Automakers need to address every link in the supply chain
Published:30-April-2009
By Datamonitor staff writer
Finished vehicle logistics is of vital importance to automakers and although there has been a greater emphasis on the inbound supply chain in the past, manufacturers now need a holistic approach to logistics. Changes in production patterns provide an opportunity to re-assess structures throughout the supply chain, including areas which have not previously been central to the logistics strategy.
Automakers' current difficulties call for a reappraisal of finished vehicle logistics practices.
The current downturn has provided an opportunity for automakers to improve their handling of finished vehicle logistics, as well as highlighting the necessity of doing so. Given the difficult market conditions, no stone should be left unturned in the search for efficiencies and initiatives in the supply chain. Indeed, there are many avenues for optimizing finished vehicle logistics, such as co-loading with other original equipment manufacturers (OEMs), using multi-modal options, collaboration with suppliers to improve efficiency, and addressing environmental footprint concerns, which will gain consumer approval.
At a time when volumes in the automotive market are lower overall, OEMs can consolidate their volumes by utilizing some of these methods. Co-loading and sharing suppliers' services would lead to improved load factors and therefore lower cost per unit. Automakers have put up barriers to co-loading in the past, as they have sought to protect their own capacity allocations, however this practice may be an unaffordable luxury in the current market. Having said that, in order for co-loading to work the sharing parties would need the highest possible forecasting accuracy, which is difficult in a market that is reacting to unfolding events daily.
As in all other sectors of manufacturing, automakers should be assessing which modes of transport they are using on both a cost and environmental basis, such as using sea instead of air freight to cut costs and using rail instead of road to improve their carbon footprint. Now is also the time to reconsider whether roll-on/roll-off (roro) or container sea freight is the most cost-effective option, particularly while container lines are crying out for business.
As well as the mode of transport, the quality of service offered by logistics service providers is also of great importance, including damage control and improving processes when damage does occur. Current collaboration through industry bodies to standardize reporting procedures will bring about progress toward removing duplicated costs. Additionally, IT improvements such as data sharing, to allow effective track and trace and proactive communication to the dealer at particular shipment milestones, will also improve transparency. As automakers have a tough year ahead, efficiency and quality improvements must be made in finished vehicle logistics to bring the sector in line with the more heavily scrutinized inbound logistics.
