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  6. Digitalization makes the supply chain more transparent.

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Digitalization makes the supply chain more transparent

Thomas Zernechel, Head of Volkswagen Group Logistics, explains which opportunities digitalization opens up for his area

The old industry hall in Ilsede in Lower Saxony breathes the charm of days long past. Nonetheless the ideas and projects introduced and discussed here at the “Innovation day of logistics” in February 2018 were aimed at the future in every way. Industry 4.0 is the magic word in the working world – and with respect to the digital networking of mobility, Volkswagen Group Logistics is at the forefront, as its director Thomas Zernechel in an interview reports.

Herr Zernechel, over ten million vehicles were sold by Volkswagen Group in 2017 worldwide – in 1997 it was less than half that. How has logistics changed in the past 20 years?

Trucks used to be the primary means of transport. Today rail and sea traffic play a disproportionately greater role. In Europe we use ships between northern Germany, the Iberian peninsula and the Mediterranean. There are many more alternatives than 20 years ago. This makes us more flexible and has a positive influence on delivery times, prices and sustainability.

We can act more quickly and with more flexibility nowadays.

Traffic has also become more dense, and natural catastrophes more frequent. How does logistics react to such unpredictability?

Reacting to unforeseen situations has always been our daily bread. However you are right, the problem has intensified. For example, when suppliers in flood areas are unreachable and we have to work hard to develop alternative supply solutions. Fortunately, thanks to digital networking, we can act more quickly and with more flexibility nowadays.

An example?

Digitalization makes the entire supply chain more transparent. Through intelligent data analysis, we know more and more about how processes interact, where congestion occurs, when there will be downtime. For example, we cooperate with the Munich Data:Lab to develop what we call a risk map, i.e. to identify problems in the supply chain early on. Another issue is error avoidance: today we scan, register and allocate deliveries semiautomatically for the most part. We are working on making this process fully automatic in the future and thus much faster and virtually error-free.

Where do you see the advantages from the customer’s point of view?

Our products are made more flexibly and delivered punctually, thanks to better utilization of shipments and increasing transparency. In addition, there are more opportunities for customization. Moreover, as a company, we will be able to better predict which products our customers order because we can take current trends and fashions into account in our planning.

Today, we are the automobile manufacturer that makes the most use of rail and ship.

Logistics is inherently energy-intensive. What progress are you making in terms of sustainability?

Today we have a very high packing density. This is how we considerably reduce our cargo space. We take great care to make full use of our trucks, to transport as much as possible by rail or ship, and in so doing to reduce emissions. We avoid air transport as much as we can. Basically, modern logistics involves the optimal mix of transport avoidance and utilization as well as selecting the right modes of transport. Today, we are the automobile manufacturer that makes the most use of rail and ship. Moreover, we are working intensively on carbon-neutral truck drives, and also pushing to expand the charging infrastructure for natural gas. LNG-powered trucks have a very good life-cycle assessment, which is why we are working with Scania to promote the use of LNG trucks by our freight forwarders.

What role does autonomous driving play in logistics? 

This has been our day-to-day business for a long time. Today, transport within the factories are mainly driverless, and self-driving trucks are also already being used in Singapore harbor, for example. It will however still take a while for the conditions allowing for driverless truck transport on highways to be met.

Are software and IT skills becoming more important in your industry too?

For sure. At this point, we need experts who recognize the opportunities of digitalization and are scanning the logistical world market for them. Cooperation with specialists will become central to our success in the future. We have the best conditions for this: with more than 120 locations, we are represented worldwide and can look for the right innovations in each region.

Personal luggage compartments could be used to transport parts.

Another major topic is networked transport systems – how seamlessly must we imagine the transition from truck to ship or train?

Here digitalization offers completely new possibilities. For example, it is conceivable to use passenger cars for transporting cargo as well. Personal luggage compartments could, for example, be used to transport parts in the future.

Sounds very forward-looking. Does logistics see itself as a digital pioneer in the company?

Logistics has always been digital. What is changing is the speed at which it is possible to identify lucrative potential in the market. It’s important to stay in the driver’s seat while keeping your eyes straight ahead.

A brief outlook to conclude: From the customer’s point of view, how will digitalized logistics work ten years from now?

In ten years, we will know which car customers are going to order before they do. We will then produce it in advance, and it will drive fully autonomously to the dealership or, if they wish, to their home. Digitalization opens up new possibilities, not least for direct interaction with customers. Speed will not be the deciding point, but rather loyalty. The most important thing is that we keep our promises to the customer one hundred percent.

Experts assume that customers will in future buy a company ID, with which they can use the vehicle of their choice every day – an enormous challenge for logistics.

In the new mobility concepts, I also see a great opportunity for logistics. The vehicles will have to be moved and maintained, they will need a retrofit every few months. Logistics in the Volkswagen Group offers an advantage over potential competitors because we have a great deal of experience with complex transport volumes. We can help to make the mobility services of tomorrow successful.

Industry 4.0 is the magic word in the working world – and with respect to the digital networking of mobility, Volkswagen Group Logistics is at the forefront. But why exactly is digitalization playing such a key role at logistics? And by which means logistics at the Volkswagen Group is pushing global connectivity? Our film "A brief look into the future –
Logistics at Volkswagen Group" gives some answers.
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The future of logistics