Special EFX unit
October 1st 2009

Hugh Basham, managing director, Ireland & Transport at DHL Supply Chain, says the firm's Electronic Freight Exchange (EFX) system is one way of driving out inefficiencies from distribution operations

Today's tough economic climate means that companies are inevitably looking for ways to streamline or maximise operations. In adapting and responding to these market conditions, the supply chain provides a real opportunity for change. But rather than scaling back, as many will be quick to do, clever adjustments to improve efficiency will reap the instant benefits expected by the board without compromising future operations.

As one of the biggest costs on a company's balance sheet, the distribution network provides a significant opportunity to drive out costs in the supply chain through increased efficiency, particularly because surplus capacity in the transport environment is a common occurrence. DHL Supply chain has developed an innovative way to avoid this wastage and create new revenue streams in the form of its Electronic Freight Exchange (EFX) system. EFX gives visibility of available volumes across all DHL Supply Chain multi-user networks and dedicated customer fleets, enabling us to identify opportunities to utilise one customers' transport capacity by matching it with another's volumes.

The key advantage of this approach is that customers can use surplus transport capacity to create a revenue stream, and with stock transport volumes down in the current economic climate, the ability to use this empty space on freight vehicles becomes even more valuable. The additional revenue taken from acquired loads acts as a cost-offset for fixed fleet assets, creating a sustainable approach to cutting costs.

The flexibility of this system also allows DHL Supply Chain to match fluctuating customer volumes without necessarily impacting fleet size. For example, when demand is high DHL Supply Chain can use EFX to ensure all of its customer's vehicles are operating at full capacity and that its network is optimised.

However, when stock volumes or demand falls it can then use EFX to sell capacity against available volume.

Another important benefit of EFX is its ability to help customers maintain operational capacity.While current market conditions have forced many companies to de-fleet to reduce fixed costs, others have looked for alternative ways to manage this infrastructure in the downturn. By utilising spare capacity through EFX, DHL can allow customers to preserve their existing fleet levels to ensure they are able to respond quickly to volume increases when the upturn comes. Those companies that have not introduced such measures will be much slower to react; having to replace or reinstate disposed fleet.

Aside from the financial benefit, EFX can also help companies to respond to the sustainability agenda by reducing the amount of waste in its transport networks.Vehicles traveling at full capacity mean that emissions per unit of freight moved are reduced.

Growing demand for EFX and increasing activity levels across DHL's network indicate the extent to which the system is helping businesses to optimise fleet networks and control costs. To date this year, we have seen an increase of 15 percent in the usage of EFX compared to 2008 across a broad spectrum of freight types.

We have also seen a greater willingness from customers to be more flexible in areas such as delivery times to maximise the benefits of EFX.

While there is generally a good range of opportunities available due to the widespread scale of DHL's multi-user networks, those customers willing to be flexible in their approach to operational planning within dedicated fleets will benefit from more opportunities to utilise available freight capacity through EFX.

As companies continue to seek ways to cut costs and drive efficiencies, innovation will be key to creating new revenue streams and maximising existing resources. EFX demonstrates the financial benefits of innovation as well as longer-term goals including sustainability.With much talk of 'green shoots' and some signs of recovery, businesses optimising assets in this way will be better positioned to respond to the upturn and drive future growth.

More articles from DHL Exel Supply Chain: