Damage still half of claims for inbound and aftermarket supply

Inbound and aftermarket component supply chains achieve remarkable levels of quality, yet damage in transport is still the cause of up to half of all claims. A report on how the industry is cutting that figure.

There is plenty about automotive component supply chains to suggest that damage in transport should be a significant problem. Parts can be large and fragile, like body panels and windscreen glass, and other component types are heading that way too, with manufacturers increasingly sourcing complete modules and subassemblies from their suppliers. Travel distances are also lengthening, as the supply base migrates to low cost regions and service parts businesses grow in emerging markets.

Inbound and aftermarket component supply chains achieve remarkable levels of quality, yet damage in transport is still the cause of up to half of all claims. Jonathan Ward reports on how the industry is cutting that figure. Marcia MacLeod looks into forklift innovations.

Improving parts protection at Ford of Europe Despite these difficult conditions, it is a testament to the sophistication of modern logistics processes that the actual incidence of component damage is extremely low. At Ford’s UK plants, for example, external logistics co-ordinator Dan Carvosso says that claims of all types hover around the 1% level for inbound shipments, but that number can vary considerably according to the nature of the plant and its supply chain. At the company’s transmission manufacturing site at Halewood, for example, claims are as low as 0.3% of shipments. At the Southampton plant, which assembles the Transit range of light commercial vehicles, it is around 1.6%. Crucially, those claims don’t just include damages, he notes, but also all incidents of late delivery, missing or superfluous components or incorrect part supply. Carvosso estimates that damage accounts for around 40% of all claims, but says such claims include all incidents of damage to external packaging, even if the parts themselves survive the journey unscathed.

Like many examples of highly effective business processes, the key to the high quality performance of supply chains like Ford’s isn’t a secret. Success is built on robust standards for the packaging of parts and the processes used in handling them, combined with effective measures and incentives to monitor and enforce compliance with those standards. “We have put the onus on our suppliers to take responsibility for the quality of parts when they are delivered to our plants,” says Carvosso. “That has really helped to reduce damage issues.”

The widespread use of durable packaging has also delivered benefits in part protection and quality, alongside its environmental and economic advantages, Carvosso says, noting that Ford’s Cologne plant currently uses durable packaging for more than 98% of all parts. However, even when durable packaging is the standard, situations may arise where there aren’t enough of the right containers in the right place to meet supply chain needs, forcing suppliers to temporarily switch to expendable alternatives. Therefore, Ford’s standards require suppliers to specify an expendable alternative that also complies with agreed part protection standards.

According to Carvosso, by far the most common situation for damage problems are cases where suppliers deviate from agreed transport standards, by accident or design. “Typically, there are two categories of parts that will experience in-transit damage,” he says “The first is heavy parts being shipped in expendable or emergency packaging, and the second is parts that have been packed in an NOK [unapproved] cardboard container, with either the cardboard being of a type that is not Ford approved or having an NOK pack pattern within the container, for example leaving space at the side or a gap between the last part and the top of the cardboard.”

The combination of heavy parts, inadequate packaging or poor packing can result in containers that split their sidewalls as they are shaken around during transport, or which collapse under the weight of containers stacked on top of them.

Rapid response
When damage occurs, most carmakers have standard processes to ensure that the impact of the issue on production is minimised, that costs are recovered and that standards are refined to prevent reoccurrence. Carvosso describes the process in place at Ford: “Once a damaged unit load of material has been identified, a number of teams are deployed to ensure that production is not interrupted. Our logistics department ensures that photographic evidence is available before it is taken from the trailer, or as soon as the damage is noticed. [The logistics team] then quarantines the pack. Next, our supply chain management team checks to see if production is at risk before the next shipment arrives.”

If the damaged part does present a risk to production, the team will take one of three possible mitigating actions. It may fast-track material to the plant from the supplier or a spare parts depot; check to see if another part can be used in its place; or alter the build schedule to produce cars that do not require the part.

Once those immediate measures have been taken, the supply chain management team and the quality department will inspect the pack and the parts to see if they meet quality standards and can be used or easily repaired, while Ford’s lead logistics partner –DHL, in Europe – will open an investigation to discover where the fault occurred and claim back the resultant costs if liability is established.

Investigating causes
Finally, Carvosso and his colleagues will take the required steps to prevent reoccurrence of the problem. In many cases, where the problem was caused by a deviation from agreed materials or processes, the solution is to enforce the use of the correct ones. “We had a period of time where our crossdock facility in France was sending trailers that had been loaded incorrectly, leading to damaged parts,” he recalls. “In this instance I asked for photos of each load before the curtains were shut. I introduced this process for a two-week period and ensured I had discussions with the personnel concerning each load, advising where improvements could be made and praising when okay loads were shipped.”

In other cases, damaged parts can reveal issues with the packaging or processes in use. As an example, Carvosso cites the case of a large door component that was one of a minority shipped in cardboard packaging as standard.

“We experienced issues with spilt container sidewalls due to a combination of the heavy parts and vehicular movements. Upon investigation I found that the packaging was being strapped only on one side of the container. I initiated a change to the pack in order to ensure strapping was carried out on all faces of the pack and the issue of parts splitting the sidewalls was resolved.”

Cases like this can also reveal further opportunities for improvement. The investigation revealed the agreed containers were strong enough to stack just two high, which meant that the supplier could not fully cube-out the trailers it was using. Carvosso is now working with the supplier to further improve the strength of the pack to allow for three-high stacking.

The evolving supply footprint also presents novel challenges for Carvosso and his team. For example, when Ford’s Craiova plant in Romania started building the Transit Connect, the combination of hot summers and poor road infrastructure in the country meant that dust was getting into existing packaging and onto parts. “That dust didn’t cause damage, but it meant we had to deploy significant resources at the plant to clean some parts before assembly,” says Carvosso. “When we recently introduced the B Max model at the same plant, we designed and procured sealed racks and packs wherever possible to minimise dust ingress.”

In the future, he suggests, such challenges will become increasingly common, as both inbound and outbound supply chains extend into regions with tough climatic conditions and difficult infrastructure.

Another source of problems, says Carvosso, is damage during handling, typically by forklift truck operations. “The more often a package is handled, the greater the chance for such damage,” he notes. “So we see that kind of damage most commonly in parts with longer, more complex logistics chains and those which pass through crossdock operations.”

The solution to such handling problems is simply discipline, says Carvosso. “We are constantly communicating the process discipline we have already established at the crossdocks and production plant docks that ensure a quality process is adhered to. This includes simple things such as a maximum speed limit when carrying packs; a policy of forks down when travelling without packs; and adhering to the process set out when unloading a trailer. We also use software to minimise distances travelled when in the plant, the theory being that the less time we touch the packs, the better for quality and cost.”

Mobis reassesses aftermarket packaging In aftermarket supply chains, which are arguably more varied and harder to control than inbound ones, performance broadly matches inbound levels. Anja Huygens, senior manager, operations and customer service for Mobis Parts Europe, Hyundai’s aftermarket parts business, says that her organisation’s overall claims ratio is less than 0.2%. Around half of all claims in the Mobis network are related to part damage, with the primary challenge being express overnight deliveries to dealers. “Every time we have an incident of damage, we look at our database to see if it is an isolated issue or something that needs additional attention,” she says.

In general, Mobis runs four to six special projects each year to tackle damage issues in its supply chain. Depending on the frequency and geographic distribution of the issue, such projects may be conducted on a local basis, working with transport partners in a particular region to improve processes, for example, or at a pan-European level, like working with suppliers to make changes to packaging specifications. The operations teams at individual Mobis warehouses meet quarterly to share information on best practices, and key information is regularly fed back to the company’s corporate headquarters in South Korea. “There are always certain parts that are more susceptible to damage,” notes Huygens. “Including bumpers, glass and body panels.”

Mobis has made strenuous efforts to reduce damage in these categories, benchmarking its own performance against industry standards and making specific changes to packaging to improve protection. “Windshield glass is supplied from Korea in bulk packaging,” she says. “We repackage those parts at our warehouse in Europe and after looking at the damage rates we were experiencing, we came to the conclusion that we needed to reinforce the windshield corners by using a special highdensity foam that gives better protection than our original foam. We also use a special shrink wrap that uses heat to create an air bubble around the part, further protecting the glass. As a direct result of those changes, damage went down by 60% on those parts.”

Other packaging changes have also delivered similar improvements. The bubble wrap used to protect bumpers was sometimes damaged when couriers dragged parts out of vehicles and over the ground, for example. Such parts are now packed in an additional layer of strong paper to resist abrasion. As in the inbound supply chain, the increasing use of returnable containers to deliver parts to dealers has helped to reduce damage as well as offering cost and environmental benefits, says Huygens.

Packaging for air freight
Certain transport routes create particular part protection risks in aftermarket supply chains. In the US, for example, while parts supply to most states can take place using truck routes that are tightly controlled by the OEMs or their LSPs, Alaska and Hawaii are relatively small markets that typically require the use of air freight and the services of an express integrator or freight forwarder.

According to Tony Gregory, president of Custom Goods, part protection strategies that work very well in conventional transport can prove inadequate in the express air freight environment, with its mixed loads and frequent handling. Custom Goods offers specialist consolidation and repacking solutions for such routes, backed by a part protection guarantee. “Typically, we collect parts from the customer’s distribution centre and take them to our own facility, where they are inspected, repackaged, consolidated and handed over to the freight forwarder for final delivery,” he explains.

By working closely with its OEM customers, dealers and freight forwarders, Custom Goods has developed packaging standards that suit the requirements of both. “We use a combination of part protection technologies, including special high density foams and foam-in-place materials, as well as standard corrugated boxes and bubble-wrap materials,” explains Barry Brennan, the company’s vice-president. “We are constantly evaluating new technologies too, like exoskeletal XO3 cube protectors for cardboard packages.”

The company’s highly collaborative approach, says Gregory, helps identify solutions that balance cost, part protection and consumption of packaging materials. “In some cases, we’ve managed to reduce the amount of packaging required, for example by eliminating wooden pallets and excess cardboard that was costly and inconvenient for dealers to recycle.”

Custom Goods uses returnable containers for 25-50% of all shipments on its highest volume routes, while consolidating parts from multiple manufacturers into a single air freight container also offers both cost and part protection benefits.

Continuous improvement at Renault In its everyday business, aftermarket operators rely on a rigorous review and mitigation process similar to that used on the inbound side to keep driving quality up. At Renault, Jean-Phillipe Willame, director of world operations aftersales logistics, says that the incidence of damage to parts in his network is less than one case for every 1,000 parcels delivered, or 0.1%. “If we have a claim, we immediately begin an enquiry in the warehouse to see if we have an issue with the people who picked the part,” he says. “Our first action is to train our operators to pick and pack parts properly. After that, we conduct an analysis to see if we have a situation in the transportation flow; for example, if we have several cases in the same logistics flow, we will ask the provider responsible to come up with an action plan to fix the problem.”

Renault continually analyses packaging performance, says Willame, to ensure suppliers are using containers that meet the agreed standards. Renault works with suppliers to revise those standards if packaging provides inadequate protection.

Proper handling by staff is the key to minimising most damage claims, says Willame, and Renault places great emphasis on training and operational performance in its facilities. “We have permanent training schools in our warehouses, with simulators where operators learn to pick and pack orders according to our standard operation sheets, which define the way parts should be packed and protected depending on the transport used and the final destination. During normal operation, if a manger sees a worker deviating from standard procedures, he will send them for retraining.”

The end result of this focus on continuous improvement has been significant. “The Renault aftermarket network has expanded into many new regions,” concludes Willame, “But we’ve halved the number of claims in the last five years.”

Rapid response When damage occurs, most carmakers have standard processes to ensure that the impact of the issue on production is minimised, that costs are recovered and that standards are refined to prevent reoccurrence. Carvosso describes the process in place at Ford: “Once a damaged unit load of material has been identified, a number of teams are deployed to ensure that production is not interrupted. Our logistics department ensures that photographic evidence is available before it is taken from the trailer, or as soon as the damage is noticed. [The logistics team] then quarantines the pack. Next, our supply chain management team checks to see if production is at risk before the next shipment arrives.”

Investigating causes Finally, Carvosso and his colleagues will take the required steps to prevent reoccurrence of the problem. In many cases, where the problem was caused by a deviation from agreed materials or processes, the solution is to enforce the use of the correct ones. “We had a period of time where our crossdock facility in France was sending trailers that had been loaded incorrectly, leading to damaged parts,” he recalls. “In this instance I asked for photos of each load before the curtains were shut. I introduced this process for a two-week period and ensured I had discussions with the personnel concerning each load, advising where improvements could be made and praising when okay loads were shipped.”

Packaging for air freight Certain transport routes create particular part protection risks in aftermarket supply chains. In the US, for example, while parts supply to most states can take place using truck routes that are tightly controlled by the OEMs or their LSPs, Alaska and Hawaii are relatively small markets that typically require the use of air freight and the services of an express integrator or freight forwarder.