Wednesday 21st Aug 2019 - Logistics & Supply Chain

Taut supply chains can often snap

The prospect of an essential production line sitting idle, haemorrhaging cash and reeling from lost opportunity is guaranteed to instil dread into the most robust of auto manufacturers.

With today’s state-of-the-art production lines and the most sophisticated supply chains, interruptions shouldn’t happen, but they can and do, often as a result of inclement weather, natural disaster, labour dispute, or fire.

The drive for reduced stocks and leaner and more sophisticated supply chains has its downside. The automotive supply chain is particularly exposed to the problems of a distance based supply chain: The automotive sector supply chain stock locations have switched to production activity; the sheer scope of components in each vehicle keeps expanding; and there is a reduction in post-manufacture “parking” of finished vehicles in favour of a demand-led production programme.

A maximum holding of parts at assembly sites may be as low as one day’s worth and stock is frequently in transit. With a new vehicle normally emerging from the production line every minute or so, imagine the cost of every idle hour. If that line had to close for several days it would be a challenge for the manufacturer to compensate for that loss through the rest of the year. Under such circumstances it becomes clear that an aircraft charter that can often run to hundreds of thousands of pounds is a worthwhile investment.

This distance-based supply chain, whose links are forged by many supplier tiers in various countries, carries a risk in that the longer and more diverse it becomes, the more it is susceptible to unforeseen circumstances. The supply chain is rendered fragile, extended and distended in some way. These challenges have become yet more complex in recent years with the trend towards manufacturing, or more especially to assemble vehicles closer to the ultimate and growing markets of eastern Europe, particularly Russia.

To combat the supply chain risks, or at least mitigate them, a number of manufacturers have voiced an aim to supply all components from within a hundred kilometre radius of the assembly plant. Recent estimates indicate that these aims are still far from fruition with an industry-wide average of between 20 and 30 per cent of supplies currently emanating from these zones.

Local sourcing policy has been much talked of, in particular within the growing Russian manufacturing sector. Renault/Nissan claim to have a three to five year goal, within which its Avtoframos plant in Moscow will be majority supplied from within the country. However, it seems doubtful that given the global manufacturing platform employed by most major manufacturers, the economics of local supply can be made to work effectively.

Even more challenging is the encouragement of tier one component suppliers to set up plants in Russia and other East Europe countries.

Supply chain disruption as described above, or certainly the threat of it therefore, can be confidently predicted to remain a part of the automotive industry in the future and auto manufacturers will continue to go to great lengths to resolve such situations.

Such natural phenomena as the Icelandic volcanic eruptions that resulted in ash clouds blighting the airspace over many parts of Europe last April/May could certainly not be predicted. Jaguar Land Rover (JLR), part of Tata Motors, was one of the auto companies that experienced significant disruption to its supply chain. Here is an example of how JLR reacted to solve the problem.

Essential JLR parts were caught in transit and a potential shutdown of three UK manufacturing plants was the worst case It seems doubtful, given that the economics of local supply can be made to work effectively.scenario. With no guarantee of flights into the UK or at the airfreight hubs of Frankfurt, Amsterdam and Paris, Jaguar Land Rover activated its contingency planning process to secure its supply chain from outside Europe. This included the chartering of an Ilyushin 76 aircraft to bring in more urgent supplies. Significant rescheduling of part availability from various suppliers was required, new shipping documentation prepared, consignments assembled and, within 20 hours, the aircraft was ready to take-off. But to which destination airport?

Initially, the aircraft was bound for Valencia, unaffected by ash, from where the cargo would take a 24 hour road/ferry journey to JLR’s factories in the Midlands. However, during the flight, some airspace restrictions were lifted and a new flight plan was submitted to divert the aircraft to Birmingham. The diversion, of course, necessitated new customs entries and alternative ground transport to the plants.  During the on-going ash-induced crisis, with no scheduled flights available, JLR relied totally on alternative multi modal solutions for its urgent intra-European component supply and aftermarket items.

Flexibility, contingency planning and the services of a freight specialist were key to maintaining Jaguar Land Rover’s supply chain integrity during the ash cloud period; the nature of global automotive supply chains will necessitate such expediencies well into the future.

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