negligible.

8.1 Data processing The aim of our data processing is to create a map of the different flows, from plants to consignees, and to identify the largest flows regarding weight and the number of transports. Throughout this process some delimitations and assumptions have been made.

8.1.1 Completion of the data The basis of this research was derived from large amounts of relatively incomplete data (see appendix B, description of the data), provided by the transport companies. To enable a better overview of the large amount of statistics, three focus areas have been identified. These areas are European transports concerning; Tetra Pak, Sidel and finally DeLaval’s, to and from its central distribution hub in Glinde, Germany. When processing the data, a decision was taken to first study the three industry groups separately and thereafter try to find synergies. This division appears rather natural, since the three industry groups ship different products. Finally, the fact that some of DeLaval transports carry dangerous goods also supports the reasoning behind such a division where, initially, the transports of each industry group are examined individually. Since the research has been based mainly on information, which to some extent is incomplete, updates were needed. However, it was not possible to update all the information, and not all information received is relevant so after studying the data, a decision was made to focus on consignee city and country, and not on consignee address, zip code etc. This decision was

172 Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera


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based on the fact that there was more information available concerning consignee city than consignee zip code. Furthermore, the use of the consignee’s name and consignee address would result in too many flows. To fill in the gaps where information was lacking, the internet search tool map24173 was used. By entering the zip codes in the search tool, we received the corresponding cities. However, when mapping the flows, the use of consignee city would still result in too many flows, since many of the consignee cities are small, scattered towns. In order to attain a clear map of the flows, showing the major transport routes, all consignee cities were approximated to different clusters around larger cities. These approximate consignee cities are situated in the close vicinity of the actual consignee city (not further than 50 km). However in some cases even the zip codes are incomplete, which might lead to incorrect mappings. An assumption has been made that, when one digit is missing from the zip code, it is the first number that has disappeared. This decision is based on the fact that if the cells in Excel are formatted as numbers, and the first digit in the zip code is a zero, the zero will disappear. Thus, the result will be an incomplete zip code. Therefore the decision was made to add a zero before the zip code in those cases. However, this could be a source of error. Nevertheless, this occurrence was very rare, only in about 0.4 per cent of the cases, and would therefore not affect the credibility of the research. Finally, the information regarding the transport suppliers also needed to be completed. This was done with the information provided in the transport contracts for each plant.

8.1.2 Important delimitations and assumptions DeLaval’s distribution structure is based on a hub structure, where transports are made to and from the hubs and to and from Glinde. Thus we have chosen to focus only on the flows related to Glinde. These are the major flows, and therefore most valuable when performing the analysis in order to extrapolate good results. In other words; a delimitation has been made to leave all domestic transports, as well as all international DeLaval shipments that are neither inbound nor outbound to or from Glinde, out of the research. When analyzing outbound flows from Glinde, a decision has also been made to use the hub city in each country as the approximate consignee city. With regard to the inbound flows, Glinde is chosen as the approximate city. 173 www.map24.se. 2005-09-01


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As mentioned above, the lack of information has lead to a few assumptions, for instance regarding zip codes. Another assumption that has been made is in relation to chargeable weight and gross weight. To be able to map and identify the major flows (regarding weight), a decision has been taken to always use chargeable weight. This decision is based on the fact that if chargeable weight is given, it is either equal to gross weight or larger. However, in those cases where information about chargeable weight is lacking, an assumption has been made to use gross weight instead. To be able to sort and analyse the data by only looking at one column, a formula has been set up that uses the largest number out of gross weight and chargeable weight. This formula has been defined as weight. In this way, the column “weight” will, if the information is available, contain chargeable weight and otherwise gross weight.

Weight = maximum (gross weight, chargeable weight) When looking at weight, European countries have somewhat different regulations regarding the weight limit of a full truckload (FTL). Therefore, to simplify our analysis, the assumption has been made to always use the average weight, 25 000 kg, as a measurement for a full truckload. This assumption was made in conjunction with our tutor in TLGT&T. Furthermore, if information about both gross weight and chargeable weight is lacking, an assumption has been made to calculate the weight using the information provided about load meter (LDM). In this case 13.6 LDM corresponds to 25 000 kg.

000256.13

LDMWeight ·=

Studying the statistics describing shipments from the plant in Budapest, Hungary, it can be seen that in many cases, information about weight and volume are lacking. Another assumption has been made whereby when no data for the transports from Budapest is available, they are presumed to be full truckloads. This decision was considered and reached in conjunction with our tutor in TLGT&T. When formatting the data to a compatible and comparable format, it was assumed that the transports are carried out all year round, 52 weeks a year. This may not be true due to public holidays and seasonal variations, but since we are not given any other specific information and since the economy


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and industries are working progressively towards utilizing the most of their time within a year, we find this assumption valid.

8.1.3 Formatting the data After updating the missing information in the statistics, the data was arranged into the same, standardised format, to enable easier comparison and analysis. Also, in order to provide the option of grouping the information by shipping date, all dates were also adjusted to the same format. Information that was considered redundant was removed from the documents to facilitate further data processing and analysis. As mentioned in appendix B the information regarding DeLaval’s shipments was gathered in a different format than that of the data considering Tetra Pak’s and Sidel’s shipments. To be able to bring the information about the three different companies together, the data concerning DeLaval needed to be re-formatted and consolidated. The statistics of DeLaval’s distribution to and from Glinde is based on the different contracts, in which the transport companies have stated the number of transports and the volume utilization of the transports carried out in 2004. As an example they could have stated that one full truckload has been departing on Monday, Wednesday and Friday of each week. In order to format the dates in the same structure as the other industry groups’, we used one column for the numbers of the weeks (1-52) and one column for the weekdays when the shipments were made.

8.1.4 Identification of goods flows In the interest of clarity we have identified a flow as: A number of transports from a specific plant to a specific consignee city. Flows can also be analyzed on a country level and are then considered to be a number of transports from a certain country to another. The size of the flow can then be expressed as the total number of shipments in 2004 or the total weight of all shipments relating to the particular flow. At this point the results of the data processing are laid out in three different Excel files; one for each company, in which the information is organized into a format which can be easily compared across all three. There is also one document that contains the compiled data of all three industry groups. To facilitate the analysis of the statistics, various pivot tables have been produced. A pivot table is a useful tool when processing large amounts of statistical data, and can easily be manipulated based on different variables,


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allowing a great deal of flexibility for users who wish to obtain the same data in a different structure quickly. To identify the major flows, the pivot tables are focused on both weight and the total number of transports for the year 2004. The tables show all flows, from one plant to a certain country, and into the approximate consignee cities. The structure of the pivot tables is illustrated in appendix C. Another parameter of interest is the average volume utilization. This is calculated for each of the identified flows to allow a comparison of loading efficiency. Average volume utilization is measured using the following formula:

s transportof no Total

weightTotal weightAverage =

Average volume utilization 00025

weightAverage=

Pivot tables are also constructed to show the total weight and the total number of shipments from one country to another. These tables are created to get a better, overall picture of the flows between the countries. Finally, to create an overview of Team Road’s use of transport suppliers, a pivot table was also constructed for the various transport companies. This table shows the total weight and the total number of transports shipped by each transport supplier during 2004.

8.2 Plants The plants belonging to Tetra Laval are scattered throughout the world, from America to Asia. Since the study is focusing on the European goods flows, the only plants of interest are those located within the boundaries of Europe itself. Since the three industry groups are independent, and no cooperation or coordination between the plants exist, each company’s plants will be described separately.


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8.2.1 Tetra Pak Tetra Pak has 30 plants situated within Europe. The map in Figure 8.1 provides an overview of these plants. The factories that are marked green are the ones whose transports TLGT&T currently are responsible for the contracting of. However, it is important to remember that historical data of the shipments has not been provided from all these plants, which implies that not all are included in the research. The map shows two plants marked yellow, which means that the responsibility for contracting the transports from these plants will be taken over by TLGT&T by the year-end 2005. Red factories are Tetra Pak plants that contract their own transport suppliers with no influence from TLGT&T.

KievLimburg

IzmirArganda

Romont

Rubiera Gornji Milanovac

Moscow

Timashevsk

Sunne

Lund

Moerdijk

Latina

Budapest

Wrexham

Modena

Carnaxide

Dijon

Berlin

HjörringÅrhus

FjällbackaStålvall

Skoghall

KievLimburg

IzmirArganda

Romont

Rubiera Gornji Milanovac

Moscow

Timashevsk

Sunne

Lund

Moerdijk

Latina

Budapest

Wrexham

Modena

Carnaxide

Dijon

Berlin

HjörringÅrhus

FjällbackaStålvall

Skoghall

Figure 8.1: Tetra Pak’s European factories

Tetra Pak’s European plants produce machinery, spare parts, packaging materials, opening and closures, and straws. This is described in Figure 8.1, which shows what country the plants are located in, the name of the plant and what products they manufacture. Furthermore, the table also shows if TLGT&T is responsible for the contracting of their transports or not.


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Country Plant Products Contract Included in the research

Denmark Hjörring Strips Yes Yes

Denmark Århus Ice cream Yes No

France Dijon Packaging material Yes No

Germany Berlin Packaging material Yes No

Germany Limburg Packaging material 2006 No

Great Britain Wrexham Packaging material Yes Yes

Hungary Budapest Packaging material Yes Yes

Italy Latina Packaging material Yes Yes

Italy Modena Machinery Yes Yes

Italy Rubiera Packaging material No No

Netherlands Moerdijk Packaging material Yes Yes

Portugal Carnaxide Straws Yes No

Russia Moscow Packaging material No No

Russia Timashevsk Packaging material No No

Spain Arganda Packaging material 2006 No

Sweden Fjällbacka Strips Yes Yes

Sweden Lund Packaging material, spare parts, machinery Yes Yes

Sweden Skoghall Machinery Yes No

Sweden Stålvall Machinery Yes Yes

Sweden Sunne Packaging material Yes Yes

Switzerland Romont Packaging material Yes No

Turkey Izmir Packaging material No No

Ukraine Kiev Packaging material Yes Yes

Yugoslavia Gornji Milanovac Packaging material No No

Table 8.1: Tetra Pak's European plants. NB: since statistics about all plants have not been submitted, some plants are left out of the survey although Team Road already is responsible for the transport contracts.

In addition to the plants described in Table 8.1 above, Tetra Pak has a number of sub-contractors providing raw material, machinery parts, opening and closures etc. Tetra Pak does not own these sub-contractors, and Team Road is not responsible for the contracting of goods transports from the factories. Therefore, these are not included in the research. However, exceptions to this are Gislaved and Hasslarp. As can be seen in Table 8.2 there are 15 subcontractors producing openings and closures for Tetra Pak. Currently, of these 15 plants, Team Road has only been responsible for Gislaved and Hasslarp. However, by the year-end 2005 Team Road will be


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responsible for all contracts, and all the plants will be managed by control towers. This will be described further in paragraph 8.3.1.

Country City Company Contract Included in the research

France Blanzy Ergom Year-end 2005 No

France Chateaubriand Novembal Year-end 2005 No

France Contrexeville Solocap Year-end 2005 No

France Le Cheres Novembal Year-end 2005 No

Germany Dresden GP Plast Year-end 2005 No Great Britain Nottinghamshire Plastek Uk Ltd. Year-end 2005 No

Italy Cavriago Ghepi Year-end 2005 No

Italy Correggio CGM Year-end 2005 No

Italy Fubine GeFit Year-end 2005 No

Italy Novi Di Modena Lameplast Year-end 2005 No

Italy Sezzardio Novembal Year-end 2005 No

Spain Sevilla Novembal Year-end 2005 No

Spain Tortosa Plasticos Castella Year-end 2005 No

Sweden Gislaved GP Plast Yes Yes

Sweden Hasslarp AP Plast Yes Yes Table 8.2: Opening and closure plants

8.2.2 DeLaval As mentioned earlier, DeLaval’s business idea is to be the first company a farmer in the dairy industry thinks of, i.e. to provide everything the farmer might need. This implies that DeLaval has to offer a wide range of products from complete milking system to rubber boots, which involves several different production plants.174 However, the products such as rubber boots, dish brushes etc. is not produced by DeLaval, but bought in from sub-contractors. Due to this product range, and the customer structure of DeLaval, the distribution from each plant originates from central hubs in each country. This will be explained in more detail in paragraph 8.3.2. In total, DeLaval has six production plants throughout Europe, which are illustrated in Figure 8.2. The four plants that are marked green are the ones whose transports Team Road currently are responsible for the contracting of. The plants marked with orange are the ones that Team Road are partly responsible for, and will take ownership of the sole responsibility for transport contracting by the year-end 2005.

174 www.delaval.com. 2005-09-01


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Tumba

Dobre Miasto

MarktschorgastWroclaw

Tarm

Drongen

Tumba

Dobre Miasto

MarktschorgastWroclaw

Tarm

Drongen

Figure 8.2: DeLaval’s European plants

The products produced in-house by DeLaval are large machinery, wagons, detergents and tanks. Table 8.3 provides an overview of where the plants are all located, the products produced and if Team Road is responsible for the transport contract or not.


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Belgium Drongen Detergents Yes Yes

Denmark Tarm Machinery Yes No

Germany Markstschorgast Machinery Yes No

Poland Dobre Miasto Waggons Inbound Yes, Outbound Year-end 2005 No

Poland Wroclaw Tanks Inbound Yes, Outbound Year-end 2005

No

Sweden Tumba Machinery Yes Yes

Table 8.3: DeLaval's European plant. NB: since statistics about all plants have not been submitted, some plants are left out of the survey although Team Road already is responsible for the transport contracts.

8.2.3 Sidel Sidel has a total of eight plants in Europe, which can be seen in Figure 8.3. Green implies that Team Road has the responsibility for the transport contracts. The orange mark for Cermex implies that Team Road is partly responsible for the contracts. Finally, the red mark for Porto means that the plant contracts its own transport suppliers, with no influence from Team Road.


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Porto

Åstorp

Hjo

Parma

Octeville-sur-MerReichstett

CermexBretagne

Porto

Åstorp

Hjo

Parma


CermexBretagne

Porto

Åstorp

Hjo

Parma


CermexBretagne

Figure 8.3: Sidel's European plants

Sidel’s plants produce: packaging equipments, machinery, plastic tubes, conveyors and spare parts. Table 8.4 provides an overview of the different plants, which country they are located in and what products they produce. The table also indicates if Team Road is responsible for the contracting of the transport suppliers.


France Bretagne Filling machines Yes No

France Cermex Packaging equipments/palletizer etc. Partly No

France Octeville-sur-mer Blowing and Coating machines Yes No

France Reichstett Conveyors Yes Yes

Italy Parma Spare parts/Blowing and Coating machines Yes No

Portugal Porto Conveyors No No

Sweden Hjo Plastic tubes Yes Yes

Sweden Åstorp Plastic tubes/Aluminium tubes Yes Yes Table 8.4: Sidel's European plants. NB: since statistics about all plants have not been

submitted, some plants are left out of the survey although Team Road already is responsible for the transport contracts.


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8.3 Tetra Laval’s distribution pattern and strategy As already mentioned, Tetra Laval Group does not have a centralised coordinating logistics function. Instead, each autonomous industry group is responsible for their own transports and logistics planning.175 However, TLGT&T has developed and is now responsible for at least 75 per cent of the total transport contracts made within the Tetra Laval Group.176 TLGT&T is working on behalf of the three industry groups as a centralised purchasing department responsible for transport solutions etc.177 Since Team Road assigned this research, it is only focused on the European truck transports. TLGT&T’s distribution network with respect to the European road freight is not fully structured or realised as of yet. Today, most of the flows are sub optimized and Team Road does not utilize the potential synergy effects that it could benefit from. However, this is an area that they are now focusing their attention on and they are now striving to develop more cost effective solutions, while taking advantage of the size of the company and its many goods flows.178 To provide a more detailed picture of what challenges TLGT&T is facing, the European truck distribution structures for each sub industry group will now be explained.

8.3.1 Tetra Pak When TLGT&T was founded about 20 years ago, it first focus was only on the domestic distribution from Tetra Pak’s Swedish plants. Contract negotiations with transport companies were entered into with a view of the whole Swedish distribution structure in mind and not that of each single plant.179 Since then, TLGT&T’s responsibilities have grown and they now take care of the transport negotiations and supplier evaluations for 19 of Tetra Pak’s plants. On behalf of the different plants, Team Road negotiates transport contracts with both regional and international transport suppliers. This enables the plants to buy from contracts at predetermined prices.180 This gradual development of TLGT&T’s responsibilities is the main reason behind the sub-optimization of the transport flows.

175 Informal meeting with Lindahl, B. 2005-10-11 176 Breakfast Seminar with Borglin, J. 2005-10-11 177 Interview with Ingvarsson, R. 2005-10-21 178 Informal meeting with Lindahl, B. 2005-10-11 179 Interview with Ingvarsson, R. 2005-10-21 180 Informal meeting with Lindahl, B. 2005-10-11


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Today, Tetra Pak’s distribution structure is decentralized, with mainly direct deliveries from the plants to the customers. The company does not have a centralized logistics department. Instead, each of Tetra Pak’s plants can be seen as an autonomous business unit, responsible for its own profits and strategies. Each unit is also responsible for the logistics planning and distribution, which has lead to a sub-optimized transport system where each independent plant has taken only its own interests into account, and chosen the transport company that best fulfils the needs of that particular plant.181 Previously Team Road had focused on each flow separately and in doing so had decided upon the most optimal transport solution for each flow respectively. As mentioned, this has led to the sub-optimized structure with the abundance of suppliers that Team Road currently face. It is hoped that in the coming negotiations, Team Road can use the map of flows and identified return flows, which is believed to have the potential to wield improvements in the distribution structure. Team Road particularly feels the need to reduce the supplier base, in order to ease their administrative workload, which would imply higher cost efficiency.182 For the distribution of straws, Tetra Pak uses so called control towers. The use of control towers can be seen as a 3PL solution, which facilitates the booking of transports. Instead of having a shipment department in each plant, when booking a transport each plant contacts the control tower, i.e. the 3PL supplier. The control tower handles all the contacts with different transport companies, and books the transports using TLGT&T’s contracts. Control towers will by the year-end 2005 also be used for the 15 sub-contractors supplying opening and closures.183

8.3.2 DeLaval DeLaval has a centralized logistics function operating mainly from Glinde in Germany, but also from Tumba in Sweden. This logistics function is responsible for all the strategic, tactical and operational decisions relating to logistics.184

181 Informal meeting with Lindahl, B. 2005-10-11 182 Informal meeting with Lindahl, B. 2005-11-25 183 Ibid. 184 Interview with Ingvarsson, R. 2005-10-21


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DeLaval used to receive complaints from the customers and had problems with different goods arriving at different times and the parts for a stall being delivered in the wrong order. Therefore, DeLaval decided to work towards a solution whereby the customer receives the full package of products at the same time, despite the fact that the products originate from several different plants. This has led to the logistics department developing a hub and spoke structure for DeLaval’s European goods flows, with hubs situated in different countries.185 Table 8.5 provides an overview of the hubs in the different countries. The table also states whether shipments are made from the hub to Glinde (inbound), from Glinde to the hub (outbound), or in both directions.

Country Hub Inbound/Outbound Glinde

Austria Linz Inbound/Outbound Belgium Drongen Inbound Czech Republic Prague Outbound Denmark Kolding Outbound Finland Turku Inbound/Outbound France Paris Inbound/Outbound Germany Glinde Inbound/Outbound Great Britain Northampton Inbound/Outbound Hungary Budapest Outbound Italy Milano Inbound/Outbound Netherlands Groningen Inbound/Outbound Norway Oslo Inbound/Outbound Poland Rakoniewice Inbound/Outbound Slovakia Bratislava Outbound Spain Madrid Inbound/Outbound Sweden Jönköping Inbound/Outbound Sweden Tumba Inbound Switzerland Altishofen Inbound/Outbound

Table 8.5: DeLaval's hub structure

185 Interview with Ingvarsson, R. 2005-10-21


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Figure 8.4 shows a map of DeLaval’s hub structure, with the central distribution centre in Glinde and the hubs in the different countries.186

Drongen

Tumba

LinzBudapest

Northampton

Paris

Turku

Prague

KoldingJönköping

Glinde

Madrid

Rakoniewice

Oslo

Groningen

Milano

Bratislava

Altishofen

Drongen

Tumba

LinzBudapest

Northampton

Paris

Turku

Prague

KoldingJönköping

Glinde

Madrid

Rakoniewice

Oslo

Groningen

Milano

Bratislava

Altishofen

Drongen

Tumba

LinzBudapest

Northampton

Paris

Turku

Prague

KoldingJönköping

Glinde

Madrid

Rakoniewice

Oslo

Groningen

Milano

Bratislava

Altishofen

Figure 8.4: DeLaval’s distribution structure, with the central distribution centre in Glinde,

marked with a triangle, and the hubs in the different countries, marked with circles. The black circles indicate that the hub has distribution both to and from Glinde. When transports are made only from Glinde, the circles are marked red. Finally, there are two hubs with distribution only to Glinde. These are marked yellow.187

Each producing unit is delivering the finished goods to the hub in its own country, or in cases where there is no hub in that particular country, the delivery is made to the closest hub. From these hubs, deliveries (mostly full truckloads) are dispatched to the distribution centre located in Glinde, Germany. In the distribution centre, all products ordered from a certain country are co-loaded and delivered, mainly in full truckloads, to the hub located within that country. Once in the hub, the shipments to each customer are consolidated and the final delivery can be undertaken.188 This hub and spoke system leads to better efficiency, with higher volume utilization and higher utilization of the trucks. Additionally, a higher rate of customer satisfaction is achieved when all the ordered products are received at one time. DeLaval delivers products that fall under the health and safety regulations, which implies that at times a certain kind of truck is needed.

186 PowerPoint presentation Tetra Laval Group 187 PowerPoint presentation Tetra Laval Group 188 Informal meeting with Lindahl, B. 2005-11-04


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The goods flows are divided into inbound and outbound Glinde respectively. The logistics division cooperates with TLGT&T where Team Road is responsible for contracting the inbound and outbound transport solutions to/from Glinde.189 The cooperation between TLGT&T and DeLaval’s logistics department is very structured and clear, TLGT&T knows what DeLaval wants from them, this is in contrast to the cooperation with Tetra Pak where it is TLGT&T’s responsibility to take the initiatives and choose what to focus on.190

8.3.3 Sidel Sidel does not have a centralized logistics department. However, the company also works in close cooperation with TNT Freight Management, which is in contact with the transport companies. Locally, at each plant, there are strong logistics units that are responsible for the operative logistics tasks. Both Team Road and the plants approach each other to initialize cooperation regarding logistics issues. However, Sidel has only belonged to Tetra Laval Group since 2003, which is a main factor in the reasoning behind Team Road not having so much responsibility for Sidel’s distribution and transport solutions thus far.191 Besides machines and machine parts, Sidel also produces packaging material such as plastic and metal tubes. Sidel delivers the machines, which implies one shipment from the factory where it is produced, and then also packaging material, which is frequently delivered upon the customers’ request or order. This is similar to Tetra Pak, which sells, rents or leases its machines to the customer and then continuously delivers packaging material.192 Sidel mainly ships out of gauge cargo i.e. cargo which is slightly higher or wider than cargo that will fit standard containers. This cargo can be carried, for example, in open top, open side, or flat rack containers. Sidel’s transports are mainly shipped by road or sea.193 However, spare parts might be transported by air, since the extra cost that it implies to deliver it by air is far less than the cost of having production stop.194

189 Informal meeting with Lindahl, B. 2005-11-04 190 Interview with Ingvarsson, R. 2005-10-21 191 Informal meeting with Nilsson, P. 2005-11-04 192 Ibid. 193 Informal meeting with Nilsson, P. 2005-11-04 194 Informal meeting with Lindahl, B. 2005-11-03


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8.4 The transport industry The transport industry in general is characterized by change. It has developed from a traditional focus on high volume utilization without customer orientation, to an industry where the customers’ demands are central. Variables that are crucial for the customer are time, cost, environment, quality and safety.195 To get a better insight into the transport industry, interviews have been conducted with representatives from transport companies (interview questions, see Appendix I).

8.4.1 The transport market The transport market can be defined as the relation between the materials flows and the transport flows, i.e. the relation between the demand for transports of goods and the availability of vehicle and ship transports. The supplied transports can be road, rail, sea and air transports. The most notable development in the transport market during the last few decades is the increase of road freight.196 Between 1991 and 2000 the volume of road freight haulage increased by 34 per cent. During the same period, airfreight also increased dramatically.197 In contrast, transports by rail and domestic sea transports have decreased during the last twenty years. The market share of the goods transports carried by rail in the European Union has in the last decades been halved.198 The introduction and establishment of the European Union have favoured the transport market in Europe, since freedom of movement between the member nations is one of the major goals.199 The only document needed when crossing the borders between the member nations is an international freight manifest; a so-called CMR.200 The goal is to implement a safe, efficient and competitive transport policy. To achieve this, the EU promotes integrated transport systems between the nations.201 EU also aims at reducing transports by road by using inter modal transports between the member nations.202 195 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet 196 Lumsden, K. (1998) Logistikens grunder 197 http://europa.eu.int/comm/transport/road/index_en.htm. 2005-11-07 198 Lumsden, K. (1998) Logistikens grunder 199 http://europa.eu.int/scadplus/leg/sv/lvb/l24208.htm. 2005-11-07 200 Petersson, K. TransFargo. 2005-11-10 201 http://europa.eu.int/scadplus/leg/sv/lvb/l24208.htm. 2005-11-07 202 http://europa.eu.int/scadplus/leg/en/lvb/l24089.htm. 2005-11-07


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8.4.2 Regulations and factors affecting the transport industry

There are various regulations affecting the transport industry within Europe. The regulations concern items such as: dangerous goods, transported weight, environmental factors, and employee conditions. Dangerous goods with regard to transports can be defined in various ways. A common definition is: “Dangerous goods are goods or substances, whose chemical or physical characteristics by itself, or in contact with other substances, can cause harm to people, goods or environment.”203 Transport of dangerous goods needs special planning in order to, as much as is possible, eliminate all risks. To facilitate the identification of goods and the proper preventive measures, dangerous goods are classified into nine categories according to the hazard they represent.204 The transport, as well as the related loading and unloading, of dangerous goods are regulated in the European Agreement concerning international carriage of Dangerous goods by Road (ADR). Depending on the classification different regulations are applicable, which affect the choice of transport mode, route planning etc.205 Furthermore, the requirements for documentation are higher when transporting dangerous goods.206 Besides transports of dangerous goods, there are various regulations regarding road transports. An example is restrictions on heavy goods vehicles. Currently seven of the EU member states have introduced various driving restrictions. These regulations are for instance applied on days and roads where high traffic density is expected, such as on Sundays and during public holidays. Driving restrictions can also be imposed at night, if the vehicle does not comply with the noise emission standards.207 Taxes are another contributing factor that affects the transport industry in Europe. According to the European Union, the member states are entitled to collect road taxes on vehicles, as long as it does not affect the border-

203 Lumsden, K. (1998) Logistikens grunder pp. 647 204 Lumsden, K. (1998) Logistikens grunder 205 http://www.unece.org/trans/danger/publi/unrec/rev14/English/02E_Part2.pdf. 2005-11-07 206 Lumsden, K. (1998) Logistikens grunder 207 http://europa.eu.int/scadplus/leg/en/lvb/l24060.htm


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crossing formalities between the member nations.208 Taxes can be collected for highways, tunnels, bridges and mountain passages.209 As a result of this, countries such as Germany, Austria and Switzerland have introduced road taxes.210 The countries can also collect environmental taxes. Levies, i.e. taxes and charges, are considered environmental if the basis of the levy has a negative impact on the environment. These levies are regulated by the EU Commission, and can be charged both on products (such as gasoline) and on pollutions (such as noise emission in the field of aviation).211 An example of taxes regarding the environment is the road taxes in Germany, which are charged differently depending on the vehicle’s engine. The highest tax is charged to vehicles with an engine type Euro 1, and the lowest to vehicles with an engine type Euro 4.212 In Europe, transport by road is regulated both with respect to the maximum weight and the length, width and height of the vehicle. Within the European Union there are common rules for the member nations concerning these dimensions.213 The maximum length in the European Union is 18.5 metres, and the maximum width and height is set to 2.55 and 4.0 metres respectively.214 However, exceptions can be made for domestic transports, which have been applied by Sweden and Finland.215 For domestic transport in Sweden the maximum length of a truck and trailer is 25.5 metres.216 The maximum weight of a truck and trailer varies between different types of vehicles. However, throughout the European Union the maximum weight is set to 44 tonnes. Also in this case, domestic transport in Sweden is an exception, where the maximum weight for a fully loaded five axle articulated vehicle is 60 tonnes.217 An important regulation affecting the route planning is the driver’s maximum driving time. The rules specify that the driver has to take 45

208http://europa.eu.int/youreurope/nav/en/citizens/factsheets/de/taxes/motorvehicletax/en.html. 2005-11-07 209 http://europa.eu.int/scadplus/leg/sv/lvb/l24045b.htm. 2005-11-08 210 Petersson, K. TransFargo. 2005-11-10 211 http://europa.eu.int/scadplus/leg/en/lvb/l28058.htm. 2005-11-08 212 Inteview with Andersson, L. Frigoscandia. 2005-11-21 213 Andersson, L. Frigoscandia. 2005-11-21 214http://www.akeri.se/pagedownload/Sveriges+Åkeriföretag/Internationellt/Blandad+information/Vikter+och+dimensioner/Maxvikter.pdf. 2005-11-21 215 http://www.eu-upplysningen.se/templates/EUU/standardRightMenuTemplate____2452.aspx. 2005-11-21 216 Lumsden, K. (1998) Logistikens grunder 217http://www.akeri.se/pagedownload/Sveriges+Åkeriföretag/Internationellt/Blandad+information/Vikter+och+dimensioner/Maxvikter.pdf. 2005-11-21


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minutes break during, or after, driving for four hours and 30 minutes. The maximum driving time in the European Union is set to nine hours, thereafter the driver has to rest for at least eight hours. Furthermore, if one vehicle has two drivers, the resting time only counts when the vehicle is not moving. This implies that after driving for 18 hours the vehicle has to stop for at least eight hours. Finally, the maximum total driving time in one week is set to 56 hours, which has to be followed by a minimum 45 hours of rest. These regulations are the same in all nations belonging to the European Union, but the penalties vary significantly between the countries.218,219

8.4.3 Route planning Today’s European transport industry is characterised by large networks of transport companies who collaborate in different areas of Europe. These networks affect the transport companies’ route planning. Most transport companies have the ability to submit an offer on stretches covering most areas of Europe, even though they are not performing the transports themselves. The network is based on different players selling and buying transports from each other. Today, for example TransFargo has more transport offers than available trucks, which implies that transport assignments need to be sold to its collaborative partners220. Schenker, on the other hand, is one of Europe’s biggest transport companies and can offer solutions carried out by its own subcontractors in most areas of Europe. Therefore, Schenker is not that dependent on its network partners.221 Due to the tough competition in the transport industry, the transport companies accept most assignments offered. When performing route planning, the transport companies consider different factors such as; the trade balances that exist between different countries, the size of the shipment, the frequency of the transports offered, the customer’s demands on loading and departure times etc.222 The more demands the customer has, the more complicated the route planning gets, and in the long run it also becomes more expensive for the customer.223 One of the most important factors to consider is to avoid transports of empty trucks. Therefore it is important to identify the existing customers in the current area.

218 Interview with Andersson, L. Frigoscandia. 2005-11-21 219 Interview with Petersson, K. TransFargo. 2005-11-30 220 Ibid. 221 Interview with Tobiasson, U. Schenker 2005-12-02 222 Interview with Andersson, L. Frigoscandia 2005-11-21 223 Interview with Petersson, K. TransFargo. 2005-11-30


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Furthermore, it is crucial to be cost-efficient, which implies striving for the target of increasing the amount of full truckloads and decreasing the amount of empty truckloads, while still following the predetermined time schedule.224 A decision to invest in a new route has to be based on the above stated aspects, and a system needs to be developed based on volume and frequency. The possibility to, in the future, get more customers on this specific route also has to be considered. This could be done in cooperation with other members in the transport company’s network.225 In order to enable a transport structure based on only full truckloads, co-loading is used extensively in the transport industry. Schenker, for example, has three main hubs in Germany and a terminal in Malmö between which fixed routes exist. When Schenker plan new routes, the part load structure is observed and statistics of the flows are analyzed, using simulation programs, to identify where the ultimate co-loading spots could be established. Although there are some standard set ups of transport flows, Schenker argues that it is a flexible company and not restricted by these standard routes. A customized solution can be developed according to the demands of a specific customer. To enable an optimal co-loading structure, the transport companies utilize their collaboration with colleagues and customers existing in their network.226 An important and crucial aspect affecting the route planning is the regulations of the drivers’ working hours. When planning the routes, the transport companies need to take the different time aspects, driving and resting, into consideration. This is the main reason why many transport companies choose to go to Germany by ship from Sweden instead of using the bridge between Malmö and Copenhagen. The ship alternative allows the driver to rest, which implies that once over in Germany, the transport can be more efficient.227 Schenker is also using a system whereby they load the trailer on a ship, which will be picked up by a carrier in Germany. This way, no driver is needed on the transport between the countries.228 TransFargo uses this system as well, where 50 per cent of the transports by ship are based on loose trailers, and 50 per cent are regular trucks with drivers.229

224 Interview with Johansson, T. Schenker 2005-12-02 225 Interview with Andersson, L. Frigoscandia 2005-11-21 226 Interview with Tobiasson, U. Schenker 2005-12-02 227 Interview with Andersson, L. Frigoscandia 2005-11-21 228 Interview with Tobiasson, U. Schenker 2005-12-02 229 Interview with Petersson, K. TransFargo. 2005-11-30


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There are several regulations established by the European Union that the transport companies need to comply with. Apart from the rules about the drivers’ working hours, there are also, as mentioned in paragraph 8.4.2, regulations regarding documents when crossing borders between different countries. When delivering goods within the European Union, the driver is required to fill out a CMR. If performing transports to or through countries that do not belong to the European Union, a transit document needs to be filled out at customs. The truck could also be sealed which would avoid a check of the truck once it exits the country in question.230 When planning transports for example from Germany to Italy, the decision has to be made whether to place the route through or around Switzerland, which is not part of the European Union. The impression given by all the interviewees is that most transport companies choose to go through Switzerland, despite the extra administrative work it implies and despite the lower weight and size limits that Switzerland use. These disadvantages are weighed against the cost that a route around Switzerland would imply.

8.5 Transport companies There is a high competition in the transport industry with many actors on the market. Many transport companies offer several types of transport, such as shipments by sea, air, road and rail.231 Furthermore, not all transport companies have the size to cover more than one region, while others cover large areas. As mentioned earlier Team Road has 55 contracted suppliers, covering various parts of Europe. A few big ones cover all the countries in Europe, while others supply only domestic transport. An overview of the areas covered by the current suppliers is available in appendix D. In this chapter, the five transport companies shipping the majority of Tetra Laval’s goods will be described briefly in alphabetical order. Also Fast Spedition will be included here, since it is the Swedish company that carries out the most transports for Tetra Laval.

230 Petersson, K. TransFargo. 2005-11-30 231 Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern logistik – för ökad lönsamhet


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8.5.1 Easy Transports Easy Transports is an East European shipping company, offering both domestic and international freight forwarding. The company offers road transports to all European countries. In 2004 Easy Transports had 160 trucks in use, and 40 employees. The turnover in 2002 (this is the most recent data available) was about 19.2 million Euros.232 Easy Transports is a relatively small player on the European market, but has good knowledge of the local market. It has a number of strategic alliances with companies in foreign countries. This allows Easy Transports to offer a wider range of services, such as airfreight, rail freight and container transports.233 Besides offering freight services, the company offers additional services such as warehouse services, customs administration and consultation. Easy Transports has a strong focus on quality, and since 2003 the company holds an ISO 9001 certification for its quality management program. No information is provided regarding the company’s environmental focus.234

8.5.2 Fast Spedition235 Fast Spedition is a shipping company, offering road and rail freights, as well as air and sea shipments. The company is Swedish, and focuses on the domestic as well as the international market. Fast Spedition has regular shipments, as well as express deliveries, to and from the countries in Europe. Fast Spedition is a privately owned and independent company, i.e. it is not tied to any larger industry group. In 2004 the company had a turnover of about 35.1 million Euros and 115 employees. Fast Spedition competes by offering logistics services and solutions for procurement, distribution and return logistics. In this way the company aims at covering the total needs of its customer. Fast Spedition also undertakes the responsibility for the total goods and information flows to its customer’s customer within the European Union market. To compete with the larger companies within the industry, Fast Spedition is a partner in the European network SystemPlus. The network contains about 400 terminals, 11 000

232 Company web page. 2005-11-07 233 Ibid. 234 Ibid. 235 Company web page. 2005-11-07.


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employees and 7 000 vehicles, and offers express deliveries with delivery times between 24 and 72 hours within all Europe. Furthermore, Fast Spedition is a member of Nordic Chain, which is a network of independent shipping companies in the Nordic countries and the Baltic States. The network is a strategic alliance that aims at providing the best service within logistics in the Nordic countries. Besides offering its customers freight solutions, Fast Spedition also offers customized logistics solutions. This means that the company does not only provide the physical transport, but also packaging, warehousing and distribution of goods and guidance regarding delivery conditions. Fast Spedition actively works with quality, and all employees actively strive for Total Quality Management (TQM). The company has clearly stated its goals on quality, which are well communicated through its webpage. Since 1995 Fast Spedition holds an ISO 9002 certificate. Fast Spedition also has a strong focus on the environment, and has an ISO 14001 certification, since 1998.

8.5.3 LMS LMS is one of the leading companies in Europe, focusing on design and delivery of advanced supply chain solutions. The company offers a broad spectrum of services, such as warehousing, distribution and freight management, all aiming at optimizing its customers’ supply chain. In 2004, LMS was active in 15 countries and employed 26 000 people. The turnover the same year was 2.4 billion Euros.236 Since transport and distribution is only a part of LMS’s services and not its main business area, it differs from the other transport companies described in this chapter. Within the transport services, LMS offers for instance, domestic and international distribution, and removals. To expand its range of services and become a leading actor in the field of logistics services, in the end of 2002 LMS acquired HLM Trans European.237 LMS does not only provide supply chain solutions, but also value enhancing services for its customers. Examples of this are services offered by the company such as consulting, procurement, reverse logistics. In addition, LMS also supply enabling services such as change management and

236 Company web page. 2005-10-25 237 Ibid.


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solution design. With regard to environmental issues, LMS claims to have a strong focus on the environment. For example it has a comprehensive recycle program. However, the company does not seem to have an ISO certification for their environmental program. Neither does the company web page provide any information specifying any quality management programs.238

8.5.4 MM Logistics MM Logistics is a Scandinavian transport company that offers transport solutions, including sea freight as well as air and road freight. With an annual turnover of 2.9 billion Euro in 2004, 11 000 employees, the company is located in 36 countries, MM Logistics is considered one of the leading companies in the European transport industry.239 MM Logistics gains competitive advantages from its size, and by offering a broad range of services. Due to its extensive network, the company can offer fast and reliable shipments. Within the road division MM Logistics provides transport of full and part loads, dry and refrigerated goods, as well as terminal and storage facilities across Europe. As a supportive activity, it also supplies tailor made IT solutions. 240 In addition to offering shipments and transport solutions, the company designs, implements and operates supply chain solutions. This is provided by the division MM Logistics solutions, which offers complete 3PL solutions. MM Logistics in Sweden has a strong focus on the environment and quality, and all offices holds ISO 9001 and ISO 14001 certificates. However, on the corporate webpage no information regarding MM Logistics’s work with quality and environment is provided.241

238 Company web page. 2005-11-07 239 Company web page. 2005-11-07 240 Ibid. 241 Ibid.


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8.5.5 OptimLogistics OptimLogistics is a relatively small European transport and removal company, managed by the family Optim.242 The company does not own any terminals, and is mainly covering the Netherlands-Netherlands/Belgium/ France/Germany sections.243 The company’s webpage provides no information regarding turnover, number of employees etc., which can be seen as an indication of its small size. Furthermore, since the web page is in Dutch, it is difficult to fully understand all information concerning its business. However, it seems like the main focus of the company lies within removals. The company is part of the UTS national network, and holds an ISO 9000 certification.244

8.5.6 WWL WWL is a German company that develops and offers transports, logistics and information services. On the European market, WWL is one of the leading transport companies for road and rail freights. In addition, the company also provides solutions for air and sea freight. WWL aims at serving both domestic and international shipments, and is active in more than 30 countries, and has about 39 000 employees. Out of these 22 000 are connected to land operations. In 2004 WWL had a turnover of 8 billion Euros and about 1100 offices worldwide.245 The competitive advantages of WWL are mainly gained because of its size. Thanks to the large network of routes between most of the European countries, WWL can offer regularly scheduled departures from and to most destinations. The large network also facilitates the possibility to combine various transport modes, and create solutions that suit the customers. 246

242 Company web page. 2005-10-25 243 Informal meeting Lindahl, B., 2005-11-18 244 Company web page. 2005-10-25 245 Company web page. 2005-10-25 246 Ibid.


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Besides offering freight solutions, WWL also offers its customers additional services such as 3PL (third party logistics), supply chain management and return flow logistics. As a result of the increased focus on the environmental impact of the transport industry, WWL actively works with environmental issues and holds an ISO 14001 certification. Furthermore, the company holds an ISO 9001 certification, as a proof of their adherence to quality.247

8.5.7 Overview of the transport companies As mentioned earlier, the transport industry is characterised by many actors and high competition. In previous paragraphs, the transport companies, shipping the majority of Tetra Laval’s goods, and their services have been described briefly. To facilitate a comparison between the companies, a matrix describing the key factors has been documented (see Table 8.6). For each transport company, information regarding the number of employees, turnover in 2004, competitive advantages, additional services and, environment and quality considerations is provided.

247 Company web page. 2005-10-25.


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Transport company

Nbr of employees

Turnover (Euro) 2004

Competitive advantages

Additional services

Environment and quality

WWL 39 000 8 billion

Large network, combination of various transport modes, additional services

3PL, supply chain management, return flow logistics

ISO 14001, ISO 9001

Easy Transports 40 19,2 million

Knowledge of the local market, strategic alliances, additional services

Warehouse services, customs administration, consulting services

ISO 9001 Environment: information N/A

LMS 26 000 2,4 billion

Wide range of services, strong focus on supply chain management, well developed additional services

Consulting, reverse logistics, enabling services

Recycling program, ISO certification: information N/A

MM Logistics 11 000 2,9 billion

Broad range of services, large network, additional services, IT solutions

Supply chain solutions, 3PL

Swedish offices: ISO 14001, ISO 9001. Corporate level: information N/A

OptimLogistics

Information N/A

Information N/A Information N/A Information

N/A Information N/A

Fast Spedition 115 35,1 million

Wide range of services, information solutions, member of Nordic Chain and SystemPlus Network

3PL, complete goods flows analysis

ISO 14001, ISO 9001, Total Quality Management (TQM)

Table 8.6: Comparison of major transport companies


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8.6 TLGT&T’s supplier selection process Supplier selection is a vital process in strategic procurement.248 When TLGT&T selects its suppliers, the department follows a specific supplier selection process, which is designed by Tetra Pak. The framework of this process is used with the purpose being to provide guidelines governing the work with suppliers. Since TLGT&T is a purchasing department for transports and travel, some steps in the process might not be applicable to TLGT&T, and has therefore been omitted from this report. TLGT&T provides purchasing directions, policies and checklists for purchases. A conduct for suppliers and guidelines on supplier relationship is developed as well as strategies for existing suppliers. This supplier selection process is illustrated in Figure 8.5. The four different steps are sourcing, contracting, ordering and supplier base management.249

Sourcing Contracting Ordering

Supplier base management

Sourcing Contracting Ordering

Supplier base management

Figure 8.5: TLGT&T’s Supplier selection process250

8.6.1 Sourcing Sourcing is the process from identification of the needs to searching for potential suppliers and finally to the qualification of these potential suppliers, see Figure 8.6. This search and qualification is driven by the company’s business requirements.251

248 van Weele, A. (2002) Purchasing and Supply Chain Management – Analysis, Planning and Practice 249 PowerPoint presentation Tetra Laval Group 250 Ibid. 251 Ibid.


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Gatherbusiness

requirements

Scout forpotential

suppliers

Qualifypotential

suppliers

Gatherbusiness

requirements

Scout forpotential

suppliers

Qualifypotential

suppliers

Figure 8.6: Sourcing phase252

• In order to find potential suppliers, the business requirements need to be identified and stated. Once these requirements are established, an appropriate sourcing strategy needs to be decided upon. Furthermore, also a supplier profile should be created.253

• When scouting for potential suppliers, TLGT&T is first searching

in the existing supplier base. This means that the old suppliers are evaluated and considered as potential suppliers even in the future. When the existing supplier base is analyzed, the next step is to search for new potential suppliers.254 An important step in this phase is to screen all the potential suppliers against the US Bureau of Industry and Security’s “Denied Persons List”, so that TLGT&T does not work with any company on this list, since this would lead to Tetra Laval becoming listed as well.255 The last step in the search for potential suppliers is to verify that the supplier is interested in doing business with TLGT&T.256

• In order to qualify the potential suppliers, the supplier profile

needs to be reviewed. The potential suppliers are then ranked both against the mandatory requirements and against the individual requirements in the profile. This leads to a list of potential suppliers, on which TLGT&T can focus in coming contract negotiations.257

When ranking potential suppliers in the selection process, TLGT&T uses two questionnaires considering; environment and quality. Team Road also uses an additional questionnaire considering traffic

252 PowerPoint presentation Tetra Laval Group 253 Ibid. 254 Ibid. 255 Informal meeting with Kruger, L. 2005-11-16 256 PowerPoint presentation Tetra Laval Group 257 Ibid.


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safety.258 The environmental questionnaire regards questions such as; if the supplier has a written program for reduction of environmental effects, if energy and emission data can be provided, and if the staff has received basic training on environmental effects. Also questions about the supplier’s environmental management is considered, such as; if the supplier has an environmental management system, if the supplier has any routines for making sure that laws and regulations are followed, and if the supplier evaluates its subcontractors in a similar way.259 In the quality questionnaire the supplier has to answer questions such as; if the supplier has a quality policy approved by management, if the company has specified quality objectives and if the supplier regularly performs internal quality audits.260 The traffic safety questionnaire regards questions about the suppliers’ traffic safety policy such as; if the supplier has a traffic safety policy, if it has a drug and alcohol policy and if the staff has received relevant training. Also if the supplier monitor that legal driving hours are followed, if the supplier can provide statistics over the number of traffic related accidents and if the company perform drug and alcohol tests on its staff. These are all questions that have to be answered.261 When the supplier has filled out the questionnaires, they are evaluated by TLGT&T and compared to predetermined requirements.

Before the supplier is either rejected or qualified for the next step in the process, there are some additional factors that need to be taken into consideration. Suppliers are also required to comply with the laws and regulation of countries in which they operate as well as demonstrate fulfillment of the requirements in Tetra Pak’s business conduct for suppliers. This business conduct consists of different aspects that each supplier needs to conform to. These areas are:

258 Informal meeting with Lindahl, B. 2005-11-16 259 NTM questionnaire: Environmental Evaluation of Suppliers Pertaining to Transport of Goods and Personnel 260 TLGT&T questionnaire: Quality Evaluation of Suppliers 261 Traffic Safety Questionnaire: Road Freight


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- Trade compliance. The supplier needs to ensure that its activities are consistent and will comply with trade laws and international trade regulations.

- Competition and confidentiality. The supplier needs to follow requirements regarding fair competition and accurate marking. They need to act with integrity, confidentiality and lawfully when handling competitive proprietary information.

- Anti-corruption. Suppliers will not offer, pay, request or accept a bribe, and not engage in any fraudulent activities or extortion. The supplier needs to maintain integrity, transparency and accuracy in annual reports and record keeping.

- Anti-discrimination. No positive or negative discrimination is allowed in the workplace of the supplier.

- The supplier needs to work actively with health and safety issues and provide its employees with safe and healthy working conditions.

- Child labour. The supplier must not employ children under the legal working age.

- Working hours and wages. Suppliers’ employees must be provided with wages that at least meet legal or industry minimum standards in the applicable community.

- Forced labour. Suppliers must not use any prison or forced labour of any kind, the person has to offer himself/herself voluntarily for the work or service.

8.6.2 Contracting The contracting phase, see Figure 8.7, stretches from the request for quotation (RFQ) to implementation of the contract. This phase covers how TLGT&T selects and contracts the best and most suitable suppliers.262

Gathercontract

requirements

Request & evaluate

quotation

Selectand contract

supplier

Validatesupplier

production

Contractimplemen-

tation

Gathercontract

requirements

Request & evaluate

quotation

Selectand contract

supplier

Validatesupplier

production

Contractimplemen-

tation

Figure 8.7: Contracting phase263 262 PowerPoint presentation Tetra Laval Group 263 PowerPoint presentation Tetra Laval Group


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• In the first step of the contracting phase, TLGT&T prepare a request

for quotation from the potential suppliers. They gather business requirements and select the potential suppliers for RFQ, with whom they have already signed confidentiality agreements. The next steps are to prepare and send RFQ and then later collect and organise the quotations.264

• After receiving the quotations, TLGT&T has to evaluate and

compare these offers against the stated requirements. The quotations then need to be reviewed with the need owner, which is often the shipping department within the current plants. This leads to a possible need for change of the requirement and/or update of the quotation, and finally TLGT&T can evaluate and rank the suppliers.265

• Once the suppliers are ranked, the contract negotiation phase starts.

In order to achieve a successful negotiation it is important to prepare for the negotiation and set an objective and strategy. The key performance indicators (KPIs) need to be identified to facilitate TLGT&T towards defining and measuring progress in relation to the organisational goals. When these steps are accomplished, TLGT&T starts their negotiations. The negotiation is then followed by evaluation and finally selection of supplier to contract. Both the selected and the rejected suppliers are then informed of the outcome of the negotiations.266

Team Road is currently in the phase of negotiating new contracts for transport solutions, which will be valid from January 2006 up until a year and a half after that date. This year is the first time that Team Road negotiates the contracts relating to all three sub-groups at the same time. As mentioned earlier, the quotations are evaluated and compared with each other and to the existing contracted supplier. Team Road decides, on the basis of the quotations what suppliers to invite for negotiations. Since Team Road are now striving to decrease its supplier base it is important to find suppliers that are able to cover several transport regions.267

264 PowerPoint presentation Tetra Laval Group 265 Ibid. 266 Ibid. 267 Informal meeting with Lindahl, B., Malm, K., Nilsson, P. 2005-10-20


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Team Road has two negotiation rounds where 40 suppliers are invited to Tetra Laval. Each negotiation is focused on the transport routes that the supplier has given quotations for and these routes are covered one by one. This way the negotiations are very time consuming for the potential suppliers that have submitted quotes on several routes. The first round of negotiations lasts for 2 weeks and in order to cover all of these potential suppliers, the members of Team Road sometimes need to hold two negotiations concurrently. All flows are important and are covered in the negotiation process, but there is more emphasis put on the flows that have a higher number of transports, large weight and which are representing higher costs.268 Evaluation of the bids as well as changing of terms in the quotations follows the first round. After that, another round is held, which finally leads up to a signed contract.269

• The step of verifying supplier production and supply process is

relating to supply of for example parts to machinery, and is not carried out by TLGT&T. This step is used by the other purchasing departments in Tetra Pak.270

• When implementing the contract, TLGT&T needs to identify and

define the contracted users and allocate volumes to these. The new suppliers, as well as the contracts, have to be communicated to both internal and external users and stakeholders. When the contract is implemented, TLGT&T starts the work of continuous improvements.271

8.6.3 Ordering Since this step is performed by each shipping department respectively, and since TLGT&T is not responsible for the ordering stage, the ordering phase will not be covered in this research.

268 Informal meeting with Lindahl, B., Malm, K., Nilsson, P. 2005-10-20 269 Ibid. 270 Informal meeting with Kruger, L., 2005-11-18 271 PowerPoint presentation Tetra Laval Group


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8.6.4 Supplier base management The supplier base management consists of never ending activities, see Figure 8.8, which implies the continuous and strategic way in which TLGT&T manage, evaluate and develop its business relationships with its suppliers.272

Optimise supplier base

Manage supplier

Restoresupplier

performance

Assess andevaluate supplier

performance

Pruningsupplier base

Optimise supplier base

Manage supplier

Restoresupplier

performance

Assess andevaluate supplier

performance

Pruningsupplier base

Figure 8.8: Supplier base management273

• To optimize the supplier base, TLGT&T analyze the current

situation and compare it with its strategy and needs. A plan for creating a supplier base to reach the predetermined targets is created. This plan and the targets need to be approved, and each supplier is managed according to the supplier base plan. Throughout the process it is important to continuously track progress and results of the supplier base plan.274

• When managing the supplier, the first step is to confirm that the

supplier does not exist on the unauthorized persons list. Once that is done, it is crucial to create a mutual understanding of the current situation, as well as the future situation, targets and KPIs. An action plan should be developed and an agreement, regarding a follow-up structure, should be reached. The last steps are to update the contract and to execute the plan.275

272 PowerPoint presentation Tetra Laval Group 273 Ibid. 274 Ibid. 275 PowerPoint presentation Tetra Laval Group


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• To assess and evaluate supplier performance, TLGT&T

establishes assessment criteria, and creates an assessment plan, which is followed when evaluating the suppliers. Team Road regularly performs supplier evaluations. These are usually carried out trough questionnaires, which are filled out by the suppliers themselves. The supplier has to provide information such as: the number of transports, delivery time, delivery accuracy, and delivery reliability.276 The suppliers then receive a score and a ranking in relation to the other suppliers and the stated criteria.277

• The step that takes into account restoring supplier performance is

often initiated or triggered by poor performance, which leads to planning and execution of corrective actions. The root cause is analyzed and corrective actions are executed. An improvement plan is also created and performed. It is important to involve key stakeholders to manage critical issues and to review the business relationship.278

• When it comes to the step of pruning the supplier base, TLGT&T

gathers all necessary information and performs a risk and consequence analysis. Based on this analysis, a decision can be made whether or not to phase out a supplier. Before this step is initiated, and throughout the pruning process, communication is critical.279

276 Informal meeting with Lindahl, B. 2005-11-18 277 PowerPoint presentation Tetra Laval Group 278 Ibid. 279 Ibid.

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9 Analysis The analytical part of the research is focused on two areas; one regarding distribution flows, and one regarding supplier base management. In the analysis we make use of the knowledge gained in the empirical chapter as well as the theoretical study.

9.1 Map of current situation The most relevant variables to consider when mapping the current flows and identifying the major ones are; weight, number of transports made, and volume utilization. It is important to remember throughout this chapter that the variables in question, only refer to the factories where Team Road is responsible for the transport contracts, and those shipments that we received statistics for. Furthermore, the numbers do not include the shipments that for various reasons (see paragraph 1.4 and 8.1.2) have been omitted of the research.

9.1.1 Overview of the three industry groups For each of the three industry groups, Table 9.1 shows the total number of flows, total weight, total number of transports and the average volume utilization.

Total no of

flows Total weight

(tonnes) Total no of

transports in 2004 Average volume

utilization

Tetra Pak 975 329 657 20 814 63 %

Sidel 59 5 342 455 47 %

DeLaval 28 96 618 5 796 67 % Total Tetra

Laval 1062 431 617 27 065 64 %

Table 9.1: Total flows, weight and number of transports for the three industry groups The results from the data processing indicate that there are in total 1062 flows for Tetra Laval. Tetra Pak has 975 flows and ships a total weight of 329 657 tonnes, which is by far the most of the three industry groups. DeLaval has in total 28 flows, out of which 13 are inbound to Glinde and 15 are outbound from Glinde, shipping a total weight of 96 618 tonnes. The statistics for Sidel include 59 flows and only 5 000 tonnes. These numbers corresponds with the fact that Tetra Pak is the largest company of the three,


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and that Sidel does not contribute much of the statistics, since they mainly buy transports on spot basis. When looking at the volume utilization, the table shows that DeLaval has the highest average volume utilization of the three industry groups. This is not surprising, since DeLaval is the only company of the three using a hub and spoke distribution structure, utilizing co-loading.

9.1.2 The largest flows on country level To create an overview of the current goods flows within Europe, the flows are mapped both on a country level, i.e. from one country to another, and on a city level, that is from one plant to an approximate consignee city. Matrices containing all flows on a country level can be seen in appendix E. Table 9.2 describes the ten largest flows on a country level, with respect to weight. In the table the different flows are stated, showing the total weight shipped and the total number of transports in 2004.

From To Sum of Weight (tonnes) Total no of trsp/2004

Great Britain Great Britain 31 000 2 294

Sweden Germany 30 304 1 698

Ukraine Russia 25 798 1 444

Sweden Finland 18 584 916

Belgium Germany 16 648 728

Netherlands Germany 14 946 1 427

Sweden Great Britain 14 889 1 322

Hungary Poland 14 331 730

Hungary Czech Republic 13 825 553

Sweden Russia 13 494 633 Table 9.2: The 10 largest flows with respect to weight

Notice that four out of the ten largest flows originate in Sweden. This is a result of the fact that Tetra Laval has more production in Sweden than in any of the other European countries. In addition, it can be seen that the second largest flow on a country level is from Sweden to Germany, this will be discussed further in paragraph 9.4. Furthermore, it can be seen that four flows have a destination point of Germany. This is mainly due to the fact that DeLaval has its main distribution centre in Glinde in Germany, and all DeLaval’s flows included in the research are either inbound or outbound to or from Glinde.

Chapter 9 Analysis

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In the same way as above, Table 9.3 shows the ten largest flows on a country level with respect to the number of transports in 2004.

From To Sum of Weight (tonnes) Total no of trsp/2004

Great Britain Great Britain 31 000 2 294

Sweden Germany 30 304 1 698

Ukraine Russia 25 798 1 444

Netherlands Germany 14 946 1 427

Sweden Great Britain 14 889 1 322

Sweden Finland 18 584 916

Sweden Italy 5 178 806

Hungary Poland 14 331 730

Belgium Germany 16 648 728

Sweden Spain 9 771 677 Table 9.3: The 10 largest flows with respect to the number of transports in 2004

It can be observed that the first three routes are the same as in Table 9.2 above. The table also indicates that five of the ten largest flows on a country level, with respect to number of transports in 2004, originate in Sweden. This is mainly due to the fact that Tetra Pak’s production plants in Sweden frequently ship packaging material.

9.1.3 The largest flows on a city level As mentioned earlier, identification of the largest flows can also be performed based on city, both with respect to weight and to the number of transports. Table 9.4 below illustrates the 20 largest flows, on a city level, regarding total weight shipped in 2004. The table describes the total weight, total number of transports and volume utilization of each flow, from one plant to an approximate consignee city.


108

Plant Consignee Country

Approx. Consignee

City

Total weight

(tonnes)

Total no of trsp /

2004

Volume utilization

Industry Group

Drongen Germany Glinde 16 648 728 91 % DeLaval

Kiev Russia Moscow 12 088 694 70 % Tetra Pak

Moerdijk Germany Mainz 10 390 464 90 % Tetra Pak

Lund Russia N/A 9 901 474 84 % Tetra Pak

Kiev Russia Lebedyan 8 582 435 79 % Tetra Pak

Moerdijk Russia Moscow 7 748 379 82 % Tetra Pak

Budapest Poland Bialystok 6 841 284 96 % Tetra Pak

Glinde France Paris 6 500 260 100 % DeLaval

Glinde Netherlands Groningen 6 500 260 100 % DeLaval

Glinde Norway Oslo 6 500 260 100 % DeLaval

Glinde Sweden Jönköping 6 500 260 100 % DeLaval

Jönköping Germany Glinde 6 500 260 100 % DeLaval

Tumba Germany Glinde 6 500 260 100 % DeLaval

Sunne Finland Jyväskylä 6 196 182 136 % Tetra Pak

Lund France Dijon 5 248 220 95 % Tetra Pak

Glinde Finland Turku 5 200 208 100 % DeLaval

Rakoniewice Germany Glinde 5 200 208 100 % DeLaval

Sunne Great Britain Bridgwater 5 032 248 81 % Tetra Pak

Budapest Slovakia Bratislava 4 925 197 100 % Tetra Pak

Latina Austria Linz 4 837 257 75 % Tetra Pak Table 9.4: The 20 largest flows with respect to weight

An important finding in Table 9.4 is that four out of the six largest flows have destinations in Russia. This is particularly interesting since Russia has not attracted much of Team Road’s attention previously. There is for example no information available regarding the consignee city of the transports from Lund to Russia, which could imply that there are in fact several consignee cities. However, the size of this flow indicates that Team Road should consider focusing more on Russia, and that there probably are savings to be done here. It can also be observed that most flows that are inbound or outbound to or from Glinde have a volume utilization of 100 per cent. This implies that DeLaval’s hub and spoke distribution structure is successful regarding transport costs. However, we do not have any information regarding lead-times, delivery-service etc. Thus, we cannot state whether the distribution structure is overall successful. Furthermore, the numbers of DeLaval’s volume utilization could be misleading since this data is based on the price DeLaval is charged, and not on the actual amount of load meters it transports. Even though DeLaval is charged the price of a full truckload, it does not have to imply that a full truckload actually is used.

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This means that DeLaval might in fact be charged for unutilized load meters, and our figures could be slightly unrepresentative. When analyzing the Tetra Pak flows, the only Tetra Pak flow in Table 9.4 with 100 per cent volume utilization is from Budapest to Bratislava. The other Tetra Pak flows in the table mainly have volume utilization between 70 and 90 per cent. These numbers are relatively high, which implies that the possibility of using co-loading is rather low. Another interesting discovery is the volume utilization of the flow from Sunne to Jyväskylä. The numbers shown are somewhat misleading, since a volume utilization of 136.2 per cent obviously is not feasible. The reason for this rate is the differences in transport regulations between Europe and Sweden/Finland. As mentioned earlier, when calculating the volume utilization, the maximum weight is set to 25 000 kg. However, in Sweden and Finland the maximum weight of a full truckload is 35 000 kg. With an average weight of 34.0 tonnes from Sunne to Jyväskylä, this corresponds to a volume utilization of 97.3 per cent, which could be seen as full truckload and therefore co-loading is not possible. The 20 largest flows on a city level, with respect to the number of transports made in 2004, are mapped in Table 9.5 below. In the same way as above, the table shows the total weight, total number of transports in 2004, and the volume utilization for each flow.


110


Approx. Consignee

City

Total weight

(tonnes)

Total no of trsp / 2004

Volume utilization

Industry Group

Drongen Germany Glinde 16 648 728 91 % DeLaval

Kiev Russia Moscow 12 088 694 70 % Tetra Pak

Lund Russia N/A 9 901 474 84 % Tetra Pak

Moerdijk Germany Mainz 10 390 464 90 % Tetra Pak

Kiev Russia Lebedyan 8 582 435 79 % Tetra Pak

Lund Italy Modena 2 814 410 27 % Tetra Pak

Moerdijk Russia Moscow 7 748 379 82 % Tetra Pak

Wrexham Great Britain Manchester 4 033 296 55 % Tetra Pak

Budapest Poland Bialystok 6 841 284 96 % Tetra Pak

Glinde France Paris 6 500 260 100 % DeLaval

Glinde Netherlands Groningen 6 500 260 100 % DeLaval

Glinde Norway Oslo 6 500 260 100 % DeLaval

Glinde Sweden Jönköping 6 500 260 100 % DeLaval

Jönköping Germany Glinde 6 500 260 100 % DeLaval

Tumba Germany Glinde 6 500 260 100 % DeLaval

Glinde Denmark Kolding 3 776 260 58 % DeLaval

Wrexham Great Britain Gloucester 3 640 260 56 % Tetra Pak

Latina Austria Linz 4 837 257 75 % Tetra Pak

Moerdijk Netherlands Rotterdam 4 086 253 65 % Tetra Pak

Sunne Great Britain Bridgwater 5 032 248 81 % Tetra Pak Table 9.5: The 20 largest flows with respect to the number of transports in 2004

From the table above it can be seen that the first two findings are the same as in Table 9.5. The only flows in the table with 100 per cent volume utilization are inbound and outbound to and from Glinde. In addition, it can be mentioned that with respect to the number of transports in 2004, four out of the ten largest flows have destinations in Russia. This strengthens the arguments stated earlier that an increased attention to these flows may be beneficial. Furthermore, it can be pointed out that the sixth largest flow, between Lund and Modena, has a volume utilization of only 27.5 per cent. In average there is more than one transport a day covering this flow, which implies that possibilities for co-loading have not been utilized. When studying the flows in Table 9.4 and Table 9.5 it can be seen that Sidel is not present amongst the 20 largest flows in either of the tables. The largest Sidel flow, both with respect to weight and to the number of transports, is from Hjo in Sweden to Barcelona in Spain. The total weight is 1 532 tonnes and the number of transports in 2004 was 83. The average volume utilization of the transports is 73.8 per cent. The flow is positioned

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as number 73 with respect to weight and number 81 with respect to the number of transports. Due to the small size of the Sidel flows, the analysis will therefore mainly be focused on Tetra Pak and DeLaval.

9.1.4 Volume utilization As mentioned earlier, volume utilization is an important variable when analysing the flows. When optimizing the flows, high volume utilization is desirable since it is both more cost efficient and more environmental friendly. As can be seen in Table 9.6 below, 7.1 per cent of the total flows have a volume utilization of 100 per cent. This is divided between Tetra Pak, who has 57 flows with 100 per cent volume utilization, and DeLaval who has 18 flows with full truckloads. Important to mention are also the 25 flows with misleading volume utilization above 100 per cent. The two reasons behind these numbers that are identified are incorrect statistics and different transport regulations, where the latter one is considered most probable. As described in paragraph 8.4.2 there are different regulations regarding maximum weight of a truck in different countries. This implies that both weight regulations above and below 25 000 kg exists. Therefore, in the calculations 25 000 kg has been used for all flows, which in some cases results in misleading numbers. Furthermore, the table also indicates that Sidel has low average volume utilization; 15 out of 59 flows with volume utilization below or equal to five percent. This implies that the alternative; using co-loading to make Sidel’s distribution system more efficient should be investigated. When looking at the volume utilization for DeLaval it can be stated that the majority of the flows have a volume utilization of 100 per cent. From this, the conclusion can be drawn that DeLaval’s distribution system is rather efficient with respect to volume utilization. Finally, the volume utilization of Tetra Pak’s flows implies that a change of distribution system might be preferable. Since the majority of Tetra Pak’s flows have volume utilization figures below 50 per cent, possibilities for co-loading exist. It is important to keep in mind that, when transporting part loads, Tetra Pak is only charged for the exact load metres they ship. Nevertheless, higher volume utilization is often preferable since it results in lower prices and less environmental impact.


112

Volume

Utilization No of Tetra Pak flows

No of DeLaval flows

No of Sidel flows

Total no of flows

% of total flows (all industry groups)

>100 % 24 0 1 25 2.4 %

=100 % 57 18 0 75 7.1 % <100 % & >90 % 60 1 0 61 5.7 %

<=90 % & >50 % 241 1 16 258 24.3 %

<=50 % & >5 % 477 4 27 508 47.8 %

<=5 % 116 4 15 135 12. % Table 9.6: Volume utilization of the different flows

9.1.5 ABC classification of flows As mentioned in paragraph 7.3, classification is a useful tool for differentiation. As stated above, this research includes 1062 different flows of various sizes. Due to limited resources, i.e. time constraints, not all flows can be given the same attention. For the identification of possible return and triangular flows, ABC classification has been a useful technique. However, for this identification not all flows are of interest. To be precise, the flows with a destination in a country where Tetra Laval does not have a producing unit have been omitted, since a return or triangular flow cannot be created with these flows. The ABC classification is then performed on the 909 remaining flows, both with respect to total weight shipped and to the total number of transports made in 2004. The limits used in the classification are 80 per cent of the total value for A flows, 15 per cent of the total value for B flows and finally five per cent of the total value for C flows. The result of the ABC classification are illustrated in Figure 9.1 and Figure 9.2 below, which provides a good picture of what share of the total weight the different flows represent.

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113

ABC classification with respect to weight

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

1 36 71 106

141

176

211

246

281

316

351

386

421

456

491

526

561

596

631

666

701

736

771

806

841

876

Nbr of flows

Per

cent

age

of to

tal w

eigh

t

A

BC

109 flows 188 flows 612 flows

Figure 9.1: ABC classification with respect to weight

The graph in Figure 9.1 demonstrates that the majority of the total weight is represented by a select number of flows. Calculations show that 12 per cent of the total number of flows represents about 80 per cent of the total weight. The graph also shows that the 500 smallest flows collectively only represent 2.4 per cent of the total weight. However, these flows are necessary for the company to reach all customers. Nevertheless, another distribution system might be applicable or available to these flows.

ABC classification with respect to number of transports

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

0,9

1

0 50 100 150 200 250 300 350 400 450 500 550 600 650 700 750 800 850 900

Nbr of flows

Per

cent

age

of t

otal

nbr

of

tran

spor

ts in

20

04

A

BC

164 flows 245 flows 500 flows

Figure 9.2: ABC classification with respect to number of transports in 2004


114

In Figure 9.2 below it can be seen that the same distribution pattern is valid also when studying the flows with respect to the number of transports. The graph shows that a high percentage of the total number of transports is represented by a small number of flows. However, this curve does not increase as fast as in the previous example. 18.6 per cent of the total number of flows represents about 80 per cent of the total number of shipments performed in the year 2004. Furthermore, calculations show that the 500 flows, with lowest weight transported, only represent 3.4 per cent of the total number of transports. This strengthens the argument that perhaps another distribution structure would be more suitable or indeed beneficial. As stated in paragraph 7.3.1, ABC classification is a good technique for classification. Due to the restrictions in time, most of the focus will be given to the A-flows in this research. This implies that the A-flows will be the basis for further analyses regarding return and triangular flows.

9.2 Return flows The aim is to identify possibilities for improvements regarding the distribution structure, which Team Road could then devote more time and research into. Hopefully Team Road can take advantage of these improvements in their future negotiations. Therefore, the decision was made to look more into the possibilities of return flows. Hence, the return flows that exist today as well as possible potential return flows are identified. A return flow is, in this research, defined as: The two flows between the two destinations A and B. An illustration of a return flow can be seen in Figure 9.3 below.

A BA B

Figure 9.3: Return flow between the two destinations A and B Both return flows on a country level and on a city level are important to study, since beneficial solutions can be obtained from both. At a country level it is interesting to see how Tetra Laval’s flows are distributed compared to the trade balances. Finding even-weighted return flows could also lead to a better starting point in negotiations with transport companies, since they are probably more likely to lower prices if they are given flows in both directions. In addition to the benefits achieved by return flows on a country level, return flows at a city level also facilitate the utilization of a

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115

distribution strategy based on roundtrips. When analysing the flows at a city level, there is a possibility to identify new return flows, although no balanced return flows on a country level were identified. Because of the interesting conclusions that could potentially be reached, the data is analyzed both on a country and a city level.

9.2.1 Current return flows on country level Pivot tables, stating all the flows on a country level in alphabetical order, were used to facilitate the identification of return flows on a country level. For each flow, a search for a potential return flow was carried out. In this way, all return flows on a country level were identified and are stated in two matrices, one with respect to weight (in tonnes) and one with regard to the number of transports made in 2004. These matrices are shown in Figure 9.4 and in Figure 9.5.

From \To AT DK FI FR DE GB HU IT NL NO PL ES SE CH UA

AT 3

DK 562 652 335 29

FI 432

FR 2 333 326 246 1

DE 3 900 3 776 5 200 6 500 3 900 1 300 2 600 6 500 6 500 2 600 2 600 6 500 2 600

GB 796 644 1 987 876

HU 11 525 100 75

IT 49 97 2 784 428 85 1 074

NL 847 733 14 946 380 2 249 2 449

NO 450

PL 5 200

ES 1 800

SE 7 851 30 304 14 889 864 5 178 6 930 1 293

CH 221

UA 9

Figure 9.4: Matrix of the return flows on country level, with respect to weight (in tonnes). NB: abbreviations for country names can be found in appendix F


116

From \To AT DK FI FR DE GB HU IT NL NO PL ES SE CH UA

AT 4

DK 30 31 26 6

FI 136

FR 624 18 17 1

DE 156 260 208 260 156 52 104 260 260 104 104 260 104

GB 42 126 101 54

HU 461 4 3

IT 3 34 364 32 9 383

NL 77 109 1 427 22 155 169

NO 236

PL 208

ES 72

SE 499 1 698 1 322 128 806 372 80

CH 96

UA 3

Figure 9.5: Matrix of the return flows on country level, with respect to total number of transports in 2004. NB: abbreviations for country names can be found in appendix F

To achieve a favourable position in negotiations, the return flows on a country level could be compared with the trade balances between the specific countries. However, these trade balances regarding transport are difficult to determine, since they are based on each transport company’s total distribution. This information is sensitive and confidential within each transport company and is therefore difficult for us to analyze further. However, what we are able to do is to analyze the price difference between the different country flows, stated in the contracts from each transport company. This gives an indication of what the trade balances look like, and will be discussed further in paragraph 9.4.

9.2.2 Current return flows on a city level In order to identify existing return flows on a city level, the flows classified as A-flows, with respect to weight, were used as a starting point. Out of these flows, only the ones delivering to countries in which Tetra Laval has a producing unit were considered, since otherwise a return flow would not be feasible. For each of these A-classified flows, a search for a transport flow in the opposite direction, originating close to the destination of the first flow, were performed. It is important to note that all flows, A, B and C

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classified, were used to identify the second flow. When finding flows existing in both directions, a return flow is identified. Since some flows that are A-classified regarding the number of transports could be classified as B-flows with respect to weight, also a search for return flows using the A-classified flows regarding the number of transports made in 2004 were performed, in the same way as earlier. In this way we have prevented the case where we could have missed any important return flows. The search for return flows on a city level resulted in 27 return flows (see appendix G). Once they were found, the relevancy of each flow had to be analyzed. Even though flows exist in both directions, it does not mean that they are optimal. By optimal return flows we mean that they are similar either regarding weight or number of transports. Hence, the same truck could be used in both directions, and cost savings could be achieved. In order to benefit from the return flows both the weight and the number of transports has to be considered. For Tetra Pak it is important when dealing with even flows to consider the amount of transports, since they still need to deliver to their customers in time. Each plant decides when the transports have to be made and therefore it is difficult to change the delivery dates, so a return flow based on the number of transport would be more useful280. Furthermore, when introducing a return trip the transport company will charge for a full truckload in both directions. This implies that a return flow with an even number of transports in both directions would be more beneficial. However, the volume utilization needs to be considerably high in order to benefit from an introduction of return flow. Table 9.7 illustrates the identified optimal return flows.

280 Informal meeting with Lindahl, B. 2005-10-14


118

No From To Weight (tonnes)

No of trsp 2004

From To Weight (tonnes)

No of trsp 2004

1 Glinde Jönköping 6 500 260 Jönköping Glinde 6 500 260

Moerdijk Malmö 1 853 93 2

Moerdijk Karlskrona 115 22 Lund Rotterdam 2 116 129

Lund Wrexham 247 20 Lund Manchester 484 61 Lund Leeds 310 31

3 Wrexham Malmö 583 32

Lund Liverpool 84 29

4 Glinde Rakoniewice 2 600 104 Rakoniewice Glinde 5 200 208 5 Glinde Madrid 2 600 104 Madrid Glinde 1 800 72

6 Glinde Oslo 6 500 260 Oslo Glinde 582 236

7 Glinde Altishofen 2 600 104 Altishofen Glinde 221 96 Table 9.7: Identified return flows. NB: abbreviations for country names can be found in

appendix F The flows from the table above will be discussed further in the following paragraphs: 1. The flows between Glinde and Jönköping are already utilized by

DeLaval, who has an organized route structure established for that return flow. The fact that there already is an organized distribution structure between these cities is probably the reason for the flows being equal, especially considering the total number of transports. DeLaval has identified the possibility for a round trip between these destinations and also established a successful solution for these flows.

2. The flows between Moerdijk - Malmö/Karlskrona and Lund -

Rotterdam are quite even or similar both regarding weight and number of transports in 2004. This return flow could imply potential advantages and could therefore be interesting for Team Road to look more into.

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3. Tetra Pak has flows both from Wrexham to Malmö and from Lund to Wrexham. However these flows are not completely even, but other flows from Lund have been identified as potential additional flows, when structuring this return flow. Even though these flows do not have Wrexham as destination city, the main part of the route is the same.

4. Even though these flows are not even, it could be useful for Team

Road to highlight them in a negotiation. They are both large flows, and the transport companies could be interested just in the fact that there are flows in both directions, although they are not even. Hence, the DeLaval flows between Glinde and Rakoniewice could be interesting even though the flow to Glinde is twice the size of the one from Glinde.

5-7. Since DeLaval has a centralized logistics function, an introduction of

an organized return flow distribution would be easier to implement. Therefore, we would recommend Team Road to investigate the flows between Glinde and Madrid/Oslo/Altishofen.

9.2.3 Potential future return flows As already mentioned, Team Road has given us the statistics of transports made in 2004. This data is based on the transports made from most plants, for which Team Road has negotiated existing transport contracts. However, there are some plants that Team Road has negotiated contracts for, which are not included in this research because data for their transports has not been available. Additionally, during 2005 Team Road has taken over the responsibility of more plants’ transport contracts. Furthermore, there are also other plants belonging to Tetra Laval that Team Road still do not have contract responsibility for but which could be worth including in further investigations. Due to all these additional plants, there will be more flows to consider in future negotiations with transport companies. This also implies that there are other potential return flows that can be considered when negotiating new contracts. Even though we do not have any statistics of the transports made from these new additional plants, we want to illustrate the potential future return flows.


120

The additional plants that fall into the criteria mentioned, and which have not been included in this research but could also be of interest when identifying potential return flows are stated in Table 9.8.

Country City Country City

Denmark Tarm Italy Novi Di Modena

Denmark Århus Italy Parma

France Blanzy Italy Rubiera

France Bretagne Italy Sezzadio

France Cermex Poland Dobre Miasto

France Chateaubriand Poland Wroclaw

France Contrexeville Portugal Carnaxide

France Dijon Portugal Porto

France Le Cheres Russia Moscow

France Octeville-sur-mer Russia Timashevsk

Germany Berlin Spain Arganda

Germany Dresden Spain Sevilla

Germany Limburg Spain Tortosa

Germany Markstschorgast Sweden Skoghall

Great Britain Nottinghamshire Sweden Åstorp

Great Britain Wrexham Switzerland Romont

Italy Cavriago Turkey Izmir

Italy Correggio Yugoslavia Gornji Milanovac

Italy Fubine Table 9.8: Additional plants

The identification of potential return flows includes all A-classified flows, considering both weight and number of transports in 2004, with a destination close to these additional plants. Since we do not have any information regarding the transports made from the additional plants, it is not possible to judge whether a return flow would be feasible. Therefore, as can be seen in Table 9.9, the flows that could be interesting if the additional plants deliver to a destination close to the shipping plant have been stated.

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Appr. Con City

Weight (tonnes)

No of trsp in 2004 Company Existing

Plant

Budapest DE Berlin 3 200 128 TP Berlin

Fjällbacka DE Berlin 782 60 TP Berlin

Gislaved DE Berlin 2 918 136 TP Berlin

Hjörring FR Dijon 425 23 TP Dijon

Kiev RU Moscow 12 088 694 TP Moscow

Kiev RU St Petersburg 1 748 106 TP Moscow

Lund DE Berlin 2 700 126 TP Berlin

Lund FR Dijon 5 248 220 TP Dijon

Moerdijk DE Berlin 1 532 104 TP Berlin

Moerdijk RU Moscow 7 748 379 TP Moscow Table 9.9: Identified potential return flows. NB: abbreviations for country names can be

found in appendix F The table states the potential return flows from existing shipping plants to consignee country and city, which is close to an existing plant of which Team Road has no transport statistics. The two first columns show what position the flow has both regarding weight and regarding number of transports made in 2004. This gives an indication of how important it could be to consider these flows. As mentioned earlier, in paragraph 9.1.3 Tetra Laval has large flows to Russia and Team Road lacks information regarding consignee city for some of them. An example is the fourth biggest flow regarding weight, which originates in Lund and has consignee country stated as being Russia but has no consignee city defined. In addition, there are other flows that also lack information regarding consignee city, and the decision was made not to consider these flows when identifying potential return flows. However, the flows to Russia with stated consignee cities are taken into consideration when trying to derive potential return flows.


122

9.3 Triangular flows In addition to return flows, triangular flows have also been examined. A triangular flow is, in this research, defined as: The three flows from A to B, from B to C and from C to A. As can be seen in Figure 9.6, the three flows create a closed loop; a triangular flow.

CA

B

CCA

B

AA

BB

Figure 9.6: Triangular flow between the destinations A, B and C

Triangular flows can be identified both on a country level and on a city level. The benefits of triangular flows on a city level are the possibilities to increase the volume utilization, to get more even flows and to implement round trips. The triangular flows can also be beneficial in negotiations, since the transport company is more willing to lower its prices if it can include all three flows in the contract. It is rather complex to implement a distribution system utilizing triangular flows, since it puts high demands on the coordination of delivery times, transport times etc. In addition, transport regulations and other issues regarding ownership of the trucks, further decrease the feasibility of triangular flows. Therefore we have chosen to only investigate triangular flows on a country level. These flows could be relevant in negotiations with the transport companies, where Team Road can benefit from potential trade imbalances that the transport company might have.

9.3.1 Current triangular flows The first step in identifying potential triangular flows was to remove all countries from which no flows originate. Thereafter, for each country, a map of incoming and outgoing flows (flow one and flow three in Figure 9.7) was created. Finally, the flows connecting the incoming and outgoing flows (flow two in Figure 9.7) were identified.

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Country 1

Country 2

Country 3Flow 3

Flow 2Flow 1

Country 1

Country 2

Country 3Flow 3

Flow 2Flow 1

Figure 9.7: Triangular flow on country level

The results of the analysis indicate that Tetra Laval has 106 triangular flows at a country level. However, many of these are not useful since the differences in size; the total weight shipped and the number of transports in 2004, are to big. Furthermore, this number might also be somewhat misleading since the same flow has been used more than once in the analysis. Thus, not all of the 106 triangular flows can be used. Nevertheless, as can be seen in Table 9.10 a few triangular flows with similar weight have been identified.

1st flow 2nd flow 3rd flow

Country 1 Country 2 Country 3 Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Italy Germany Great Britain 2 784 364 3 900 156 1 987 101

Italy Germany Sweden 2 784 364 6 500 260 5 178 806

Netherlands Germany Sweden 14 946 1 427 6 500 260 6 930 372

Poland Germany Sweden 5 200 208 6 500 260 5 263 283

Spain Germany Great Britain 1 800 72 3 900 156 2 244 91 Table 9.10: Triangular flows with respect to weight

A few triangular flows of similar size regarding total number of transports in 2004 have also been identified. These can be found in Table 9.11 below.


124


Country 1 Country 2 Country 3 Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Hungary Switzerland Germany 2 450 98 221 96 1 300 52

Norway Germany Sweden 450 236 6 500 260 9 275 520

Poland Germany Sweden 5 200 208 6 500 260 5 263 283

Spain Germany Italy 1 800 72 2 600 104 870 58

Spain Germany Great Britain 1 800 72 3 900 000 156 2 244 91 Table 9.11: Triangular flows with respect to number of transports

As mentioned above, when mapping the triangular flows, the same flow might have been used more than once. This is also valid for the triangular flows in Table 9.10 and Table 9.11 above, where for example the flow between Germany and Sweden is used as a part of three different triangular flows. However, the aim of this investigation is to provide an overview of the possibilities for improving the distribution, and therefore we have chosen to highlight them all.

9.3.2 Potential future triangular flows In addition to the current triangular flows outlined, other potential triangular flows on a country level have also been identified. From each relevant country, the flows to a country with additional plants (where Team Road in the future may be responsible for the contracts) have been identified. Since no statistics of the flows from these plants is available, a closed loop cannot be created at the moment. Some examples of potential triangular flows can be seen in Table 9.12 below. If there are any flows from Russia to Germany or to Sweden existing, three triangular flows can be created.


Country 1 Country 2 Country 3

Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Weight (tonnes)

No of trsp

Germany Hungary Russia 1 300 52 1 725 69 Depends on the flows from the additional plant

Germany Great Britain Russia 3 900 156 1 906 76

Sweden Netherlands Russia 6 930 372 8 896 435 Table 9.12: Potential triangular flows

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The potential triangular flows might be a good tool in the future, when Team Road takes over the contracting responsibility for these plants also.

9.4 Trade balances The trade between different countries is seldom balanced. Trade imbalances regarding transports exist between many countries, both within and outside of Europe. Measuring these is a relatively difficult exercise, since the figures publicly available regarding the trade are mainly concerned with the value of the goods, and not the number of transports. An indication of the trade balance between certain countries can be obtained by using the transport companies’ prices on a particular distance. If there is a general imbalance, the transport company tries to control it through its pricing strategy. This implies that the company decreases the prices on the stretches with fewer transports and vice versa. However, the price could also be affected by the difference in the amount of shipped goods. There is probably a correlation between large amount of shipped goods and a cheaper transport price. Nevertheless, the influence is not big enough to result in a misleading imbalance; therefore the prices could still be used as an indication of the trade imbalances. Since we only have access to the current contracts and prices of the existing flows, an estimate of the trade balance could only be performed on the return flows, since the prices in both directions is necessary in order to calculate a ratio. This estimation was carried out using the prices of a full truckload on the different stretches. A ratio between Tetra Laval’s export and import, as well as a ratio of the transport companies’ prices, was calculated for each return flow (the results can be seen in appendix H). Table 9.13 shows eleven flows where the trade imbalance might be beneficial for Tetra Laval, i.e. the trade balance of the transport company is the opposite compared to the balance of Tetra Laval’s export and import.


126

Export Trade Balance

From To

Tetra Laval:

s) transportof (noImport

s) transportof (noExport

Transport company:

FTL) 1 (priceImport

FTL) 1 (priceExport

Germany Poland 0,5 1,2

Italy Sweden 0,5 1,5

Netherlands Sweden 0,5 1,7

Germany France 0,4 1,3

Italy Great Britain 0,3 2,5

Germany Sweden 0,2 2,1

Italy Netherlands 0,1 1,1

Italy Denmark 0,1 1,4

Ukraine Sweden 0,04 1,1

Austria Germany 0,03 1,4

Denmark Sweden 0,01 1,5 Table 9.13: Beneficial trade imbalances

There are four flows in Table 9.13, which are more important than the others, due to their size. These flows will be described in more detail in the following paragraphs. We believe that Team Road could benefit from the identification of these trade imbalances in coming negotiations, since transport companies should be more eager to take the responsibility for stretches that counteract the trade imbalances.

• During 2004 Tetra Laval had 499 transports from Sweden to Denmark, and only six in the opposite direction. The transport company’s prices give an indication of an export from Denmark to Sweden exceeding the corresponding import by 50 per cent.

• In 2004 Tetra Laval exported goods on 624 transports from France to Germany. The number of transports from Germany to France was 260. The trade balance suggests that the export is only 80 per cent of the import.

• The prices provided by the transport suppliers indicate that the export from Germany to Sweden exceeds the import by 110 per cent. However, during 2004 Tetra Laval had 260 transports from Germany to Sweden, and as much as 1698 transports from Sweden to Germany.

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• During 2004 Tetra Laval had 383 transports from Italy to Sweden, while the number of transports in the opposite direction was 806. This imbalance is the reverse when compared to the estimation of the trade imbalance. The trade imbalance indicates that the export from Italy to Sweden is 50 per cent higher than the import.

9.5 Complexity of the transport market The different transport companies have received a request for quotation (RFQ) and submitted offers on different geographical areas and flows. In order to get an overview of the supply of transport companies on the different stretches, an analysis of the specified areas has been made. This analysis is also performed to identify any tendencies for more complex regions. A region is defined as complex if there are only a few transport companies operating within it, and it contains stretches on which few offers has been submitted. The offers made by all transport companies that currently have an existing contract with Team Road have been compiled. Thereafter, the statistics have been analyzed regarding their level of complexity. If only a few transport suppliers cover a stretch, it is considered to have a high complexity. On the other hand if the stretch is covered by many transport suppliers, it is considered have a low complexity. Therefore, it is interesting to analyse how many transport suppliers have submitted offers on the different stretches. Furthermore it is interesting to see how many of the stretches that would be considered as having high and low complexities respectively. Below, in Figure 9.8, the diagram illustrates the number of stretches, on which a certain amount of offers have been submitted. The x-axis shows the number of offers submitted and the height of the bars indicate the amount of stretches with this number of offers submitted. For example, it can be seen that eight offers are submitted on 19 different stretches respectively. The flows with zero to two offers submitted are considered as having high complexity. These flows will be discussed more later, as well as the flows on which a high amount of offers are submitted.


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0

10

20

30

40

50

60

70

0 1 2 3 4 5 6 7 8 9 10 11 12

Amount of offers submitted

Nu

mb

er o

f st

retc

hes

Figure 9.8: Illustration of complexity

Table 9.14 below states those stretches, which are the most critical and complex, and for which very few offers were submitted, as well as the stretches with the lowest complexity, where the highest amount of offers were submitted.

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0 offers

made 1 offer made

2 offers made

8 offers made

9 offers made

11 offers made

12 stretches 4 stretches 9 stretches 19 stretches 14 stretches 1 stretches • Fjällbacka to GR • Fjällbacka to IE • Fjällbacka to UA • Fjällbacka to YU • Latina to SE • Latina to TR • Lund to LV • Lund to LT • Moerdjik to TR • Sunne to EE • Sunne to LV • Sunne to LT

• Latina to GB • Lund to EE • Milano to DE • Moerdjik to LU

• Domestic Ireland • Drongen to DE • Linz to DE • Lund to YU • Moerdjik to YU • Rakoniewice to DE • Reichstett to CH • Sunne to YU • Sunne to UA

• Budapest to PL • Fjällbacka to NL • Hjörring to GB • Hjörring to HU • Hjörring to IT • Lund to BE • Latina to AT • Latina toDE • Lund to NL • Modena to AT • Modena to BE • Modena to PL • Modena to YU • Modena to SI • Modena to CH • Sunne to NL • Wrexham to CZ • Wrexham to FR • Wrexham to PL

• Budapest to AT • Budapest to CZ • Budapest to DE • Budapest to IT • Budapest to SL • Budapest to SI • Modena to DE • Modena to SK • Sunne to BE • Wrexham to DE • Wrexham to IT • Wrexham to NL • Wrexham to ES • Wrexham to SE

• Wrexham to BE

Table 9.14: The most and the least complex stretches. NB: abbreviations for country names can be found in appendix F

The high-complexity stretches, on which very few offers are submitted, need to be considered when making decisions about reducing the supplier base. The transport companies that do place bids on these stretches should be considered as crucial suppliers, since other transport companies cannot easily replace them. Therefore, in a phase-out process, suppliers identified


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as potentially superfluous need to be analyzed with regard to the stretches they are operating on. The transport companies submitting an offer on the low-complexity stretches are less critical and could be phased out in a potential pruning process. The identification of stretches where many offers are made can facilitate the negotiation of prices. If there are several transport companies submitting offers on the same flows, Team Road could make use of this to negotiate lower prices. Another factor, which could be interesting to discuss, is the trade imbalances that the transport companies are experiencing. These imbalances would logically be the same for all transport companies and would also affect their bidding pattern. The fact that there are so many offers submitted on a few stretches could be an implication of existing trade imbalances experienced by the transport companies. If these stretches could even up the imbalances, transport companies would obviously be interested in attaining the responsibility for these flows. When comparing Table 9.14 above with the identified trade imbalances in Table 9.13, there are some stretches that would even up the imbalances that the transport companies are probably are experiencing. Examples of these flows are the ones from Sweden to Netherlands, from Denmark to Italy, from Italy to Germany and from Great Britain to Sweden. Another reason for the high amount of offers on these stretches, could be that the transport companies already have well-developed routes in these areas and are therefore able to utilize co-loading and previous experience.

9.6 Analysis of the transport suppliers Organisation of the supplier base is an important factor in achieving effective supplier management. Currently, Team Road has a stated goal to reduce its supplier base. As mentioned earlier, they have about 55 transport suppliers, and no stated differentiation strategy281. It is time consuming to manage this large amount of suppliers and it is also leads to high administration costs. Furthermore, it is hard to establish close relationships with some of them without a differentiation strategy.

281 Informal meeting with Lindahl, B. 2005-10-19

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9.6.1 Current supplier base To create an overview of the current supplier base, two diagrams were drawn up. One diagram shows the total weight shipped by each transport company, and the other illustrates the total number of transports shipped in 2004. Since the provided statistics did not cover all of Tetra Laval’s plants, not all 55 suppliers are included in the research. Figure 9.9 provides an overview of the total weight (in tonnes) shipped by each transport supplier. As can be seen, WWL is by far the largest supplier with respect to weight, shipping 37 per cent of the total weight. The second largest supplier is the Hungarian transport company Easy Transports, shipping about 10 per cent of the total weight. This is surprising since Easy Transports is one of the small players on the European market, with only 40 employees. However, Easy Transports might be part of a large transport network, although no information is available to support this argument. Furthermore, Figure 9.9 shows that the 80-20 principle, discussed earlier, is valid also for Team Road’s suppliers. For example, it can be seen that two per cent of the total weight is shipped by ten suppliers. This result supports the decision to reduce the supplier base, and will be discussed more in detail in paragraph 9.6.4.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

WW

L

Easy T

rans

ports

LMS

MM L

ogist

ics

Opti

mLogis

tics

HLM

Neel S

hippin

g Com

pany

Ander

sons

Fast S

pedit

ion

XY Log

istics

Bakke

r Spe

ditio

nEPL

Linds

Logis

tics

Torre

s

STAR

Sunca

nt

Prinzo

Trans

Europe

Karl J

önsso

n

Wire

Logis

ticsIm

Ex

Schwar

tz Lo

gistic

s

Sparre

Spe

dition

Smith

's Tra

nspor

ts

Hearn

e Log

istics

BEC

Boslaw

Irktra

ns

Wro

cspe

d

Fritte

Logis

tics

Wor

ld Spe

dition

Transport Company (assumed names)

To

tal w

eig

ht (

ton

nes

)

Figure 9.9: Diagram of the total weight shipped by the different transport companies


132

Figure 9.10 provides an overview of the total number of transports carried out in 2004 by each transport supplier. WWL is also the largest supplier with respect to the number of transports, shipping 37 per cent of the total number of transports. The second largest supplier with respect to number of transports is LMS, shipping 7.9 per cent of the total number of transports. This is interesting, since the core competence of LMS is not transport but supplying additional logistics services. The third largest supplier, MM Logistics, is responsible for 7.8 per cent of the total number of transports. In Figure 9.10 the 80-20 principle is applicable as well, where ten of the suppliers represent 2.7 per cent of the total number of transports in 2004.

0

2,000

4,000

6,000

8,000

10,000

12,000

WW

LLM

S

MM L

ogist

ics

Easy T

rans

ports

OptimLo

gistic

s

Neel S

hippin

g Com

pany

Fast Sped

ition

HLM

XY Log

istics

Ander

sons

Bakke

r Spe

dition

Linds

Logis

tics

STAR

Sunca

nt

Hearn

e Log

istics EPL

Schwar

tz Lo

gistics

Wire

Logis

tics

Karl J

önsso

n

Torres

ImEx

Prinzo

Trans

Europe

Sparre

Spe

dition

BEC

Smith

's Tra

nspor

ts

Boslaw

Irktra

ns

Wro

cspe

d

World

Sped

ition

Fritte

Logist

ics

Transport Company (assumed names)

Tota

l no

of t

rans

port

s in

200

4

Figure 9.10: Diagram of the total number of transports shipped by the different transport

companies The majority of the transports illustrated above are bought on contract, which implies that for each flow a contract has been established with a certain supplier. Buying on contract from a certain supplier facilitates the establishment of close relationships between the companies. Close relationships are easier to achieve when dealing with a limited supplier base. This is another point in favour of the argument to reduce the supplier base. However, to examine the possibilities to reduce the supplier base the first step is to perform a classification of the suppliers, which will be performed both through an ABC classification and a modified Kraljic classification.

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9.6.2 ABC classification Classification is an important technique for differentiation of suppliers. As stated in paragraph 7.3.1 and 7.3.2, ABC classification can be carried out regarding either one or two criteria. A classification based on multiple criteria usually provides better results. Since both the total weight shipped by the transport company, and the total number of transports performed is of great importance, the ABC classification will be performed with respect to both criteria. The classification is performed first with respect to one criterion and then with respect to the other. The suppliers classified as A-suppliers, are together responsible for 80 per cent of the total weight shipped or the total number of transports performed. The corresponding limit for B classification is 15 per cent and for C classification 5 per cent. Thereafter the results of the two classifications are compiled into one matrix, as can be seen in Figure 9.11.

Weight

A B C

A

Easy Transports, Fast Spedition, HLM, LMS, MM Logistics, Neel Sh ipping

Company, OptimLogistics, WWL

XY Logistics ---

B Andersons Bakker Spedition, EPL, Linds Logistics, STAR,

Suncant

Hearne Logistics, Schwartz Logistics, Wire

Logistics

Nu

mb

er o

f tr

ansp

ort

s

C --- Prinzo, Torres, TransEurope

BEC, Boslaw, Fritte Logistics, ImEx, Irktrans,

Karl Jönsson, Smith’s Transport, Sparre Spedition, World

Spedition, Wrocsped

Figure 9.11: ABC classification regarding weight and number of transports


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The matrix shows eight transport suppliers classified as AA-suppliers. These are the most important suppliers, since they are responsible both for 80 per cent of the total weight and 80 per cent of the total number of transports. The AA-suppliers represent group 1. The two transport companies Andersons and XY Logistics, are classified as BA-supplier and AB-supplier respectively. This implies that they are classified as A-suppliers according to one criteria and B-suppliers according to the other. Together with the five suppliers classified as B-suppliers, both with respect to weight and to the number of transports, these suppliers represent group 2. Three suppliers are classified as CB-suppliers and three suppliers are classified as BC-suppliers. Finally, ten of the suppliers are classified as CC-suppliers. The CC-suppliers are together responsible for only five per cent of the total weight shipped and five per cent of the total number of transports performed in 2004. Together, the BC-, CB- and CC-suppliers represents the last group of suppliers, group 3. An overview of the grouping of the suppliers can be seen in Table 9.15.

Group Classification No of suppliers

1 AA 8 2 AB, BA, BB, AC, CA 7

3 BC, CB, CC 16 Table 9.15: Grouping of the suppliers

When analyzing the supplier base, the number of flows each supplier is responsible for is also of interest. Even though a supplier may ship a large amount of transports each year, it might still be possible to phase out that particular supplier in a potential pruning process, if it is only responsible for a few flows. In a similar way, suppliers that transport only a small amount of weight but are responsible for a large amount of flows might be crucial to maintain. To include this aspect in the analysis of the supplier base an additional ABC classification with two criteria has been performed, as can be seen in Figure 9.12. For this classification, the same limits as in previous classification has been used, i.e. 80 per cent, 15 per cent and five per cent.

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Weight and number of transports

Group 1 Group 2 Group 3

A

Easy Transports, Fast Spedition, LMS, MM

Logistics, OptimLogistics, WWL

XY Logistics Schwartz Logistics

B HLM, Bakker Spedition, Suncant

BEC,Hearne Logistics, Smith’s Transport, Sparre Spedition, Wire Logistics

Nu

mb

er o

f fl

ow

s th

e su

pp

lier

is r

esp

on

sib

le f

or

C Neel Shipping Company Andersons, EPL, Linds Logistics, STAR

Boslaw, Fritte Logistics, ImEx, Irktrans, Karl

Jönsson, Prinzo, Torres, TransEurope, World Spedition, Wrocsped

Figure 9.12: ABC classification regarding number of flows the supplier is responsible for and weight/number of transports. One axis of the matrix illustrates the three groups from the previous classification and the other axis shows the new ABC classification regarding number of flows the supplier is responsible for.

Figure 9.12 shows that most of the suppliers classified as group 1 suppliers are also responsible for a large number of flows, i.e. classified as A-suppliers with respect to number of flows it is responsible for. These transport companies represent group I, and would probably be the most interesting, if considering an establishment of strategic cooperation and close relationships between Team Road and the suppliers. Out of the suppliers in group 1, only HLM and Neel Shipping Company are classified as B- and C-suppliers with respect to the number of flows they are responsible for. The classification illustrates that four out of the seven suppliers classified as group 2 suppliers, are responsible only for a small number of flows, i.e. C suppliers. This puts them in group III, together with the suppliers classified as B3 and C3. Finally, the only supplier in group 3 that is classified as an A-supplier is Schwartz Logistics. This means that even though it is performing few transports with low weight, it is responsible for a high number of flows. Thus, Schwartz Logistics might be


136

important to keep, and is therefore positioned in group II. An overview of the new grouping of the suppliers can be seen in Table 9.16.

Group Classification No of suppliers

I A1 6

II A2, A3, B1, B2, C1 6

III B3, C2, C3 19

Table 9.16: New grouping of the suppliers In further analysis regarding reduction of the supplier base, the suppliers in group III will be of particular interest.

9.6.3 Kraljic classification Another way to classify suppliers is with the use of a Kraljic matrix. By grouping the suppliers in two dimensions; the importance of the procurement and the complexity of the supplier market, four different ways of managing the suppliers can be identified. Classification with the use of Kraljic will in this research only be performed on the suppliers classified as group III suppliers. These are the suppliers that are of current interest if a reduction of the supplier base is to be carried out, and therefore further analysis of these would be valuable. However, in this research the Kraljic matrix will be used with some modifications. In the ABC classification above, it is already determined that the group III suppliers have low volume value regarding weight and/or the total number of transports in 2004. This implies that the importance of the procurement is low for all these suppliers. Therefore, in this analysis the suppliers will only be classified with respect to the supplier market complexity. We have modified the Kraljic matrix further, since this classification method normally is used within companies to classify their different suppliers, which are operating on different markets. In our case all transport suppliers are operating on the same transport market, so instead we have chosen to classify the transport suppliers with respect to the complexity of the different areas they are operating in. As mentioned earlier, some regions and stretches are more critical than others and the transport companies operating on these are considered to be experiencing high supplier market complexity. Furthermore, Team Road’s transport suppliers are classified according to this experienced supplier market complexity.

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The assessment of the supplier market complexity will be carried out for each individual flow. This means that for each supplier, all flows and the total number of transport companies covering the particular stretch are mapped. Previously when discussing stretches with complex supplier access, a stretch was identified as critical if there were only two or less suppliers submitting offers on this particular stretch. However, in this analysis it is important to avoid any unnecessary initiation of a pruning process. Therefore, in this case a stretch is considered critical if there are three or fewer different transport companies offering to supply the transports for the same stretch. A stretch is also considered critical if only transport companies classified as group III suppliers can cover it. If the transport company has one or more critical stretches, the market for that particular supplier is considered complex. The division of the suppliers in the modified Kraljic matrix can be seen in Figure 9.13.

Supplier market complexity

Low High

Imp

ort

ance

of

the

pro

cure

men

t

Low

Boslaw, Fritte Logistics, Hearne Logistics, ImEx, Karl

Jönsson, Prinzo, Smith’s Transport, Sparre Spedition, TransEurope, Wire Logistics

Andersons, BEC, EPL, Irktrans, Linds Logistics,

STAR, Torres, World Spedition, Wrocsped

Figure 9.13: Kraljic matrix of the suppliers

9.6.4 Reduction of the supplier base A company can choose to organize its supplier base in two ways as described in paragraph 7.5, by direct handling or in tiers. Currently Team Road handles 55 suppliers, which is both time-consuming and costly. As stated above, there are many arguments in favour of a reduction of the supplier base. However, this is complicated by the fact that all Tetra Pak plants only have their own interests in mind. This means that the same supplier could not be used for all flows if it would imply higher freight rates


138

for one particular plant, even though it would lower the total costs. Furthermore, some of the smaller transport companies might be specializing in a particular region. Therefore, when analyzing the possible pruning of the supplier base, potential substitute suppliers need to be identified. The Kraljic classification resulted in ten suppliers classified as experiencing low market complexity. Due to their low proportion of the total weight, number of transports and number of flows, which they are responsible for, combined with the low complexity, these suppliers might be phased out in a potential pruning process. Table 9.17 illustrates these ten suppliers (sorted by name), the total weight, the total number of shipments performed and the stretches covered (during 2004).

Transport company

No of transports in

2004

Transported Weight

(tonnes)

Covered stretches, from specific plant to country

1. Boslaw 30 576 Latina (IT) to CH, LU

2. Fritte Logistics 10 143 Modena (IT) to AT, SK, YU

3. Hearne Logistics 314 788 Wrexham (GB) to GB, IE

4. ImEx 200 2820 Altishofen (CH) to DE Glinde (DE) to CH

5. Karl Jönsson 260 3775 Glinde (DE) to DK

6. Prinzo 176 4 400 Glinde (DE) to ES Madrid (ES) to DE

7. Smith’s Transport 68 1077 Reichstett (FR) to FR, DE, ES, IT, NL, NO, PT

8. Sparre Spedition 140 1554 Modena (IT) to AT, BG, DE, PL, RU, SK, UA, YU

9. TransEurope 156 3 900 Glinde (DE) to GB

10. Wire Logistics 286 3 713 Moerdijk (NL) to DE, DK, SE

Table 9.17: The ten group III suppliers, experiencing low market complexity. NB: abbreviations for country names can be found in appendix F

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All the suppliers illustrated in Table 9.17 will be discussed more in detail in the following paragraphs: 1. Team Road only contracts the transport company Boslaw for the

stretches from Italy to Switzerland and from Italy to Luxembourg. The trucks are relatively full, 19.2 tonnes in average per truck, but the total number of transports is low. Currently six other suppliers can handle these flows.

2. Fritte Logistics, who only had 10 shipments in 2004, performs the

smallest number of transports. Team Road contracts the company for the stretches from Modena in Italy to Austria, Slovakia and Yugoslavia. The company experiences low market complexity, and as much as eight other suppliers have submitted an offer on these stretches.

3. Hearne Logistics is a supplier contracted by Team Road for

domestic transport in Great Britain and for transport from Great Britain to Ireland. Due to the low number of transports performed by Hearne Logistics, it might be beneficial for Team Road to phase out this supplier. The company experiences low market complexity, and four other transport companies have submitted an offer on the current stretches.

4. ImEx is a transport company contracted for the return flow between

Glinde and Altishofen. The total weight shipped and the number of transports performed is low, and both flows can be replaced by five other suppliers.

5. The transport company Karl Jönsson is only contracted for some of

the flows included in the stretch from Germany to Denmark. The company experiences low market complexity, and four other suppliers can handle these particular flows.

6,7,9 TransEurope, Prinzo and Smith’s Transport are all classified as

group III suppliers. These are more or less already in Team Road’s pruning process, since both TransEurope and Smith’s Transport have not submitted any offers and Prinzo has a poor administrative function and has only submitted their prices via email282.

282 Informal conversation Nilsson, P. 2005-12-08


140

8. Sparre Spedition is an Italian supplier, contracted on the sections from Modena in Italy to eight European countries. Although the company is contracted for a relatively large amount of flows, the total number of transports performed and the total weight shipped is low. Currently, four to eight transport companies could replace Sparre Spedition on these stretches.

10. Wire Logistics currently handles the stretches operating from

Moerdijk to Germany, Denmark and Sweden. The supplier market has low complexity, and the stretches could be handled by at least four other suppliers.

In addition to the above mentioned transport companies nine suppliers were, in the Kraljic matrix, classified as experiencing high market complexity. This implies that on one, or all stretches, there are a maximum of three other transport companies that can replace the current supplier. Table 9.18 illustrates these suppliers, their transported weight, number of transports, ABC classification and covered stretches.

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Transport company

No of transports

in 2004

Transported Weight (tonnes)

Covered stretches, from specific plant to country

1. Andersons 728 16 648 Drongen (BE) to Glinde

2. BEC 93 778 Hjo (SE) to FR, FI, PL, TR Åstorp to CZ, DK, PO, PT

3. EPL 312 7 800 Glinde (DE) to PL Rakoniewice (PL) to DE

4. Irktrans 27 548 Moerdijk (NL) to IE

5. Linds Logistics 403 7 318 Latina (IT) to AT, DE, GB, GR, IT

6. STAR 344 5 632 Glinde (DE) to FI Turku (FI) - DE

7. Torres 231 7 001 Sunne (SE) to FI

8. World Spedition

17 102 Moerdijk (NL) to GR

9. Wrocsped 20 233 Moerdijk (NL) to SI

Table 9.18: The nine group III suppliers with high market complexity. NB: abbreviations for country names can be found in appendix F

1. The transport company Andersons is responsible for the flow from

Drongen to Glinde. Even though it is the largest flow on a city level, Andersons is only contracted for this particular flow, and would therefore be possible to replace. However, the company experiences a high market complexity, and only two other suppliers, Irktrans and WWL, have submitted an offer on the same stretch. Since Irktrans is classified as a group III supplier and might be phased out, this implies that Tetra Laval would risk becoming dependent on one supplier, WWL. Even though WWL is a large transport company with an extensive network, Team Road has to consider the risk of supplier dependency before phasing out Andersons.


142

2. BEC, which is a large transport company mainly focused on express

distribution, has been contracted for the shipments from Hjo and Åstorp. On the stretches Hjo - Turkey, and on all stretches from Åstorp, BEC experiences high market complexity. Although not many companies have submitted an offer on these stretches, large suppliers such as Fast Spedition, WWL and MM Logistics have, and Tetra Laval does not risk becoming dependent on a single supplier if phasing out BEC.

3. EPL is responsible for the return flow between Glinde and

Rakoniewice. The supplier is considered to experience a high market complexity since the stretch from Rakoniewice to Glinde only can be covered by two other suppliers. However, the two suppliers are WWL and HLM, which are both large companies, and therefore EPL could still be of interest in a potential pruning process.

4. Irktrans is responsible for a very small proportion of the total

shipments, both regarding weight and number of transports. The supplier is considered critical since only three other suppliers have submitted an offer on the stretch from the Netherlands to Ireland. However, the three suppliers are the group I suppliers, WWL and MM Logistics, and the group II supplier, HLM. As mentioned in paragraph 8.5 both WWL and MM Logistics have extensive networks covering all of Europe and offer additional services such as 3PL. This implies that Irktrans can be phased out, since Team Road does not risk becoming dependent on a single supplier.

5. Linds Logistics covers domestic transport from Latina in Italy, and

the four stretches from Latina to Austria, Germany, Great Britain and Greece. The company is considered to experience high market complexity, since only Irktrans has submitted an offer on the flows included in the stretch from Latina to Great Britain. Irktrans is classified as a group III supplier, and might be phased out in a potential pruning process. This implies that Linds Logistics would be crucial to keep.

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6. STAR is only contracted for the return flow between Glinde and

Turku. The company is considered critical since only three other suppliers can replace STAR on the stretch from Turku to Glinde. However, the other suppliers are Bakker Spedition, MM Logistics and BEC, where Bakker Spedition belongs to group I and MM Logistics to group II. This implies that STAR could be considered in a potential pruning process.

7. Torres covers the stretch from Sweden to Finland, and is considered

to experience a high market complexity since only two other suppliers have submitted an offer on this stretch. These suppliers are MM Logistics and Fast Spedition, where, as mentioned in paragraph 8.5, MM Logistics is one of the major European transport companies and Fast Spedition has an extensive network of European partner companies. Therefore, Torres is also of interest in a potential pruning process.

8. The supplier World Spedition is responsible for a very small

percentage of Tetra Laval’s total shipments. The company has not submitted an offer for the year 2005, and is therefore already in the pruning process.

9. Wrocsped performed 20 transports for Tetra Laval in 2004. The

company is only contracted for one flow, Moerdijk - Ljubljana. The supplier is classified as critical, since only three other suppliers have submitted an offer on this stretch. However, these three companies are MM Logistics, BEC and WWL, and therefore there is no risk for Tetra Laval to become dependent on one single supplier.

The analysis of the suppliers in group III indicates that all of them, except Andersons and Linds Logistics, are possible to phase out. However, it requires further investigations to determine if these suppliers would be considered indispensable for some other reason. Furthermore, Team Road needs to consider the fact that the plants do not look at the overall picture, and will therefore not accept a contract if the conditions for that particular plant are worse than the current conditions, even though it might lower the overall costs. However, the administration costs for handling all the different suppliers are significantly high for the plants also, and therefore a reduction might be possible anyway. Another factor that needs to be taken into consideration is the fact that the alternative transport companies that have been identified when analysing the complexity of the supplier market


144

might be included in large networks. If for example Team Road should sign a contract with Fast Spedition instead of Torres for the Finnish transports, there is a possibility that Torres will continue to perform the transports even though the contract is with Fast Spedition. Fast Spedition could use Torres for these stretches, which could imply higher prices since the transports are not bought direct from Torres. However, these increased costs need to be compared with the decreased administrative costs that a smaller supplier base would imply. Therefore, a reduction of this supplier might still be of interest.

9.6.5 Supplier management TLGT&T has an extensive supplier selection process. The requirements to qualify as a potential supplier are rigorous and many aspects such as trade compliance, anti-corruption etc. need to be fulfilled. This extensive process is very time consuming since it is performed on all potential suppliers. However, it decreases the risk of having to phase out suppliers performing below the required expectations. Team Road does not classify and differentiate its current transport suppliers. An evaluation and classification of the suppliers against multiple criteria could be a good basis for more efficient supplier management. Although a reduction of the supplier base might not be possible to implement in the current situation, a classification could provide an indication of what suppliers should be given the most attention. Team Road has the target to perform regular supplier evaluations, and as mentioned earlier, the evaluations are carried out through questionnaires, filled out by the suppliers themselves. To achieve effective supplier management, regular and precise supplier evaluations and assessments are crucial. This may not be accomplished if the evaluations are based only on information provided by the suppliers. If the information from the suppliers were complemented with information from each plant, greater objectivity would be achieved. This could be realized by letting all plants provide information regarding delivery time, delivery reliability etc., either continuously through an Internet based portal or quarterly as a report. The advantages are, besides increased objectivity, that the plants have a greater incentive to provide accurate information and to provide information about goods that are not delivered on time. The disadvantages are that this method might be relatively time consuming, and that each plant might not have the information systems available to provide the necessary information.

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Due to the nature of the purchase, supplier audit is not of current interest. Supplier audits are mainly performed when companies are visiting and investigating their suppliers’ production plants. However, if Team Road reduces the supplier base, supplier audits could become more important in the process of developing, maintaining and improving the relationships established.


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Chapter 10 Conclusions and recommendations

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10 Conclusions and recommendations This chapter contains conclusions, as well as our personal recommendations to Team Road. The recommendations are both of short and long term character, and are based on the conclusions from the analysis. In this chapter we also express our general thoughts, which have emerged throughout our research at TLGT&T.

10.1 Current situation Team Road is a centralized purchasing function for Tetra Laval’s European road freight solutions. We find their work procedure similar to that of a 3PL provider, working on behalf of the three sub groups. However, they are not focusing on some of the areas normally covered by a 3PL provider, e.g. route planning. Instead, Team Road and TLGT&T work as a link between Tetra Laval and the transport industry, with the intention to work on a strategic level. However, their work is still rather operational, but we believe that with improved and increased contact with the three sub groups as well as with the transport suppliers, and with more standardized information structure, a more efficient and strategic work procedure would be facilitated. When analysing the current situation, the complexity of Tetra Laval Group’s organisation and distribution structure is striking. There is hardly any integration or cooperation between the three industry groups, which makes the work for Team Road more difficult. Furthermore, Team Road’s work is also complicated by the fact that the transport contracts they are responsible for are covering large amount of flows of varying sizes. Moreover, the fact that Team Road currently has 55 contracted suppliers complicates the administration work. Advantages of reducing the supplier base will be discussed further, later in this chapter. It is important to remember that not all statistics are included in this research. This implies that there may be additional return flows not identified. As for Team Road’s dependency on transport suppliers, this analysis could have been more thoroughly performed, if complete statistics were available.


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To enable a detailed mapping of existing transport relations as well as discovering possible return flows, which would lead to greater cost savings, we believe that a simulation program could be useful. However, despite the lack of such a simulation system, we have mapped the transport flows and have reached the following conclusions that could be useful in the negotiations for year 2006.

10.1.1 Benefit from trade imbalances The identified return flows on a country level have been compared with the estimated trade balances of the transport companies. This has resulted in eleven return flows that could be beneficial for Tetra Laval. By highlighting these return flows in the negotiations, the transport companies might lower their prices on these routes since getting the contracts for these flows would imply higher volume utilization and could even up their imbalances. Another, more strategic application of the trade imbalances could be to highlight them in discussions regarding where to place future plants. An obvious factor, which is taken into consideration when taking such decisions, is to identify areas which would imply low production costs. In addition to production costs we think it could be valuable to look more into the transport costs. Therefore, the transport companies’ imbalances could be worth taking into consideration, since placing a plant in a specific country might imply lower transport costs. Since it is not Team Road or TLGT&T taking decisions of where to place future plants, we recommend Team Road to highlight the analysis of trade balances as a strategic input to a higher level in Tetra Laval.

10.1.2 Utilize return flows on a city level Return flows on a city level can be utilized both in the negotiations, and also for an introduction of a roundtrip. In the negotiations, a return flow between two cities can be utilized even though the flows are not even in both directions. By offering the same transport company both stretches, the total price might be lower. However, the results from the interviews with transport companies imply that this total price is only slightly reduced, since it is still constructed from two single stretches. A better price on a return flow can be obtained by implementing a roundtrip, i.e. having the same truck (or trucks) providing the transports in both directions. However, high volume utilization is prerequisite to benefit from


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implementation of roundtrips, since the price always concerns a full truckload. A roundtrip also requires even flows, i.e. an equal amount of transports, in both directions. Due to these requirements the possibilities for Team Road to implement roundtrips are relatively small. A roundtrip already exists between Jönköping and Glinde, where an even return flow is identified. The flows between Moerdijk – Malmö and Lund – Rotterdam are the only flows on a city level that are even both with respect to weight and to number of transports. An introduction of a roundtrip between these destinations might be beneficial for Tetra Laval. For other identified return flows, an implementation of a roundtrip does not provide that obvious advantages.

10.1.3 Investigate possibilities for co-loading further To provide suggestions for improvements of Tetra Laval’s distribution structure it is important not only to look at each of the three industry groups respectively, but to look at Tetra Laval’s distribution from a group perspective. It is crucial to have the complete picture in mind to avoid sub optimization and to achieve cost savings. The total cost and the impact on the environment could be decreased by for example introducing a common distribution structure utilizing co-loading or allowing the whole of Tetra Laval to benefit from DeLaval’s already established hub and spoke structure. The mapping carried out in this research has provided Tetra Laval with a more complete picture of its distribution. However, although looking from a group perspective, it has been difficult to identify possibilities for a common distribution structure with co-loading within and between the three industry groups. The distribution structure differs greatly between the three industry groups. Tetra Pak’s decentralised distribution system has resulted in a sub optimised transport structure, where Tetra Pak mainly uses direct transports. DeLaval on the other hand has a more structured and centralised distribution system based on a hub and spoke structure. It is difficult to identify Sidel’s distribution structure, since Sidel does not contribute much of the statistics, and the research only includes three of its eight plants. This is mainly due to the fact that Sidel is the newest industry group, and Team Road does not have responsibility for many of Sidel’s transport contracts yet. Today, almost all plants work independently, having only their own interest in mind. For the plants to abandon this mindset, and look at a group perspective, incentives are needed. This is crucial to facilitate an establishment of a common distribution structure.


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Utilizing co-loading by combining the three industry groups’ goods flows is difficult. The difference in the sub groups’ distribution systems is the first obstacle. Furthermore, the fact that Sidel buys many transports on a spot basis, complicates the potential co-loading due to difficult time and route planning. The third barrier is the fact that the three industry groups utilize different vehicles. DeLaval transports mainly dangerous goods and Sidel often ship goods on out of gauge carriers. Because of these reasons, with our limited resources, we have decided not to investigate the possibilities for co-loading between the three industry groups. However, dependent of future developments, co-loading may be an area for future investigation. It is also difficult to identify possibilities for co-loading within each of the three industry groups’ goods flows. Both DeLaval and Tetra Pak have relatively high average volume utilization of 67 and 63 per cent respectively. In addition to the fact that DeLaval already utilizes co-loading, and because of lack of resources the decision has been made, not to investigate the possibilities for co-loading within the different industry groups. Sidel on the other hand has relatively low volume utilization, which implies that co-loading could be of current interest. This should be investigated further, when Team Road gets the contract responsibility for more of Sidel’s plants.

10.2 Supplier management Besides the given recommendations, the analysis also resulted in a few, somewhat more long-term, recommendations. These suggestions mainly concern the supplier base and the access of information.

10.2.1 Reduce the supplier base As of today, Team Road’s supplier base organisation is based more on direct handling where they have direct contact with all suppliers. We believe they should reduce their supplier base, which would imply lower administration costs. The way the transport industry is structured with its many networks, the suppliers are similar to that of system suppliers. This way, by reducing the supplier base, there is a risk of losing control of the companies that in fact carry out the transports on each flow. However we believe it is valuable to perform a supplier reduction despite this risk, since the daily work would be facilitated and a more effective work procedure could be achieved.


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By analysing the complexity of the transport supply, there are indications that several stretches can be covered by numerous transport companies. This implies that the supplier dependency is low, which can be utilized in negotiations with the suppliers. The low dependency in addition with low switching costs also implies that Team Road should easily be able to reduce its supplier base. The ABC and Kraljic analysis of the suppliers indicate that Team Road can reduce the supplier base with as many as 17 suppliers (31 per cent of Team Road’s supplier base). This recommendation is based on the finding that the transport market is not very complex, and most of the suppliers can easily be replaced by others. One of the reasons behind Team Road’s high amount of suppliers is Tetra Pak’s sub optimised distribution structure. Even though a smaller amount of suppliers would imply a lower total cost, the elimination of a particular supplier may not be possible. Each plant has its own interest in mind, and wants to contract the cheapest supplier possible. However, Team Road needs to look at the overall picture in order to decrease the administration costs. Each additional supplier implies increased administration costs, which should be compared to the cost savings achieved by contracting a cheaper supplier. In order create the right incentive for each plant to look at the overall picture, comprehensive changes in how the different units are measured and evaluated within this area are needed.

10.2.2 Develop close relationships Another possible change, which can be implemented in addition to the reduction of the supplier base, is to increase the cooperation and develop closer relationships with the suppliers in group I. Since Team Road is buying on a contract basis – a long-term cooperation with increased services such as route planning could increase the overall performance and provide cost reductions.

10.2.3 Discussion of the recommendations It can be difficult to decide what changes and implementations to prioritize. Therefore, we first want to clarify the advantages and disadvantages with the suggested recommendations. An overview is presented in Table 10.1 below.


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Recommendation Advantages Disadvantages

Benefit from trade imbalances

• Lower price in negotiations

• Difficult to derive accurate values of trade balances

Utilize return flows on a city level

• Lower price in negotiations

• Round trip requires large and relatively balanced return flows

Investigate possibilities for co-loading further

• High volume utilization • Lower transport costs

• Difficult to implement • Requires centralised

coordination Reduce the supplier base • Decreased

administration costs • More effective supplier

base management • Facilitate information

sharing, supplier evaluation and close cooperation

• Risk of higher transport prices

• Risk of supplier dependency

Develop close relationships

• Increased services • Increased availability of

resources

• Risk of supplier dependency

• Requires investments in the start up phase

Table 10.1: Advantages and disadvantages with the suggested recommendations As can be realised from the table above, the recommendations are of varying difficulty to implement and the results achieved are of various character. Therefore, to give the different recommendations priority, we have created a matrix (see Figure 10.1) illustrating the effect achieved in relation to the effort required. The effect axis gives an indication of how valuable the different suggestions are. This should be balanced against the amount of effort needed to implement these suggestions of change. This way we believe that the matrix will give Team Road a good illustration of what changes to prioritise.


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Effect

Effort

Close Relationship

Trade Balance

ReturnFlow

Co-Loading

SupplierReduction

STRATEGIC CHANCE

OPTIONAL LOW PRIORITY

HIGH PRIORITY

High

High

Low

Effect

Effort

Close Relationship

Close Relationship

Trade BalanceTrade

Balance

ReturnFlow

ReturnFlow

Co-Loading

Co-Loading

SupplierReductionSupplier

Reduction

STRATEGIC CHANCE

OPTIONAL LOW PRIORITY

HIGH PRIORITY

High

High

Low

Figure 10.1: Matrix illustrating the effect and effort of the recommendations

The positioning of the recommendations in the matrix is based on the advantages and disadvantages described earlier. Projects that result in high effect and require low effort to implement should be given highest priority. Therefore, we suggest that a reduction of the supplier base is most important, even though it requires relatively high effort. The suggestions to utilize the trade imbalance and return flows on city level both require low effort, and should therefore be implemented even if the achieved effect is relatively low. The suggestion to implement close relationships with a few suppliers has a more strategic and long-term character. This suggestion, which needs to be preceded by the reduction of the supplier base, requires high effort, but will hopefully achieve high effect. Finally, the suggestion to further investigate the possibilities for co-loading has been given lowest priority since it, in the current situation, requires high effort but achieves low effect. However, further investigation with respect to co-loading may be given higher priority in the future, if statistics for all plants are included.

10.3 General thoughts Apart from above stated conclusions and recommendations we have also identified other possible improvement areas. It is important to emphasize that the feasibility of the recognised improvements have not been


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investigated further. However, we believe they are still worth highlighting in this report.

10.3.1 Improve the information system An important conclusion reached in this research is that Team Road experiences problems with its information flow regarding transports. It is remarkable that Team Road receives all its transport data from the transport suppliers. This implies that Team Road is dependent on the suppliers to, first of all, submit information (only 31 out of 55 suppliers have provided statistics for this research) but also that the information is accurate and complete. Currently, the information is not sufficiently standardised, and is often incorrect and insufficient. We believe that if Team Road implemented a better information exchange with the different players in the supply chain, such as the transport companies but most importantly the plants, the map of the current situation would be more precise and the analysis would provide more complete, accurate and useful results. Attaining a more correct and complete map would lead to better position for Team Road in their cooperation with the transport companies. This way, Team Road would have better odds to utilize identified possibilities for cost reductions. Furthermore, an improved information system would also facilitate continuous evaluation of the suppliers. This is particularly important if the cooperation with the suppliers is increased, but also in the current situation. We consider Team Road’s existing assessment of the suppliers inadequate and maybe misleading, since it is mainly based on evaluations performed by the suppliers themselves. If Team Road was provided with correct and accurate information, a continuous evaluation of the suppliers could be performed. Finally, an improved information system would facilitate Team Road’s daily work. The lack of complete information results in a lot of unnecessary operative work, where for example requested reports or information would both be easier to generate and to distribute within the organisation if a well functioning information system would be established. Currently, Tetra Pak is in the process of implementing SAP R/3 and we recommend Team Road to investigate the possibilities of this information system.


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10.3.2 Structure central logistics functions Most companies today have realized the importance of having an efficient logistics unit. The most striking discovery when performing this research is the fact that neither Tetra Pak nor Sidel have a central logistics department. We believe that a central logistics department at Tetra Pak and Sidel would facilitate the work of Team Road, and probably for the whole department of TLGT&T. DeLaval has a central logistics department, which has resulted in a clearly structured distribution system. This allows Team Road to work more strategically. TLGT&T is supposed to be a purchasing department focused on strategic procurements. In the work carried out with Tetra Pak, Team Road can currently not completely focus on the purchasing process since there are many logistics problems that need to be solved during this process. Tetra Pak’s current distribution system is decentralised, with a number of special cases, which further complicates the purchasing process and counteracts Team Road’s efforts to find a holistic solution. We strongly recommend both Sidel and Tetra Pak to introduce centralised logistics units. However since Tetra Pak does not have a structured logistics department yet, and in order for Team Road to have the possibility to optimize Tetra Pak’s road freight in a competitive manner, other resources such as simulation software and integrated information system are needed.

10.3.3 Improve the contracting phase Another general thought, developed throughout the research, is regarding the contracting phase. We believe it is too time consuming to ask for RFQ’s from as many suppliers as Team Road does. Besides receiving bids from the 55 current suppliers, more than 90 potential suppliers submitted an offer. To evaluate these suppliers on all Tetra Laval’s flows is very time consuming and we believe Team Road should question whether it is necessary to involve such a high number of suppliers.


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Chapter 11 Generalisation

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11 Generalisation This research is focused on Team Road and the European goods flows. In order to enable other parties than Team Road to benefit from this research and its conclusions, a generalisation is performed. By lifting the thesis one abstraction level, hopefully other departments within Tetra Laval are able to benefit from this research (internal generalisation). Furthermore, the chapter also aims at generalizing this research to be applicable to other companies (external generalisation). In addition to the external and internal generalisation, the method and line of action used in this research could be generalised to other students’ and researchers’ work. Before identifying possible areas of improvements, it is important to create a clear map of the current situation. This is not only valid for problems within the area of distribution and logistics, but could also be applied to for example organizational problems and cost analysis.

11.1 Internal generalisation Apart from Team Road, there are other functions within the department TLGT&T that could benefit from this research, both from the line of action and from the results. To have a clear map of the current situation could for example be very useful also for Team Sea. Even though the flows might be of different character, it could be beneficial to highlight important flows in coming negotiations with shipping companies. Furthermore, since both Team Sea and Team Air and Express work with transports across nations, a similar analysis of the trade balances could be performed. Furthermore, an analysis of the supplier base could be beneficial to perform for all functions within TLGT&T. This is valuable in order to decrease the administration costs and to enable close relationships with a few important suppliers.


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Since TLGT&T is a centralised department, purchasing transports for Tetra Laval, a generalisation with respect to distribution and transport suppliers cannot be made to other departments within the group. However, the analysis of the transport supplier base could be valuable and carried out in other departments. They could conduct analysis and classification similar to the ones in this research, but instead focus on the suppliers, which are providing raw material, components etc. This kind of analysis and classification could facilitate a more efficient supplier base management. Since, it would give indications on which suppliers that could be possible to phase out and which to maintain and finally which to establish a close relationship with.

11.2 External generalisation As mentioned in the market description, Tetra Laval is a unique company in the sense that no other company provides the same range of products. However, a generalisation could be made to other multinational companies and in some way also to smaller companies. Many large multinational companies experience similar problems as Tetra Laval, due to the absence of a complete picture. Many industries are characterized by mergers and acquisitions, which result in large industry groups with decentralised organisation structure. In such companies, few companies have a holistic view of the distribution structure and therefore, performing mapping and analysis of the goods flows could be valuable, and result in large cost savings. Furthermore, possible return flows with high volume utilization in both directions could be identified. These return flows could be beneficial to utilize in order to obtain better contract conditions with lower prices, higher service level etc. The analysis also creates an awareness of the volume utilization and the possibilities for co-loading. The generalisation performed above is not relevant to smaller companies, since they can more easily obtain an overall picture of the current situation. However, it is beneficial for all companies, independent of size, to have a well structured and managed supplier base. Therefore, the analysis of the supplier base could be generalised to other companies. The analysis could also identify areas that, if altered, would make the administrative work more efficient and facilitate a possible establishment of close relationship with a few key suppliers. The analysis and development of close relationships is particularly important for manufacturing companies, since they may want to involve the suppliers early in the production phase.

Chapter 11 Generalisation

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In addition to the above-mentioned areas, the research illustrates the importance of complete and accurate information, which should be accessible for all parties. This is a common problem in many companies. Today, there is a large supply of information systems and software tools supporting most functions within a company, which could be utilized to solve this problem. Finally, the results show the importance of a centralised logistics function. Logistics is important and should be given a lot of attention in all companies. Large cost savings can be achieved by efficient logistics, which in turn could be facilitated by the introduction of a centralised logistics department.


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Chapter 12 Suggestions for future studies

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12 Suggestions for future studies These are suggestions of areas that could be subject for future studies. These have arisen during our research and should only be seen as our thoughts of potential research areas. We have not further examined the possibilities of actually realizing these potential research areas. However, we hope these suggestions could provide inspiration for Tetra Laval, TLGT&T as well as logistics students in the future.

12.1 Future distribution hub in southern Sweden Tetra Laval has several plants in Sweden producing goods, which are later distributed to customers all over Europe. There are also many goods transported to Sweden from Europe. Most of these transports are performed via southern Sweden by ship to/from Germany. The outbound transports from the Swedish plants to Europe have an average volume utilization of 60 per cent, which imply that a use of co-loading could be possible. Therefore, we believe that having a distribution hub in this area would be valuable for Tetra Laval. However, an establishment of a distribution hub would imply large investment, and it would therefore be necessary to provide research focusing on the advantages, disadvantages and possibilities of introducing such a hub in southern Sweden.

12.2 Standardised information system As mentioned earlier, Team Road do not use any standardised information system. We believe it is crucial to have open and clear communication within the organisation. Therefore we think that Team Road could benefit from establishing a more structured information flow with its transport suppliers and the plants. This way Team Road would ensure receiving more accurate and complete information, which could facilitate both their strategic and daily work, and result in improved control and management. However, in order to achieve the potential advantages a standardised information system would imply, further research would be necessary.


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12.3 Increase the use of rail distribution Currently, Team Road is only utilizing the possibility of rail distribution in Europe in a small scale. The environmental issue is an important factor and is considered in Team Road’s work when for example contracting suppliers as well as developing the truck distribution system. We believe it could be valuable for Team Road to look into the possible benefits from making more use of rail distribution, especially since the truck transport market is facing increasing tax regulations. This will lead to increased costs for the customer, in this case Team Road, and is in addition to mentioned environmental aspects another incentive to look further into the possibilities of utilizing rail distribution.

12.4 Centralised logistics function at Tetra Pak We have already mentioned how Team Road is affected by the subgroup’s different organisation structure regarding the logistics function. Tetra Pak does not have a centralised logistics department, and we find it surprising that a large multinational company such as Tetra Pak has not fully realized the importance of logistics and efficient supply chain management. We believe that Tetra Pak would benefit from having a centralised logistics unit, which would be responsible for the establishment of a structured distribution system. This is a large investment and change, and therefore a thorough investigation would be needed.

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References Literature Aronsson, H., Ekdahl, B. and Oskarsson, B. (2003) Modern Logistik – för ökad lönsamhet. Lund. Liber AB. Ballou, R. H. (2004) Business Logistics/Supply Chain Management. New Yersey, USA. Pearson Prentice Hall. Arbnor, I. and Bjerke, B. (1994) Företagsekonomisk metodlära. Lund. Studentlitteratur. Björklund, M. and Paulsson, U. (2003) Seminarieboken – att skriva, presentera och opponera. Lund. Studentlitteratur. Björnland, D., Persson, G. and Virum, H. (2003) Logistik för konkurrenskraft – ett ledaransvar. Lund. Liber AB. Davidsson, B. and Patel, R. (1994) Forskningsmetodikens grunder. Lund. Studentlitteratur. Eriksson, L. T. and Wiedersheim, P. F. (1991) Att utreda, forska och rapportera. Malmö. Almqvist & Wiksell. Gadde, L-E. and Håkansson, H. (1998) Professionellt Inköp. Lund. Studentlitteratur. Holme, I. M. and Solvang, B. K. (1986) Forskningsmetodik – om kvalitativa och kvantitativa metoder. Lund. Studentlitteratur. Kaminsky, P., Simchi-Levi, D. and Simchi-Levi, E. (2003) Designing & Managing the Supply Chain – Concepts, Strategies & Case Studies. Singapore. McGraw-Hill. Lumsden, K. (1998) Logistikens grunder. Lund. Studentlitteratur. Paulsson, U. (1999) Uppsatser och rapporter – med eller utan uppdragsgivare. Lund. Studentlitteratur.

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Storhagen, N. G. (1999) Godstransporter och logistik – kunskapsläge och forskningsbehov. Lund. Studentlitteratur och KFB. van Weele, A. (2002) Purchasing and Supply Chain Management – Analysis, Planning and Practice. Singapore. Thomson. Articles Gammelgaard, B., (1997) “The Systems Approach in Logistics” Proceedings from the NOFOMA Conference. 1/1997. Pp 9-20. Kraljic, P., (1983) “Purchasing Must Become Supply Management” Harvard Business Review. Sep-Oct 1983. Pp 109-117. Theses Berglund, M. (2000) Strategic Positioning of the Emergin Third-Party Logistics Providers. Linköping. Stefansson, G. (2004) Collaborative Logistics Management – The Role of Third-Party Service Providers and the Enabling Information Systems Architecture. Göteborg. Public company sources Annual report of Tetra Laval Group (2004) Malmö. Sund Kommunikation. Non public company sources NTM Questionnaire: Environmental Evaluation of Suppliers Pertaining to Transport of Goods and Personnel PowerPoint Presentation Team Road. TLGT&T. PowerPoint Presentation Tetra Laval Group. TLGT&T. TLGT&T Questionnaire: Quality Evaluation of Suppliers Traffic Safety Questionnaire: Road Freight Breakfast Seminar, Borgelin, J., 2005-10-11 Interviews Kristian Pettersson. Traffic conductor. TransFargo. Lund. Telephone Interview 2005-11-30. Lennart Andersson. Inbound Transports Sweden. Frigoscandia. Lund. Telephone Interview 2005-11-21. Patrik Johnfors. Domestic Transports Sweden. Frigoscandia. Lund. Telephone Interview 2005-11-21.

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Robert Ingvarsson. Manager TLGT&T. Tetra Laval. Lund. Interview 2005-10-21. Thomas Johansson. Price analyst. Schenker. Malmö. Interview 2005-12-02. Ulf Tobiaesson. Route planner. Schenker. Malmö. Interview 2005-12-02. Electronic references http://crossborder.practicallaw.com/2-200-5556. 2005-09-10. http://europa.eu.int/comm/transport/road/index_en.htm. 2005-11-07 http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04. http://europa.eu.int/eur-lex/lex/LexUriServ/LexUriServ.do?uri=CELEX:32004D0124:SV:HTML, 2005-11-04 http://europa.eu.int/scadplus/leg/sv/lvb/l24208.htm. 2005-11-07 http://europa.eu.int/scadplus/leg/en/lvb/l24089.htm. 2005-11-07 http://www.akeri.se/pagedownload/Sveriges+Åkeriföretag/Internationellt/Blandad+information/Vikter+och+dimensioner/Maxvikter.pdf. 2005-11-21 www.alfalaval.com. 2005-11-08 www.delaval.com. 2005-09-01 www.elopak.com/site/cms.jsp?node=44, 2005-12-09 www.eraa.org/intranet/documents/43/495/051012BetterPurchsingTechniques.pdf. 2005-11-18 www.eu-upplysningen.se/templates/EUU/standardRightMenuTemplate____2452.aspx. 2005-11-21 www.freshfields.com/practice/comptrade/publications/pdf/10831.pdf. 2005-09-10. www.sidel.com. 2005-09-01. www.tetralaval.com. 2005-09-01. www.tetrapak.com. 2005-09-01.

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Informal conversations Björn Lindahl. Team Road. TLGT&T. Tetra Laval. Lund. Kristian Malm. Team Road. TLGT&T. Tetra Laval. Lund. Lina Kruger. TLGT&T. Tetra Laval. Lund. Per Nilsson. Team Road. TLGT&T. Lund University. Lund. Robert Lindroth. Engineering Logistics. Lund University. Lund. Ymer Hjelmqvist. Team Sea. TLGT&T. Tetra Laval. Lund. General sources http://lexikon.nada.kth.se/cgi-bin/sve-eng www.elopak.com. www.google.com www.krones.com/index.htm. www.map24.se www.sig-group.com. www.sipa.it. www.urola.com. www.wikipedia.com

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Appendices

Appendix A – Abbreviations and definitions Approx. consignee city: Large city situated in the close vicinity of the

actual consignee city (not further than 50 km)

Average weight: s transportof no Total

weightTotal weightAverage =

CBM: Cubic Meter, 1 CBM: 250 – 333 kg Chargeable weight: Highest taxable weight CMR: Convention on the contract for the international

carriage of goods by road Control tower: A company or supplier that handles all the

contacts with different transport companies, and books the transports using TLGT&T’s contracts

Country codes: In some tables the country codes has been used

instead of the full name of the country. A table of all country codes used in this report can be found in appendix F

Flow: A number of transports from a certain plant to a

certain consignee city FTL: Full TruckLoad. The maximum weight of a full

truckload varies between the countries. In this thesis an average of 25 000 kg has been used

Gross weight: The actual weight of the goods Inbound Glinde: Shipments from a hub in a certain country to the

central distribution centre in Glinde

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KPI: Key Performance Indicators LDM: Load Meter, 1 LDM: 1 650 – 2 000 kg Outbound Glinde: Shipments from the central distribution centre in

Glinde to the hub in a specific country Pruning process: Process used when reducing the supplier base Return flow: Distribution flows in both directions between

two destinations RFQ: Request For Quotation Team Road: The division within TLGT&T that is

responsible for Tetra Laval’s road and rail freight, mainly in Europe

TLGT&T: Tetra Laval Group Transport and Travel Triangular flow: The three flows from A to B, from B to C and

from C to A

Volume utilization Volume utilization00025

truckloada ofWeight =

Weight: Weight = maximum (gross weight, chargeable

weight). If neither figures for neither gross weight nor chargeable weight is available:

000256.13

LDMWeight ·=

3PL: Third-Party Logistics

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Appendix B - Description of the data This appendix provides a thorough description of the data that has been used as a basis for this research. The research is based on large amounts of statistics covering the three independent industry groups’ transport information for 2004. All data is based on information provided by the different transport companies. We received Excel files, containing data concerning Tetra Pak’s, DeLaval’s and Sidel’s transports respectively. The information regarding Tetra Pak’s transports was given in a large file, while the information considering DeLaval and Sidel were given in various smaller Excel files. The files of Tetra Pak and Sidel contain almost the same data. In both files, only information about the outbound shipments from each plant is considered, i.e. no information about the supplying flows into the plants is given. The inbound flows are generally taken care of by the suppliers. Therefore, they are not Tetra Laval’s responsibility. Furthermore, both excel files are divided into a number of sheets, providing all information about each plant. Each sheet contains information about the transport itself, the shipper and the consignee. The data available about the transport itself are; transport company, shipping date, gross weight (kg), chargeable weight (kg), volume (LDM), volume (CBM), terms of delivery, currency and costs (given in the stated currency). The information about the shipper contains; the name of the shipper, shippers address, city, zip code and country. In the same way, data is available about the consignee; the name of the consignee, consignee address, city, zip code and country. This information is available for each single shipment. One shipment, from the plant to a certain consignee, is represented as one row in the Excel file. Furthermore, one shipment is maximum one full truckload. The information about DeLaval is arranged in a somewhat different way. As mentioned earlier, the goods flows of DeLaval have a totally different structure than Tetra Pak and Sidel, using a hub and spoke structure for all its shipments. Data about DeLaval’s shipments is structured in Excel files, where each file contains all the data about one country. However, these documents are not as uniform as the files of Tetra Pak and Sidel. Nevertheless, in these documents, most of the files are divided into sheets, with one sheet covering the business requirements, one sheet providing information about the outbound shipments to Glinde and in some cases also

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a sheet with data covering the domestic shipments. Each of the sheets contains data in the same format as the documents for Tetra Pak and Sidel, where each row represents a shipment. However, the information that was provided is somewhat less informative, only data about shipping date, shippers address, city and country, name of the consignee, consignee city, address and country and finally gross and chargeable weight is available. The structure of the document providing information about DeLaval’s shipments from Germany differed to some extent from the others. This file contained one sheet with information about the business requirements and one sheet for each country receiving shipments from Glinde. However, the data provided about the various countries are as informative as the other documents. The only information available is about what days a week shipments were made and an average of how big the truckloads were. Besides the statistics of all shipments, all the existing contracts with Tetra Laval Group’s current transport suppliers were given to us. In the contracts, which are grouped by country, freight rates for all routes with various loads can be found. For each destination, the contracts provide information regarding departure dates, transit times and arrival times. Furthermore, information about freight calculations such as maximum gross weight, maximum number of load meter and rules for freight calculations is also provided. As mentioned above, we received large amounts of data and statistics. However, a major problem is that a lot of data is lacking and the information is incomplete. Considering the sheets covering Tetra Pak’s shipments, in most cases either the information about consignee city or the information about consignee zip code is missing. It is also very rare to find a shipment with complete information concerning gross weight, chargeable weight, volume in load metres and volume in cubic metres. Another important factor is that shipping date has not been registered on all shipments. The provided documents with information do not only cover the relevant flows, a lot of information concerning flows that are out of the scope of this thesis was also given to us. An example of this is all DeLaval documents with domestic shipments.

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Appendix C – Structure of pivot tables This appendix illustrates the structure of the pivot tables used when mapping the current situation. The tables do not show all the data, but only an extraction to illustrate the construction. This table shows the structure of the pivot tables used when identifying the largest flows on city level.

This table shows the structure of the pivot tables used to get an overview of the flows between the different countries.

Shipper country

Consignee Country Data Total

NO DE Count of No 236 Sum of Weight 449 986

PL DE Count of No 208 Sum of Weight 5 200 000

SE FR Count of No 469 Sum of Weight 8 128 219

AT Count of No 152 Sum of Weight 1 568 994

Shipper country

Consignee Country

Approx. Consignee City Data Total

FR IT Parma Sum of Weight 45 Count of No 1

N/A Sum of Weight 245 600 Count of No 16

NL N/A Sum of Weight 1355 Count of No 1

NO N/A Sum of Weight 22 000 Count of No 1

AT DE Glinde Sum of Weight 3265 Count of No 4

BE DE Glinde Sum of Weight 16 647 854 Count of No 728

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This table shows the structure of the pivot tables used to get an overview of the various transport suppliers.

Transport company Plant

Consignee Country

Approx. Consignee City Data Total

Irktrans Moerdijk IE Donegal Sum of Weight 404 060 Count of No 18

Dublin Sum of Weight 137 085 Count of No 5

Limerick Sum of Weight 4 475 Count of No 3

Newtonards Sum of Weight 2 775 Count of No 1

Torres Sunne FI Jyväskylä Sum of Weight 6 196 203 Count of No 182

Seinajoki Sum of Weight 260 400 Count of No 15

Seinäjoki Sum of Weight 544 000 Count of No 34

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Appendix D – Covered area by current suppliers This appendix aims at providing an overview of the areas covered by different transport companies. The first table shows from what countries the different suppliers have submitted an offer on the export transports. The second table shows what countries the different transport companies have submitted an offer on the domestic transports. Contracted Suppliers Export

Forwarder SE BeNeLux DK HU ES+NO+

FI+CH FR GB DE UA AT+ IT PL

A Transport Company x

Alloin

Andersons

B Transport Company

Bakker Spedition x x x x x

BEC Freight x x x x x x x x x x x

Boslaw x x x x

C Transport Company x

Cave

D Transport Company x x

E Transport Company

Easy Transports x x x x x x x

EPL

F Transport Company

Fast Spedition x x x x x

Fritte Logistics

G Transport Company

Geodis

H Transport Company Hearne Logistics Preece x

HLM Ferrymasters x x x x x x x x

I Transport Company x

ImEx x x x x

Irktrans Logistics x x x x x x x x

J Transport Company

K Transport Company x

Karl Jönsson x x

174

Contracted Suppliers Export

Forwarder SE BeNeLux DK HU ES+NO

+FI+CH FR GB DE UA AT+IT PL

L Transport Company x

Linds Logistics x x x x x x x x x

LMS

M Transport Company

MM Logistics x x x x x x x x x x x

N Transport Company Neel Shipping Company x x x x x x x x x x

O Transport Company x

OptimLogistics x

Optitrans

P Transport Company x

Prinzo

Q Transport Company x

R Transport Company

S Transport Company

Schwartz Logistics x

Smith’s Transport

Sparre Spedition x x x x x

STAR x x x x

Suncant x x x

T Transport Company

Torres Transport

TransEurope

Wire Logistics x x

World Spedition

Wrocsped x x x x

WWL x x x x x x x x x x x

XY Logistics x

175

Contracted Suppliers Domestic

Forwarder SE DE BeNeLux ES+PT NO DK IT GB AT IE

A Transport Company x x x x

Alloin

Andersons

B Transport Company

Bakker Spedition x

BEC Freight x x x x x x

Boslaw x

C Transport Company

Cave

D Transport Company x

E Transport Company

Easy Transports

EPL

F Transport Company

Fast Spedition x x

Fritte Logistics

G Transport Company

Geodis

H Transport Company

Hearne Logistics Preece

HLM Ferrymasters

I Transport Company

ImEx

Irktrans Logistics

J Transport Company

K x x

Karl Jönsson x

L Transport Company

Linds Logistics

LMS x

M Transport Company

MM Logistics x x x x x

N Transport Company

Neel Shipping Company x x x x x x

O Transport Company

OptimLogistics

176

Contracted Suppliers Domestic

Forwarder SE DE BeNeLux ES+PT NO DK IT GB AT IE

Optitrans

P Transport Company

Prinzo

Q Transport Company

R Transport Company

S Transport Company x

Schwartz Logistics

Smith’s Transport

Sparre Spedition

STAR

Suncant

T Transport Company

Torres Transport

TransEurope

Wire Logistics

World Spedition

Wrocsped

WWL x x x x x x x

XY Logistics

177

Appendix E – All flows on country level This appendix provides an overview of all flows on country level. The first matrices shows all flows on country level, expressed in tonnes.

From

\To AT BE BA BG HR CZ DK EE FI FR DE GB GR HU IE IT

AT 3

BE 16648

DK 894 562 436 275 652

FI 432

FR 141 2333 326 246

DE 3900 1300 3776 5200 6500 3900 1300 2600

GB 49 2134 25 176 775 796 644 866 6258 1987

HU 475 25 1450 13825 500 11525 50 75

IT 5795 144 1 23 49 47 97 2784 428 49 27

NL 44 987 20 48 588 847 74 733 14946 5424 102 380 548 2249

NO 450

PL 5200

ES 1800

SE 1569 1216 407 88 98 101 7851 71 18584 8128 30304 14889 1180 864 2574 5178

CH 221

UA 26

178

From

\To LV LT LU NL NO PL PT RO RU SI SL ES SE CH TR UA YU

AT

BE

DK 335 2600 1174 29 216

FI

FR 1 22 53 312

DE 6500 6500 2600 1300 2600 6500 2600

GB 281 38 1906 2244 876 60

HU 100 14331 1075 1725 9150 1475 75 2450

IT 562 85 62 83 197 63 83 870 1074 116 24 61 143

NL 8 239 1870 14 8 8896 142 233 2449 471

NO

PL

ES

SE 48 20 0 6930 9275 5263 661 94 13494 349 93 9771 2646 501 1293 609

CH

UA 3813 215 25798 9 0,3

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The following matrices shows all flows on country level, expressed in total number of transports.

From\To AT BE BA BG HR CZ DK EE FI FR DE GB GR HU IE IT

AT 4

BE 728

DK 47 30 35 41 31

FI 136

FR 7 624 18 17

DE 156 52 260 208 260 156 52 104

GB 3 105 1 7 33 42 126 38 470 101

HU 19 1 58 553 20 461 2 3

IT 322 12 1 1 3 2 34 364 32 4 3

NL 7 162 2 4 44 77 19 109 1 427 316 17 22 27 155

NO 236

PL 208

ES 72

SE 152 126 22 16 52 17 499 9 916 469 1 698 1 322 96 128 262 806

CH 96

UA 5

180

From\To LV LT LU NL NO PL PT RO RU SI SL ES SE CH TR UA YU

AT

BE

DK 26 104 60 6 27

FI

FR 1 1 3 5

DE 260 260 104 52 104 260 104

GB 11 3 76 91 54 5

HU 4 730 43 69 366 59 3 98

IT 27 9 9 7 21 4 6 58 383 48 1 4 10

NL 2 19 88 1 2 435 17 20 169 56

NO

PL

ES

SE 15 8 2 372 520 283 77 22 633 52 42 677 184 66 80 58

CH

UA 198 9 1

444 3 1

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Appendix F – Country codes The table below provides an overview of the country codes, and the corresponding country.

ISO Country

AT Austria

BE Belgium

BG Bulgaria

BY Belarus

CH Switzerland

CZ Czech Republic

DE Germany

DK Denmark

EE Estonia

ES Spain

FI Finland

FR France

GB Great Britain

GR Greece

HR Croatia

HU Hungary

IE Ireland

IT Italy

LT Lithuania

LU Luxembourg

LV Latvia

NL Netherlands

NO Norway

PL Poland

PT Portugal

RO Romania

RU Russia

SE Sweden

SI Slovenia

SK Slovakia

TR Turkey

UA Ukraine

YU Yugoslavia

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Appendix G – Return flows on a city level This section provides an overview of the flows where goods are distributed in both directions, so called return flows. Below the return flows on a city level are stated, in alphabetical order of the first column. Both the total weight and the number of transports performed are stated for each return flow.

First flow Return flow

From To Country Weight (tonnes)

No of trsp 2004

From To Country Weight (tonnes

)

No of trsp 2004

Fjällbacka Rotterdam NL 1 114 52 Moerdijk Göteborg SE 6 2

Fjällbacka Wrexham GB 398 Wrexham Göteborg SE 2

Hjörring Modena IT 652 31 Modena Aalborg DK 47 2

Hjörring Rotterdam NL 335 26 Moerdijk Aalborg DK 40 10

Glinde Altishofen CH 2 600 104 Altishofen Glinde DE 221 96

Budapest Hannover DE 950 38

Glinde Budapest HU 1 300 52 Budapest Bremen DE 900 36

Budapest Hamburg DE 225 9

Glinde Groningen NL 6 500 260 Groningen Glinde DE 339 566

Glinde Jönköping SE 6 500 260 Jönköping Glinde DE 6 500 260

Glinde Linz AT 3 900 156 Linz Glinde DE 3 4

Glinde Madrid ES 2 600 104 Madrid Glinde DE 1 800 72

Glinde Milano IT 2 600 104 Milano Glinde DE 115 173

Glinde Northampton GB 3 900 156 Northampton Glinde DE 189 102

Glinde Oslo NO 6 500 260 Oslo Glinde DE 582 236

Glinde Paris FR 6 500 260 Paris Glinde DE 1 244 563

Glinde Rakoniewice PL 2 600 104 Rakoniewice Glinde DE 5 200 208

Glinde Turku FI 5 200 208 Turku Glinde DE 432 136

Lund Aalborg DK 246 35 Hjörring Malmö SE 3 4

Lund Budapest HU 150 60 Budapest Malmö SE 75 3

Lund Cardiff GB 623 62 Wrexham Malmö SE 583 32

Lund Leeds GB 310 31 Wrexham Malmö SE 583 32

LundMöSk Rotterdam NL 2 116 129 Moerdijk Malmö SE 1 853 93

Moerdijk Karlskrona SE 114 22

Modena Malmö SE 475 77 Lund Modena IT 2 814 410

Lund Bologna IT 766 71

Moerdijk Gyor HU 361 Budapest Rotterdam NL 100

Moerdjik Modena IT 1 918 117 Modena Rotterdam NL 61 7

Stålvall Modena IT 274 75 Modena Göteborg SE 11 27

Lund Wrexham GB 247 20

Wrexham Malmö SE 583 32 Lund Manchester GB 484 61

Lund Leeds GB 310 31

Lund Liverpool GB 84 29

Wrexham Modena IT 1 917 97 Modena Wrexham GB 16 3

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Appendix H – Trade balances The table shows the results from the calculations of trade balances. The balance between two countries is calculated by dividing the export with the import. A comparison has been made between the Tetra Laval’s trade balance, and the balance of the contracted transport company, and is considered favourable for Tetra Laval if they are opposite.

Export Trade Balance - export/import

From To Tetra Laval Transport Company

Favourable for Tetra Laval

Germany Switzerland 0.93 1 No

Germany Norway 0.91 0.65 No

Germany Great Britain 0.81 N/A N/A

Germany Spain 0.69 0.88 No

Finland Germany 0.65 0.69 No

France Italy 0.5 0.6 No

Germany Poland 0.5 1.22 Yes

Italy Sweden 0.48 1.48 Yes

Sweden Netherlands 0.45 1.64 Yes

France Great Britain 0.43 N/A N/A

France Germany 0.42 1.30 Yes

Denmark Netherlands 0.34 0.61 No

Italy Great Britain 0.32 2.52 Yes

Germany Italy 0.29 0.83 No

Netherlands Hungary 0.18 0.56 No

Germany Netherlands 0.18 0.73 No

Germany Sweden 0.15 2.06 Yes

Denmark Germany 0.12 N/A N/A

Germany Hungary 0.11 N/A N/A

Denmark Italy 0.10 1.49 Yes

Italy Netherlands 0.058 1.12 Yes

Sweden Great Britain 0.04 0.68 No

Ukraine Sweden 0.038 1.11 Yes

Austria Germany 0.03 1.44 Yes

Sweden Hungary 0.02 N/A N/A

Denmark Sweden 0.012 1.5 Yes

France Netherlands 0.0092 1.08 Yes

184

Appendix I – Interview Questions To gain a deeper insight into the transport market and its players, interviews with three different transport companies, Frigoscandia. TransFargo and Schenker, were performed. Robert Ingvarsson, manager of TLGT&T, was also interviewed to get a better understanding of TLGT&T’s history and purpose. To facilitate a rewarding discussion, each interviewee had already received the questions before the interviews were carried out. The questions asked in the interview are stated below. Besides these questions, spontaneous follow up questions were asked to attain a better discussion. Questions to transport company representatives: 1. What factors need to be taken into consideration when performing route

planning? 2. Is each rout optimized for every single transport, or is there a standard to

follow? 3. How do you handle part-loads? 4. To what extent is co-loading utilized? 5. Is any documentation required to gross the nation borders within the

European Union. 6. How are transports from Sweden to Europe carried out? Mainly by boat

to Germany or the bridge to Denmark? 7. To what extent do EU’s country borders affect route planning? Do you

for example. rather plan a route going around Switzerland than through Switzerland?

8. How are the transports to Great Britain in general carried out? 9. What general factors affect the driving time? 10. What regulations exist regarding a driver’s working time? Are they set

by each country, or by the European Union? 11. What requirements need to be fulfilled in order to implement a round

trip? 12. To what extent do you utilize return flows? What obstacles are there? 13. What are the regulations regarding weight, length and width of trucks in

the European countries? Do they differ between the countries? 14. What additional regulations need to be considered? 15. Are the rules set by each country or by the European Union?

185

Questions to Robert Ingvarsson, Manager TLGT&T: 1. When was TLGT&T founded? 2. For what reason was TLGT&T founded? What were the underlying

needs? 3. What was the focus when TLGT&T was founded, and how has it

changed throughout the years? 4. What does the future look like? Expansion? 5. TLGT&T is a non profit organization. How is the department financed? 6. What tasks do the different functions Sea, Road, Air and Express have? 7. Do you transport goods by rail? On what stretches? 8. How are the different industry groups treated by TLGT&T? Do you give

any special treatment to Tetra Pak since it is the largest of the three?

Documents

Tetra Laval’s European Road Freight - LTH · Tetra Laval’s European Road Freight ... which consists of Tetra Pak, DeLaval and Sidel, ... 3 Company presentation