Disruption, risk and contingencies in the supply chain

The automotive sector has learned some tough lessons over the last two years but they have instilled a greater sense of the importance of supply chain resiliency, something that depends on greater flexibility, stronger communication and an understanding of the value of logistics services. Marcus Williams reports from Detroit

Carmakers are currently watching a very big percentage of annual profitability disappear in dealing with supply chain disruption, while few have full visibility of those supply chains, which makes them more vulnerable to interruptions in supply.

At this year’s Automotive Logistics and Supply Chain Global conference, experts from carmakers, tier suppliers and logistics providers met to discuss what they were doing to deal with the ongoing disruption and risk affecting automotive production around the world. Many have learned lessons over the pandemic and are now operating with greater collaboration and creativity to make their supply chain logistics both more resilient and flexible.

Steve Brown, vice-president of parts supply chain at Toyota North America said the meaning of flexibility had changed at the carmaker over the past couple of years. It used to involve aggressively cutting cost when carrying out long-range logistics planning, something that was very conservative in its approach.

Toyota’s Steve Brown said the company needed to be flexible with the supply challenges it didn’t yet know

“We had a team mapping the progress of Covid in China and, as we saw regions shutting down, we were anticipating that our vessel pipeline would deplete between China and North America,” explained Leich. “So, very early on, we knew that logistics capacity was going to be very important for us. We secured two months’ worth of extra logistics capacity all at one time.”

That came in the form of smaller, faster vessels that cut the ocean lead time between China and North America.

“We were very proactive in doing that and it worked out very well for us,” said Leich. “We were able to keep all of our operations flowing.” (Watch an interview with David Leich from GM here.)

That is just one example of where disruption has cultured a greater readiness among OEMs and shippers to spend on the logistics services and capacity needed as a tactical necessity. GM and others have even taken to pre-booking extra transport capacity as ‘insurance’ that they have enough.

“Now we have to think about how we build flexibility into things we don’t know, based on the last few years; it is very important,” said Brown.

David Leich, executive director of global supply chain at GM, said intercontinental container shipments are still recovering from misalignment and delay, the result of ongoing shutdowns in China and port congestion across the world.

“From a vessel standpoint we see the wrong container at the wrong place at the wrong time,” said Leich, who has led supply chain operations, including supplier forecasting and capacity management since January 2020. He said the carmaker had worked proactively to secure additional capacity, a move it made when Covid first hit China, where it has a lot of suppliers.

GM’s David Leich said had worked proactively to secure additional vessel capacity since Covid hit

Pongracz said that the increased collaboration between Kuehne + Nagel’s own internal operations to develop more innovative services was a new thing. She said even with the use of control towers it is still important to understand exactly the status the customer’s plants to be able to feed back that information to put together the optimum service.

“We really need to understand what they need as much as we need to understand what we can offer,” she said.

Closer collaboration between internal teams is also happening at GM, as it works to make its logistics more resilient to disruption. Edgard Pezzo, executive director of global logistics and containerization at GM, said greater resilience was achieved through cross-functional teams, as well as increased partnerships with logistics service providers. The carmaker has also invested more in end-to-end visibility in the supply chain and is refining its data analytics to predict where problems are likely to arrive. (Watch the panel discussion at the event featuring Edgard Pezzo here.)

“We’ve learned how to be more flexible and dynamic in managing surprises and crises,” said Pezzo. “In dealing with the pandemic we’ve changed transport modes or ports. We have learned to gather information [with our providers] to adapt and protect plants from disruption.”

Better communication

The automotive sector is also looking at closer communication as a means to gain a more accurate view of freight movements and plant demand.

Julia Pongracz, vice-president of sales and head of the automotive vertical in North America for Kuehne + Nagel, said that detailed information on service and routing requirements was every bit as important as procurement and cost.

“[You have to] to marry that up with the plant requirements and have a relationship at all levels in the organisation,” she said. “That has been key to successful onboarding in the business. You then have to firm that up for customers and ensure you are talking at all the levels in the company and not just at a procurement level.”

GM’s Edgard Pezzo said said greater resilience was achieved through cross-functional teams

Maxim Serov, director of supply chain management for Benteler Automotive’s North American operations, said resiliency was about getting the right parts in at the right time and in the right quantity, but he admitted that is not happening now and his company has to collaborate on improving that.

One option he noted to improve that situation is in picking a direct service for ocean services between Europe and Mexico and not paying for services that stop at multiple US east coast ports, each with their own congestion issues. Serov said it was worth paying more for a direct service.

"There are opportunities that we need to consider and learn from that,” said Serov. “That is what we are doing, we are learning, using data for decision making, implementing more tools, and to improve we also need to collaborate, this is clear.”

Pin-pointing the parts

Paul Biegen, director of global transportation, customs and packaging at Joyson Safety Systems, said his company has established closer and more regular meetings with its freight forwarders. That was made necessary by the need Joyson had for greater visibility into the location of its parts in transit – where exactly they were and what vessels its logistics partners had planned to ship them, as well as the number of containers they had secured.

A similar hands-on approach is being taken at American Axle Manufacturing (AAM), according to Ryan Etherton, senior manager transportation and logistics. He said it was crucial for the company to understand cost and transit time, and to work with its production plants to make sure any of the logistics options available would meet the needs of continuing output.

“We were meeting with our forwarders and… making sure our [production] forecasts were provided to our forwarders six or eight weeks out or so,” said Etherton. “Then it was understanding, based on the volumes, whether we were going to secure the bookings we needed.”

If that was not possible Etherton said it is a case of working with the freight forwarder on a good plan B to maintain the flow of material.

Premium as standard

The plan B of an expedited shipment grew substantially over the pandemic but planning for the use of emergency services has also become a tactic that many have adopted and pre-booking space on charter planes as a matter of course is something the industry has adopted.

Chris Ludwig was joined by (l to r): Scott Morson from Royale International; Julia Pongracz from Kuehne + Nagel; Ryan Etherton from AAM; and Paul Biegen, Joyson Safety Systems

Etherton said it is about understanding the full range of transport service options available and exhausting every one for the best result. What was important for AAM was to break down each situation carefully and look at the different options. That included diverting shipments to different modes of transport where necessary, and he noted that the company had switched to alternative ports in North America and used direct truck services into Mexico.

“We went deep into the organisations of our forwarders and started to work with the directors of ocean procurement and different people to really give them the information,” said Etherton, adding that information allowed the partners to provide a good custom solution.

Biegen said Joyson was using a transport management system (TMS) system from Cargobase that had a premium move application. “We needed a solution that was going out to all the forwarders and giving us as many bids for the services we were looking for. We needed to get approvals at all levels within our company and turn that into an actual move.”

Scott Morson, commercial director at Royale International, said emergency logistics providers like his had taken on a more consultative role, rather than simply responding to requests for services.

“We have been giving a lot more advice and it has become more important to talk to customers on a daily basis and get into that war-room mentality,” said Morson. He added that that tactic was backed up in the company with daily communication aimed at finding available capacity.

“We had to be quite innovative and come up with new solutions that we hadn’t used before. That was a big change for us,” he said.

That included the development of hybrid products for markets facing shutdowns. Morson said it has combined next-flight-out services with hand-carry ons that has become a solid option for clients in some of the more challenging regions, including for those trying to get parts from China and Taiwan to North America.

Data analysis

Digital tools are helping companies work together on getting a deeper understanding of the supply chain through better gathering and analysis, and by sharing that data with partners.

GM has been investing a significant amount in data analytics with aim of better forecasting, according to Edgard Pezzo.

IAC’s Kelly Bysouth said refining data from base systems was important and the company was working hard on standardising those systems

“We can identify where the vehicles are as well as where the parts are,” said Pezzo. “This is a tool that is helping us a lot and we continue to implement it. Today we have a lot more visibility of where our parts and vehicles are.”

“That started with the pandemic, when we realised we would have a lot of difficulties [in terms of transport capacity] when the assembly plants went back to work,” said Pezzo. “We started working internally and cross-functionally to better understand the data we had on when plants were going to start producing again, and what was going to be the gap in terms [parts] of volume necessary to keep them running.”

Automating the tracking of material is one area GM has been focusing on and Pezzo understood that further improvements to the quality of the data being gathered was a priority. The carmaker has been working with supply chain technology company AThingz on improving its data gathering and analytics for better shipment forecasts and predicting disruption.

GM is also working with transport visibility software provider, FreightVerify, to gain better visibility on both parts and finished vehicle shipments. The FreightVerify tool works with GM’s OnStar GPS technology.

Tools to empower

The technology used is developing rapidly and there are new digital tools being made available on a daily basis. That proliferation of digital software brings with it a new challenge in how to connect the tools with existing legacy systems, according to Eva Ames, vice-president of the Electrification and Mobility Competence Center at logistics provider DSV.

“There is huge risk in changing the [existing] data systems… that are core to every aspect of company life,” said Ames. “Changing the data inputs to allow these new tools to integrate with the existing data is a huge risk and it is going to be tough to find a way for all these tools to exist.”

At tier supplier Johnson Electric, Raman Mehta, senior vice-president and chief technology officer, said the company was creating tools of its own to improve data analytics for better decision making.

“We are trying to empower our planners so they have a holistic view of the entire supply chain, rather than being siloed,” said Mehta. “We are big on conquering planning and looking at cloud tools that can take a lot of the data and crunch it.”

At parts supplier IAC Group, Kelly Bysouth, chief supply chain officer, said refining the data the company was gathering from its base systems was important and it was working hard on standardising those systems. On top of that, IAC is using data analytics tools to pull the data and share it with its supplier and logistics partners.

“One of the biggest tools we have as a tier one is data, and getting that data to do the work for us, rather than spending all of our time data mining,” said Bysouth. “That is one of the things we are still working on that is absolutely critical.”

DSV’s Eva Ames said that changing data inputs to integrate newer digital tools with the existing data is a huge risk

The timely sharing of quality data is essentiall to a flexible supply chain, said James Williams, vice-president of global key accounts at Ceva Logistics.

“Having comprehensive visibility tools that allow you to collect data across all the modes of transport, [means you can] crunch that data and start to make any dynamic mode changes required to meet the needs of the plants,” said Williams.

Ceva is also working with FreightVerify to improve transparency in the movement of parts and has invested more in control tower technology. Williams said that had helped logistics planners understand what needs to be where, and when.

“You can manoevure the assets accordingly… and connect with the visibility partners. The community then meets the needs of a carmaker such as GM,” said Williams.

Staffing crisis

Another major challenge stemming in a large part from the pandemic disruption relates to staffing levels in the North American automotive logistics sector, notably in the number of drivers available. Disruption to parts and vehicle deliveries that began with the ‘great resignation’ over the Covid pandemic continues to impact an automotive sector that was already fighting to recruit more of them.

To recruit drivers, transport providers have to offer secure career opportunities matched with a competitive wage.

It is also about providing better working conditions, something to which the recent investment in safe parking options for drivers in the US has gone some way to address. As part of the recently signed Bipartisan Infrastructure Law, the Department of Transport (DoT) has committed $37.6m to the expansion of safer parking options for road freight drivers, part of the BIL’s Trucking Action Plan.

The automotive logistics sector is also looking at ways of attracting new talent, a hangover from the problems caused by the Covid pandemic, which shut schools and colleges.

“We had to refocus ourselves on those coming from other trucking companies, rather than coming out of the schools,” said Richard DeBoer, executive vice-president of supply chain logistics at Carter Logistics, which provides a range of inbound truckload services. “That has helped us because we have perfected that process and it has helped us become more flexible.”

Stellantis’ Christopher Mattingly said the driver shortage in haulaway was a big problem and his company was bringing in drivers from other industries

Shorter hauls
What is also important in attracting a younger generation of drivers is cutting long-haul deliveries, which keep drivers out on the road for a week or more, an issue of particular concern for the finished vehicle sector.

“Getting people at home every night is important,” said Mattingly. “It is easier to do in other driver jobs but a lot more difficult with auto-hauling; that is where we are focusing.”

Michael Anderson, vice-president of the automotive/industrial vertical for North America at Maersk, concurred.

“There are studies that show if we can shorten that [time away] with team drivers it can make it more attractive as an industry to come into,” he said.

Mattingly added that geography was the challenge across the extensive road haulage distances in the US and that rail was the better (and more cost efficient) option for long-distance vehicle shipments.

“It is a lot cheaper to move a vehicle via rail on long distances than having these drivers two and three days on the road to make their deliveries,” he said.

Watch all of the sessions from this year’s Automotive Logistics and Supply Chain Global conference and book your place for Automotive Logistics Mexico, which takes place in Mexico City between 15-17 November this year.

Very early on we knew that logistics capacity was going to be very important for us. We secured two months’ worth of extra logistics capacity all at one time

David Leich, GM

We really need to understand what [our customers] need as much as we need to understand what we can offer 

Julia Pongracz, Kuehne + Nagel

We’ve learned how to be more flexible and dynamic in managing surprises and crises… [.] We have learned to gather information [with our providers] to adapt and protect plants from disruption 

Edgard Pezzo, GM

We were meeting with our forwarders and… making sure our [production] forecasts were provided to our forwarders six or eight weeks out or so 

Ryan Etherton, American Axle Manufacturing

One of the biggest tools we have as a tier one is data, and getting that data to do the work for us, rather than spending all of our time data mining… is absolutely critical 

Kelly Bysouth, IAC Group

Getting people at home every night is important. It is easier to do in other driver jobs but a lot more difficult with auto-hauling; that is where we are focusing 

Christopher Mattingly, Stellantis