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4th January 2011

Automotive Logistics: 10 Common areas to assist savings within your logistics operation

Mark,

Modern automotive, 1st and 2nd tier suppliers often support the most demanding OEM’s and aftermarket supply chains in the industry. As the amount of stock held locally is pushed to be reduced, the timely delivery of parts becomes a more critical issue. The following 10 areas are commonly where focus is required to operate as an effective logistics supplier within the automotive industry, both within the production supply chain and supporting the aftermarket network.

1. Lean decision making process:-

Logistics management within an automotive aftermarket or production environment typically involves multiple decision makers at different levels. Ultimately, logistics problems consist of numerous components characterised by their dynamic behaviour and high interconnectivity. Understanding the dynamics of such problems and solving them is usually difficult enough, without the added complexity of hierarchy and inexperienced management. Utilising and investing in an experienced management team with localised knowledge and the capacity to make critical business changing decisions at a local level is a vital attribute for any logistics service provider/business unit within the industry. This gives the customer the confidence to keep optimal performance and not waste time and budget negotiating changes with rigid suppliers.

2. Flexible commercial agreements:-

As automotive suppliers are finding demand for their products in the market place is becoming more sensitive to economic changes, the greater the need for suppliers to be commercially flexible and breathe with the changes. The ability to turn volume related costs on and off at late notice is therefore essential as a successful risk-sharing logistics service provider. It is necessary that 3pl’s invest thought and research into developing not only operational innovation, but also commercial innovation that shares risk and reward in engaging commercial partnerships.

3. The ability to monitor the business real-time:-

As within any manufacturing or aftermarket support business, if the flow of material is halted due to unplanned challenges, the financial penalties for both the supplier and it’s customers can be catastrophic. This can lead to strained relationships, reduced sales and unplanned cost throughout the supply chain all the way to the end customer. The ability for a 3pl to consistently monitor its operations on an hour- by-hour basis is essential to its customer, being either OEM, 1st tier or aftermarket based. Having the right information at the right time enables management to react and correct any potential shortages before they affect the client. It also means that supervisory and management staff have the ability to allocate it’s resource to the right area at the right time in a fluid manner, ensuring the balance between service level and cost efficiency is kept to a manageable level.

4. Robust process engineering and control:-

The complexities of delivering material to a range of customers, with varied volume quantities, hour-by-hour, at the right place, at the right time, requires intricate and robust process mapping. The ability to continually re-develop and monitor processes alongside an ever changing volume plan is also essential. The detail within the operating processes is regularly overlooked by management and this can cause operational challenges that are time-consuming to rectify. Investment in process engineering skill-sets and project teams to control changes will reduce errors and therefore costs.

5. Investment in training and staff:-

Employees provide the basic foundation within any automotive logistics solution. As with any other asset, investment and development is key to ensure that the best performance is obtained from every member of staff throughout the structure. Investment in staff and a perpetual training plan or framework ensures that the knowledge, skills, and capability remain within in the business, reducing unnecessary recruitment costs.

6. Operating as an extension of the customer’s organisation:-

As many automotive suppliers and OEM’s follow a range of management principles and core values, it is important that a 3pl or logistics function fully understands and embraces the principles to effectively work in partnership, to ensure the logistics process is designed to support the overall company framework. A 3pl should be proactive to anticipate operational changes and be open to commercial negotiations on an on-going basis to support its customer’s long-term goals.

7. A specialist approach:-

As automotive OEM and aftermarket supply has a range of unique logistical challenges that rarely occur within other sectors of the industry, it is important that the localised logistics team has a pedigree of experience and a key understanding of the requirements. Many suppliers utilise logistics specialists from other backgrounds to manage the process, without the support of automotive logistics specialists. Although many credible non-automotive logisticians can deliver a service, many are unable to deliver with the cost-effectiveness and efficiency of individuals with the relevant background, due to little exposure to such a rigid cost controlled environment and hour by hour changes in requirements.

8. Flexible suppliers:-

As it is essential that automotive logistics service providers are flexible to OEM’s and suppliers both commercially and operationally, it is also the requirement that the 3pl builds a portfolio of suppliers themselves that support the overall service ethos. A regular day by day review and communication process has to be managed between 3pl and its resource suppliers on a daily basis to ensure that the end customer receives the agreed service level.

9. Error proofing:-

As the end customer expects more and from the automotive industry, many aftermarket and production logistics suppliers will regularly require changes to logistical processes and Service Level Agreements. The implementation of new processes at short notice is always inevitable and the expectation on any 3pl involved will be to get it 100% correct at the first attempt, as errors can disrupt service and become expensive. Therefore the planning of process implementation and re-mapping has to be subject to structured, industry recognised error proofing to ensure mistakes are eradicated before they occur.

10. On-going IT investment and training:-

Accurate stock integrity is achieved through the application of appropriate stock management systems. A number of bespoke and off the shelf IT systems are available in the market place, but not all fit the demanding requirements of the automotive industry (either production or aftermarket). Whilst the selection and implementation of such systems is key, many management teams also miss the importance of training it’s users to a level which gives understanding and accountability on an ongoing basis. Ensuring that IT training is kept up-to-date is a small cost but can reduce costly mistakes, and also assists with the development of systems as changes in the operational profile emerge.
 

For more information call us on 01543 441685 or e-mail jbiddulph@rh-automotive.co.uk

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