At last week's Automotive Logistics Russia conference in Moscow carmakers were asked a simple question by TL Group's general manager, Alexander Kostomarov: what is more important - quality or cost?
But the answer was not evident based on Kostomarov's observation of the Russian vehicle logistics market. He pointed out that in many instances road tariffs are being kept down because regional transport providers are contacting OEMs directly for business and undercutting larger providers. At the same time, however, they are offering lower standards, leading to high damage rates on substandard equipment that negate any savings from lower tariffs.
Kostomarov went so far as to suggest that the Russian vehicle logistics sector would benefit from wide-scale consolidation under the country's larger operators. "The only solution I can see is the unification of the regional transport providers under the aegis of companies such as Gefco, Major Auto Trans or TL Logistics," he continued. "That will ensure better service and as a united group you can introduce standards and schemes that we have already developed and mastered."
Toyota Russia's Alexsey Kokotkin, senior manager of vehicle logistics, noted that one of the problems facing the industry was the absence of government standards for logistics quality in Russia. He said that each LSP and OEM had its own interpretation of quality and that an industry-wide effort to establish a standard practice was needed.
Kokotkin also went into detail about the specifics affecting damage and delivery. Despite a dramatic reduction in damage rates from nearly 10% to around 2% over the past two years, between January and May this year traffic accidents accounted for damage to 14 vehicles, while there were 10 cases of total loss and 35 vehicles with other serious damage.
Toyota Russia has now set new targets for service quality and on time delivery: backlogs should be zero, delays should be not more than one day (and should be be less than 2% of the total) while the damage ratio for trucks must be less than 1%. In addition, there should be no accidents to workers. Kokotkin stressed that all Toyota's logistics partners need to follow those standards too.
He pointed to particular areas that were in need of improvement, including equipment standards and driver professionalism. He also suggested that it was important to control and manage the quality of subcontractor's fleets as well as primary providers.
"An LSP will pay attention to is own fleet but if a subcontractor's share is significant, at or above 5%, the same work should be done for each subcontractor and they should be controlled and instructed in this way," he stated.
As a result of monthly meetings with its logistics partners, Kokotkin said it had become clear that protective equipment on fleets was essential, and that shielded or covered trucks reduce damage, along with correct loading and the standardisation of lashing equipment.
Drivers need to be trained properly and regularly monitored for safe driving. Speed controls in the truck would lower damage, and using GPS can prevent speeding and other traffic violations which lead to accidents and driver injuries. A driver's psychological make-up and attitude is also important, he said, and lack of care or poor maintenance standards needed to be addressed.
John Mylonas, a former GM and Ford executive who has founded a new carmaker in Russia, Myla motors, had earlier told delegates how he had personally caught drivers siphoning fuel from the cars they were transporting.
The driver quality point was picked up on by GM's head of forecast, logistics and distribution, Alexey Tenkov, who agreed that the key action was to correctly train and develop the driver pool. "If they are not following procedures there is an increase in damage. Instruction and procedure are crucial," he concluded.
