Several recent strikes at suppliers’ plants have highlighted vehicle manufacturers’ exposure to external events often beyond their control. In mid-September, a metalworkers’ union in Sao Paolo, Brazil, called for strike action; a few days ago in India, a supplier halted production at its Bangalore plant after workers downed tools; and in France, workers at a key supplier are staging a five-week strike.
According to research by Evolution Time Critical, stopping a vehicle manufacturing line due to parts shortage can cost up to €1m (US$1.34m) an hour. One of our teams recently saved a major vehicle manufacturer more than €1m in lost production, keeping the lines running by resolving a compound failure after the supply chain process experienced two consecutive faults. This emphasises how lean some manufacturers are running, and the importance of a back-up plan for when things go wrong.
Automotive supply chain failures continue to raise questions about the ability of existing planning techniques to cope with recovering manufacturing volumes. Today’s best-practice analysis and contingency planning systems are no longer sufficient to prevent delays in deliveries.
Automotive supply chain failures continue to raise questions about the ability of existing planning techniques to cope with recovering manufacturing volumes.
With better contingency planning, manufacturers can afford to take a bigger risk with inventory reduction and supplier strength. Some vehicle manufacturers and Tier One suppliers are integrating emergency logistics within their lean strategies, saving them considerable sums of money.
The need for premium, time critical and emergency logistics is increasing. This is in part due to factors outside the control of vehicle manufacturers, but also because premium logistics is increasingly seen as an enabler to other areas of business improvement, such as buffer stock reduction, contracted engineering timescales and reduced cost bought-in components. As a result of these factors, and the growing confidence vehicle manufacturers have in emergency logistics, the number of logistics strategies with integrated emergency logistics is increasing. We are increasingly working as part of our customers’ overall logistics infrastructure, supporting manufacturers holding low levels of inventory on a regular basis.
Vehicle manufacturers are running leaner supply chains while also producing higher volumes. This strategy saves companies money, time and space, if everything runs smoothly. However, when failures occur within the chain, they can be extremely expensive, with both cost and customer service implications.
Vehicle manufacturers are encouraged to look deep into their supply chains in order to avoid expensive supply chain failures. Similarly, Tier One suppliers could also benefit from implementing a more rigorous approach to supply chain analysis.
In the search for greater economies, many Tier suppliers are moving production to low cost areas such as North Africa, South America, Asia and India. This comes with its own set of challenges: transport infrastructures can be underdeveloped, with small airports and a limited road and rail network. With the careful logistics planning typically associated with automotive supply chains, an effective transport programme can be implemented. However, companies forced to incorporate an underdeveloped transport infrastructure into their supply chain magnify the requirement for a competent contingency plan.
Vehicle manufacturers are encouraged to look deep into their supply chains in order to avoid expensive supply chain failures. Similarly, Tier One suppliers could also benefit from implementing a more rigorous approach to supply chain analysis. We are receiving an increasing number of commissions from Tier Ones which are unable to make deliveries because they cannot get hold of components or materials from their suppliers. Making a high level of supply chain analysis available to these businesses could help to avoid these situations, or at least to resolve them more quickly, and with less cost.
The opinions expressed here are those of the author and do not necessarily reflect the positions of Automotive World Ltd.
Brad Brennan is the managing director of Evolution Time Critical. For more information, visit www.evolution-timecritical.com
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