The year 2020 has brought supply chain management to the cusp of revolution. With the demand for logistics growing steadily, there has been high employee turnover, shortage of skilled labor, and an aging workforce. Lax monitoring charge, transportation delays, and operator errors can increase cost pressure and affect EBIT.
The convergence of physical and digital systems—industry 4.0—is having an overarching influence on supply chain. Getting the right product at the right time, at the right place, at the right condition, at the right cost and in the right quantity will keep supply chain management nimble with automotive logisticsOpens a new window , 3PL and connected logistics.
The Logistics Performance Index (LPI)Opens a new window 2018 report has placed Germany at the numero uno position. UK has bettered the likes of U.S. as it is well positioned at 6, while the U.S. rules the roost at number 10. However, there is a void left in logistics performance between the top and bottom performers, which is only increasing by the day.
Supply chain management plays a handy role in quality of trade- and transport-related infrastructure, efficiency of the customs clearance process, and quality of logistics services. It also has the ability to track and trace consignments, frequency with which the shipments reach the consignee within the stipulated time frame, and ease of arranging a competitively priced international shipment have
A seismic shift towards sustainable supply chain has meant automotive industry, one of biggest verticals across the globe, could have a major influence on its logistics that is dedicated to the management, strategy, and transportation of finished automobiles, components, and service parts.
There are a few questions that stakeholders would like to peruse as on today:
- Will the logistics industry keep up with the changing customer expectations and evolving business models?
- With digital transformation ranking high in the horizon, how can managers boost automotive logistics, 3PL & Connected logistics?
As margins decline, it appears to be viable time to maximize efficiency and serve customers and compete in the supply chain. Reliance on one company for products and items to be purchased may be a bad idea. However, supply chain managers, despite knowing the perils of single sourcing, do it out of compulsion to meet a cost target or secure their supply. The 2020s are thus poised to be a decade filled with new opportunities as companies will explore new strategies, solutions and innovations.
Automotive Logistics boosting supply chain strategies
Robust logistics initiatives are reducing the in-transit damage, enhancing information visibility, and ramping up the flow of parts & vehicles. Citing the latest data on worldwide car production issued by the international Organization of Motor Vehicle Manufacturers (OICA), Worldometer has claimed production of cars in 2020 to have surpassed 16 million. Similarly, world motor vehicle productionOpens a new window in the U.S. in 2019 was pegged at over 10 million.
Supply chain managers are grappling to reduce inbound and outbound logistics cost. The high cost is mainly attributed to the processes undertaken by several small dealers and redundancy of jobs. Moreover, there are numerous franchise dealers wanting to establish their own identity. While operating cost per vehicle of a small dealer is comparatively higher than that of a large dealer, large dealers can keep considerably lower levels of stock to underpin the same customer level.
What solution can be adopted by automotive logistics suppliers to counter high inbound costs?
Creating a cross dock between supplier and the vehicle assembly plant wouldn’t be a bad idea.
An auto manufacturer cannot build a car in days if a supplier takes a week or so to manufacture and ship the customized products. Plausibly, it may be time for automotive companies to go back to the drawing board to give a whole new dimension to their supply chain strategies. Rethinking supply chain strategies to make the most out of possible opportunities will help them maintain competitive advantage and reduce costs.
Supply chain dynamics in the automotive industry
China is vying to be the largest market, while the U.S. and Russia are leaving no stone unturned to prove their mettle across the globe. Building and integrating new assembly plants in these regions have signified the importance of managing their journey through cross-border transport and customs clearance. Of late, just in time and build-to-order systems have warranted flexible production environment and more responsive supply chains. Zeroing in on the supply chain dynamics, brand building and sustainability have topped the charts among passenger vehicle, commercial vehicle and component manufacturers.
- Passenger vehicle: Unprecedented rise in price-sensitive buyers and burgeoning competition have substantiated the relevance of brand building. While car ownership is rising, public transport is likely to have toll on auto makers.
- Commercial vehicle: In a bid to co-engineer novel vehicle technologies, collaboration with Original Equipment Manufacturers has become paramount. This will help lower costs and reduce risks, as the who’s who of the auto industry have formed alliances to boost supply chains. Sustainability concerns have prompted companies to boost efficiency and lower CO2 emissions.
- Component manufacturers: Rising prominence of technology in vehicles has brought disruption in automotive logistics. Today’s customers sift options via internet that shape production planning. There is no doubt that auto manufacturers warrant suppliers to pump funds in logistics.
Automotive logistics suppliers envisaging “asset-heavy balance sheet†are carving out lucrative facets of the value chain and cashing in on the digital technology to boost last mile delivery. Some of the major disrupting factors are technological breakthroughs, changing customer expectations, new entrants and novel ways to collaborate and compete. Logistics service providers are looking to bolster sustainability and brand building and augment the EBIT margins.
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Third party logistics (3PL) provides Synergy effect
High consumer expectation and a strong economy have created a viable operating environment for third party logistics providers with shippers increasingly engaging outside resources to keep up with the rigorous delivery deadlines and propel customer satisfaction.
Akin to individual customers, industrial customers expect swift shipments with more transparency and more flexibility at a lower price. Shippers have become increasingly aware of what lies beneath the technological capabilities to attain the goals as several 3PLs are already injecting money into shippers’ operations.
What should companies do to respond to faster shipping demands?
Logistics outsourcing or third party logisticsOpens a new window is being bolstered by data-fueled insights. Whether it is venturing into new markets or expanding customer base, 3PL providers strive to offer a one-stop solution for supply chains in transportation, packaging, warehousing, and order fulfillment. 3PL providers are leveraged with:
- Cost saving;
- Risk mitigation;
- Cost reduction;
- Seamless customer experience.
Not having to maintain staff and space is believed to boost cost-saving. Besides, 3PL service leverages companies to maximize returns with minimum investment and helps in portfolio diversification. 3PLs also help to negate the risk of shipping delays and potentially protect the company in the case of loss of goods or event of damage.
Shipments can be bolstered given the fact that 3PLs tend to handle customs, documentation, duties and other issues which stem at the border.
With logistics practices evolving from in-house operation, demand for an independent logistics company has risen considerably. These third party providers provide innovative and modern way to meet ever-growing demand of clients. Likes of 3PL and 4PL are trendy agendas in logistics companies. They are going a step ahead from merely providing efficient supply chain solutions.
For instance, 4PL is boosting corporate clarity by being a single point of contact between their client’s supply chain process and client. 4PL is also boosting last-mile solutions and material sourcing as they have become a supply chain architects.
3PL logistics providers are helping companies to propel business growth by bolstering their presence in untapped markets. To put it in perspective, managing stock in an untapped market without having to invest on equipment or warehouses can save money. When it comes to optimizing supply chain, creating value chain, reducing costs, 3PL can be the right option.
In a bid to meet the supply chain demands, third party logistics service providers are emphasizing on cost efficiency, innovation, and asset productivity. 3PL is becoming more and more successful by the hour as 3PL providers are obtaining data in real-time and are collaborating to attain their supply chain goals. Partnerships are helping 3PL providers and 3PL users to enhance end-to-end user experience and allowing shippers to use supply chain as a competitive advantage.
The next big catch through Connected logistics
Logistics providers are using a slew of efficiencies, including optimal warehouse slotting, load planning and overall network designs. Reaping benefits from internal strengths and external opportunities in an industry where every step in the production and transit process poses challenges, has become critical. In this scenario, it is vital that an advanced communication system replete with sensor devices, IoT and RFID is deployed to boost SCM.
Learn more: How are Analytics, IoT, & AI streamlining SCM Operations?Opens a new window
Industry 4.0 technologies can help boost supply chain management by enabling automated systems to work aptly and streamlining connected logisticsOpens a new window . Advanced technologies such as Internet of things (IoT), augmented reality (AR), low-cost sensors, computer vision, human-robot safety are innately being used to foster automation in SCM. In common parlance, supply chain is digitized by combing the IoT and relevant digital and physical technologies, such as robotics, analytics, additive manufacturing, and AI.
Voice-directed warehousing—a trending technology—uses speech recognition to direct warehouse workers on how to find the product and where to go in the supply chain process. Voice picking may help workers do away with scanning barcode or typing in a computer system, thereby enabling them to work efficiently and swiftly. Voice-centric solutions can help streamline process and reduce operational cost.
Logistics companies such as DHLOpens a new window have deployed AR smart glasses to expedite warehouse operations. The device is said to boost “hands-free†picking in a warehouse as its visual capabilities enable workers to sort and locate the products fast. The company also rolled out allegedly the fastest rail freight service between China and Germany. It will reduce the transit time by travelling through the Mamonova-Braniewo railway border between Poland and Russia.
Connected logistics can help management with strategic, tactical and operational decision making. AI technologies and Internet of things (IoT) have become highly sought-after in logistics providersS as they help in enhancing asset utilization, visibility, reliability and availability of supply chain and predictive maintenance work.
- For example, Union Pacific, one of the largest railroads in the U.S. in terms of revenue, has come up with IoT to monitor the condition and reliability of its equipment. It uses IoT to reduce derailment risks and predict equipment failures. The company has been able to minimize bearing-related derailments by placing visual and acoustic sensors on tracks to keep check on the integrity of train wheels.
- Amazon uses robots claiming they improve productivity within the warehouse. The Amazon Robotics, for instance, can point workers to equipment within the factory, thereby ramping up the picking processes and self-organizing the warehouse.
- Alibaba is improving delivery services by setting up Cainiao, a joint venture with several logistics companies, investment firm to achieve efficiency. The company has invested over 100 bn yuan in its logistics backbone Cainia. The company is looking to deliver products within 24 hours in China and within 72 hours globally.
- A Canadian mining company Dundee Precious Metals (DPM) is using IoT to connect end-to-end mining operation such as mobile devices, programmable logic controllers (PLCs) and mobile devices on lights, fans, conveyor to track miner and equipment movements through the mine.
Last Yard: A Trendy SCM Process
Service providers are now focusing on “last yard†that goes a step ahead and alludes to what happens to a shipment once it is delivered to a customer. The last yard concept determines if customer’s needs are fully satisfied. Companies deliver products directly to retail stores to ensure freshness, accurately fill orders, and take responsibilities for refreshing shelves and stocking.
Automotive logistics, 3PL, and connected logistics will reap benefit from logistics 4.0, or the next-gen of successful supply chain management. Siloed activities, including freight payment, logistics planning may be executed by an individual. Improvement in customer experience and supply chain transparency are likely to be at the forefront. While visual recognition can be better done by humans, advancements in technologies may sway the balance towards logistics 4.0 and enhance supply chain management dynamics in the years to come.
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