Worldwide Automotive Supply Chains
European companies are adopting international accounting standards. Investor relations, once seen as a North American practice, is now being practiced more actively as companies around the world rush to attract international investors. Advertisers are developing Internet sites and television commercials that target a global audience. It turns out that what sells well in Brazil can also sell well in the United States, Canada, or Japan, or vice versa.
The major players have been operating at a multinational level for several years. The automotive manufacturers, driven by economics, set up operations in locations where there is a substantial opportunity to enter a market or increase market share in a region. But as one automotive executive stated, multi-national is simply operating in several countries. To be truly global requires operations that are linked together by an integrated global strategy.
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The related Tier-One automotive suppliers are following this lead and developing their own global manufacturing and distribution strategies — their main aim is to continue providing materials to their primary customers.
Similarly, supply chain management has been developing as an outsourced process around the world. In Europe and North America, for example, the basic objectives have been the same — reduce overall supply chain costs. Logistics contracts in Europe, however, tend to skew towards warehousing and customer service. In North America, perhaps driven by the geography of vast distances, transportation is a substantial part of most contracts. End-to-end supply chain management services are available from TNT on a worldwide basis and we are able to track trends as they develop. Now we are seeing a move to transfer our inbound logistics services from North America to other countries.
In our role as Lead Logistics Provider (LLP) for Ford Motor Company’s assembly plants, TNT Logistics has built and refined a process that maintains an even flow of materials into the plants. The basic premise is small lot, high frequency deliveries from Tier-One suppliers to line-side at each assembly operation. The flow of parts is synchronized to the pace of the assembly line.
In the past, parts shipments large enough to cover one or even two weeks of production were delivered to the assembly plants on a random basis. Timing of the deliveries was linked to the manufacturing rate of the suppliers, not to Ford’s needs. This generated high accumulations of inventories at the plant. The downside to this method was the high cost of inventory and warehousing space. In addition, defective parts would be discarded but would not be identified to purchasing until that particular shipment had been fully used.
With the cost of doing business continuing to go up, Ford identified the parts and material inventories as an opportunity to generate savings. TNT has produced those savings by implementing a precisely timed flow of materials into the plants.
A series of precisely scheduled milk and sweep runs were designed for each shift of operation, based on the analysis of the time and place requirements for parts, load capacities and locations of supplier facilities. Small quantities of parts, enough for a few hours, are picked up from suppliers within specific window times several times a day and then delivered to Ford, again, within specific 15-minute window times. In some cases, the parts are first sent to TNT’s sequencing centre so that the right color of floor mat, for example, reaches the line in time for placement in the right color of vehicle. The benefits of reduced inventory, management time, material handling and warehousing space accrue to Ford.
In 1998, Ford identified the same material flow issues at assembly plants in Europe. They also recognized TNT’s Lead Logistics Provider (LLP) methodology as a “best practice.” The question was – how do you get a logistics provider in North America to implement their process at plants in Europe?
The answer: through TNT’s global connection. Not only does our company operate there, but TNT Logistics Europe was already handling after market parts distribution for Ford. TNT had local people who operated with the same philosophies and objectives. With the players already in place, the transfer of the expertise and the process was handled smoothly. TNT Logistics Europe is the current LLP for Ford Motor Company assembly plants in Sarlouis and Cologne, Germany, and Genk, Belgium.
There has been extensive media coverage about General Motors’ new factory strategy. The plan is to build smaller facilities with highly efficient processes. These plants will be modeled after facilities like the Blue Macaw project in Brazil. The Blue Macaw concept relies on suppliers to pre-assemble key modules, such as instrument panels and suspension and brake systems within sight of the plant. GM workers then assemble the modules into vehicles. The plant and the module or Tier-One suppliers are housed in what they call a condominium complex.
Even though the suppliers are “within sight” of the General Motors assembly line facility, the modules still have to be moved to line side. Trucks obviously are not required but the same principles that are used at the Ford plants in North America were called for at Blue Macaw.
The Blue Macaw requirements were transmitted to us through two global connections: the Brazilian division of our sister company, TNT Express Worldwide, and our contacts at General Motors in Detroit.
After an on-site assessment by one of our logistics design specialists from Canada, we developed a solution to keep the assembly line stocked with the necessary quantities of modules on a continuous basis. Instead of trucks, tow tractors maintain an even flow of materials along the condominium lanes. There are fixed routes which vary only in their frequency and duration. Most module suppliers are shipping each half hour or hour. Again, this process works with clockwork precision.
In the case of the Blue Macaw project, TNT Logistics North America had the methodology but we had no tangible business foundation in Brazil. TNT Automotive Logistics Italy was already established in Brazil with the Fiat contract.
Our team from Canada successfully provided the design and start up methodology for Blue Macaw. Once the logistics design and processes were complete, we transferred the contract to our logistics partner from Italy to leverage their financial base and purchasing power in Brazil. This created a win-win for our client, General Motors, and set up another working module in TNT’s global network.
The strategy of think global and act local is practiced by TNT. Our global vision is “to become the recognized worldwide leader in logistics.”