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After decades of Just In Time, Kanban, Toyota Production Systems and the like, it might be assumed that the automotive industry’s inbound logistics systems are by now close to perfection. This is far from the case. In a market characterised by falling profitability and massive overcapacity, car manufacturers are as focussed as ever on finding new ways of slashing costs and inventories, and of using the supply chain to get closer to the ideal of manufacturing to known demand rather than to forecast.

It isn’t even clear that automotive supply chains are any longer (if they ever were) the paradigm to which other industries aspire. Dr Dirk Petermann, European supply chain manager for the tyres business of Continental AG, says: ‘It is a fairytale that the automotive industry has the most advanced supply chains. CPG for example is good at category management and at VMI and hitech really understands the global supply network. Automotive could learn a lot but it may be that there are too many ‘one industry people’ in it.

‘Of course it is difficult to bring someone into the management of a supply chain who doesn’t have deep knowledge of all the networks involved but how else do you get fresh eyes to look at something you see every day?’

Nonetheless, there are fresh eyes and new approaches out there. Paul Shankley, managing director of Gefco UK, the Peugeot- Citroen subsidiary, notes a number of trends in inbound logistics. ‘We are looking at small warehousing facilities in, for example, Coventry, for immediate lineside delivery to Peugeot or Jaguar; there is always the general requirement for us to reduce costs and take ownership of some lineside activities. Overall there is an impetus to bring automotive inbound logistics up to supermarket standards of delivery – say, 15 minute time windows – under the tightest cost control.’

Beyond the EU
Of course, this is easier said than done, especially as the inbound suppply chain now stretches right across ‘New Europe’ and beyond. The expanded EU, in Shankley’s view, is a fundamental shift but one which to a large extent has already happened. ‘Delphi has been in countries like Poland for a long time,’ he says.

Gefco is already well established in Poland and Russia, there are new operations developing in the Czech Republic and Slovakia but already the supply chain boundaries extend well beyond the EU. Gefco manages a flow of five trucks per day from Turkey into the UK for Delphi destined for Ford at Eastleigh, and similar flows across Europe. Gefco, says Shankley, can add value to these flows – for example through the Gefbox system of returnable transit packaging.

A factor that has shaped inbound automotive logistics over the past 20 years has been the trend for manufacturers to buy-in complete systems and assemblies rather than individual parts. That has tended to simplify the manufactuers’ own supply chains but put greater stress on the logistics performance of first tier suppliers.

A natural balance
Petermann makes an interesting suggestion: ‘In the past two decades the automotive manufacturers have put a lot of effort into strengthening their relationships with suppliers, leading to the outsourcing of responsibility for complete assemblies and systems. It is possible that this trend has peaked or is even on its way down. First tier suppliers have their own supply chain organisations, connected to those of the OEMs but also able to challenge them. In the end the relationship will find a natural balance.

‘Integration is still a challenge for first tier companies. We need good connections, processes, organisation and support systems in both directions and there are problems of internal integration. In Continental, for example, the Tyres division has a streamlined and aligned approach to supply chain whereas in the Automotive Systems division (largely an acquisition) there is still a lot of work to do. ‘Technical reasons’ is the usual excuse for short-term thinking’

There is no longer a standard auto industry ‘approach’ to logistics. Harvey Francis, general manager, automotive, for P&O Ferrymasters, says that while most major automotive companies are alike in looking to deal with a single source rather than using a multitude of hauliers, each client has its own interpretation of what they are looking for. The secret for firms like Ferrymasters is to recognise what they want and come up with tailored answers using in-house expertise. First and second tier suppliers, who have much greater impact these days, similarly require different solutions – often for each manufacturer with which they are linked. Nonetheless, common factors are speed of transit, reduced stockholding, and, increasingly, security of supply.

An integral part
Another common factor, says Paul Kavanagh of NYK Logistics, is is the desire for inbound logistics to be driven by the needs of the manufacturing plant, not the whim of the supplier. This requires a deep level of integration between contractor and client as in NYKL’s contract with Jaguar at Halewood. Here, NYKL operates as an integral part of Jaguar Materials Planning and Logistics, attending internal meetings and representing Jaguar externally to suppliers and service providers. NYKL has total management responsibility from supplier collection right up to lineside – indeed ‘the first Jaguar employee to handle a component is the one who fits it to the vehicle’, says Kavanagh.

The New Europe should, says Francis, improve speed of transit through reduced or eliminated customs clearances. At the same time, Ferrymasters, which already operates in a number of the new territories, has the challenge of increasing its reach and providing similar levels of service to those its clients have been used to in Western Europe on what is not always a Western European quality infrastructure. Low labour costs will not compensate for poor transit times. ‘Transit times are still absolutely key, and JIT won’t go away. Our ability to control parts to schedule is critical. The emphasis is on the ability to dovetail components into the schedule – whether that’s for new-build or for VOR,’ says Francis. A major element for many clients is the implant, eg Ferrymasters personnel sitting next to the expeditors, coordinating systems and stock levels and modes of transit.

The market has ever lower expectations when it comes to transit times. This requires considerable flexibility, for example the ability to schedule and manage driver changeovers in transit or to divert to alternative ports. The EU’s Working Time Directive will, says Francis, focus the driver’s working week on hours actually spent driving. ‘Firms who can’t manage driving hours and eliminate waiting time will get hammered,’ he adds.

The automotive industry having been notorious for the short-term nature of its business relationships, Francis is happy that both Ferrymasters and its clients are now thinking much longer term. ‘We can get extremely close to the client, effectively become part of his organisation to the point where we not only know but can anticipate what he is looking for. Adding value means being part of the team, totally involved in daily discussions, weekly planning, and being part of the improvement process, looking for savings that can be made in conjunction with the client, for example by changing part of the client’s process. We have a fully documented cost-saving protocol as a way of agreeing, implementing and sharing the gains.’

And Shankley too acknowledges and welcomes the automotive industry’s general shift away from short-term contracts. ‘Now we are able to grow the level of collaboration with manufacturers so that we are almost fully integrated into the fabric of their business. However, we realise we still have to remain competitive by offering new services and solutions – otherwise other players will come in behind us.’

Peter Rogers, P&O Ferrymasters’ central services director, says that collaboration between logistics providers is an increasingly important part of the scene: ‘We work with a number of partners in selected markets and geographical areas. Often, the best solution is not to do things with our own staff and equipment. One main target is to drive down empty running. Our principal clients are expecting and encouraging us to go down that route’.

And Francis adds: ‘The industry is open to the idea of partnerships provided you collect on time and deliver on time. It’s another aspect of tailoring the right cost-solution package’.

Multiple collections
One aspect of this is the increasing deployment of JIT2 – multiple collections forming a single delivery which can increase delivery frequency without a significant increase in the amount of empty air being shipped. However, some logistics providers to pan- Continental industries such as automotive are, in Shankley’s view ‘just badging a loose association’. Gefco, he claims, operates more like the international parcels industry – ‘genuinely one organisation across Europe’. This has encouraged expansion and Gefco’s network now accommodates the needs of many non-auto manufacturers who are after a one-stop-shop, inbound or outbound. The ability this gives the firm to minimise empty running and maximise utilisation benefits its core automotive customer base.

The ability of firms like Gefco and Ferrymasters to offer comprehensive freight management on a continental or even global scale with a degree of accuracy and visibility unimaginable even a few years ago has encouraged some large-scale contracts recently. An example is the agreement between P&O Ferrymasters and Trico, the wiper blade manufacturer, under which Ferrymasters is managing both the collection of parts inbound to Trico facilities and the delivery of complete wiper systems to vehicle assembly plants. As Trico has facilities in the UK, Australia, North and South America and is expanding in Asia, this is a truly global contract. In similar style, Menlo Worldwide is working with the automotive electronics firm Continental Temic, moving production materials from Europe and Asia into manufacturing plants in Mexico and the Philippines and shipping completed products back to a distribution centre near Frankfurt.

Arguably the most interesting feature of these contracts is that the logistics provider is managing both inbound and outbound flows, albeit for a first tier supplier rather than a vehicle manufacturer. As manufacturers and their logistics partners seek further efficiencies, this trend may grow – TNT Logistics in the US, for example, has extended its long-term arrangement with BMW which already provides complete inbound supply chain management for BMW’s South Carolina plant to include delivery of aftermarket parts direct from suppliers to BMW’s parts distribution centres. Since the parts and suppliers for production and after-market are usually identical this might seem obvious, but in fact combining the delivery of relatively small volumes to multiple locations with large-scale flows to a single plant costeffectively without compromising either production or service is a trick which only the best logistics providers can pull off, and is likely to be an important differentiator in a consolidating market.

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