Development of measures to reduce the cost of road transport using vehicle operation monitoring systems
Table of Contents
This research investigates how vehicle operation monitoring system can reduce the cost of road transport. Even though its implementation cost is high, the system enables freight companies to save up at the expense of the lower cost of a truck maintenance. There is no accurate data about system effects on company transport cost. Therefore, to analyze the financial efficiency of the monitoring system is the main goal of the paper and in order to do that it is necessary to identify what is included in the cost of transport and how it can be optimized. By analyzing the real freight company X, the received statistics will prove the effectiveness of the system. This can be done with a financial analysis of the company and a number of surveys for its customers. As a result, it is anticipated that the key financial ratios will change positively which will be the proof of vehicle operation monitoring system efficiency. This paper includes the following parts: Literature Review, Methodology, Anticipated Results, Conclusion and References.
Nowadays, transportation as a process is considered one of the most important stages in a supply chain. Therefore, logistics companies tend to invest in modernization and development of the transport, in particular road one, in order to use it in the most efficient way. Despite the fact that road transport has a number of advantages such as a high mobility, this mode of transport has its own drawbacks as well such as a cost price which remains a major issue for many companies. Due to an increasing demand for road transport today, it has become important to find out how transport cost, which is known as all costs that are related to the process of transportation from suppliers to customers including taxes and duties, can be reduced.
The ongoing discussion of the problem has led to several possible solutions that may tackle it. The most efficient one is expected to be vehicle operation monitoring systems. But is it efficient to implement such systems in road vehicles?
Vehicle operation monitoring systems can be applied to both passenger and freight transport, and they allow to receive the essential information about the truck’s location via GPS, fuel consumption and determine if a driver followed the laid route. Although a brand-new software implementation is costly, the usage of the systems enables freight companies to lower the cost of road transport. As a result, this technology can save the time by planning more optimal routes for truck drivers and, moreover, reduce the cost of a truck maintenance.
The main aim of the study is identifying the impact of vehicle operation monitoring systems on cost of transport. Therefore, the main tasks of the research include the following points:
- To identify what is included in the cost of transport;
- To analyze the most popular methods of reducing the cost of transport;
- To evaluate the effectiveness of the monitoring systems in practice;
Delimitations of the Study
This study will include the overview of the characteristics of a freight transport, the description of how vehicle operation monitoring system works and due to which factors the system can reduce the transportation cost. The listed points are essential for the research as they have a direct influence on achieving the aim of the study which can help further solve the main problem and, as a result, be implemented in freight companies.
The usefulness of the conducted research is that the demand for road transport is rising from year to year and although the share of road transport in the world cargo turnover is about 8%, costs for this mode of transport accounts for 60% (Vladimirov, 2016). Therefore, it is crucial to find out how the cost of transport can be reduced in the nearest future in order to maximize the efficiency of road transport.
Definitions of key terms
There are several terms that will be used in the research such as:
- Dead-Head can be described as a transportation trip with no freight being conveyed inside (Vineyard, 2017);
- Carriers are specialized companies that manage truckloads in order to transport cargo (Gleissner, 2013);
- Forwarder can be defined as a sender of cargo, in particular the one who is in charge of organizing the transportation.
This paper is divided into several parts which are literature review, methodology, anticipated results, conclusion and list of reference.
In recent years road transport has become one of the most popular means of transportation of cargo for both international and domestic deliveries. Due to its high demand, many companies face the problem of how to use road transport in a more rational way by implementing special software. Therefore, the following researches are aimed at assessing the effectiveness of that software in practice.
Transport costs are directly related to all logistics expenses, with theirs increase the total price of a good also rises, therefore, there are different strategies aimed at reducing them (Murray, 2019). The first one is having fewer carriers. This means that the risk of working with multiple shippers is higher than operating with a few credible ones, however, there is a possibility to become overdependent on them as well. The second strategy is consolidating shipments. It means consolidation of cargos in order to use a vehicle less often without dead-head (fewer trips are made), as a result, the transportation cost can be cut. The next option can be described as a single sourcing. This strategy has some similarities with the first one, however, it implies that by offering the whole transportation out to bid, a company may find the most suitable forwarder that can meet all the necessary company’s requirements. The last alternative is implementing modern software with a monitoring system.
First and foremost, vehicle operation monitoring system can be defined as a combination of an electronic device, that collects data throughout the whole time of transportation, and a purpose-designed software, which in its turn processes the received information and stores it (Ahmed, Rahman, & Evans Costa, 2015; Kavitha, Deepika, Devapriya, & Divya Bharathi, 2017). There are several ways how the process of monitoring can be executed. One of them is by using passive RFID tags that contain all the necessary data about vehicle. Such tags have no internal power source, therefore, they work by the electromagnetic energy. In order to scan the information from the tag an RFID reader should be used. The core principal of the method is that buildings along a road are nods, which are connected to Ethernet, that have an RFID reader in them, so when a vehicle passes the node by the information is read, and a timestamp is sent to the internet cloud (Kavitha, 2017). The other method suggests a usage of GPS modems (Ahmed, 2015). They are installed in a vehicle in order to track its movement and work via GPS signal. Basically, GPS antenna helps receive the signal from a satellite, and then the obtained information is converted and sent to a server which in its turn displays the data on a screen. Both described techniques are widely used in practice on trucks as they have common following advantages. The most important one is that vehicle operation monitoring system allows to track the location of the vehicle, as a result, it is clear which route a driver follows. Moreover, it helps reduce any kind of cheating from the driver side as all movements are recorded, and it is a solid evidence in case of violation of the rules. The second upside is that the system can check drivers attendance at work and at the end of a period help calculate their salary according to the amount of work they have done.
Apart from monitoring any movement of the vehicle, vehicle operation monitoring system can also be used as a precautionary measure for security of the transport in case of hijacking (Ahmed, 2015). As it was written before, GPS signal helps track the truck at any place in the world, so whenever the vehicle moves the data goes straight to the owner of it, and he can see what is happening in any moment of time. If the vehicle is stolen the system is used as a retrieval device, and its data stored in the internet cloud or server can be used for police in order to help them find the transport. The most technologically advanced monitoring systems are capable of identifying if the vehicle is driven unauthorizedly and alerting to the owner. Also, the system may have additional components such as seatbelt sensors, speed sensors, harsh acceleration and braking sensors and excessive idling recording. They are all used depending on specific purposes of a vehicle or company requirements.
There are several services that are integrated in vehicle operation monitoring system which in its turn is connected to ERP-system (“Current state and trends of navigation services and applied navigation technologies in road transport,” n.d.). The first service is a remote diagnostic. It helps diagnose the vehicle systems via satellite navigation and special sensors. The next service is transport dispatching systems which are able to both monitor the transport and provide communication with drivers. This can increase the efficiency of the whole transport system, and in particular the key components of it are: navigation, route optimization, the system of notifications and capability for integration with ERP-system. The third service is driver control system. As it was described in the previous passage, such system analyzes driving styles and the amount of time in route, as a result, all the received information is used for the development of the measures that can reduce of a vehicle maintenance (oil, petrol). The last service is mobile employee monitoring which implies a remote monitoring of all workers in a company, this can improve company effectiveness. All the described services are made for facilitation of company processes, and in the end cut the operational costs in order to run the business more efficiently.
Komarov (2010) considers that as vehicle operation monitoring system stores a significant amount of data daily, the system should be capable of quick data processing as well, therefore, it requires a purpose-designed software. One of the examples may be CALS technology (Continuous Acquisition and Life cycle Support) which originally implied an exchange of data with suppliers. Today it is used as an up-to-date approach to the design and production of goods and services by using advanced computer technology at all stages of the system life cycle and, additionally, it provides uniform methods for communication between all parties. The problem of such approach is that CALS is designed more for production processes rather than for transportation ones. This technology is widely used in different areas in the USA but in terms of logistics it is not very widespread in Russia. CALS allows to lower different indexes such as reducing the cost of preparing technical documentation but it is difficult to adapt the technology to transport-related area. Therefore, CALS may be called as a debatable approach to vehicle operation monitoring system as even though it includes electronic data interchange standards, the system is not very applicable to the transportation processes.
Despite the fact that the advantages of vehicle operation monitoring system are evident, there is no detailed information about what financial and technical indicators are decreased after the implementation of the system. There is almost no statistics from real logistics companies that prove the effectiveness of monitoring system, therefore, this paper is focused on finding it out by studying the case of a real freight company X.
The next section of the paper is focused on the methods that are going to be used in the research in order to fulfil the tasks. Due to the fact that the real logistics company X specialized in freight transportation is taken as a case of the study, the description of methodology will be based on its official documentation.
The main aim of the research is to examine in what way vehicle operation monitoring system reduces the cost of transport, so it is necessary to analyze a range of company financial indicators. First of all, the statistics of average profit and expenses from previous years is needed when the monitoring system was not installed. This can be considered a starting point of the study as it should be proved that the implementation of the system does lower the costs of a company. Besides, the same indicators are supposed to be taken after the monitoring system execution in order to compare all figures and decide whether the system will be worth using in future. The difference in profits will be the proof. The same approach can be applied to the indicators such as the number of complaints from customers and profitability of freight transport. Both indexes are essential for a successful running of a logistics company, therefore, it is important to find out how they will be changed when the monitoring system is used in practice.
There are several ways of how the necessary data can be collected. In order to receive the most accurate and updated company information the request for it can be submitted. Moreover, the possibility of an internship in that company also provides such opportunity. As the mentioned financial indicators are confidential it is almost impossible to obtain them without the permission of the firm. Nevertheless, there is a small chance to receive them from the financial statements which are publicly posted on the Internet. However, in most cases they are outdated and inaccurate.
Apart from that, surveys and polls can be conducted too. They may be useful if it is important to learn more about customers opinion on issues such as cargo safety which may be solved with the monitoring system. This method will allow to find out about the most frequent types of complaints. As a result, the reasons of them will be identified. By using electronic forms and templates the company may save a lot of time because the answers will be sent on its email.
The crucial part of the whole project is the analysis of the acquired information. In this particular research it is needed to estimate the monitoring system implementation, its price and effects. In terms of the indicators (profit, expenses, profitability) financial analysis can be applied. It will help calculate the difference in profit and expenses, so as to make a conclusion if the company has available funds to invest in vehicle operation monitoring system. Otherwise, it may need to take a loan.
The number of complaints from customers is also a significant problem to be analyzed. After all the filled electronic forms will be received a thorough analysis can be started. The ways it can be done depend on the number of customers the company deals with. If there is a small number of them, it may be done manually by making an Excel table, for example. But in case of having many clients, the use of a specific software such as Microsoft Access is necessary. This program allows to create complex tables and database in order to collect and analyze a large amount of data in a convenient way.
In this section the anticipated results are going to be described. Once the financial analysis is made, it is necessary to compare the figures before vehicle operation monitoring system implementation and after. The latter is supposed to illustrate the reduction in expenses and cost-related ratios. If the system does work properly, then it may increase the company profit as the cost of trucks maintenance will be most likely to drop. In this case the list of recommendations can be suggested. It will include the description of the type of monitoring system itself, how it should be used and its main practical advantages. This list may be helpful for other freight firms in future who are seeking the options of reducing the cost of transport. Suggested recommendations will be the proof that vehicle operation monitoring system does its job, and it is worth its funding.
Moreover, the conducted surveys are expected to show the most frequent reasons of customers complaints. After a thorough analysis the formed table should explain to company X management which areas of their business are the most vulnerable and are needed to be improved. The received data will be illustrated by tables and diagrams with certain calculations. The listed recommendations will contain a detailed description in order to make it clear for the third-party users.
To conclude, it will be found out that the cost of road transport may be reduced by use of vehicle operation monitoring system. Its efficiency is the main question of the whole research and, most likely, it will be proved that the system works correctly which in its turn allows to cut the transport-related expenses. By collecting the data such as truck GPS location and the consumption of fuel, the company can analyze it and decide which areas require further developments and improvements. Despite the fact that vehicle operation monitoring system implementation may be expensive for some firms, it can reduce the cost of road transport by optimizing the number of parameters related to a truck maintenance.
Furthermore, several tasks will be fulfilled, in particular the cost of transport will be identified, different methods of reducing the cost of transport will be considered, the efficiency of the monitoring system will be assessed.
On the whole, the study is expected to confirm that vehicle operation monitoring system can decrease the cost of road transport. This will be proved by the number of the researches that are going to be analyzed which provided the information about the real cases when the described system had been used. However, those ones did not mention any statistics of how different ratios were changing over time, therefore, it is necessary to look at more cases of real freight companies that use the monitoring system in order to receive the most accurate statistics.
Ahmed, S., Rahman, S., & Evans Costa, S. (2015). Real-Time Vehicle Tracking System. (Publication No. 61807216) [Bachelor’s thesis, BRAC University]. CORE.
Andrianov, Yu.V., Kravchinsky, V.I., Petrakov, A.M., & Komarov, V.V. (2010). Sistema monitoringa svoystv avtomobil'noy tekhniki v ekspluatatsii [System for monitoring the properties of automotive vehicles in operation]. Transport Rossiyskoy Federatsii, 2(27), 30.
Current state and trends of navigation services and applied navigation technologies in road transport. (n.d.). Federal Space Agency.
Gleissner, H., & Christian Femerling, J. (2013). Logistics. Springer International Publishing.
Kavitha, D., Deepika, T.G., Devapriya, A., & Divya Bharathi, N. (2017). A Survey on Vehicle Monitoring System. International Journal of Scientific Development and Research, 2(4), 117-119. Retrieved from https://www.researchgate.net/publication/328282500_A_Survey_on_Vehicle_Monitoring_System
Murray M. (2019, July 29). Reducing Supply Chain Transportation Logistics Costs. The Balance Small Business. Retrieved from https://www.thebalancesmb.com/reducing-transportation-costs-2221049
Vineyard J. (2017, May 9). Logistics Glossary Vs. Urban Dictionary. Universal Cargo. Retrieved from https://www.universalcargo.com/logistics-glossary-vs-urban-dictionary-useful-to-funny-definitions/
Vladimirov S. (2016). Mirovaya transportnaya sistema i logistika: osnovnyye napravleniya razvitiya [The global transport and logistics system: main areas of development]. Regional economy and management: electronic scientific journal, 2(46).Retrieved from https://eee-region.ru/article/4602/
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