Thursday, June 5, 2008

Groupe Robert: Leaders in Best Practices for Third Party Logistics

This summarizes a talk by Claude Robert, CEO of Robert Transport as part of the Canadian Leadership Orientation for North American MBA Students sponsored by ACSUS, HEC Montreal and the University of Ottawa Telfer School of Management.

By Ted Chan

The theme for this leg of the Canadian Leadership Orientation program in Montreal has been supply chain management and third party logistics. Thursday morning’s first talk was given by Claude Robert, CEO of Groupe Robert. Groupe Robert started off as a trucking company, but it takes care of the now it takes care of many aspects of the logistics required for supply chain management. Besides supplying truck, trailers and flatbeds, this means warehousing and other inventory services, information systems and other services. Robert transports items ranging from the little L’Oreal samples you get in the department store to 50,000 pounds of steel and other commodities from Western Canada. Robert is a 3rd generation family business, founded by Claude Robert’s father. Claude’s three children are now all working in key roles within the firm.

Some key points Robert touched on:

IT Systems in Logistics Management

One of the sources of competitive advantage for Robert is an internally built warehouse management system that is scalable and flexible while being compatible with customer systems (SAP and others). The company plans to continue to invest in technologies, shifting from satellite focused strategies to ones using Blackberries and more intuitive tools. Robert says the return on investment from management can be massive. UPS has changed their routing so that trucks can only turn left (this help avoid accidents. Their upgraded system also greatly reduces the miles required to arrive at the destination, saving on fuel costs and reducing their carbon footprint.

New trucks are equipped with CPUs to track truck performance. The trucks are also equipped with driver fatigue systems. The system monitors eye movements and can make noises and even shut down safely. There are also sensors that track incidents (such as the truck getting cut off or being in an accident) and keeps videos of these incidents.

Railways versus Roads

Robert feels railways aren’t nearly as efficient as people make them out to be. He says many of the graphs and statistics about how efficient railways are deceptive because they assume the rails are running full. According to Robert, a recent studied showed these trains were 56% empty when they move, whereas with trucks that is rarely the case. Groupe Robert’s strategy has been to focus on shorter routes where trucks are far more efficient than trains. Their focus is operating on a 500 mile radius from Montreal, Toronto and Detroit (if you draw the three circles, they touch one another).

Risk Management, Competitiveness and Fuel Prices

Groupe Robert has elected not to buy future. They use about 100 million liters of diesel fuel per year. Instead, they use a fuel surcharge into their contracts to hedge fuel price risk. Southwest has been in the news having hedged fuel at $51 per barrel of oil.

Robert is a contrarian on fuel prices. He feels oil producing companies are going to force prices to stay high by controlling supply. Similar to many others, he feels alternative energy and public transportation strategies are the only escape.

An interesting point Robert emphasized is how fuel costs are going to hurt Asian exports. Robert pointed at the doubling of container shipping costs as fuel prices have gone up. This makes Asian goods considerably less competitive.

Overall, Robert sees the trucking industry as a struggling industry due primarily to a sustained increase in fuel costs. Robert sees themselves positioned well with their technology and logistics focused. Clearly, they have succeeded because they focus on value added services, allowing them to avoid being a commodified product for which the inputs (fuel and truck drivers) are only getting more expensive. Said Robert, “Our most demanding customers are our best customers. Their demands make us better and in the long run more competitive.”

2 comments:

Third Party Logistics  said...

Technology is absolutely playing a big role in 3PL and warehousing sectors today and it’s a fact it will keep on to enhance.

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