AUTOMOTIVE INBOUND-TO-MANUFACTURING (I2M)

Automotive manufacturers worldwide are seeking to transform their assembly lines. Here’s how one 3PL is helping customers do just that – now and for the future.

The global automotive supply chain depends on the tightest possible cooperation among partners. All of the links must function in perfect harmony to keep the assembly line moving. Yet the growing complexity of automotive production – including the need to source in multiple markets – is making it harder than ever to achieve that goal.

Faced with customer demands for greater product variation, availability, and quality, OEMs are turning to skilled third-party logistics service providers (3PLs) to help manage the critical inbound-to-manufacturing (I2M) piece of their operations. Once restricted to supplying basic transportation and warehousing, modern-day 3PLs are performing such tasks as the receipt, warehousing, sub assembly, kitting , sequencing, and onward distribution of parts and components – all in conformance with the pace and rhythm of the production line.

To successfully carry out those responsibilities with the necessary degree of precision requires deep expertise in the automotive industry, of course. But it also requires the 3PL to have solid process management skills, sophisticated technology, strong transportation and delivery infrastructure, and constant two-way communication with the customer. The following examples from DHL Supply Chain’s experience show how I2M works today, and what it takes on the part of the 3PL to make I2M a success, now and for the future.

Reaching New Markets

One of the main drivers behind automakers’ reliance on I2M partners is a desire to penetrate new markets, especially in emerging economies. No longer do manufacturers build vehicles in one location and ship them all over the world. By siting plants closer to the buyer, they can respond more quickly and efficiently to changing market tastes. But that strategy comes with its own challenges, and here, too, a qualified 3PL can help.

One international car maker sources parts from a base of 94 suppliers spread throughout Turkey and distributes them to plants in France, Spain, Slovenia, and Romania. To help the customer manage this cross-border operation, DHL runs a cross-docking operation in Gebze, Turkey, on the manufacturer’s behalf. At that location, the 3PL performs parts consolidation, route planning, onward distribution, customs clearance facilitation, and order and supply management.

The operation involves around 2,000 shipments per year. The partnership has helped the manufacturer to keep track of its sizeable array of suppliers and inbound parts in a difficult-to-reach location, and to plan more accurately for demand.

At the Mexican plant of another automaker, maintenance of the production schedule hinges on the cooperation of parts suppliers, sub-assemblers, logistics service providers, and transportation companies. With three discrete production processes, 22 suppliers, and 300 part numbers to be managed, it’s no surprise that the operation was plagued with obsolete materials, unnecessary payments, and excessive transportation and administrative expenses. Special teams could address issues with key suppliers, but their efforts weren’t yielding sustainable, consistent levels of performance.

The manufacturer sought to improve the situation through a revamping of its I2M parts flow. DHL designed and implemented a tailored information-technology platform that links all of the supply chain partners serving the Mexican plant. In addition, it provides real-time scheduling data and maintains control over parts inventories. Close monitoring and analysis of key data allow the 3PL to identify obsolete material before it becomes an issue.

According to the principals, the relationship has resulted in timelier and more accurate inventory counts; on-time delivery of supplies for maintenance, repair, and operations; and reduced transportation expense, line stoppages, inventory levels, and working capital.

An Expanding Mansion

At a time when global supply chains are becoming simultaneously more fragile and more complex, car makers are calling on their 3PLs to go beyond their historical role as providers of transportation and warehousing services. In venturing into the automotive I2M arena, 3PLs have taken on a very complex and demanding mission.

The need for 3PLs to not just perform a service but also to add value is growing as manufacturers are waking to the need for calculating the true landed cost of each product. Gone are the days when a plant-siting decision rested solely on the cost of local labor, or on the best available transportation route.

In keeping with that trend, DHL has adopted the approach of total logistics cost management (TLCM), a calculation aimed at helping OEMs to make sophisticated decisions about where to build plants, and how to operate them.

DHL can provide cost and operational analysis on a plant-by-plant basis, according to Martin Dougherty, VP, Business Development, Automotive UK at DHL Supply Chain . Once the OEM has selected the scenario that best meets its needs, the 3PL provides the visibility tools needed to link the plant with multiple tiers of suppliers.

The application of I2M principles in the automotive industry continues to evolve. The globalization of production, coupled with manufacturers’ ceaseless search for new markets, has created new challenges in terms of efficiency, visibility, quality, and product variety. Car makers – and the 3PLs that support them – are meeting those challenges together by collaborating on efficient, precise I2M processes. The manufacturers’ move toward building cars in multiple geographies will make managing and carrying out those processes in any assembly plant, regardless of location, imperative in the future, says Michael Martin, DHL Supply Chain’s VP of Strategic Development for Global Automotive.

That’s one reason 3PLs are expected to play an increasing role in managing automotive supply chains in the future, working with their clients to incorporate sophisticated I2M processes into assembly operations in both new and established markets, and in developed and developing economies.

This is the second of a two-part series of articles about Automotive Inbound to Manufacturing (I2M). Part One, “Automotive inbound to manufacturing (I2M): Precision in motion”, can be read here.

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