Surprising return to 2008 volumes for leading emergency logistics supplier, but the type of work reflects fundamental shifts in how auto companies are managing their supply chains
A fundamental shift in the way that vehicle manufacturers are managing their supply chains has been revealed by new research from the leading global supplier of automotive emergency logistics, Evolution Time Critical. June and July shipment volumes for the firm hit a 12-month high, matching the same period last year (despite significantly lower vehicle build volumes), but the underlying causes of emergency requirements were significantly different.
Managing director Brad Brennan identifies four strong trends. First is the inevitable reductions in inventory and goods in-transit that make supply chain failure more critical. Second is route consolidation (fewer ‘milkruns’, but each covering more pick-ups), which makes the impact of failure more wide ranging. Third is the unfortunate failure of some component suppliers and the related need to establish new suppliers, increasingly many thousands of miles away. Fourth is a strong increase in the proportion of road transport used for time-critical operations as shortfall volumes jump.
"Automotive supply chains were already amongst the leanest in any industry, so freeing up capital by further reducing inventory means that there is now almost no contingency to accommodate even modest delays," says Brennan. "More highly integrated routes can reduce transport costs, but this compounds the problem because the impact of failures may now be significantly more wide ranging."
An unfortunate but increasingly common mode of failure is component suppliers going out of business. This not only stops that leg of the supply chain, it also means that a new supplier must start deliveries immediately. "When stopping a vehicle line can cost up to €1million every minute, taking time out of the transition process is absolutely critical," emphasizes Brennan. "Emergency logistics helps to deliver manufacturing plant and materials to the new supplier as well as facilitating very fast delivery of the first production."
An interesting observation from Evolution is that many of the new suppliers are in Asia, replacing even low cost East European suppliers. "We think this is because capital is more readily available in China and some other Asian countries. In Europe, it is still very hard to find the investment needed to start a new production facility," says Brennan.
Evolution’s MD feels that financial strength is one reason why his company has proved successful in difficult times. "We are well funded and extremely stable," he says. "When emergency logistics is your last option, the most reliable solution has to be a provider that can always deliver the best service without any financial constraints." Brennan also highlights his company’s nine year focus on the automotive industry: "this gives us knowledge and insight that is of significant value to our clients, helping us to find solutions that may be overlooked by less specialist providers."
The final significant change is an increase in the proportion of emergency shipments that use road transport. Brennan suggests that this could be due to the combination of reduced inventories and consolidated routes. "One result of the turbulence is that when things do go wrong, they increasingly go wrong in a big way," he says. "We are still providing immediate solutions, typically using small regional airports for very fast local departure with arrival close to the target manufacturing plant, but these are often now complemented by fast road deliveries with a light van to accommodate a higher level of product shortfall."
Planning is critical
Evolution has also found that emergency logistics is increasingly integrated with lean strategies, allowing further inventory reductions while maintaining the reliability of deliveries to manufacturing plants. Recent consulting projects include providing expert opinion on regional transport suppliers, the development of plans to support the transition between component suppliers, and the identification of supply chain weak links with associated contingency planning.
"The automotive industry has been extremely effective in accommodating its many supply chain challenges, with emergency logistics playing and increasingly central – and increasingly planned – part in this success," concludes Brennan.