18 January 2012
Conducting a fine-tuned lineside logistics operation calls for experience, timing and a large dose of trust, as Laura Cork finds out
Managing inbound logistics for automotive manufacturers is rather similar to conducting a huge orchestra. The input of the smallest instrument at the back of the concert hall is just as crucial to the tune of the overall performance as any of the larger players – and it's the eagle-eyed conductor who must pick up any timing issues before they prove irreversible.
This crucial conductor role often falls to the logistics organisations that manage manufacturing supply chains – automotive in particular, because of its just-in-time, sequenced schedules where every second counts.
Honda's car and engine plants at its 340-acre site in Swindon are fed by a complex supply chain. Last summer, the car maker extended its deal with Ceva Logistics for a further three years, which sees Ceva taking on the role of lead logistics provider for the car maker's European inbound supply chain.
Parts are collected from suppliers at more than 40 locations across Europe and are consolidated at Ceva's site in Antwerp, Belgium, before onward transportation to Honda's plant in Swindon. The parts are delivered, handled and presented in order to meet Honda's build schedule.
As lead logistics provider, Ceva also manages hauliers and transport firms on Honda's behalf, taking care of planning and delivery control. Ceva's IT systems give Honda visibility of the supply chain through event management services, from point of collection to point of delivery. Using the same processes, Ceva's Antwerp operation controls the return of empty packaging, as well as focusing on load consolidation and route planning to reduce carbon emissions and add value.
Dave Taylor, Honda's divisional manager for parts logistics, says the deal gives the car maker additional flexibility, better visibility and cuts costs and emissions. "The decision to renew this contract was led by the strong and positive relationship with our partner and by the awareness of Ceva's great experience, qualified resources and open minded approach," he added.
Automotive logistics is quite a different world to other transport and distribution sectors, given the nature of car production – and, as important, the high cost of downtime. This is a niche where small specialist players – often unknown outside this sector – sit alongside established, global logistics businesses, all vying for a share of this lucrative market.
Take Rudolph and Hellmann Automotive, for example. It's not a name that would trip off the tongue in the wider industrial market, but it's a specialist automotive logistics business that sprang up just over ten years ago and boasts the BWM/Mini Oxford plant among its UK client base.
Contracts often extend gradually to incorporate more tasks, once delivery ability is proven. Rudolph and Hellmann cites an example where it was asked, by an unnamed automotive manufacturer, to extend a lineside delivery solution to incorporate sequenced delivery of vehicle wiring harnesses. The harness supplier had its own employees at the manufacturer's site and had been allocated an area to carry out receiving and sequencing activity. But the manufacturer decided that rationalising handling could reduce costs.
Rudolph and Hellmann worked with the manufacturer's team to design a revised solution and has now taken responsibility for receiving the vehicle harnesses within its on-site logistics operation, storing the harnesses in standardised containers. The containers are then picked in sequence and delivered to the trackside, to a managed process area next to the line. From there, a Rudolph and Hellmann operative feeds the individual harness kits via an automated conveyor in sequence, providing a final visual check. Because the operative can now also manage any re-sequencing activity, next to the line, the overall benefit of the revised process has been a cost saving and a more robust solution.
Experience pays off
Norbert Dentressangle Logistics UK's past experience included sequenced deliveries for Honda. It collected from suppliers and ran a mobile warehousing solution ensuring picked product was fully line sequenced while reducing traffic and congestion around the Honda factory – "a warehouse on wheels" is how NDL's shared user business unit director Clare Davies describes it.
NDL's expertise extends across many other manufacturing sectors. Ardagh Glass is a leading manufacturer of glass containers for the food and beverage sector, making bottles and jars at its four UK manufacturing sites, at Knottingley, Wheatley, Barnsley and Irvine. Ardagh's relationship with NDL UK goes back more than 30 years in various guises. Last renewed for a further five years in 2008, the contract covers movement of goods around and between Ardagh's four production sites and two stockholding locations.
Larry Mantell, Ardagh's supply chain director, said: "We have established an excellent working relationship with Norbert Dentressangle. They have an in-depth understanding of our business and I have always found them to be extremely innovative in terms of the logistical solutions that they have developed for us."
Those solutions include around 30,000 inter-site movements a year and 44,000 deliveries – all full-load traffic – of finished goods from end of production to Ardagh's customers. "It's an end to end solution, where we offer lineside transport solutions as well as 4PL management of transport for despatch," explains Clare Davies.
Davies says the contract's longevity is testament to NDL's unstinting focus on improvement and innovation: "We've made a lot of changes in terms of quality control and load presentation, which are critical given the fragility of the product, and damages have reduced significantly."
As important, she says, is NDL's ability to absorb volume fluctuations which would prove nigh on impossible for an in-house logistics team to manage as cost effectively.
"Seasonal demand is a major challenge: by operating a 4PL transport solution, we're able to retain a small dedicated fleet and use preferred suppliers and sub-contractors to flex that volume," says Davies. "Many of the deliveries have a window of less than four hours from end of production to arrival at Ardagh's clients' factories so we are talking short lead times with extremely high levels of OTIF deliveries – at 99.75% it's a higher rate than many offer in our industry."
Economies of scale mean that NDL has been able to refine the solution for Ardagh with KPIs, reduce costs, react to volatility and provide a full lineside clearance service. As Davies points out, whether inbound or outbound, all lineside logistics solutions demand exceptional performance to prevent downtime.
Benefits wrapped up
A fine example of a true end-to-end lineside delivery solution outside of automotive is that delivered by DHL Supply Chain to its client Ball Packaging Europe and, in turn, to one of Ball Packaging's client, the Coors brewery in Burton on Trent.
When Dan Hughes left school 18 years ago he began working for British Road Services at Ball Packaging's Rugby factory, checking the cardboard packaging around the cans. British Road Services became Exel and Exel became DHL – and Dan Hughes went on to become general manager of DHL Supply Chain's engineering and manufacturing division. Though no longer directly responsible for the Ball Packaging contract, Hughes' time there means he knows the operation inside out and is well placed to describe the intricacies of this longstanding relationship that relies as much on trust as it does on efficiency and KPI adherence.
DHL used to manage logistics at Ball Packaging's Rugby and Wrexham factories, though the manufacturer took the Rugby operation back in-house two years ago, more of which later. But at Wrexham, DHL still plays a pivotal role, taking packaging back from customers, inspecting it and feeding it back into the line. The packaging for the cans has to meet food hygiene standards and DHL takes responsibility for checking for any debris or contamination, ensuring its suitability to re-enter the food chain.
Huge 10-tonne rolls of aluminium coil are offloaded by DHL from flatbed trainers and put into bays ready to move to the can-making lines. But it's arguably at the other end of Ball Packaging's lines that DHL's expertise really comes into play, when it feeds Ball's cans to its clients on a just-in-time basis.
Four years ago, in return for a five-year contract renewal, DHL built an 84,000 sq ft facility in Burton, next to Ball's client Coors Brewery. "All product for Coors is sent to that warehouse, where we put the product on to special wheeled trailers which work like a conveyor system," says Hughes. What's unusual here is that the product is not touched by Coors at all – Ball Packaging makes the cans, which are moved by DHL to its purpose-built warehouse and fed direct to the Coors lines by DHL, to meet a call-off production schedule issued by the brewery.
The warehouse takes in product around-the-clock and has the capability to feed Coors' lines 24/7 when demand requires – at its peak, the lines consume as many as 1,000 pallets a day containing, on average, 6,500 cans per pallet.
Even at other Ball Packaging customer sites, where DHL doesn't unload direct to lines, it has to meet delivery schedules with 15-minute tolerances.
The differentiator here is DHL's ability to take away the logistical headache from Ball Packaging while ensuring Ball's relationship with its own client is not compromised. Apart from logging purchase orders for commercial reasons, Ball Packaging has very little need to be involved in supply chain management, says Hughes: "The local day-to-day communication with Coors of what's needed and when is run by DHL, with little involvement from Ball Packaging. We manage the changes if schedules alter within the brewery, if beer production is running late or ahead of schedule. In most other supply chains of this type, Coors would ring Ball and ask them to ask us. But all that is done locally and directly by us." It calls for a huge amount of trust that has built up between the three parties over the two decades of the contract.
It's not that the manufacturer couldn't do this directly, of course; more that it would demand time and money that is better deployed in manufacturing. "If Ball Packaging did this, it would require investment on their part and would be a fixed asset," says Hughes. "But for DHL, if the warehousing is not needed for any periods, our global capability means we can fill that with other customers' products. We only ask Ball to commit to what they need and we take the responsibility of utilising the assets away from them, in a way that only we and other similar sized logistics providers could."
Despite the relationship longevity, deals like this are still won very much on price. But capability, too, is crucial: "Being able to respond to Ball's requirements at short notice is absolutely key. We have other sites nearby that we can pull people in from – they would struggle to do that in-house."
It's worth pointing out, too, that if Ball or Coors or other manufacturers like them chose to employ people directly to do this, they could have to pay higher wages: "Their pay structures typically tend to be more generous in terms of benefits," says Hughes. "They are often operating in a unionised environment and if they take an operation back in-house, the result can be that the people receive better T&Cs." Indeed, this is what happened at Ball Packaging's Rugby site: the manufacturer took the operation back in-house, and with it the people via TUPE, and took a hit when the warehousemen formerly employed by DHL moved on to Ball's low engineer pay scales.
Hughes and NDL's Davies agree that trust is the most critical aspect of any lineside delivery contract. "It's a big leap of faith to trust someone to feed a production line – but we're more than capable of doing this and have a proven track record," Hughes states. "For a lot of manufacturers outsourcing for the first time, they see it as a step too far to let us that far into the process or factory. Yet there's absolutely no reason why we couldn't do this for more businesses outside of the automotive sector."
Ball Packaging and Coors is one of only a few examples, outside automotive, where true lineside deliveries are managed by the logistics partner. "Once the MD of a manufacturing business realises his core competence lies in manufacturing, all the ancillary activities around the plant are then up for grabs – we can generally find more efficiencies, better communications and control, improved visibility and more, but the first step is for the manufacturer to trust us enough to allow us to prove that," Hughes concludes.
Sounds like a challenge, doesn't it?
CEVA Logistics Ltd
DHL Supply Chain
DHL Supply Chain
Norbert Dentressangle Logistics
Rudolph and Hellmann Automotive Ltd
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