Watch a short video from this years conference, with testimonials from some of our speakers

Thinking big and acting small  

Yes, there have been improvements.

But visibility and resilience in the European automotive supply chain needs a lot more attention

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BONN, 1 MARCH 2012: Visibility has gone right back to the top of the agenda for logistics executives, leading straight on to issues of control and risk management which have dominated in this past 12 months of natural disasters.

Europe’s OEMs, tier suppliers and logistics companies are going behind difficult economic conditions – uncertainty over sales, looming decisions on plant closures, the perennial pressure on costs – to emphasise the need for a better understanding and control over the supply chains they run.

Better sourcing decisions should be a result, and getting some insurance against disruptions must be a longer term benefit.

Around 300 delegates met at the Automotive Logistics Europe conference in Bonn, Germany this week under the theme ’Just deal with it; building end-to-end resilience across the supply chain’. The 10th event in this annual series was again the opportunity for high-level networking and discussions. The mood was generally optimistic, tempered with determination to learn from global challenges like the 2011 Japanese tsunami and Thai floods. 

There were also intense practical exchanges over two days of plenary sessions and workshops, most notably around finished vehicle logistics cost and service, high and heavy logistics, and the changes about to envelop the aftermarket.

Assessing the risk of potential disasters

Ford’s Draper commended LSPs

The meeting started with some high-level views from Ford and GM of the lessons learned about supply chain risk. Alan Draper, vice president of purchasing for Ford Europe, told delegates that although Ford had minimal disruption to global manufacturing from the last year’s events, it required a significant effort from logistics and supply chain functions to make the necessary adjustments.

“In the days that followed the Japanese earthquake, our assessment showed that there were 77 facilities and 110 parts suppliers that were affected, which would impact around 850 finished components for Ford,” he said. “In short, it was a potentially disastrous situation.” And he was quick to recognise the way LSPs responded. “I acknowledge the outstanding work of our  Ford logistics partners” in recovering from the disaster, he told the audience at the conference.

In assessing what happened, Draper noted that many of his suppliers in Japan were electronic component suppliers at the tier two or tier three level. In Thailand Ford faced the situation where stamping dyes were under water and affecting plants as far away as South Africa.

He explained how his supply chain teams started a process of tracking every part so as to have the visibility to make decisions about either alternate production, re-sourcing and/or premium freight to maintain inventory levels. Ford has developed a global risk chart to assess zones vulnerable to political as well as natural disruptions, and to compile a list of suppliers at risk, including those who are operating close to capacity even in normal times.

“There are areas of the supply chain that are already overstretched,” observed Draper. “We have to understand that suppliers producing at maximum capacity could pose a risk if they face an issue,” he said.

This overall  assessment could lead to important shifts in supplier sourcing and locations, Draper indicated, particularly as Ford continues to produce across global platforms. “Technology needs to be available globally and we can’t focus our supply sources on only one location.”

But he acknowledged that new or local supply bases take time to develop. He pointed to production in Turkey, where Ford began with a largely imported supply base and developed until today to the current level of around 80% locally-sourced material. In Russia Ford is taking all efforts to develop a local supply base, supporting the Ford Sollers joint venture manufacturing sites in St Petersburg and Tatarstan, he said.

“You need to have a strategy for all your supply bases, including those started to be developed. It does not mean you have to monitor everything all the time, but you have to understand the risk points,” said Draper.

Susanna Webber

Susanna Webber, Vice President of Purchasing and Supply Chain, GM Europe

Not-so-low cost sourcing and gaps in the budget

GM has also developed country risk maps together with suppliers as part of a global supply chain risk and purchasing strategy that has seen significant evolution over recent years. Susanna Webber, vice president of purchasing and supply chain at General Motors Europe, reminded the conference audience of the ‘total enterprise cost’ developed when she global head of logistics for GM, and indeed was interviewed on the subject by Automotive Logistics two years ago.

This model focuses on the so-called ‘C price’, in which risk of sourcing decisions, along with considerations such as obsolescence, premium freight and quality, are treated as costs and added to the material (A price) and logistics (B price) elements of any component. “In the past, we looked more at piece price and supplier capabilities,” she admitted. “(The new method) has fundamentally changed our approach. The priority is no longer on low-cost country sourcing, as there are a lot more factors to consider.”

Webber says that GM has also developed backup plans including what she called ‘front loading’ which could include building up inventory or increasing premium freight to avoid potential issues (although she warned that stockpiling supplies was not always the best solution).

Toyota’s Yuksel said inbound TPS strategy would extend to outbound

Toyota has strengthened its inbound logistics set up under its Toyota Production System strategy said Toyota Motor Europe’s director of logistics, Levent Yuksel. He said the company now wanted to expand the practical applications to outbound including cyclical delivery and a level workload.

Factoring in ‘exceptional’ costs such as premium freight at the planning stage is now seen as critical, and other manufacturers pointed to the role that logistics providers should play in identifying issues and making quick decisions.Ralf Gerhardt, logistics manager for Central Europe at Delphi, said that he relied on providers to be able to react in “a matter of hours” in some scenarios, including those of a considerably lower scale than the events in Japan or Thailand.

“In recent weeks, for example, we had some very cold weather in Eastern Europe and this had potential disruptions to supply from Romania and Bulgaria. For some of this material we only hold a few hours of inventory, so we needed our providers to act very quickly to move the material or increase stock.

Continental’s Wolfgang Michel, head of customs, transportation and packaging, said that in 2010 the tier one spent around €180m in premium freight, which reduced in 2011 but only to €100m. While not all of this money was necessarily Continental’s responsibility, not a single euro of it had been budgeted, he said.

Inergy’s Mas: suppliers rely on manual communications

A lack of inbound visibility

Increased visibility and control in the supply chain fed into discussions at every level of the conference. Thomas Golda, senior managing consultant at IBM Global Business Services, revealed that in their recent survey of 400 chief supply chain officers across numerous industries, visibility was the most common concern, cited by 70% of respondents.

And visibility means especially of tier two and tier three suppliers that pose great risk of disruption. Several tier one suppliers at the conference pointed to a lack of automated messaging and EDI infrastructure among much of their own supply base. Inergy’s supply chain director for Europe, Hubert-Paul Mas, said that many of his suppliers rely on manual fax, telephone or email communication for delivery confirmations. Inergy’s LSP, which is Gefco, has developed an open platform system (called Ista) in which suppliers without EDI to send electronic confirmations, said Mas.

While any such system is clearly welcome, the automotive industry as a whole has struggled with a multitude of standards that do not communicate effectively. Odette International’s John Canvin described the development of a common interface program funded by the European Commission, while Continental’s Michel also pointed to SupplyOn, an internet platform for EDI communication that suppliers can join, which has been developed over the past decade by SAP together with Continental, ZF, Robert Bosch and Schaeffler.

Taking out 63% of logistics costs

Beyond IT enabling, there were several notable presentations by tier suppliers that emphasised their efforts to improve control over inbound flows. In a joint presentation with Emmanuel Arnaud, who is Gefco’s sales director for global accounts, Inergy’s Mas revealed how the company has switched its delivery terms in Europe from the suppliers’ responsibility (DDU/DAP) to ex-works, allowing it to consolidate deliveries and significantly decrease inventory. According to Mas, by switching to a “pull mode”, Inergy and Gefco could better optimise the transport flows, reduce cost and improve the reliability of deliveries

Under the new arrangements Gefco has implemented a control tower to regulate transport flows and monitor other carriers, so that Inergy now has better visibility of the supplier pipeline. “Our 27 plant managers across Europe are now sleeping much better because they know exactly what is going to arrive at the plant and when, and they are also aware of potential disruptions,” said Mas.

In another significant case study, Felice Patti, Tenneco’s senior manager for global supply chain management in Europe, described how the company had cut logistics costs 63% by implementing a multiple-3PL solution for North American suppliers sending material to Europe to support production of a heavy-duty exhaust systems there for John Deere and Caterpillar.

Patti said that the 52 suppliers – which John Deere and Caterpillar required Tenneco to use – were arranged on a mixed incoterm basis with only about 30% ex-works. Individually, they would have required about 35 shipments per week, including 5-10 airfreight shipments.

Tenneco implemented a consolidation hub in Anderson, Indiana with one 3PL, which is responsible for all of the pre-carriage transport from suppliers to the hub, for export documentation and for stuffing the sea containers. This LSP also handled communication with the suppliers and with Tenneco in North America and Europe.

A second, more internationally-focused, carrier becomes responsible for transport from the hub to the port in the US, for booking the sea freight through to discharge in Hamburg, and then for customs clearance and delivery to the Tenneco plant. This service is offered at a special “house price” to the suppliers in North America responsible for delivery.

The 63% saving is by taking control of the transport chain and compares to the cost of single shipments. It comes especially from higher container utilisation. “Without this control we would have no visibility on our inbound supply, as well as facing much higher logistics costs,” said Patti.

The hub solution has been so successful that Tenneco is rolling it out to establish hubs this year at Sint Truiden in Belgium, Fameck in France and Irun in Spain, as well as in India, China and South Africa. “As the Russian market is going to be very important for us in the future, we are also considering adding a hub on the Poland-Belarus border to manage material flows from Western Europe,” he added.

Finally, Continental’s Michel also revealed how the supplier has tried to take more direct control of its inbound flows. In one case, a switch from individual supplier deliveries several times a week to a daily service with local milkruns had allowed Continental to reduce its inventory and maintain better visibility over its supply chain.

This is part of a strategy to shift more of freight to ex-works terms, says Michel. That’s not always as easy to do, he commented, since it throws up internal issues whereby purchasing has to negotiate piece price reductions from the supply base. “It’s a slow process, but we are slowly moving towards taking more control of our supply chain,” he said.  

Presentations, questions and discussions in the formal part of the conference

(From right): Magna Steyr’s Druml, Honda’s Marlow and Geodis Wilson’s Baumann with moderator Arlinghaus

Risk was a key element of the overall conference, but also had a special break-out session devoted to it. A thought-provoking discussion moderated by independent consultant Bruce Arlinghaus identified that information isn’t always enough. 

Peter Baumann, global director of automotive for Geodis Wilson, outlined the essentials of an effective strategy for managing risk, focussing on the information needed in advance and the operational planning to mitigate the effect of disruptions, regardless of the (unknown) source of the disruption.

The risk is the lack of information

However, planning skills are “basically at the very beginning,” noted Michael Druml, director of supply chain management at Magna Steyr, which as both tier supplier and contract producer of 150K vehicles per annum sits across two parts of the supply chain. He said that OEMs are asking suppliers for information ostensibly to assess risk, but noted that different companies used different definitions for the same thing, and that responses are being required on Excel sheets. Anyway facts may change shortly after being submitted, he said. “I don’t see any standard,” he said.

Richard Marlow, manager of external logistics at Honda Manufacturing UK, described an entirely different order of challenge in trying to assess risk. He said that, after the Icelandic volcano of 2010, they had thought their supply chain was robust. With no reliance on air freight, there was no disruption. 

But with 1200 parts ex Japan and a further 200 from Thailand, where the Honda plant was under 2m of water, production was severely affected by these 2011 disasters. The launch of the new Civic was delayed by two months as one consequence. “Sometimes the impact is so severe we are not able to cope,” he confessed. “Its a wake-up call: what do we put in place?”

Returning to the need for information, Marlow noted that a key message was the need for clarity and accuracy about parts. That extended not just to tier one suppliers, but to lower tiers as well, and was needed not just at model launch time, but also for subsequent updates.

Greater Europe: Reduce here and expand there

IHS forecaster Robinet: decisions on capacity are ‘now’

The recession facing Europe is about to drive “very tough” decisions on production capacity, says Michael Robinet, managing director of IHS Automotive Consulting. He gave delegates a broad and data-led view of future logistics flows across the globe. But closer to home, falling sales in troubled southern European markets, together with widespread adoption of three- rather than two-shift production, and more localised output in fast-growing markets outside of Europe, all mean that a “breaking point” on over-capacity has been reached, he warned. Speaking on the day that GM and Peugeot announced their collaboration, for purchasing and joint platform development but not yet plant consolidation, Robinet was blunt in telling delegates what, in truth, they already know.

“Europe has not caught up (with matching capacity and demand), but now is the time. There will be a lot more of GM/PSA; there’s way’s too much capacity in the system right now.”

An insight into the expansion of greater Europe markets was given by Turkey’s Altan Aytac, supply chain director at Tofas for Fiat, where expansion is expected to continue. The potential and challenges for the growing Russian market were described at length by Bo Andersson, chief executive of GAZ Group, the market-leader in light and heavy commercial vehicles. 

Andersson at GAZ: straight dealing in a tough place.

Andersson, a former head of GM’s global purchasing, has overseen a tremendous turnaround at GAZ since taking the helm three years ago, and continues to introduce new models. Whilst much of his focus has been on paying down supplier debt, and improving productivity and quality, the combination of nearly halving the workforce whilst doubling production has put considerable pressure on the supply chain and on logistics.

To add to that, he reflected at the conference on the well-known and considerable logistical challenges in Russia, such as customs. Although GAZ has in-house customs clearance, Andersson says that the normal process is slow, expensive and often corrupt. “I made a commitment that there would be zero tolerance to corruption when I took this job and so we pay nothing [in bribes] for customs,” he said. “So therefore,” he added wryly, “we are a bit slower”.

As GAZ has builds VW, GM and Daimler cars under contract, some of which like the Skoda Octavia and VW Jetta are global platforms, imported material are set to increase dramatically “Next year we will be importing about 300 containers a week as production ramps up,” he said.

Andersson, who was known at GM for pushing hard to improve supplier operations and costs, also pointed to Russia’s underdeveloped supply base, which faces other unique challenges. “Of our suppliers, about seven of them are owned by oligarchs that are not easy to deal with. Another 50 or so turn up wearing leather jackets and acting tough. They’re proud of that.” As a Swede who formerly served in his country’s armed services, Andersson is not afraid of straight speaking.   

So “now that we have cleared our debt to suppliers, the supply base is something we need to work on,” he told delegates. For logistics, there would be considerably more focus at GAZ, including plans to use its own fleet of trucks for local milkruns.

[see the next issue of Automotive Logistics for an exclusive interview with Bo Andersson, including detail on GAZ’s supply chain management. The company is itself owned by one of Russia’s so-called oligarchs, Oleg Deripaska].  

Dealers lack confidence in outbound LSPs

Poor forecasts and a lack of visibility in the delivery process mean that both OEMs and logistics providers recognise a real lack of confidence felt in the dealership community about the outbound supply chain. It’s a situation that needs to be remedied through better information and transparency. Meanwhile, OEMs including BMW, Opel and Seat criticise the lack of logistics capacity and limitations in road and rail infrastructure across Europe. 

Well-attended sessions at the conference focussed on finished vehicle logistics and the seemingly impossible challenge of working from common and reliable information.

BMW’s Wellbrock: more volume to come, but capacity worries

As backdrop, Seat’s distribution projects manager, Agapito Perez Bote, said once again that OEMs and importers need to improve the distribution process through a closer collaboration with logistics providers to better satisfy dealers and so the end customers. BMW’s general manager of worldwide distribution, Mathias Wellbrock, repeated that the issue is not always about speed of delivery, but about creating a delivery date and sticking it to it. 

Part of the route to a more efficient delivery process is via things like the standardisation of vehicle tracking systems and a decrease in the amount of trucking downtime through the optimisation of driver shift patterns.   Seat’s Perez also noted the difficulties in getting all the necessary information into the same database, a problem exacerbated by the failure of providers to share their information.   There is also the underlying issue of just how effective an OEM can be in a situation where some manufacturers may not have a direct relationship with their dealers, as Tom Jacobson, managing consultant at Ssangyong Motor UK pointed out. The relationship could with a national sales company so that the OEM doesn’t make a local decision on which LSP to appoint. “Different finance companies, different lead times and the number of free days; all those things are determined locally so it is actually difficult to implement something at a manufacturer level which has the impact on the dealer,” commented Jacobson.

Speaking from a short-sea shipping perspective, UECC’s head of car transport sales, Bjorn Svenningsen, said that the company didn’t distinguish between brands, importers or dealers,  because if the logistics provider failed to deliver the product to the dealer in the time agreed with the importer then it became an issue for the brand anyway.

Opel’s Graffe: internal look

Asked whether vehicle delivery performance was less significant for the OEM than the inbound side, Andreas Graffe, logistics director at Opel/Vauxhall, acknowledged that the process began with inbound, but said that it was a case of looking at the entire supply chain and assessing what could be done internally.

On capacity, BMW’s Wellbrock said that he was expecting a general increase in both market volume and in the average transport distances from new facilities. He acknowledged that there had restrained investment by LSPs because of a lack of confidence in Europe and so increased waiting times were likely.

He added: “In 2012 there is a lack of capacity of 15-20% and still a shortage of road and rail infrastructure,” he said.

A time to be green, though not much impact 

John Buchanan, Ford Europe

Whether or not the relative proportion of total emissions that come from logistics mean that the sector should be deeply concerned about ‘green’ was debated at the conference.

John Buchanan, responsible for emerging markets sourcing for Ford Europe, and a specialist in the area of reporting on CO2 emissions, said that some 80% of lifetime emissions from an average Ford Focus came from the car’s use.

Colin MacDonald, vice president of logistics at Renault Nissan, showed delegates a chart that had, for a Renault Laguna, 69% of emissions stemming from its use, with 18% from raw materials and component suppliers plus a further chunk from transporting the petrol that cars use. Automotive logistics counted for just 1%.  

Colin Macdonald ”it’s dead easy”

But he acknowledged that this did not lessen the need for action. “One reason that we have to be green in logistics is simply because the boss says so,” he joked, referring to CEO Carlos Ghosn’s objectives. But more seriously, “lowering emissions has to be part of our cost targets,” he said.

“It’s not complicated, it’s dead easy. If we lower our (logistics) fuel consumption, we lower our costs. We have to take a pragmatic approach. We cannot wait for technology to save us or for government to regulate us.”

Buchanan explained that Ford is already receiving more requests for carbon reporting from potential customers – such as fleet purchasers – as well as from potential regulators. He envisioned a scenario where full-carbon reporting across an enterprise and its supply chain would be audited by accountants as part of compliance regulations. 

On hand to reinforce the point and outline the regulatory environment was Astrid Schlewing, head of the logistics sector at DG Move, an arm of the European Commission. 

There are costs, of course. Kai Kraass, COO for shipping line and logistics provider WWL, reminded delegates that, even before pending sulphur-emission restrictions come into force in European and North American waters, fuel prices have been rocketing. With bunkers at around $700 per tonne, he predicted a rise to $850 by the end of the year. “In the ro-ro market, we have already balanced capacity with demand so as global trade grows, so too will the price of oil and bunkers,” he said.

Michael Douglas was the surprise guest (aka Editor Chris Ludwig), with WWL’s Kai Kraass.

Kraass says his industry is simply “not ready” for emission controls that mandate 0.1% sulphur levels in fuel for shipping by 2015. Costs would rise 60-70%, and there is no immediate technology available to meet the changed requirements.

“The industry is going to need to think completely differently, including how quickly a vessel comes in and out of a port,” he says. “Otherwise we are going to be in trouble.”    Other new regulations which will bite include plans to limit large trucks in the centre of Paris and other French cities, and new road tax regulations in Germany.

The EC’s Schlewing outlined the framework within the white paper on transport published last year, which includes a reduction in greenhouse gases of the transport sector by 60% by 2050, with intermediate targets along the way. A shift to the ‘user/polluter pays’ model is a key strategy.

The white paper is also notable for some return to the notion of modal shift, whereby the EU sets targets for freight to be shifted from road to rail, sea and barges. The objective is to put at least 30% of freight transport in the EU on to rail, up from the current level of less than 10%.

While acknowledging the impact of the white paper in pushing up transport costs, Schlewing also indicated that the EC would be reviewing regulations that could benefit the efficiency of logistics. Along with research into so-called intelligent transport systems, the EC has pledged to end cabotage and review directive 96/53/EC on weights and measures. The latter could lead to more harmonisation of truck heights and loading lengths for vehicle carriers, among others.   High and heavy can be expensive for the wrong reasons

High and heavy can be expensive for the wrong reasons

‘High and heavy’ refers as much to the investment needed in its logistics as it does to the equipment itself, delegates heard in the special break-out session on this subject. Mitsui OSK Line’s general manager of Europe, Rudolf Luttmann, noted that an ocean car carrier combining high and heavy freight with passenger vehicles creates significant extra costs. They include ramps capable of supporting 420 tonnes, special hoistable decks, and expert staff able to load equipment and fix specialized lashing. This is aside from the dedicated terminal space and mafi trailers for static machinery.

Introductions and discussions in the extensive breaks planned into the conference schedule

Though the dimensions differ vastly and the volumes are smaller, customers in this sector have the same demands as those shipping cars, including high-frequency, damage-free handling and short transit times over a global network, he noted.

Land transport also demands investment, with added challenges from transport regulations and permits. Vega’s CEO Franz Blum pointed out that European regulations are different from country to country, and said it took weeks to get cost details. Italy was the worst country for bureaucratic hold ups and costs, sometimes taking as long as eight weeks to give permission for transport. He cited the €20,000 expense of moving a fire-fighting machine for Fiat Industrial to Poland.

Given these challenges, LSPs may not continue their services, something that Daimler’s manager of passenger cars and commercial vehicles in Europe, Jan Maes, has noticed.  “If I just look at the portfolio of service providers available, we organise cars with around 100 LSPs. But if I look at high and heavy, it is clearly below 50 and interest is decreasing,” he said.  “It is a concern.” 

He added that Daimler had improved its distribution as much as possible over the years, but that savings from load factor optimisation are exhausted. “So we need to look more towards the ideal mix of transport modes,” Maes told delegates. “Currently we use them all; road, rail, barge and own-axle. It is a daily search for the right concept – multimodal or otherwise – depending on the type of product, region and customer.” Daimler is also looking for a door-to-door solution for its high and heavy transport. “We need a lead logistics provider,” concluded Maes.

Unfortunately, competence in these service is sometimes overlooked, according to Höegh Autoliner’s CEO, Ingar Skiaker. He noted the delay and cost incurred in the supply chain when providers do not recognise even the most basic information. He recounted how an asphalt machine being moved from France to South America via Jamaica became stranded because the operating instructions for the machine were written in French. “Everyone can start a car,” observed Skiaker, ”but not many are confident with a large machine with levers going in every direction.” The machine eventually had to make the loop back via Europe simply for the instructions in the right language to be included.   Staff training is obviously a high need, but according to Amports CEO, Steve Rand, it is a challenge to find the correctly qualified labour. The task is ultimately up to the stevedoring company rather than the terminal operator. An obvious factor for improving service is planning that all needs are established and met before the equipment leaves its factory, says Blum. In fact lessons could be learned from the car sector, he observed.  

Getting the aftersales business to be like Macdonalds

Since most car buyers have selected their vehicle before they walk into a dealer, and have little need of a relationship with its staff, then the after-sales experience is critical for its ‘touch points’ which can build or damage brand loyalty among customers.  

Speakers from Ford and Opel/Vauxhall emphasised the impact of a vehicle service being delayed through unavailability of parts. In two break-out sessions at the conference which were devoted to service parts, Greg Magee, director of supply chain after sales for GM Europe, and Raymond Damerow, director of parts supply and logistics for Ford Europe’s customer service division, each spelled out the same message; that customers accept scheduled service dates some way in the future, but react badly to any delay in completing that service.  

In fact the delay is more likely to come from dealer staff who mis-diagnose a fault or order the wrong part, rather than delay in fulfilment, said Magee. But against a backdrop of increasing complexity in vehicle technology, and what Shay Dorgan, a director within DHL’s customer solutions division, described as a “doubling” of components per vehicle in the past decade, any failure of logistics compounds the problem.   “We’re in the fmcg business,” commented Magee. Each employee has to ask: “What am I doing and how does it impact the customer? We have to become a Macdonalds where (everyone) knows that the reason they have a job is because of a customer.”   Re-iterating senior management’s message since GM emerged from bankruptcy, he noted that “we are not a manufacturing company”. To that end, GM aftersales in North America has re-branded itself as Customer Care & Aftersales, a change which is also coming to Europe, said Magee. Ford has established a team to handle aftersales for commercial and fleet buyers, where delays in returning cars from servicing can have a significant impact. “They have authority to get a part from anywhere,” said Damerow, “including going to the (assembly) plant and pulling it from there.” This kind of change has also been seen in Tier 1 suppliers. Delphi’s manager of logistics for central Europe, Ralf Gerhardt, told the break-out session audience that his company has a division for service parts with its own P&L and its own logistics priorities in parts supply, which are different to those for inbound logistics to the OEMs.

No money, no suggestions in aftermarket operations

Well-known data that service parts account for a disproportionately large share of profits at both OEMs and dealers were cited by CEVA’s Chris Senior, global key account director. He also gave the audience results of a survey that tied OEM inventory to dealer satisfaction, or rather that didn’t. Senior said that inventory levels varied between 2 and 6 months, and that there was no correlation between the level and satisfying dealers with availability. “There are increased stocks or parts that can easily be ordered,” he said, “not of those that are difficult to get which improve (overall levels of) availability to the dealers.” 

Better IT systems at the dealer can also help, said GM’s Magee. He cited US experience that OEM-driven procedures for dealer ordering of service parts can substantially reduce delay in getting them to the servicing technicians. (They can also capture more of the orders for the OEM and squeeze out independent suppliers). “The problem in Europe is that the dealers have no money. The majority lost money in 2011, and will do again in 2012,” he said.

More care by OEMs for their dealers’ needs is a factor. An ‘adopt a dealer’ programme has been implemented in the US whereby the OEM’s after-market staff take on responsibility for keeping in touch with dealers. Satisfaction ratings have improved 30% as a result, said Magee.

But both Ford and GM complain about the lack of initiative from LSPs in reducing costs or improving the service in aftermarket logistics. With volumes of 110K orders for 500K parts each day at Ford Europe there is plenty of scope. And with pressure to move to more intra day (rather than next day) delivery to dealers, logistics costs are rising.

“I’ve been here (in Europe) for four years and I’ve never had anyone knock on my door and say: ‘have you thought about sharing your transport with another OEM, or even with another (non-auto) manufacturer’,” said Magee, pointing out that competing dealers are often located close together.

Ford’s Damerow echoed that. “We’ve moved completely away from dedicated networks,” he pointed out. “We know LSPs are load-sharing anyway.”

DHL’s Dorgan responded that “it is hard to think outside the box part-way through a contract,” and that the few weeks of an RFQ process was not time to put collaborations in place.

Delphi’s Gerhardt had a slightly better experience, having had one recent proposal from an LSP about transport sharing, but all three customers agreed that there were gains to be had, and were prepared to share information to get them. “I have no dramas about sharing operational, (as opposed to financial) information,” commented Magee.

His colleague Kai Rabe, aftersales logistics manager at Opel went further. “Ask me what our operations and volumes are if you are putting together an RFQ (for another OEM). I wouldn’t have a problem with that. I want an efficient shared network.”  

Standards, standards, packaging standards

For as long as there have been Automotive Logistics conferences, it seems there have been calls for standardised packaging. And yet seemingly obvious savings are not being picked up.

Perhaps that is an unfair summary of the break-out session on packaging, led by former Linpac executive and now independent consultant Rodney Salmon, and featuring some new and not-so-new executives from the field.

Salmon opening by relaying his experience of a 900-person tier supplier plant which served eight OEMs and had 10 people just to manage the packaging. There were some 300 types in use, and a potential 30% reduction in packaging costs to be had, said Salmon. He cited Walmart “a supply chain in itself”, where highly standardised packaging means the product is touched only once. He also noted that the scale of this company can drive change, so perhaps it is not so relevant to automotive. For example, “Walmart gave up waiting for an RFID standard and established its own,” said Salmon, adding that other retailers and suppliers then adopted it.

Such standardisation does apply in packaging elsewhere, however. Goodpack Europe’s sales director, Colin Howard, cited the global standard established for products like rubber, fruit juices and chemicals, and said that opportunities were abound. To get to them, he said “we should tap into what is out there, rather than go looking for something new.

There is some standardisation within OEMs, of course, as instanced by Steve Thomas, general manager for production parts logistics at Toyota Europe. For example, there are rigid standards for ocean transport between Japan and Europe’s four manufacturing plus three engine plants. But there is a real challenge in road transport in Europe, where there are lots (ie no) standards.

The standards that do apply are also model-related. “We keep the (packaging manufacturers) happy with a big spend when a new model comes along,” said Thomas.

Picking up on this point, not all are so sure of the need for commonality. Colin MacDonald, head of logistics for Renault Nissan, said he was a ‘fragmentalist’, pointing out the time and effort needed to get to agreement. “By the time we get there the standards would change anyway,” he said. “Cars are getting wider, taller, heavier. Old standards won’t apply.”

Ownership of packaging was another key theme of the break-out session. Toyota’s Thomas said that though the company owned its packaging, it was not actively managed. “It goes out for the parts and comes back,” he said, admitting that the company does not know what ‘leakage’ or re-use levels it has. Nissan’s experience is the same, said MacDonald.

To add to the complexity of this issue, Renault operates a different policy, he added. Packaging management is very centralised, so it should produce efficiencies. However the disbenefit is that the cost is spread and no-one in the operational areas ‘owns’ it. So packaging is used and mis-used for other things by the plants, he admitted.

10th birthday, but the party stays the same

The party was not the same. Fireworks at the gala dinner after birthday honours for the delegates who attended the first Automotive Logistics Europe conference in 2003

Some frustration was expressed by delegates at the lack of real innovation over the last decade in Europe. Reflecting on 10 years of Automotive Logistics Europe conferences, a survey taken live during the event revealed that 72% of respondents did not believe that innovation levels over the period had been significant.

Toyota’s Yuksel was among the most vocal at the conference in calling for logistics providers and suppliers to share ideas and new solutions. He complained that since he outlined his vision for increased inter-modality and multimodal transport for the outbound sector, which he did last October to fellow OEMs and to LSPs at the ECG Conference (the annual event of the association of European vehicle logistics), only one provider had approached him with new ideas. 

Yuksel emphasised that a carmaker’s core competence will never be logistics. “We are willing to work with logistics providers carefully and to support them, but we will never invest in our own hardware, for example,” he said.

“We feel the industry needs to work more together. Our headquarters is in Brussels, close to the ECG, ACEA (the association of European car manufacturers) and the EC, but we always need somebody else to organise our meetings together.”       

The whole automotive logistics sector needs to “think big but act small”, Inergy’s Mas told delegates. It should imagine major changes and gains, but take evolutionary rather than revolutionary steps towards them. Mas noted that the examples given at the conference of tier suppliers taking control of delivery, of improvements to visibility, and better considerations of supply chain risk, reinforced this incremental approach.

Indeed, in many cases the changes for logistics need to start at the most basic levels within even the biggest carmakers. GM’s Webber told delegates that one of the most important ways for OEMs to get away from a strictly cost-led and price-focussed approach to purchasing logistics was simply by educating other internal departments as to its function and significance.

“One of the most important things we can do is to inform and educate our own people about supply chain,” she told Automotive Logistics in conversation outside the main conference session. “Many don’t truly understand what the implications of poor logistics and supply chain services are, and so the focus will only be on price. We are working hard to change that.”

Which certainly takes everyone back to the reason for the conference.

Automotive Logistics Europe Conference – Final Session

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