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Emergency logistics is an enabler for high-risk automotive supply strategies

08 December 2014 | Brad Brennan

There was a time when the supply chain was thought of as being no more than the steady flow of components through tier suppliers to vehicle manufacturers, but the level of understanding is changing at a quickening pace. OEMs are now displaying an increasing awareness of the crucial role played by logistics networks in maintaining optimised production and the importance of supply chain activity is increasingly prominent at senior management and board level. Lean supply strategies born from this growing awareness are now evolving to include emergency logistics as a core supply enabler in a diversifying and increasingly complex industrial process.

Lean supply has become a common if relatively high-risk strategy to ensure efficient production, but through an intensified focus on contingency planning and provision of premium freight, vehicle manufacturers and their suppliers are successfully safeguarding operations against supply chain failure. As the benefits of robust practices become more apparent, the supply chain has been increasingly visible as an area where there are operational challenges but also the potential to give manufacturers the opportunity to adopt more dynamic production supply strategies.

Through the evolution of these strategies it has become clear that safeguarding the supply chain through contingency planning and availability of emergency logistics expertise is crucial to the ongoing development of  systems traditionally considered ‘high risk’: by minimising the chance of things going wrong and reducing the potential cost of failure, further streamlining of production strategies is possible.

This subject is particularly relevant as the automotive industry continues to grapple with the demand for increasing model variance and trim specification that necessitates low-volume but high technology, higher quality components.

Running higher risk production strategies has previously been akin to walking a tightrope without the benefit of a safety net; there is only so high you can go before the cost of failure is cataclysmic. The availability of emergency logistics as a contingency for the automotive supply chain enables vehicle manufacturers to raise the stakes in the knowledge that the potential impact of failure is reduced and therefore the cost threat is less significant.

Emergency logistics allows vehicle manufacturers to more easily meet the demands of a new breed of sophisticated car buyer that demands a wider variety of choice, higher quality components and the introduction of visible new technologies – all without affecting end cost, of course. Increasing model and specification variance in particular requires tier suppliers to offer a near-boutique capability in order to satisfy customer requirements. Smaller batches are required and more frequently in order to meet the demand driven by more accurate sales forecasting by automotive manufacturers; suppliers can no longer rely on long-term forecasts based on generalisations and the law of averages to give them breathing space

The increasing end-user demand for choice will have serious knock-on effects for the supply chain if the way forecasts are calculated does not evolve to complement emerging supply chain nuances. As an example, a tier one supplier may be able to adapt its shipment to meet fluctuating demand from the vehicle manufacturer by relying on buffer stocks, but only in the short-term. If demand remains unstable then depending on existing forecasting and any flexibility inbuilt to the supply chain or physical capacity, ongoing supply can be jeopardised by conflicting lead times between tier one, two and even three suppliers.

The question of absolute quality also impacts the supply chain. This year we have seen an increase in part failure rate on production lines as components previously deemed fit for purpose are failing inspection due to vehicle manufacturers – particularly those in the premium sector – implementing additional actions to drive higher quality. One example that illustrates this well is a seat-base component being ‘failed’ for perceived stitch quality. This is something that is not in a driver’s eye line and has no impact on durability, but it reflects the fact that customer expectations are higher and this in turn is translating into intensified quality control on all components.

In cases like this, the value of having the right emergency logistics provision in place is immediately proven by the ability to bridge gaps in the supply chain through utilisation of reserve stocks or sourcing from alternative warehouse locations.

The pressure on suppliers to maintain dependable on-going supply while stretching reserve stock capacity to fill unexpected requirements is still very significant, but they have the best opportunity to do this if the immediate issue has been resolved by emergency logistics action.

Brad Brennan is managing director of emergency logistics provider, Evolution Time Critical.

Tagged with: Inbound, Premium Freight, SCM, Tier Suppliers