GM’s Opel/Vauxhall unit is making moves to centralise its aftermarket logistics and improve efficiency at its warehouses. Simon Duval Smith caught up with Sarah Kenworthy, director of aftermarket supply chain.
Vauxhall’s Chalton parts warehouse, near to the OEM’s Luton plant some 55km north of London, covers 1.2m square feet (110,00m2) of space. It has around £35m ($55m) of inventory on hand, made up of 74,000 ‘live’ part numbers, where live describes an order from a retailer, whether a replacement part or a large order of frequently-used spare parts.
Chalton is one of the seven parts distribution centres (PDCs) in General Motors’ European network, together with five source warehouses, under the responsibility of Sarah Kenworthy, director of aftersales supply chain at Opel/ Vauxhall. She is responsible for parts procurement and scheduling operations for the warehouses and for final dealer delivery. With GM since 1992, Kenworthy oversees a team of 80 people, and has been helping to implement competitive changes in the company’s European aftermarket network.
Chalton is an example where the carmaker has moved toward centralisation and insourcing, taking some duties away from 3PLs. An example of this move is the proposed brake parts kitting line, which will be installed with a new conveyor system later this year. The aim is for a more centralised approach to the aftermarket network rather than one fragmented by country. Given the company’s difficulties in Europe, cost reduction remains an obvious issue as well.
Simon Duval Smith: What does the global make-up of the Opel/Vauxhall aftermarket supply chain look like?
Sarah Kenworthy: As GM manufactures vehicles on global platforms in different regions, [in aftermarket parts] we also source globally. But against this pattern, we are keen to source locally too, to help sustain manufacturing in all our areas of operation and to reduce cost. So, approximately 80% of the stock comes from inside Europe, from about 1,000 suppliers.
SDS: How does the aftersales supply chain follow the sourcing strategies of original build (OE) parts? Are there dual sourcing arrangements for some components?
SK: There is some crossover [with production parts procurement] but we have separate purchasing organisations. Clearly, where we have an OE arrangement, sourcing will be done predominantly from the OE supplier. We are also sourcing beyond production but will as far as possible continue to source from the OE manufacturer of the part.
SDS: Are there principles as to whom you might buy from?
SK: The main principle is one of cost. The purchasing organisation is responsible for sourcing at the best price including transport. Hence, they are trying to source locally as much as possible, which is also better for the environment. There is a total cost model that we will abide by, also in terms of whether we are sourcing a part into the UK directly or into the source [aftermarket warehouse in] at Bochum.
SDS: On the production side, GM has spoken a lot about total enterprise cost, not only the ‘A price’: material and labour, the ‘B’ price: logistics and customs, but also a ‘C’ price to include risk factors. Are these considerations being taken for aftermarket as well as for the original build parts?
SDS: On the production side, GM has spoken a lot about total enterprise cost, not only the ‘A price’: material and labour, the ‘B’ price: logistics and customs, but also a ‘C’ price to include risk factors. Are these considerations being taken for aftermarket as well as for the original build parts?
SK: I think the purchasing contracting process does take into account this A, B, C model in terms of where the risk factors apply, so by definition they are built into the aftersales supply chain. With aftermarket parts, when we are doing a total first model, we factor in all these points, in terms of where we are going to pull a part from. Whether we are going to pull a [GM-made] part into the German warehouse or into multiple warehouses, or from a supplier, whether it comes into the German warehouse or into the UK warehouse, we calculate the total cost model that will take into account the volume, the cube, transport cost and the logistics cost, etc. I have a small team of statisticians who are doing a lot of analysis in terms of the warehousing, and how much material we need in safety stocks, how often we need to replenish with a supplier, and whether it makes more economic sense to order more regularly in small quantities or less often in large quantities.
SDS: Have efforts to reduce inventory driven an improved management of forecasting?
SK: We have a new forecasting and planning system that came in last year. This is to GM standard, and it is already in existence in our PDC locations. We brought it in to the UK, Germany, Spain and Sweden, and we have it in the US. It is called MerciaLincs Enterprise (MLE) and was introduced early in 2011. The statistical group I mentioned look at the velocity of each part, using MLE to make global decisions on parts rather than leaving it to the planners. This means the planners can concentrate on the forecasting and deciding on the quantities that we require.
SDS: Your IT systems have changed considerably, from the older GM legacy systems to new software. How has this worked out?
SK: The 20-year-old VEDIS system has been replaced by SILO and this is part of our plan to ‘work out’ of legacy systems and ‘go common’ with GM global systems.
SDS: Do you see further scope to centralise logistics provision across Europe and to reduce the number of carriers?
SK: Because of the way we have changed the organisation in Europe, from having separate business ‘entities’ contracting logistics from many different providers and where the UK used to contract independently for its logistics services, this has now changed to a centrally coordinated approach. But we are not yet in a position where we can use a single logistics provider, for example.
SDS: There is a plan to bring brake system ‘kitting’ in-house at the Luton PDC. Would you like to see more of this insourcing?
SK:Where we have resources and space, such as here in the warehouse in Luton, it makes sense to bring this type of kitting in-house. Some of the brake work was done by outside contractors and by the suppliers and we also still have some centralised kitting done in Germany–we have increased these centralised operations. With the flexibility afforded by balancing in- and out-sourcing, we can respond more rapidly to changing market demand.
SDS: Shared service distribution is not apparent in the UK aftermarket model, have you considered this?
SK: We have considered this, as where there are no issues of competition [with another carmaker sharing loads] it certainly makes sense and there are certainly economies to be gained, but we are not there yet. The way Hyundai and Kia share with Mobis is a good example of how this can work well.
SDS: What protocols do you have in place to minimise packaging and avoid re-packaging?
SK: We are always trying to improve in packaging, which is an area that does not often get the attention it should. We now have a dedicated resource investigating the cost of packaging and re-packaging, whether or not we should specify readypackaged items from our suppliers or pack ourselves. We are moving toward bringing in more material ‘raw’ and packing here. We don’t do any packing here at Luton, it is contracted out to DK Packing & Casemaking in Northampton, our source warehouse. Material coming from Germany already packaged will come into the source warehouse, where this is re-packaged, and other material will be packed for the first time at the source warehouse before coming to Luton.
