Logistics Strategies
Opening the Supply Chain Toolbox
Supply chain management, logistics infrastructure, material flow strategy are all industry jargon describing the same process, the movement of commodities from the point of manufacture to the next point of use in the most efficient manner possible while satisfying the customer’s requirements. At DaimlerChrysler we have adopted a Total Systems Cost approach, also known as total cost of ownership. Within this model we take into account the location of the supplier, the supplier’s expertise and technical capabilities, transportation costs, containerization requirements and point of use delivery requirements. The purpose of this exercise is to ensure the supply chain is cost effective. Once this road map, or part plan, has been determined it is dissected and the various areas of responsibility begin to hone their particular piece of the chain. When launching a new product, this process becomes very complex when you consider part quantity and complexity, the size of the supply base and the volume requirements.
Once a program is launched the task of continually improving the efficiency of the chain begins. To be successful supply chain managers it is necessary to constantly be looking for new ways of doing business. Sometimes these ”new” ways are old ideas updated or technologically improved in a manner that they become increasingly cost effective. Case in point is the DCX/Expressway initiative I wrote about last issue (LQ™, Volume 7, Issue 1). With Expressway, CPR has reinvented piggyback intermodal, addressing the deficiencies which prompted the auto industry to shy away from it during the transition to JIT delivery systems. Anyone that utilized piggyback intermodal in the late ’70s knows that it was not the most time sensitive or reliable system available and even its low cost could not overcome the shortcomings in a JIT environment. The Expressway system successfully overcomes these issues and in conjunction with our DCX team we were able to successfully integrate it into Brampton Assembly’s logistics infrastructure.
The JIT programs, which have been in effect within the auto industry over the last 20 years, have successfully focused on making truck transportation more efficient as well as catering to the internal customer’s requirements. Lean manufacturing philosophies have created new delivery requirements and driven cost into the supply chain. The challenge now is to find new ways to offset these costs. When looking into the toolbox developed over the years, we find things that have been set aside for specific purposes. Airfreight, for example, historically has been utilized for expedited moves on an as required basis. The Brampton Assembly team, while investigating routings out of the northeastern United States, discovered that certain commodities were better suited to airfreight than LTL truck when the entire delivery system was considered. This was due to the quantity, size and weight of the material as well as the lack of returnable containers in this loop. We conducted a trial of an airfreight milk run and found that it was faster and cheaper than conventional LTL truck.
As we move forward into a new round of cost-cutting activities within the auto industry, those with vision will continue to break new ground with new applications of various types of transportation systems. There are a variety of strategies that could be developed to continue to cut costs and improve efficiencies. An example could be the application of conventional boxcar, transporting material for multiple plant locations, routed into a warehouse, deconned, and the material dispersed to the various using locations using the most efficient available mode. In the case of Brampton that may be the Expressway intermodal service. In this case the conventional rail would be confined to suppliers, with a rail siding, that are located in the southern and eastern United States. The railcars would be routed to the Detroit or Chicago area where the material would be unloaded to a warehouse then transferred to trailers and loaded onto the Expressway train for delivery to Brampton Assembly on a JIT schedule. This would be a two-tiered system with a warehouse in the middle to compensate for the railcar quantities as well as the inconsistencies of conventional rail. A study of this scenario is necessary to assess the impact on the total system cost. Does the reduced cost of the rail offset the warehouse cost? When the cost of additional inventory is taken into account, is the total supply chain still cost effective? What are the risks to supply of marrying these various types of transportation and what is the cost of coordinating such complex moves? Is the IT infrastructure in place to manage these types of arrangements?
Speaking of IT infrastructure, DCX has a very mature set of systems to manage material flow into the assembly plants. A new menu-driven tracking system called Shipment Tracking and Reporting System (STARS) is now in place to supplement these systems. I was involved in the development of this system a few years ago and we attempted to provide the user with dynamic tracking capability while interfacing with all the existing systems. The system allows for dynamic inputs from truck drivers or their dispatch, via satellite transmission internet access or hardwire, providing instantaneous updates of ETAs as well as early notification of problems. The ability to identify and react to issues early has enhanced our ability to avoid and/or reduce excess transportation, minimize part shortages at the manufacturing locations and monitor our carrier delivery performance. This was launched and patented last year and is now being enhanced and improved. This is another example of developing the infrastructure that allows us to move forward and continue to streamline our business processes.
The current economic climate is bringing us into a time of restraint and continual reevaluation of our processes to realize every efficiency available. The toolbox and experience we have acquired over the years will become more important than ever as we explore both the old and new methodologies that are available to us as logistics professionals and supply chain managers. We at DCX Brampton Assembly intend to be at the forefront of developing the most innovative and efficient supply chain within the industry. Stay tuned.