We were used to year-on-year GDP growth, and the only
debate was whether it would be 2% or 4%,” he smiled. “Since
then, we have learned how to deal with volatility and we
strongly believe that the volatility we see today is here to stay.
Five years ago, the freight budgeting process was about
expecting a little bit of slack in January, February and March
and then a recovery. The question then was when peak season
would hit and that was how you did your budget every year. I
don’t remember any year since 2008 which has been like that
and I don’t think we’re going to get back to it any time soon.”
Operational flow, performance tracking and tracking of
material in transit are three areas which are heavily dependent
on IT. Panalpina has worked really hard over the last few years
to integrate its systems.
We started worldwide about ten years ago to bring
everyone onto the same operating platform and that enabled
us to link the data that we were capturing into one database,
make it available to the organisation and also convert some of
that information for our clients to enable tracking and
tracing,” explained Kuehner. “The big topic over the last ten
years was integration and we have seen the fruits of that in the
last two to three years. We can now feed out information more
quickly and more cohesively and give the client what he
actually wants. The client doesn’t want to know everything
about his container; he wants to know when something goes
wrong, and then he wants to know what we are going to do
about it.
Moving forward, now that we have everyone on the same
platform we have made a huge investment, both monetary and
resource-wise, into changing the base programme onto an
SAP platform. This involves a lot of work, but it sets us up for
the future because it is the core of our operating engine and it
drives performance measurement and track and trace for
In an ideal world there would be one seamless IT web
where information could be exchanged effortlessly among all
parties. Kuehner believes that this is not a pipe dream.
There are excellent platforms out there in that middle-
man segment of brokering information,” he said. “They allow
our clients to make better choices and they deliver
information back and forth. It really is a question of what a
company’s specific information strategy is. Do they want to
work with their own proprietary system or on our platform, for
example in a warehouse where we do their inventory? There
are several ways to link information and that is the key to
seamless integration. It can be done through a third party or
on similar systems; it can be done on either system; all these
ways work.
Technology is such a fast-paced area that right now we
may have one opinion but, in a few years, we will look back
and say that we should have seen the signs of the times and
gone in another direction. Today, the brokers are an
interesting alternative. It is extremely important for our clients
to get information in a timely and actionable manner and,
when we win a new account, that we can hook up quickly with
the client without the need to re-create the whole IT system.”
Logistics service providers are being asked to carry more
of the commercial risk that would have been found in
production 10 or 15 years ago. The vertical integration of the
supply chain makes it even more challenging. Kuehner
believes that companies need to analyse the risk on a case by
case basis.
We are very, very careful and diligent about the kind of
risk we take on,” he said. “As companies compete in a really
competitive environment there is a natural tendency to try to
shift not only cost over to service providers but also risk. It is a
continuous trend and I wouldn’t say that it goes too far. It is
an individual decision where to engage and at what level of
risk. If there is an up-side, it can be set against the potential
downside risk. Both need to be in equilibrium. We will not
take on risk that we feel we cannot manage or is
The ultimate goal should be to optimise logistics, not just
as a standalone function, but as a constituent part of the
entire business and supply chain. In practice, logistics
decisions are far too often taken in isolation and too late in
the product or process lifecycle.
There are companies which do this really well and take a
holistic view of their supply chain,” said Kuehner. “They
integrate procurement and sourcing strategies with their
logistics and supply chain strategies. We also, however, see
other companies which set up a manufacturing plant
somewhere and bring their logistics people in two years later
when the factory is up and running but has no infrastructure
to get anything to the port or the airport. It comes down to the
level of importance given to supply chain as a function.
I am convinced that the Icelandic volcano lifted a lot of
supply chain people into a higher echelon in certain large
companies. It hasn’t happened everywhere but it has been a
major shift compared to what we saw in the past. It comes
down to what people’s individual objectives and KPIs are. A
sourcing person should not be taking decisions without
considering logistics strategies and vice versa. Service
companies can help because they have visibility. Often, when
we have our regular business reviews with our clients, they are
interested, of course, in the performance but they are also
interested in our suggestions as to how they can improve their
own business processes. I don’t think this openness was there
to the same extent five or ten years ago.”
Environmental awareness is an area which can act as a
differentiator between companies vying for a contract. It is not
Technology is
such a fast-
paced area that
right nowwe
may have one
opinion but, in a few years,
we will look back and say
that we should have seen
the signs of the times and
gone in another direction.”
Lucas Kuehner, Global Head of Air Freight,
Panalpina Group