Europe conference panel discussion: A time for optimism22 March 2016 | Rachael Hogg
Finally, the outlook in Europe is positive once again. Of course, the market is fragile and subject to risk, but on the path to recovery. Last year, most European countries saw strong growth, with many in the double digits, and the European Union had stronger growth than almost all other major markets for light vehicle sales and assembly. This resurgence was clearly evident in the discussions at this year’s Automotive Logistics Europe conference, as executives from manufacturers and logistics providers discussed increasing transport capacity and equipment shortages.
However, along with managing current bottlenecks, speakers and delegates looked to the future in anticipation of new and development technologies reshaping the industry in big way. Whether this is the developments in electric and autonomous cars, understanding big data, continuing to harness RFID, or the internet or things, OEMs, suppliers and logistics providers were keen to get in on the action.
In the final session, senior executives came together to sum up their key findings from the conference, their year in business, and what the future holds for the industry, including Andreas Ginkel, director of alliance logistics at Adam Opel; Hans-Bert Bong, manager of material flow and supply chain management at Ford of Europe; Peter Weiss, head of supply chain for FCA; and Luc Nadal, chairman of the Gefco Group.
The comments have been edited for clarity and brevity.
What are your key takeaways from this year’s conference?
Andreas Ginkel, Adam Opel: We will have eCall [a telematics-based accident alert system] mandatory in every car in [the EU] by 2018, and we will have autonomous driving in 2018. The gentleman from Ernst & Young talked about a paradigm shift and the fourth industrial revolution by 2020. It is about connection, data exchange and enabling changes in an autonomous way. However, that provokes a vast amount of questions: who owns the data… who is liable? It’s about connecting various players and turning data into information. There has been a huge amount of intelligence and interest and engagement [at the conference], and it gives me a lot of confidence. We are seeing ourselves as a community that wants to get ahead of the curve, asking the right questions so we get the right answers.
Hans-Bert Bong, Ford: We cannot be visionary enough. Among the big themes for me are electric cars, but the cost is much more than a combustion engine at the moment. Ford recently announced that it will be spending $4.5 billion in the next couple of years investing in alternative powertrains. Connectivity is another big theme, and Ford has recently announced a new smart mobility company in California Palo Alto looking at car sharing, driver demand, smart parking… options for when people don’t always own a car.
Big data is not being used in the way we could. A car produces up to 25gb data per hour driving. Imagine 1m cars on the road – that would create 25 terabytes of data, or as much as Google. There is a potential to do something with this.
Autonomous driving is more or less available: lane keeping, adaptive cruise control, acceleration, parking… what I find strange is that in logistics, only one or two truck manufacturers are using these features. It seems to be hard to find. Instead of lane keep assist, there’s a beep rather than corrective steering. The technology is behind.
Peter Weiss, FCA: Inbound, outbound, OEM, supplier… we’re all in the same boat. There are not many people out there that understand what we’re talking about. The challenge right now is trying to balance the demand side with the supply side. It’s a good problem but it requires supply chain skills.
When you look back to the first Automotive Logistics Global conference in the US back in 2000, it seems like the industry overall has not made much progress. During this time, Amazon came out of nowhere and is considered as the benchmark company now. What can we do? Amazon is creating transparency for the customer. It’s still incomprehensible that you can order a piece of soap and have more transparency at Amazon than when you order a vehicle. We have more data and fulfilment than other industries, but we have not found the golden ticket to utilise business intelligence behind this.
People don’t want to share. Looking at other industries, many things are standardised, such as chargers or USB plugs, but OEMs and suppliers all have different connectors. We need to work together.
So what can we do? AIAG [the Automotive Industry Action Group in North America] was active and trying to standardise releases and quality and damage prevention. In Vienna we put some ideas down and we’re working on how we can bring this to life [LINK to ECG report]. It’s exactly what this platform should be doing.
Sustainability… where can we go forward? Talking about CNG, LNG, what can we use for inbound and outbound? Other industries take it seriously and describe to service providers that they have to have a certain carbon footprint. We can rally around and should get standards going.
The Geneva motor show was a couple of weeks ago, and there were many new things. For me, electric vehicle development was the best. If they become affordable, in ten years it might be something. It could be that the person to do that is not in this room, and comes from another industry.
Autonomous driving is technically already feasible, and it’s at the starting point. The rest is about testing it out and making sure nothing happens. I think augmented driving rather than completely autonomous driving will happen. For example where you can drive trucks in a line [platooning]. We should look into this. How are we as supply chain professionals driving this? We need to speak to service providers and say, ‘this is what we need’.
Luc Nadal, Gefco: I have seen a lot of progress. When I was 23 I bought a Fiat Uno for the equivalent of €9,000 ($10,100) back then – think what you can get for an equivalent amount [in real terms] today. The value of the car is improved, safety is improved, and the cost is the same. It’s tremendous performance when you look at other industries including trucks. I see logistics operators have played their part. We calculate the logistics cost per car and it has gone down relative to the value of the vehicle.
The industrial footprint will change over time, whether that’s electric cars or others. We have faced two big crises, and there’s also the issue of cities. Delivering in cities is not easy. We need to be smart and see what we can do to improve that.
We also need more transparency. Go and see your customer. Show them your IT. Compared to other industries, logistics is still quite poor in terms of IT. We still need to invest without spending too much time on the legacy. Companies are spending too much time to change their IT systems and the product will be obsolete by the time you get it out there.
If logistics complexity and mileage is growing, how is it dropping in cost relative to vehicle value?
Andreas Ginkel, Opel: It is true that the cost per car is dropping. Around 8-9 years ago we decided that all the sourcing we do would be based on total cost approach. For example, we need to work together with engineering: if we have an exhaust, we need to look at how to transport it, and we have to work with manufacturing, and purchasing to figure out global programmes.
We have tried to break down the silos in our organisations. Last year we won a logistics innovation award for our project on order slotting (http://automotivelogistics.media/intelligence/opelvauxhall-moves-to-order-slotting) – considering the way we build and sequence from long distances. We’re trying to rethink whether the old way of taking production requirements on a schedule and converting them to a smaller schedule. Overall, I also believe there is a high degree of competition in the logistics industry that helps us to achieve what we have achieved.
Bert Bong, Ford: Logistics is our job, it’s what we do every year. It’s the same process in outbound. Every year we do projects to fine tune and optimise. We have hundreds of projects at the management level, which lead to reduced logistics costs.
These costs rises are being offset to some extent by big increases in inter-company trading between regions. For example, we are seeing a bit increase in mileage in our supply chain, including more parts from North America and Asia. We are also seeing more vehicles imported and exported across regions. Over the next five years, we expect our customs and duty costs to rise by around five times.
Peter Weiss, FCA: We are also in the era of cross-shipping, where we build products and parts in Europe for North America, and in North America for Europe. Because of the growing exchange of material, we also needed to beef up our export sales of vehicles as a kind of hedge.
However, the price of logistics is still dropping: the cost of the service, fuel, miles travelled, density etc. We’re looking to get a higher packaging density and other engineering improvements. We’re also introducing new competitors, and have benefitted from the drop in the oil price.
Luc Nadal, Gefco: We’re looking to reduce cost and fill empty containers. We’re redesigning and redesigning our milk-runs. We have to find the right balance with our supplier footprint. On the outbound side there is a lot to be done to reduce inventory. To reduce overall costs, there’s still a lot of progress to be made.
What has been your business success this year?
Bert Bong, Ford: We’re doing a lot of small projects to make things better, to save money, to improve logistics, so there is not one specific thing sticking out. It’s not the revolution, it’s the evolution. We’ve just implemented and prepared a project and got funding to install an IT solution for warehousing crossdocks – there’s a lot of paper shuffling still. We’ve got good visibility apart from at crossdocks – it has been done for years in an old-fashioned way. We’re installing a piece of software to reduce inventory.
Peter Weiss, FCA: We got to the sales growth we set out to do, that’s our biggest accomplishment. We have a good team in EMEA [Europe, Middle East and Africa] and globally the company works well together. It’s a good structure and we know what we are doing. We’re getting better every day.
Luc Nadal, Gefco: We’re extending our geographical footprint. We’ve got Gefco in Algeria, Thailand, Taiwan, Australia… it’s important for us to be able to follow customers. We’re working on a project moving automotive components and finished vehicles from Europe to China by rail. We see this as a reliable solution especially for expensive cars. We know how to do that for customers and also strengthen our team.
What would the most important skill be for your successor in five years?
Bert Bong, Ford: Logistics is a science. They would need high analytical skills and be able to analyse what’s going on and where there are opportunities. They should be able to figure out what else can we do even if we thought we had exhausted ideas.
Peter Weiss, FCA: When I was at school and university, supply chain courses were not there, but they are common today. It is about training for the challenges you have to face. You need to be a thinker who processes and understands cause and effect. You need to understand the industrial side, but also the commercial side. All these things link together. You need to be able to convince board level management to make changes.
Luc Nadal, Gefco: You have to be customer-centric. It’s not a question of price, it’s a question of optimisation. For the chairman of a logistics company, it’s about data management and IT solutions. The main fear and topic to face will be about to to move forward with brilliant IT solutions.
Peter, you worked at DaimlerChrysler during the integration of Daimler and Chrysler and subsequent divorce. Now you have been through another merger with Fia and Chrysler. Thinking about integration from a supply chain perspective, what lessons have you carried through to FCA from DaimlerChrysler?
Peter Weiss, FCA: We had a different production network in the DaimlerChrysler days. We separated it and shared best practices, but we kept it separate, with the small exception of the Magna Steyr plant in Graz, Austria that produced Mercedes-Benz and Chrysler productions. At FCA, we are cross-loading platforms into different plants. Cars are being produced in Mexico and sold in Europe… it’s different to what we had before. From a process standpoint, we have formalised our supply chain organisation. We have a clear focus on region, but transparency with global requirements to ensure they are all on the same playing field. We also need to make sure people are informed. There’s further integration, and parts are now being cross-shipped, which didn’t happen with DaimlerChrysler.
What steps would you have to take to get to the ‘super supply chain’?
Andreas Ginkel, Opel: We have got a few puzzle pieces coming together. We are integrating horizontally and vertically, and in 2018 we will be in a position to drive a lot of activities more precisely and more focused than we can today. We could also rethink freight and establish a way to see data at all times: once a car has left the plant, one it is at the port, or shipped, or arriving, or on rail, etc. There would be no waiting. This is why standards are important. There is potential across OEMs and suppliers. We wouldn’t need to generate a separate invoice once a standard is established.
Bert Bong, Ford: We have talked about the complexity of building cars and all the combinations. We need to see how we want to receive data and do payment processes and billing data. We need specific standards that can make life easier for service providers.
Andreas Ginkel, Opel: We have talked about AGVs and connectivity. We also need to enable them to come together, rather than just looking at individual puzzle pieces. In the future there will be algorithms driving these things, but we need to communicate with ourselves.