The Effects of Consolidation on Volvo Group’s LCL Transportation Network

The purpose of this thesis was to map out the current less-than-container load (LCL) flow of Volvo Group and to investigate the effects that consolidation of the LCL shipments would have on the company’s transportation network. In order to map out the company’s current LCL transportation network, data was collected from 12 LCL logistics service providers that had been used by the Volvo Group during 2015. The geographical spread of the LCL shipment varied from region to region. Asia-Pacific (APAC) was the region with the largest portion of the LCL shipments during the year based on the number of shipments. 62 percent of the consignments were shipped intra-APAC during 2015, and the shipments from all of the three regions (APAC, EMEA and Americas) to APAC accounted for 75% of the total number of consignments globally. During the year, the Volvo Group had LCL shipments originating from 34 different countries. Base on a total cost of ownership model, multiple criteria were considered in order to evaluate potential scenarios developed during the project. Five categories representing different costs related to a purchase were chosen in order to evaluate the scenarios from different perspectives. The chosen categories are cost, management, quality, service and communication. Within each category a number of assessment parameters that would have an impact on the total cost of that specific category were identified. In order to identify consolidation opportunities for the Volvo Group’s LCL transportation network, seven potential LCL transportation scenarios were constructed. Five of them included consolidation, both buyers’ consolidation and standard consolidation, and the other two scenarios were designed in order to identify the effects of consolidation. Each scenario was then assessed based on the aforementioned parameters. The conclusion from the analysis is that each scenario has its strengths and weaknesses. Having a door-to-door setup with a reduced number of logistics service providers will decrease the level of management needed and improve the quality of the LCL transportation network. A transport solution where Volvo Group procures the LCL transports in different transport legs will lead to the lowest transport cost. If the company’s aim is to get the best service level then a door-to-door solution with multiple logistics service providers will be the most feasible setup. In order to make the business-to-business communication more efficient as well as gaining a better tracking and tracing solution, the Volvo Group should manage minor and major flows differently. The transports in the major lanes should be procured in different transport legs and the transports in the minor lanes should be purchased door-to-door from a limited number of logistics service providers