Disruption, risk and contingencies in the supply chain

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.

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.

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.

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.”

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.”

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.