Global supply route complexity in an evolving industry18 May 2015 | Automotive Logistics
Growing supply route complexity is providing fresh challenges for automotive industry logisticians to overcome. Globalised production strategies, emerging hubs and increasing production agility are three of the many factors that see companies distributing between a greater number of countries than ever before. The introduction of new laws and conflicting legislation can pose problems even when travelling from country to country within continents: in Europe, for instance, the recent increases to the minimum wage of truckers operating in Germany has resulted in professional unrest, a logistical headache and, ultimately, impending strike action.
Automotive manufacturing is now a truly global operation. In the 20th century however, vehicle manufacturers favoured settled production locations and dealt with fewer suppliers from a limited number of countries operating safer production strategies: simple logistics for simpler vehicles, in straightforward times. Supply routes were a comparatively well-trodden path, whereas today they are a physical and legislative spider’s web which spans the globe.
Global supply routes are like the extension cable that is eternally tangled when it’s most needed. It is a vital tool which you know can be successfully reorganised, but you do not always have the time to straighten it out. Time compression in the automotive industry is placing increased pressure on the supply chain as vehicle launches become ever more frequent, lead times contract, supply becomes more lean and production intensifies. Global supply routes become busier and more convoluted, and the threat of failure builds until eventually the weakest link in the supply chain is found. A dramatic vision perhaps, but vehicle manufacturers can ill-afford delays within the supply chain that jeopardise production lines. It is for this reason we have seen increased analysis of supply chain activity at all levels by vehicle manufacturers, and the provision of contingency planning through premium and emergency logistics expertise.
It has been a necessary evil for the complexity of global supply routes to intensify in order to meet the demand of increasingly agile manufacturers. OEMs are no longer tied to a long-term fixed location, but can move production between countries ubiquitously as the costs of labour or other resources fluctuate depending on global economic peaks and troughs, or consumer demand driving near-shoring strategies. Through careful analysis of lead times, intensifying production to bolster buffer stocks and ultra time-sensitive delivery, it is now possible for vehicle manufacturers to have more live production between continents without facing downtime – and as further production hubs emerge this trend can only increase in frequency.
The mounting complexity of global supply routes offers the potential to present a growing threat to supply chain integrity, and it is therefore vital to work towards a fully integrated physical and legislative network. Even within Europe, variance of regulations in truck size and payload capacity makes the logistics paper trail increasingly complex, and this is taking a common, road and rail-based route as an example. Consider trans-global, time sensitive logistics between emerging hubs and under-pressure companies, and the permutations are clear.
The automotive industry is evolving with more models, launches, trim choice and higher demand for quality than ever before: fluctuating orders and lead times will demand greater responsiveness from suppliers regardless of manufacturer locality. As global routes become increasingly tangled, a growing awareness between suppliers and manufacturers of the need for agility and reaction time can provide a natural contingency against supply chain failure, just as the familiarity afforded by only a few supply routes once protected the more simplistic automotive supply chains.
Brad Brennan is the managing director of Evolution Time Critical, the world’s leading specialist in emergency logistics for the automotive industry.