Facing low return on capital and new competitive threats, established automotive manufacturers must slash costs and increase visibility of the downstream supply chain, from factories to end-customers.
Koopman is using IBM Blockchain technology to create a trusted digital solution for vehicle logistics – both for bringing new cars to their first owners and for selling used cars when leases end.
€775 millionin potential savings through elimination of paperwork in EU
Transparencythroughout downstream supply chain will promote real-time decision making
Trustin tamper-proof car information will help reduce commercial friction and cut fraud
Business challenge story
Funding transformation through cost-cutting
The global automotive industry is facing challenging times. Although worldwide sales and operating margins are riding high, return on invested capital compares poorly with industrial averages. And as established players square up to emerging competitors, there is growing pressure to change components and manufacturing techniques.
The traditional industry giants (OEMs) must figure out how to transform their existing operations, reinventing them for a future of self-driving, connected, electric cars – while continuing to produce and sell current models in their tens of millions. One thing is clear: OEMs must slash costs to fund the required investments in new technology, design, and manufacturing.
Downstream logistics is one operational area with significant potential for cost savings: the movement of finished vehicles from the end of the assembly line to the driveways of their first owners. Traditionally, this creates mountains of paper documentation as each vehicle is tracked via multiple transportation providers on land and sea. Paperwork can be lost or damaged, creating uncertainty and delay, and while vehicles are in transit there is no visibility of process or progress. All of this means high administrative costs and low flexibility, as well as creating opportunities for fraud.
The Koopman Logistics Group, which specializes in logistics (transportation, storage and value-added services) for the automotive industry, set out to resolve these challenges, as Jon Kuiper, CEO, explains: “Our customers, the OEMs, must achieve double-digit percentage savings in operational costs to free up billions of Euros for transformation. To help, and to strengthen our position as a value-add supplier, we wanted to digitize the existing paper-based logistics processes. We saw that this would lead to direct savings in administrative costs, but also would give OEMs the required visibility to reengineer their supply chains for much greater efficiency.
“The challenge was to build a vendor-independent solution that could be trusted by independent parties throughout the full supply chain – from the OEMs to the road and rail transportation companies, from the port terminals to the shipping companies, and from the dealers to the delivery drivers. Blockchain technology, which provides a tamper-proof shared ledger, is the key enabler for our vision.”
Trustworthy tracking of vehicles
Koopman chose IBM Blockchain as the platform for its electronic solution, which aims to replace existing paper-based administration in the finished-vehicles supply chain.
“Our technical and business analyses both pointed to IBM as the best partner for Koopman,” says Jon Kuiper. “On the technical level, we wanted to use Hyperledger Fabric because a permissioned blockchain is best in a scenario where each party needs to know and trust the other companies they are doing business with. Another factor for a permissioned blockchain is that this supply chain involves billions of Euros of assets passing through the hands of multiple different partners.”
The paper-based bill of lading, known in the trade as CMR, uses the Vehicle Identification Number (VIN), a unique serial number etched into the chassis of every car – to track vehicles from production to delivery. The Koopman e-CMR solution uses a blockchain to store the VIN of each vehicle it transports, adding relevant data generated during the logistics process: where the vehicle is located, which supply-chain partner is currently responsible for it, potentially any damage caused during transit, and the digital documentation governing the handover from one partner to another, complete with digital signatures.
The blockchain links these sets of data using cryptographic hashes in a way that makes them immutable. As the blockchain is accessible to all trusted partners, all parties have full visibility of the location and status of every vehicle. And as the blockchain preserves a tamper-proof record of every event and transaction, paper documentation is potentially no longer required, saving huge amounts of time and effort.
“The functionality currently offered by our e-CMR solution already has the potential to revolutionize the transportation of new cars throughout Europe, bringing dramatic improvements in efficiency,” comments Jon Kuiper. “But this is really just scratching the surface of what we can achieve with IBM Blockchain. For example, a second use-case we’re developing is in the remarketing of cars at the end of a personal or business lease.”
Koopman can use its blockchain to permanently link information of any kind to each VIN: the precise factory configuration with all optional extras, the exact mileage, the service history, records of any accidents, ownership, and more. In remarketing, a smart contract embedded in the blockchain could automatically notify Koopman to collect the used vehicle from the consumer at the end of the lease period, and transport it back to the dealer or fleet operator for technical inspection, cleaning and photography. The dealer or fleet operator could then use the internet to sell the car – backed by a full and trustworthy specification – directly to a consumer anywhere in Europe.
“Currently, reselling used cars to consumers is difficult for fleet operators and dealerships, so they tend to move them as quickly as possible in the local market,” says Jon Kuiper. “Using the blockchain as the source of trustworthy information, we are building a service that makes it fast and easy to remarket used cars over the internet and deliver them direct to consumers across Europe, enabling our clients to maximize profits.”
In the future, the solution could also store financial and legal information. For example, invoicing and even payments could be handled on the blockchain, as could customs documentation, VAT records, legally binding proof of ownership, and tamper-proof odometer readings. This should increase consumer confidence in second-hand vehicles, and help to avoid mileage and VAT fraud in the cross-border sales process for used cars, estimated by the European parliament to cost the EU up to €10 billion a year.
Equally, storing the serial numbers of all vehicle components alongside the VIN will make it much faster and easier for manufacturers to recall vehicles if a component is found to be faulty. This could also help in the fight against the theft and resale of expensive car parts, enabling after-market suppliers to verify the provenance of used components.
Higher speed, greater visibility, lower costs
In an industry desperate to free up cash for investment in new technologies and factories, the Koopman e-CMR solution promises to significantly reduce costs. Not only will it save money by replacing time-consuming paperwork with seamless digital processing, but also the solution will consolidate inefficient processes in the cash-to-cash cycle, potentially boosting return on invested capital for OEMs.
Looking at the annual cost of transporting new and used vehicles throughout EU countries, and assuming a conservative percentage of potential cost savings, Koopman estimates that e-CMR could save the industry €775 million each year.
“A significant number of FTEs are currently tied up in cumbersome invoicing and payment processes, and delayed payments have a negative impact on cashflow,” comments Jon Kuiper. “By digitizing processes and creating trusted records that are shared between all partners, our solution will accelerate the cash-conversion cycle and cut out huge amounts of waste. What’s more, the availability of accurate, real-time information on vehicles will make it possible to hold partners accountable for damage. One customer has told us that he loses €2 million a year in damage to cars during the handover process– our solution could eliminate this.”
With IBM Blockchain technology providing trusted provenance in a decentralized system, participants in the supply chain can follow each car throughout its lifecycle from the factory to the dealer to the first buyer, and from the reseller to the second buyer. Data can be made visible for selected audiences, providing tailored digital information to all stakeholders. For example, dealers can see when their shipment will arrive, and tax authorities can see when a vehicle was exported.
“Right along the supply chain, everyone wants to sell their existing stock as rapidly as possible, because the potential value of most cars is dropping all the time,” comments Jon Kuiper. “This is particularly the case for used vehicles, where the standard industry estimate is that the value drops by €10 per vehicle per day. For companies that handle thousands of used vehicles, every month of delay in the supply chain therefore potentially erodes millions of euros in value. By providing full visibility of stock everywhere in the supply chain, our solution helps companies fundamentally reduce cycle time, thereby cutting costs while boosting service levels. This also enables greater flexibility, allowing companies to move stock more easily from one location to another to capture time-limited sales opportunities.”
Koopman’s first customer for e-CMR – PON Logistics in the Netherlands – is using the solution to eliminate paperwork and increase visibility in the national transportation of approximately 50,000 cars annually. In addition, a major global OEM is deploying the solution as a trial covering approximately 80,000 cars transported out of two countries each year.
“Blockchain promises to be a truly transformative technology in the downstream automotive supply chain, delivering potentially hundreds of millions of Euros in cost savings and the visibility to enable faster and better decision making,” says Jon Kuiper. “We are very proud to have worked with IBM to bring to market an operational blockchain solution that is already delivering value in the real world. Backed by the scale and technological leadership of IBM, we are committed to building out a vendor-independent blockchain platform that can become the backbone of finished-vehicle logistics throughout Europe and beyond.”
Koopman is an innovative logistics service provider in the market segment of Finished Vehicle Logistics. Supporting OEM customers through a full range of logistics services, including the transportation of cars from factories and harbour terminals to dealers, and serving fleet owners with remarketing services for used cars, Koopman employs more than 1,000 people and owns terminals in the Netherlands, Belgium and Germany. Koopman’s fleet of more than 500 vehicles transports more than one million cars each year throughout Europe.
Take the next step
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