Their underlying business model is typically asset intensive, high fixed cost and operationally leveraged. They are particularly complex because their physical infrastructure is characterised by multiple supply, demand and intermediary points. They have many customers with uncertain patterns of demand and they employ large numbers of people who need to be effectively scheduled and who are often remotely managed.

Brammer plc is a typically complex distribution business, as described by the CEO Ian Fraser, “We buy 200,000 part numbers from 6,000 suppliers and deliver them, typically in small packages, to 100,000 customers across 10 countries. This is an operationally leveraged business in which the detail needs to be constantly managed.”

cvj_jan2003-01Passenger rail is another a complex business, with complexity driven principally by the constraints of the network. Andy Wylie, Track Access Manager at GB Rail, comments, “There is very little slack in the system as trains stop every few minutes at stations. Also, we are very constrained by the physical network, so if a train breaks down or the track is not passable, you have very few options to get around the problem. This means that when things start to go wrong the impact reaches the rest of the operation very quickly.”

We find that the best run transport, logistics and distribution businesses focus on three key levers to drive value – capacity planning, asset utilisation and resource scheduling. Capacity planning covers decisions about the level of investment and mix of assets to meet demand effectively (in the rail industry capacity planning also covers investment and access decisions about the network itself). Asset utilisation is about driving assets such as vehicles, trains or planes as hard as possible within maintenance constraints and against lifetime costs (a key area here is “back hauling” where a vehicle is utilised on a return journey).

Resource scheduling is the management of a large, specialised and remote workforce, typically against an industry based safety and qualification framework.

These businesses use technology to manage their complexity. Logistics and enterprise management tools have become a great deal more advanced over the last decade, making it possible to manage such complex businesses effectively on a day to day basis. Telematics applications have also come a long way, allowing up to the minute information on the performance and location of assets.

However, there are two key areas where current technologies have failed to deliver. Firstly, sophisticated capacity and scenario planning, which would allow logistics and distribution businesses to understand and optimise the economic and operational implications of changing their infrastructure, assets and resources. And secondly, real time decision support to enable the business to constantly optimise assets and resources against changing demand – in other words a scheduling capability that can take into account business strategies and economics in the allocation of resources, rather than simple availability.

The answer to this problem may come from “smart agent” based technologies. These technologies solve complex allocation and scheduling problems through multiple, simultaneous negotiations between software agents that represent assets and resources.

cvj_jan2003-02“Smart agent” technology has only recently become robust enough for commercial applications, but is already providing outstanding results. Complex environments require a combination of flexible, iterative thinking (which humans are good at) and the ability to weigh multiple options (requiring the processing power of a computer). We have already used the technology to help rail companies think through timetabling and capacity issues; scenarios which used to take five hours can be run in a matter of minutes. Many of our clients in other industries are becoming excited by the opportunities.

Whilst technology cannot remove complexity from your world, early results from “smart agents” offer encouraging signs for a variety of asset-intensive industries.

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Articles from this issue

• The complexity of growth
• Managing Complexity in Alliances

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