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Sunday, 10 December 2017

Should we lay down more asphalt in The Netherlands? Or should we think about different, more efficient delivery methods for trucks and delivery vans in order to reduce the amount of traffic?!

The call for more asphalt in The Netherlands, in order to mitigate the damage caused by the current large traffic jams, is at least partially driven by the ubiquitous ‘Just In Time’ delivery method for factories and stores. Even though JIT is very successful as a way to reduce the safety stock for companies and stores, it should not be a logistical dogma, as it has some sturdy drawbacks that rear their ugly heads in this time of year.

Last Friday, the Dutch newspaper Telegraaf printed an alarming news message about the 'cost for society' of the daily traffic jams in 2016, with respect to the road transport. 

"Over one billion of euro’s in economic damage" was caused by these traffic jams in The Netherlands, according to a spokesman of Transport and Logistics The Netherlands (TLN) in The Telegraaf:

The economic damage, caused by delays in road transport, has [in 2016 - EL] increased by roughly €100 million to a record level of €1.2 billion. In order to turn the tides, more asphalt is very necessary.

This becames clear after research, executed by TNO and commissioned by Transport and Logistics The Netherlands (TLN). The data are presented on this Friday.

“These are alarming results and we therefore urge the Cabinet to carry through the mitigation of the traffic bottlenecks at the highest possible pace”, according to TLN chairman Arthur van Dijk.

“On a number of routes more asphalt is very necessary and at the same time we want a number of new roads to be added to the investment program of the State – MIRT”.

The rest of the article consists of a description of the presumed financial damage that is caused by overtime delivery. One snippet is standing out here:

In the so-called Economic Roadmap (i.e. Economische Wegwijzer), it has been calculated which were the most expensive traffic jams for companies  in The Netherlands. 

Van Dijk: “Traffic jams not only cause annoyance, but also substantial financial damages for the whole logistical chain. Delays during the shipping process cause the required supplies to arrive too late in the stores and factories. This strongly delays the whole production process”.

Before I will give my opinion about this plea for more asphalt in The Netherlands by Arthur van Dijk, I want to take ourselves back to 2011, when the mortgage crisis had just grown into the longlasting economic slump that we came to know as the Great Recession of the 21st Century. It was one of my early articles:

The combination of increased road transport and passenger traffic led to roads and highways that were constantly overcrowded.

After the beginning of the credit crisis (in The Netherlands mid-2008), however, one could notice a clear decrease in the number of trucks on the road. Less visible but probably even more important is the substantial decrease of the average number of driven kilometers per car since 2005.

As a consequence there has been a dramatic decrease of the number and length of traffic jams in 2009, that is not at all compensated in 2010. Although the official figures from the CBS about road transport in 2010 are only presented in December 2011, a prognosis based on the core data of SME (Small and Medium Enterprise) showed an increase of 3.5% for road transport (see graph 1). This is clearly growth, but the total is still well under the total of 2007, the last year before the credit crisis.

Looking at the transport growth figures over the last three years (see graph 4), it shows clearly why the highways were less crowded, with especially 2009 being a disastrous year.

This brief view back into the economic situation of 2011 shows that the current traffic jams – irrespective of how damaging and annoying they are for the chauffeurs, the logistical companies and the big retail and wholesale companies – are first and foremost a sign of the longlasting economic growth and resulting success for these same companies after the recession.  

This is shown by the following chart, based upon data of the Dutch Central Bureau of Statistics. 

The development of truck transport and courier activity since 2005
Data courtesy of
Chart by Ernst's Economy
Click to enlarge
When the roads seemed much less crowded during the early crisis years (2008 – 2011), that came because they WERE much less crowded. 

Both the number of trucks and delivery vans, as the number of passenger cars were reduced in those difficult years. This happened as a consequence of the diminished economic activity, as well as the mounting unemployment in those years. 

Those crisis years are definitely over for the transport and logistics companies...

This is clearly shown by the growing numbers of trucks and other means of (goods) transport on the road (i.e. delivery vans and minivans of freelance construction workers). This in spite of the fact that it sometimes seems differently for the average lower and middle class people, who still not seem to be out of the crisis yet. 

Many lower and middle class workers are still struck by a challenging labour market and stable or even diminishing purchase power, due to the tax increases during the last 7 years. But for transport and logistics companies the acute economic crisis is already finished for years.

The question now at hand is, however, whether we should meet the desires of the transport and logistics companies – as expressed by the spokesman of TLN  to lay down enough asphalt to meet the growing road transport demands for the future.

Apart from the infrastructural, nature and environmental challenges (“Is this small and already densely populated and quite polluted country meant to be a country for the people to live in or solely for the companies to build their business upon?”), there is the following very important question:

Are we already close to ‘peak transport’ (i.e. a natural "ceiling" in the now growing need for transport and logistics) or are we only at the beginning of a longterm period of economic growth, that will lead to much, much more road transport in the foreseeable future?!

And also this question: Is it not bad infrastructural planning and execution to create a massive road grid in The Netherlands, especially for the (indeed traditionally disastrous) months September – December? Months that stand out, due to their difficult weather situation with much rain, snow and wind, alltogether causing dense traffic and hence traffic jams? Or with their upcoming national holidays (i.e. Sinterklaas and Christmas), that bring their own logistical challenges? 

This question is especially topical, as during the remaining months of the year (January - August) the traffic is normally far, far less problematic for both trucks and passenger cars. 

Everybody, who drives to his work in the spring and the summer, understands what I mean! Traffic jams are mostly non-existent and when there, they are mostly provoked by car accidents, police speed traps and road works!

I think ‘we’ (i.e.The Netherlands) should not create such a monstrous road grid in our country, as this inevitably leads to a deteriorating living situation for most Dutch citizens, due to the expansive traffic and the accompanying exhaust and noise pollution. According to myself, we should first and foremost look to the few notorious intersections, where the situation is dramatic throughout the year and can be improved quite easily.

The addition of new asphalt to the already vast and dense array of highways in The Netherlands is in most cases only a temporary solution for an eternal problem, as it only discloses the next bottleneck and congestion-prone spot on the roads. And more and better roads often provoke further growth in (fossile fueled) traffic, that in the process tends to drive with higher average speeds, due to wider and better roads.  

And there is something more...

In the Nineties, there has been the worldwide rise of Just In Time delivery (i.e. JIT), as the panacea for the logistical problems of factories, distribution centres and (large) stores.

Instead of factories and individual stores keeping up large warehouses and storages in order to maintain the necessary stock for their production and sales process, the stocks were minimized dramatically, thanks to Just In Time delivery.

Stocks were closely monitored by the Enterprise Resource Planning (computer) systems of such stores, distribution centres and factories and as soon as certain thresholds in the stocks were reached (i.e. below the established ‘safety stock level’), a purchase order was placed to replenish the stocks within an agreed, relatively short amount of time. A truck or delivery van came running in that brought the necessary parts in time to let the sales or production process run unhampered and without delays.

This JIT delivery method dramatically diminished the necessary safety stocks for factories and stores and henceforth moved the costs for maintaining storages and warehouses from the companies itself to their suppliers and logistical partners, that were bound by very strict contracts.

The factories, distribution centres and stores were extremely happy with JIT, as their safety stock diminished strongly and so did their risks with respect to stock challenges (a.o. theft, fire, loss and unsaleable out-of-fashion stock).

So all is well that ends well?! Not for every aspect... 

As JIT urged the delivery of products and semi-manufactured goods at exactly the right time and in exactly the right amount, this led to more traffic of trucks and delivery vans; much more traffic, as a matter of fact.

There is quite a difference between trucks loaded to the brim with products and semi-manufactured goods for one particular company (i.e. factory or store) at one particular spot (i.e. warehouse or storage) at one hand and trucks that are either loaded with only a few products or semifabricates for one company or with goods for twenty-odd delivery addresses at the other hand. 

In both latter cases, JIT is here less efficient than the first mentioned 'old fashioned' delivery method.

Fully loaded trucks for one particular delivery address, with only a limited number of kilometers to drive, are much more efficient than half-loaded trucks or trucks (delivery vans) that have to deal with a large number of delivery addresses.

To these eyes, this is the fatal flaw of Just In Time delivery: less efficient delivery per truck or delivery van requires more trucks and delivery vans for the same amount of goods and semi-fabricates delivery and hence to more traffic on the road.

So where JIT is the most efficient delivery method for the receiving parties, as it reduces their cost of stock, it is definitely not the most efficient delivery method for the shipping companies, as it increases their amount of trucks and delivery vans and thus the traffic in general.

Whether stores, distribution centres and factories should maintain their JIT as the most efficient delivery method for them, or should be pushed by politics to keep up larger stocks in their own warehouses and storages, in order to reduce the number of trucks on the roads, is a political question. But it is a very important question to these eyes.

It is an undeniable fact that the roads are (over)crowded with trucks and delivery vans during the last months of the year, especially when one takes the more difficult traffic situation on the roads into consideration.

However, it is much too easy to just throw down extra asphalt, in favour of the transport and logistics companies, in order to solve this problem the easy way.
This country and especially its citizens won’t really benefit from this extra asphalt at all.

To these eyes, it is much better to look at more efficient ways of delivery, that reduce the necessary number of trucks and delivery vans, while eventually maintaining the current service level for factories, distribution centres and stores. 

This is a social, political and economic problem that should be solved by politicians and economists. Not just by infratructural construction companies alone.

Monday, 4 December 2017

Impressions from India, Pt II: Forget the robotized office tools for the next ten years... the Indians are coming now!

Like I already mentioned in the previous article, I have spent two weeks with my colleagues on a business trip to India, on behalf of my supermarket chain. It was a truly wonderful experience and one that I hope to repeat in 2018.

During our stay in Noida, close to (New) Delhi, I was struck by the fact that – apart from the large European and American ICT companies that one would expect there – the globally operating audit firms had also opened large subsidiaries in Noida.

Accenture, EY and KPMG were only three of the audit and consultancy firms that I saw during a short car trip on the “Silicon Expressway” (i.e. the name I gave it) from Noida to Delhi.

Office of Accenture in Noida, India
Picture courtesy of Accenture India
Click to enlarge
For me this was a tell-tale sign that the danger for many American and European middle class knowledge workers in the audit and consultancy industry does not (yet) come from the robotization of their workplace. No, it are the extremely qualified, but nevertheless much cheaper chartered accountants/auditors and consultants in India that might pose an immediate threat to such jobs in the Western world. And they are far from science fiction.

Office of KPMG in Noida, India
Picture courtesy of KPMG India
Click to enlarge
Of course, I don’t close my eyes for the recent emergence of IBM’s Watson and other robotized administrative tools in the bullpens of modern offices. I am convinced that within roughly a decade such strategic tools have eaten away a substantial amount of the moderately complex administrative work from the people that do it now on a daily basis.

And perhaps these tools might then even execute a large share of the more complex and cautious assessment and advisory work, that is the very heart of strategic auditing nowadays.

Nevertheless, as a seasoned ICT consultant and software tester with over 25 years of working experience, I know how darn hard it is to deploy new and extremely complex information management tools in organizations that are not yet familiar with them. Especially when the managers and normal employees don’t understand how they must use these tools in the most beneficial way.

Office of EY in Delhi, India
Picture courtesy of EY, India
Click to enlarge
Even though IBM advertises Watson as “the answer to all future questions”, I suspect that the first strategic implementation programmes and projects for Watson might become an expensive failure. Just for the reason that many new and extremely complex ICT projects tend to fail initially, due to a lack of experience among the contractors and lack of focus, as well as massive resistance, among the people that should use such systems and tools.

Only in a decade or more, there is probably enough experience and confidence available to bring such projects to a successful end, as then seasoned consultants will know about the challenges and pitfalls in such complex, strategic information projects.

So for now... perhaps you should forget the robotized office tools and think about the Indians first. They are smart and very well educated and trained... and they can be deployed immediately for all kinds of administrative and assessment labour. At least, that is my idea after seeing all these Western audit firms in Noida and elsewhere in India.

Of course these Western audit firms in India will probably also have more than enough assignments within the Indian domestic market itself; assignments that will undoubtedly yield a substantial share of their annual sales figures in India.

Nevertheless, in India there is ample availability of very high qualified workers, with a profound – close to native – knowledge of English and very good education and skills. Therefore, to these eyes, it is already a sound strategy for the large audit firms  to outsource a large share of their moderately complex, routine assessment work to India.

New housing facilities for the emerging
middle classes in Noida, India

Picture copyright of Ernst Labruyère
Click to enlarge
By doing so these companies strongly increase the audit capacity of their branches in Europe and the United States and it saves them roughly 50% in cost and expenses to do so.

Yesterday, I spoke with the (Indian) capacity manager of a large, Dutch ICT consultancy firm and he told me how hard it was to find sufficient qualified personnel in The Netherlands at this moment. And even though this capacity problem is most imminent for the Dutch and European ICT industries, this will also apply to complex administrative work, like auditing and accountancy. Hence, India...

The availability of sufficiently qualified and well-trained personnel is never a problem in India, with its population of roughly 1.3 billion people, among others existing of countless well-educated and very eager male and female professionals, with a strong desire for a better life for them and their loved ones.

In the past many outsourcing projects had to deal with huge setbacks and tough challenges, caused by cultural differences and mutual misunderstanding between the Indian knowledge workers and their Western principals. Nowadays, the number of knowledge workers with sufficient, hands-on experience in European and American companies, is growing. This strongly increases the success rate for large and complex projects in Europe and the United States, that are partially or fully executed on Indian turf.

Picture of shops in Delhi, India
Picture copyright of Ernst Labruyère
Click to enlarge
There is, however, a dark side about the success of the Indian knowledge workers in the ICT, consultancy and audit industry... A dark side for which the Indian consultants cannot be blamed at all, but that has nevertheless much influence upon the chances of the Western knowledge workers.

Many middle class workers in the Western world have dealt with stagnating or dropping purchase power during the last fifteen years, under pressure of the enduring economic crisis and earlier the popping of the dotcom bubble.

While the costs and expenses of most middle class workers have been rising by the year in especially Europe, due to inflation and tax hikes, their salary increases remained (close to) nought for many years in a row. Eventually this led to a stable, even dropping purchase power for many, many middle class workers.

But now the crisis has finally ended in the Western world and there is ample money at hand within the larger, profitable companies and the government. Therefore it would be the perfect time for such companies and government bodies to administer a sturdy wage hike, in order to get the middle class – as the motor of modern society – back on its feet again.

However, many large consultancy and audit firms – just like the ICT firms did twenty years before them – are now trying to cut their expenses (in my humble opinion), by deploying large numbers of knowledge workers in India. They do so in order to perform routine assessment activities overthere against lower costs, which were formerly done in the Western countries themselves. I don’t think this development is solely prompted by the lack of qualified workers in the Western world, even though this might have been a trigger initially.

Personally, I suspect it to be an ordinary austerity measure, that could have far-reaching impact on employment in the Western world. Especially as the costs for securely storing and shipping large packages (i.e. Terabytes) of classified data all over the world have dropped to almost nought and the possibilities for international video conferencing and other forms of direct communication are nearly endless and of excellent quality against low cost.

This whole development will inevitably lead to enduring downward pressure on the salaries of the middle class workers in the Western world and could hamper the oh so necessary wage hike that many Western workers are craving for. And of course this will also apply to the lower qualified workers in the Western world, who are already in a very awkward situation.

This is the reason that this development gives me mixed feelings. I am happy for the wonderful people in India, who have a good chance to rise above poverty and lead a prosperous and decent life with their relatives and friends. All these people do very well deserve to have good jobs and a good life and future ahead.

New housing facilities for the emerging
middle classes in Noida, India

Picture copyright of Ernst Labruyère
Click to enlarge
Nevertheless, I have some worries about the middle and lower classes in Europe and the United States. They are already suffering from the ongoing decrease in administrative and non-administrative routine jobs at their employers and from their slowly diminishing purchase power over the last fifteen years.

The current developments in India could have additional negative impact on their direct labour situation and their immediate future, in contrary to the robotization of their workplace. The latter seems only an issue for the more distant future (say, ten years), in my opinion. 

So please don’t worry too much about the robots yet... as the people that might take over your jobs in the near future are still very human and very well qualified for the job.

Wednesday, 29 November 2017

Impressions from India, Pt I: How India’s traffic chaos can teach us in the Western world a lesson.

The last two weeks I have been the guest of India; the second country in the world, when it comes to population.

I, together with a group of colleagues from my employer – a large supermarket chain in The Netherlands – had the opportunity to visit one of our key suppliers in India, in a sheer unforgettable business trip.

We all resided in Noida, a neighbouring city of Indian capital Delhi, and that was also the city were the supplier was established. It was the trip of a lifetime for me and the hospitality and friendliness of the Indian people have been heartwarming! I genuinely loved this country and its sometimes peculiar, but special, culture during the last two weeks made an enormous impression on me.

A trip to India is a culture shock for Western people, to say the least…

A street corner in Delhi, India
Picture copyright of Ernst Labruyère
The streets are litterally clotted with masses of garbage and people living on the streets in tents… or just in a blanket or sleeping-bag. Beggars approach you everywhere and street sellers of litterally everything don’t take a simple ‘No’ for an answer, but try to persuade you into buying some of their stuff with enormous perseverance.

A Sunday market in Delhi, India
Picture copyright of Ernst Labruyère
Poverty and backwardedness is always extremely palpable and tangible in India, wherever one goes. And so is the sheer wealth at some places.

Gathering at a hotel of the Lamborghini club of Delhi, India
Picture copyright of Ernst Labruyère
These are the sometimes painful consequences of life in a Third World country, being in an unstoppable march towards more business success and prosperity than ever before: the dot on the horizon is very much visible, but the road towards it is long and winding.

Tens of thousands of stray animals (mainly dogs and (holy) cows) are walking in the streets and straight through the dense traffic or they are browsing through the massive stockpiles of garbage for their daily meal.

Two cows eating from a stockpile of garbage
in one of the streets of Noida, India
Picture copyright of Ernst Labruyère

And last, but not least, the traffic itself makes Western people wonder…

One thing that probably strikes every Western visitor is the blatant chaos of Indian traffic and the 24*7 continuous honking of cars, scooter cars, motorbikes, lorries, rickshaws and anything else with a horn mounted (i.e. which is everything, except people, cows and dogs). 

“I honk and therefore I am”, could be a statement of an Indian René Descartes these days.

Where excess honking is a habit in traffic that can make people angry in about every other country in the world, the Indians react indifferent or even with an understanding smile. Some lorries even beg their fellow traffickers to user their horn as a warning signal!

A picture of the traffic in Delhi, India
Picture copyright of Ernst Labruyère
When you honk, the Indians might give you a little bit of space. Just enough to not directly crash in the fifteen cars, lorries, rickshaws and scooter-cars immediately surrounding you.

For the rest the survival of the fittest rules in Indian traffic: if you don’t fight for your square meter of street space before you, someone else will claim that. Giving precedence to other traffic will make you a fool, who will wait forever. Simply because nobody else will give precedence to you. So you blow your horn with a confident smile, step on the gas and fight for every meter of space, without stopping too clearly for the other traffic or for pedestrians and bikers. They are aware of you and won’t move one centimeter to both sides.

If you can pass somebody with 20 cm of space, you clearly gave them too much room to drive. Stopping for other traffic is futile, so you blow your horn once more and pass them with serious speeds. Who goes first, wins. The others are clearly sheep in search of a shepherd.

At this moment you might wonder if the daily Indian traffic is not laden with the most gruesome accidents, seeing their driving style.

A picture of the traffic in Delhi, India
Picture copyright of Ernst Labruyère
Well, it isn’t actually… That was the most amazing discovery that I did during my fortnight trip to India.

Taking the constant, 24*7 traffic chaos in consideration, there were amazingly few accidents. To be honest: I only saw one small quarrel caused by a tiny traffic accident, to be honest. For the rest, the traffic in Delhi seemed to run like a Swiss clockwork in all its chaos.

And that amazing fact set my mind to work: what if the totally disorderly “outlaw state” of Indian traffic, was actually safer than the watertight web of traffic regulations in The Netherlands?! It was almost impossible to believe!

The Netherlands is a country with a huge web, consisting of thousands and thousands of traffic rules for every possible situation and far, far beyond.

Pedestrians and bikes are protected by traffic laws that declare cars guilty for every accident, in which they are involved with the former.

Was the bike riding through red? Not paying attention to approaching cars? Riding in the middle of the road, while ignoring the other traffic? Looking at this telephone, while riding? Never mind! The car is guilty anyway.

The logical consequence is that bikers in The Netherlands stopped paying attention to the other traffic at all, until they find out the hard way that they are perhaps legally invulnerable, but far from immortal or physically invulnerable.

The same is true with other participants – cars, trucks, bikes and pedestrians – of Dutch traffic. Their instincts for the strange habits of their fellow-participants in traffic have all been replaced. Either by the vast web of Dutch traffic rules or by the pseudo-safety of airbags, extra strong cage constructions in cars and all kinds of modern technology, like anti-slip software and brake assistants.

Where machines get smarter over the years, the humans operating them become inevitably less smart and less skilled. That is a law of nature! Or do you still know somebody, who can calculate his supermarket sales slips by heart or find a complex route without the usage of a navigation system?!

A picture of the traffic in Delhi, India
Picture copyright of Ernst Labruyère
So perhaps the Indians, with their utterly chaotic and seemingly hopeless traffic, are touching a sensitive point of the West indeed: that too many traffic rules and too much technology actually not make the traffic in Western countries much safer, but rather to the contrary. People lose their skill set and their ability to watch out for themselves.

That would be a surprising lesson to learn for us. This lesson is extremely hard to believe, but Indian traffic might prove that it could be right anyway. Then it would be an extremely important lessons for traffic officials too. 

So step in your car, blow your horn and let the survival of the fittest begin! In the meantime, I say “Hi” from India.