Guiding Companies Through Troubled Logistics WatersSat, 09/01/2018 - 11:23
Choosing the right logistics partner can make all the difference between success and failure among automotive companies. As the needs of these companies become increasingly complex and more enter the transportation market, guidance when choosing the best option can save manufacturers headaches, says Carlos Canseco, Director General of Profesionales en Logística y Transporte (PELT).
“Logistics is all about managing the purchasing, transportation, storage, manufacturing and distribution of products,” says Canseco. PELT’s role in this process consists of assessing the needs of its clients, putting together service packages and inviting logistics suppliers to bid and offer these services. “All OEMs present in Mexico have participated in at least one of PELT’s customer care, consultative selling, demand planning or sales administration courses.” As examples of its successes, Canseco says the company has helped manufacturer MAF Muelles to lead Mexico’s automotive springs sector and logistics supplier Grupo Ditrans to better care for the Bajio automotive industry.
Although untrained eyes might see logistics as mostly moving products from point A to point B, Canseco says the automotive industry’s needs have led to modern logistics schemes that forecast demand to manufacture and market products accordingly, taking legal, political, sustainability and other factors into account. “Logistics chains must have a robust IT and human resources backbone that considers safety, sustainability, legal, political and quality matters in their processes,” he says.
Prior to 2007, most logistics processes were managed through a supply chain scheme where assembly plants took most decisions according to Canseco. “This model had the problem of plant managers deciding on production regardless of whether there was a demand for products, which caused high inventories of unsold wares.” Once demand planners came into the picture and new efficiency measurement parameters were adopted in 2007, a new form of logistics oriented to the value chain was created. “Demand planners have become logistics wizards; they read what the market demands and channel the value chain accordingly,” he says. “An appropriate value chain approach that considers customer service, optimal inventory levels, accuracy of market forecasts and appropriate logistics costs enables us to plan our operations in terms of volumes, frequency and resources.”
Automotive companies can use both the supply chain and the value chain approach in logistics but that depends on the vehicle being produced and its total demand. “In the case of Volkswagen, Jetta can benefit from the supply chain scheme while Golf R might find the greatest advantages in a value chain solution,” says Canseco. Jetta is a well-received vehicle with larger sales volumes, making its logistics processes more suitable for a supply chain model. On the other hand, a vehicle that is more expensive, and rare, such as Golf R, is more suitable for a value chain model because it is harder to sell and sometimes is only produced on demand.
Regardless of the model, Canseco says choosing a logistics supplier can be a thorny topic because of the many mitigating factors. “It makes more sense to hire local logistics operators to manage local supplier bases because they know their home market the best,” says Canseco. “Global operators such as DHL, Panalpina or DB Schenker, meanwhile, are the best option for international logistics because they have global presence and offer global processes and market prices.”
Despite the challenges that logistics suppliers must face as part of the automotive supply chain, Canseco says the industry is an attractive sector as long as logistics suppliers deliver on their promises. “Automotive is a noble, yet demanding industry,” he says. “Companies pay competitive prices for transportation services, provided that operators meet their needs. If this is not the case, OEMs may charge fines should production be halted. Canseco identifies international purchases as the most promising area of opportunity for Mexican automotive companies to improve their logistics. “Previously, companies would place an order from a supplier online and hope it would arrive at some point,” he says. “Visits to suppliers in Asia or elsewhere to negotiate prices, monitor their logistics and ensure they have enough production capacity is the new strategy.”