Capacity forecasting can lead to the substantial cost savings generated by a better match between supply and demand. Transmetrics, a Bulgarian company with a strong Belgian support, found a willing partner in DHL Aviation to fine-tune its concept in 2014. Since then Transmetrics has turned the concept into a commercial product that is available for cargo transport companies as of 2015.
According to the Sofia-based CEO, Asparuh Koev, and the Brussels-based CCO, Anna Shaposhnikova, Transmetrics’ solution is not limited to the air cargo industry. “The problem is very acute in road
haulage, where companies have on average 40% empty capacity. As a consequence, they use far too many transport trips to service their customers. Thanks to our predictive analytics product, we can
tell them which trips to cancel, which results in daily savings.”
Several types of companies throughout the logistics chain are facing significant issues with capacity utilization, for which a predictive analytics product can easily lead to substantial benefits. Anna and Asparuh identified what they call ‘easily addressable customers’, which have combined revenues of 1.1 billion dollars. Within this group, express and parcel networks account for 216 billion USD, freight forwarders for 200 billion USD and airlines for 94 billion USD for cargo.
Addressing volume fluctuation
According to Anna and Asparuh, using Transmetrics can bring cargo transport companies a benefit of 5% on their turnover. “Our concept is, however, not about capacity sharing. What we have designed is the system that allows a cargo company to forecast with high accuracy their fluctuating volumes, and then find the most optimized way to utilize their own or in-sourced capacity based on the forecast and complex algorithms. The idea behind it is that the shipment volumes fluctuate all the time and if your company hasn’t planned for enough capacity, then it might lose customers to your competitors that are offering similar services.”
The Transmetrics concept was initially tried out by DHL Aviation. “Their business size is calculated at several billion. They have their own planes and in-source aircrafts from 3rd parties. When the plane is only partially filled and you know exactly how much capacity is not used, you can start collaborating. This is important, as air cargo tends to be booked at a short notice, which normally leaves little time for collaboration.”
The proof of concept with DHL Aviation has revealed that Transmetrics is able to forecast the needed capacity for next week’s with over 90% prediction accuracy. “This forecast is based on both
shipping history of the company and external variables that influence shipping demand”, says Asparuh. “Among the latter are public holidays, industry seasonality, weather, special shopping days,
new product launches, gained and lost customers, and the like.”
Generating a constant stream of shipments
From DHL Aviation Transmetrics received all data on the individual shipment level. Asparuh: “When you look at several years of data, you can see the behaviour of all your customers and you can make inferences on what they are going to do. Without the company’s historical data, such forecast is impossible, but we haven’t had a case yet when a company was not willing to share their data with us. One of the reasons is that our data extracts don’t require any sensitive data to produce a forecast, so we won’t need your customer names, addresses, pricing and so on. Another reason is that we store the data in a very secure environment.”
Anna is convinced that better forecasting of customer bookings may lead to an optimized capacity plan for cargo companies. “This enables you to talk to other companies, both customers and competitors. For example, if you see from the forecast that you are about to have an overcapacity issue, you can negotiate with your customer to move the shipment to another day where you have empty capacity, in exchange for a discount. As a result, instead of having constant peaks and lows in the shipping volumes, you are able to generate a more constant stream of shipments.”
We will publish the second part of this article in our August 15th issue.
Marcel Schoeters in Brussels