This week we’re joined by the CEO of Vinturas, Jon Kuiper. Jon was the former head of Koopman Logistics Group and has years of experience as a senior executive and a CEO in the Finished Vehicle Logistics (FVL) industry. He joins us to talk about how Vinturas is using blockchain technology to revolutionise the FVL industry.
Jon Kuiper explains what blockchain technology means in the FVL industry. Blockchain technology or distributed ledger technology allows Vinturas to create an infrastructure which fosters collaboration between FVL companies and all other stakeholders in the ecosystem. This in depth collaboration allows for a single source of truth amongst all players in the FVL ecosystem, which in turn can bring huge benefits for all network participants.
According to The Association of European Vehicle Logistics, Finished Vehicle Logistics (FVL) are the activities that take place after a new vehicle leaves the factory until the point when it reaches the customer. The FVL industry is a highly specialised sub-section of the transportation industry with dedicated storage warehouses and skilled drivers to ensure smooth delivery without damages to the high-value product.
FVL is part of the automotive logistics market which according to a study by Global Market Insights is valued at over USD 115 billion in 2018 and is estimated to grow to USD 170 billion by 2025.
In 2017 Supply Chain Worldwide Survey surveyed 623 supply chain professionals across 17 different countries and concluded that only 6% of firms were able to offer any type of supply chain visibility. This, more than ever presents a huge problem across supply chains which need to be addressed.
Complexity
The finished vehicle supply chain is very complex and the complexity is only increasing. Cars can be transported from the original equipment manufacturer (OEM) through potentially 4 modes of transport road, rail, maritime and river before it reaches the car dealership further increasing the complexity. FVL often spans different countries and these countries have their regulations and rules which will need to be abided to. Also, it’s not one firm which controls the whole supply chain. Products are often passed between 3 or 4 LSP’s in the supply chain before it reaches the car dealership creating multiple handover points between different logistic service providers.
Customer demands
Amazon certainly leads the way in producing extremely efficient supply chains having spent billions in R&D in the last 20 years perfecting their supply chain. The ‘Amazon Effect’ has meant that expectations of supply chains in many industries have risen in recent years. Now consumers expect shorter delivery times, are less tolerant of mistakes or late deliveries. Importantly customers expect to know where their product is and how long it’ll take to reach them so like Jon Kuiper says they know ‘if he can use it to go on holiday or not.”
Forecasting
A problem with opaque supply chains is that it removes OEM’s ability to forecast or plan. This means that they are not able to update customers, nor are they able to execute last mile processes. The fleet owners have no information on the vehicles and the reasoning behind their vehicles being held up. If it’s because of damage it will have a large impact on their business. The overarching problem with the inability to forecast is that all stakeholders in the supply chain can’t manage the process.
Before the supply chain process begins a tendering process occurs to see who can cover the supply chain service at the lowest price but there are well-known disadvantages of this process. The tendering process means that profit margins reduce. This means that not a lot of money can be spent on the research and development side of the business such as updating the IT systems. This likely explains the outdated supply chain systems which have plagued this industry for so long. As the margins reduce the leaders of the FVL industry may not make any more bids even though they may have the best capabilities to deliver the service. The smaller service providers may be overpromising on what their capabilities can deliver. What this could lead to are shortcuts which increase the possibility of mistakes in the supply chain and reduces the level of safety for workers along the supply chain.
After a company has won the tendering process and the supply chain is operational the supply chain suffers from a legacy system. Information is passed along the supply chain through paper processes. This is an unsustainable practice but it also presents the problem of human-error as these vital documents can be lost or damaged along the supply chain. Then at the end of the supply chain, the information is then transferred back to the OEM’s or fleet owner and often has time delays or is scattered and incomplete.
Market leader Groupe CAT transport 90% of their vehicles via lorry. The reduction of the number of lorry drivers with only 1% of drivers below the age of 25 and 50 drivers leaving daily in the UK gives the LSP’s and OEM’s several operational problems. For LSP’s they may need to raise salaries to keep and attract drivers and therefore increase costs. They will need to make use of alternative modes of transport. Meanwhile, they’re being pressured by OEM’s and fleet owners to reduce costs. LSP’s already have squeezed margins therefore they’ll likely spread this cost along the supply chain increasing costs for all participants.
Those with large fleets of cars sell their cars more and more across borders than they did decades ago. This can be attributed to the ubiquitous data that the internet provides, now they can market their cars on the internet for other businesses to rent or purchase. The advantage of this method of acquiring cars is that instead of a Polish company purchasing a fleet of cars from Spain, through the internet they may find a company with a fleet of cars to sell in Lithuania instead. This significantly reduces cost and the time it takes to receive the cars. However, the disadvantages of purchasing through this method are that the purchasing company is more susceptible to car fraud. Mileage fraud alone is predicted to cost 5-10 billion Euros in economic damage each year. However, the opportunity cost for not having a blockchain network in place for authorities is higher. VAT and import tax evasion across European borders is rife and in Eastern Europe particularly where rules are less robust.
How the industry has attempted to tackled these inefficiencies without blockchain? Structural collaboration between all stakeholders in the supply chain has historically been difficult to realise. “Supply Chain Control Towers” have been one attempt to challenge the above identified problems. These are initiatives where bigger players try to optimise networks by getting the contracts of the smaller players in the industry. It works where towers generate data from service providers and aggregate them to a level where operational supply chain processes can be managed effectively by the party collecting all the data.
This is an undesirable way of collaborating for many service providers, as they are forced to release their data to third parties who then monetize their data, reducing them to service providers with even less value for their customers.
Control towers are not an attractive option for OEM’s either as they create a customer lock-in, they still only cover part of the network, they are costly and they are vulnerable (one database).
Why Vinturas chose blockchain technology to solve these challenges is because they believe that blockchains characteristics are best suited to solve the challenges being faced in the FVL industry:
Vinturas is a consortium of different logistic service providers (LSP’s) and FVL companies in the FVL industry. Vinturas was founded in January 2019 and their blockchain platform has been operational since September 2019. Their objective in the European FVL industry is to provide a blockchain network where all participants of the network can benefit from the sharing of supply chain data safely and immutably. The participants include logistic providers, OEMs, and other stakeholders in the process like claim handlers that handle the claims of damage in the supply chain.
With 6 major consortium members covering all of the key markets in Europe Vinturas can certainly be considered the leading digital platform in FVL. In October 2019 the market leader in the Groupe CAT which shipped more than 8.9 million new vehicles in 2018 and achieved a turnover of 1.35 million in 2018 joined the consortium. This means that Vinturas are predicted to provide end to end supply chain visibility on 25% of the cars in Europe once fully operational.
The Consortium Consists of:
The consortium is also backed by key partners. One being IBM who were integral in creating the blockchain architecture on the Hyperledger and continues to give expert advice in growing the platform. They have Grant Thornton as a partner to give legal advice, perform audits and share their blockchain expertise.
Key Partners:
Jon Kuiper: “Vinturas aims to be the leading platform in Finished Vehicle Logistics. We strongly believe in the power of collaboration. The launch of Vinturas with four well-known logistics service providers and our choice of IBM as technology partner shows our long-term commitment to delivering sustainable value”.
Like many industries the FVL industry doesn’t have a strong background in collaboration. Blockchain technology provides this platform to facilitate collaboration and create additional value for all participants. This requires a mindset of identifying the value that requires the parties to collectively digitize themselves and participate on the blockchain in a safe and fair way to realizing a common vision. This is the Vinturas vision of enabling all parties to get end-to-end supply chain visibility, remove paper processes and optimise cost structures.
Dealers will be able to understand when the vehicles will arrive which means that they can plan and manage the process after the arrival of the cars. If orders have already been placed on the incoming cars through being part of Vinturas you’ll be able to inform customers the location of the vehicle currently and the actual delivery time in near real time. It allows dealers to become more agile and respond to customers’ demands. For example, if the customer is not at home delivery could be postponed.
Value is provided by giving you real-time information and insight on all the logistic activities in the supply chain to your customer. This valuable information will allow an understanding of any postponement along the supply chain and corrective action can be taken quickly. Having all the data about your supply chain will allow you to optimise and re-engineer the network. In the case of a recall information about who interacted with the vehicle will be accessible on the ledger which will help understand what went wrong.
Through using Vinturas network fleet owners transporting vehicles will be able to understand where the vehicles are located. This data can help improve lead times and supply chain processes can be improved. With Vinturas you receive a Proof of delivery (e-CMR) digital receipt which includes the identity of the recipient. Fleet owners can make use of the import functionality process reducing throughput at borders.
In line with expectations, consumers finally get the opportunity to understand where their car is along the supply chain at any given moment. This makes it possible to plan when you’ll receive the car from the dealership.
This network provides digital proof of vehicles going across borders which is immutable. This vastly reduces the risk of VAT, mileage and tax fraud which will generate significant wealth for local municipalities. One of the key objectives of the European Commission is to achieve a digital market, Vinturas makes this possible in the FVL industry.
The industry has many costly EDI (electronic data interchange) connections which means there are no standard in transactional processes. Vinturas is focusing on two key areas:
Jon sees a big opportunity in getting insurers and finance blockchain ecosystem to collaborate around setting up the standard for the damage handling of new and used vehicles. Having all the data about the vehicle and how it is being transported from A to B provides insurance companies the opportunity to create new and innovative solutions for that industry. From the financing side there are opportunities for supply chain finance opportunities for logistic service providers.
Jon Kuipers advice to others considering building a consortium blockchain in their respected industry is that you have to be able to change the mindsets of the other players in the ecosystem. You must be able to convince them that through collaborating there is tremendous value to be made for all. But he advises, don’t try to convince potential participants through talking about blockchain or collaborating. Start by explaining the collective value that can be gained through working with one another and if you’re able to quantify the additional value gained by the reduction of costs you’ll be much more likely to get them onside.
Vinturas have completed several pilots in a few different countries in 2019. The pilot proved the concept and Vinturas were able to provide:
Now they’re ready to go into full production this year’s quarter.
Going forward at Vinturas those in the ecosystem that are ‘sitting on the fence looking in’ Jon Kuiper hopes to convince them to join the network and increase the participants. For the current members of the network Vinturas plan to increase the offerings to them by adding more functionality such as automatic payment. Once the transfer of the vehicle has been legally verified then automatic payment would remove the need for sending invoices between the supply chain participants.
Vinturas is part of the MOBI (mobility open blockchain initiative) initiative. They work with MOBI to further define standards way of working. Jon also recognises some interesting OEM blockchain projects as though done by Mercedes and BMW to name a few. These are in the mobility services side and not quite related to the logistics one.
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