Year on year, the automotive industry tackles increasing pressure to deliver technological innovation and evolved efficiency, all whilst facing volatile markets as the major manufacturers race to reach the finish line first. In such a process-driven culture, inbound supply chain disruptions of component parts can have huge financial consequences for OEMs and suppliers alike. After all, when inefficient automotive logistics disrupt the product pipeline, losses can amount to £100,000s in just minutes.
Logistics managers need a guarantee of on time in full (OTIF) deliveries, damage reduction, on-time collections and a commitment to reduce a supply chain’s carbon footprint. So, if your 3PL partner cannot provide tried, tested and trusted warehousing and distribution alongside commercial cost-down, then maybe it’s time to consider what problems need addressing.
Here at Yusen Logistics, we have decades of experience in automotive logistics; that’s why we recommend these four essentials for your inbound supply chain:
If plans fall through during an inbound supply chain there can be serious consequences for Tier 1 and Tier 2 suppliers. While the financial losses are often extreme, it could also damage your relationships with OEMs and their subsequent tender opportunities.
There are high levels of risk to business continuity throughout the supply chain, whether on-site at the supplier, in transit, during warehousing and distribution or in the final mile of delivery. However, a robust contingency plan and risk assessment can go a long way to protecting both supplier and OEM.
For example, in recent years the automotive industry has questioned the resilience of Just In Time (JIT) supply chains. When handling multiple component parts for an end-product, a lower risk strategy would consider shipping from a variety of suppliers and using vendor managed inventory services. General Motors’ response to the 2011 Fukishima crisis is a well-cited example of introducing flexibility to a supply chain strategy to great effect.
A strong 3PL partner will look for early warning signs with proactive solutions based on a thorough understanding of your business and its market conditions. They’ll consider the effect of all manner of challenges, including natural disasters, political unrest and warehousing failures.
Make sure their solutions are the most cost-effective option available to you, whether that be hiring extra drivers, geographically-optimised warehousing, crossdocking or using air freight to correct disrupted supply chains.
The automotive industry is set to become even more complex, with new models and greater emphasis on electrical components with long lead times. Innovative technology will drive end-market price, leading to an increased need for flexible manufacturing with single-line assembly.
Therefore, losing sight of the progress of your supply chain can mean opportunities are missed for proactive mitigation of delays and additional costs. In fact, IBM’s research into smarter supply chains found that:
In such a process-driven industry, you need real-time reporting on key milestones throughout an end-to-end supply chain. Customer-specific technology, such as control tower management, can help track shipments at every stage of their journey. Otherwise, lead times could be compromised with long-term effects to productivity.
A strong 3PL partner will have strong relationships with your team and OEM. That way, they can help streamline your inbound supply chain with cost-effective strategies that suit your individual needs. Moreover, they can speak directly to the concerned party with real-time data so proactive solutions can be actioned as soon as possible.
Sustainable supply chain management
Due to the nature of the industry, automotive logistics is becoming increasingly concerned with its carbon footprint and environmental impact.
In recent years, many initiatives have been established to coordinate OEMs’ and suppliers’ efforts in reducing the industry’s CO2 emissions. For example, the Logistics Carbon Reduction Scheme is just one industry-led approach to record, report and reduce carbon emissions from freight transport.
However, your 3PL partner should be constantly reviewing and initiating sustainable policies within your supply chain management. They could even be part of larger cost-effective strategies with smarter transport planning.
For example, BMW showcased their efforts in switching from air to rail freight to help reduce carbon emissions by 120,000 tonnes.
Ensuring long transport is fully optimised, utilising crossdocking services or choosing warehousing and distribution facilities near to OEM factories can go an even further way towards consolidating both costs and CO2 emissions.
If your 3PL partner isn’t achieving this already, look for a logistics provider with a strong global network and host of big brands. That way, they’re more likely to have established transport links for consolidating shipments. They’ll have the expertise, experience and environmental tools to ensure that you’re going green while keeping costs out of the red.
Consistent commercial cost-down
Budgets are everything in automotive manufacturing, especially with the costs of raw materials and component parts continuing to fluctuate. That’s why a logistics provider’s struggle to commit to commercial cost-down year-on-year can be a reason for suppliers to initiate a tender process.
A disconnected inbound supply chain can haemorrhage costs, with underfilled but convenient transit and speed-over-cost solutions taking priority.
If this is the case for you, then it’s important to explore a 3PL partner’s ability to find cost-effective solutions across their supply chain management. It’s here where experience and expertise truly count.
Look for a logistics provider with existing large networks in place, so you can make the most of ready-made consolidation opportunities. This will also be the case with established warehousing operations close to major OEMs, when space comes free make the most of prime locations for a cost-effective crossdocking and sequencing site. Finally, a strong solutions engineering service will also help address cost-down in long-term strategies.
Facing challenges with your automotive logistics? Explore our blog series from in-house experts, with decades of experience. Alternatively, get in touch for tailored advice on your supply chain needs.