One measure of the Logistics Optimization initiative is to formulate and implement a new and appropriate warehousing strategy for the our spare parts supply. Where were spare parts and wheel sets for our fleet stored in the past? In a wide range of workshops, where a relatively large number of VTG wagons were repaired. This meant that railway experts had to have a command not only of wagon maintenance, but also logistics. In recent years, this has led us to have a large number of storage facilities in Europe – which has impacted the level of our service quality and resulted in high expenses. These were attributable to the high warehouse inventory values at the individual locations, the costs of on-site support and scheduling, and transport expenses. Another cost driver was delivering materials for mobile services. “Between 2017 to 2020, logistics costs for spare parts and wheel sets steadily increased by around 15 per cent a year to around €8.5 million, where they now stand,” explains Christin Buresch. As head of the Service Improvement (WXP-I) team, she is in charge of the Logistics Optimization initiative, which was launched in January 2021 to enhance our expertise in logistics, to counter costs increases and to optimize the supply of spare parts and wheelsets to VTG’s fleet.
Milestones: Central warehouse in Raunheim
Since the launch, a project group from the WXP-I, WXS-W and WXS-M departments led by Stefanie Kunze, Product Manager Service Improvement, has been pushing ahead with the optimization process. “In September 2022, we reached a milestone when we opened our central warehouse in Raunheim, near Frankfurt am Main,” Stefanie explains. “The central warehouse will enable us to lower our former warehouse inventory values across the board. At the regional level, we will now only be storing expendable items and wheel sets, but fewer spare parts.” Warehousing is being performed according to the so-called “hub and spoke” system, like that of a bicycle wheel, where all the spokes are connected to the hub in the center. The logistics network is organized with these same kinds of linkages.
Before all this was achieved, the team – with the assistance of professional consultants – conducted a variety of analyses on the flows of goods, looked at consumption per country, devised a suitable warehousing strategy that factors in service times for deliveries, and selected the logistics company Simon Hegele following a tender process. In addition to its logistics expertise and in-depth industry know-how, the company’s price was also a decisive factor in winning the contract. All these aspects could not be covered using in-house solutions. “The supply of VTG’s fleet, whose size has dramatically increased over the years, as well as our growth forecast for the next few years were arguments in favor of centralized spare parts logistics, because centralized inventories make daily storage management a whole lot easier,” Stefanie explains.
“The central warehouse will enable us to lower our former warehouse inventory values across the board. At the regional level, we will now only be storing expendable items and wheel sets, but fewer spare parts.”
Verbesserte Verkehre
In addition, transports of key categories of material – in particular, of wheelsets – were consolidated or round trips were introduced, which has optimized transports between sites. This system is being gradually expanded to include other routes.
Everything in stock
By teaming up with Simon Hegele, we are placing our spare parts storage management in the hands of a logistics service provider with many years of expertise in this field. At the launch of our central warehousing operations, the digital interfaces needed to transmit our shipping and delivery documents as well as the material master data were created. “This mainly worked out so well because, with the HERMES developers, we had a development team on board that was managed by us,” Christin happily notes. And, of course, the operational processes in the workshops had to be reorganized, too. “There, we will see an increase in transparency and a decrease in the operational workload,” Christin continues. “Thanks to direct IT interfaces with our new logistics service provider, our spare parts deliveries will now be handled professionally, digitally and reliably, such as through the automated registration of shipments with UPS or Kühne + Nagel. The next goal is to automatically process a material requisition from a repair facility to a shipment of spare parts.”
“With the HERMES developers, we had a development team on board that was controlled by us.”
Additional optimizations
By 2024 at the latest, a central IT logistics interface will be in place that will enable Track & Trace, among other things, as we will then not have the limited IT capacities that have delayed this project until now. But more is planned, too. “We also want to set up monitoring with appropriate metrics for our transportation costs,” Stefanie says.
But what about the transport costs themselves? They are supposed to eventually go down by 10 percent. In fact, despite a general increase in transport costs owing to a rise in energy prices and a shortage of freight forwarders, some initial impacts can already be seen. “Nevertheless,” Christian points out, “without the initiative and the related measures, the cost increase would have been much higher.”
Impressive hall: VTG’s first central logistics center in Raunheim, near Frankfurt am Main, which offers space for 3,000 pallets and features an automated small-parts warehouse.
Rock it
The strategic lead program serves to ensure sustainable earning power. This will comprise a total of around 50 individual initiatives in the areas of process innovations, digital services and structural adjustments.
Financial contribution from the three workstreams (January to December 2022):
Topline Optimization:
€29.0 million1
Excellence in Repair & Maintenance:
€13.5 million1
Excellence in Holding & Administration (non-personnel costs):
€5,1 million1
1Cash flow improvement (EBITDA – Maintenance Capex) compared to 2020.
Do you like the story?
