Automotive Supply Chain Issues

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Natural disasters energise deeper supply chain analysis

Natural disasters have caused significant disruption to supply chains throughout 2011. Much of the attention has rightly been focused on Japan, but other areas have also been affected. Earlier this year in the United States, 10 airports had to shut completely as a result of the devastation caused by hurricane Irene, and more recently we have seen automotive supply chain disruption caused by the severe floods in Thailand. "This has been a year in which the importance of deeper and more rigorous analysis has been brought sharply into focus," explains Evolution Time Critical managing director Brad Brennan. "The situation we predicted a year ago and described as a 'second level failure' has proved to be more apposite than we could ever have imagined. The option of booking a courier, or sending a fast van, just may not exist."

"This has been a year in which the importance of deeper and more rigorous analysis has been brought sharply into focus," explains Evolution Time Critical managing director Brad Brennan. "The situation we predicted a year ago and described as a 'second level failure' has proved to be more apposite than we could ever have imagined. The option of booking a courier, or sending a fast van, just may not exist."

Now with further earthquakes possible in Asia and in North America, the most rigorous vehicle manufacturers and first tier suppliers are undertaking additional reviews of their supply chains. "A lot has been learnt from the earthquake and tsunami in Japan, with new areas of supply chain vulnerability exposed," says Brennan. "Having gathered experiences across a wide range of companies this summer, we have built substantially on our knowledge of potential failures and the most robust ways to plan for uninterrupted deliveries," he concludes. "My advice is to not rely on your existing contingency planning: we now know so much more about what could go wrong and how to solve it. Revisit your plan and analyse it using the experiences of 2011 to make sure the goods get through."

Civil war in Libya

North Africa is increasingly popular for Tier suppliers; it is fast becoming the new low cost region of choice, following in the footsteps of China and Mexico. The region is not as vulnerable to natural disasters as parts of Asia and North America, but it does bring its own unique challenges.

Following the recent end to the civil war, the first steps towards the return to normality have begun. Shipments are still coming in and out of Benghazi, with cargo also being dispatched via other Mediterranean ports.

"Our biggest concern is for operations in neighbouring countries Algeria and Tunisia, where an increasing range of automotive suppliers have facilities," explains Evolution Time Critical operations director Andrew Hampson. "Morocco, a very successful manufacturing location, is sufficiently removed not to be affected by the Libyan conflict at this time, but it still needs a different approach to other developing countries."

Hampson says that the key to supply chain robustness in new low-cost regions is a detailed understanding of the local transport infrastructure and the alternative transport options. "It's easy to assume that the same contingency options will be available that we have in more established low-cost manufacturing regions, but that isn't necessarily true. Even contacting a transport supplier can be difficult. Having the right contacts, the right numbers and addresses, can make the difference before delivering tomorrow and delivering after the weekend."

India plans $8billion ports investment

India is investing heavily in its infrastructure; it is reported that by March 2017 around $7.6 billion will have been pumped into seven new ports as part of a drive to triple the country's exports to $750 billion per annum. Growth in India has been constrained by the nation's infrastructure especially the existing ports, which have been developed less quickly than the road network and which are now struggling to cope with dramatically increasing volumes.

The timescales for these much needed improvements are heavily dependent on investments from the private sector, which includes large shipping companies who are expected to pay at least a third of the $7.6 billion.

US government invests to build air cargo facility in Texas

Brownsville airport in Texas will receive a $1 million grant to create a purpose built air cargo facility, a sum that will be matched by private investment. It is hoped that the geographical positioning of Brownsville will mean it becomes a key pivot for air cargo between the US, South America and Europe. In order to ease transit through the airport, it is anticipated that there will be a dual customs operation with officers from both the US and Mexico present.

The development is still in the early stages and it will be interesting to see which airlines establish flights in and out of the airport. It is possible that the new facility could compete with Mexico City as a gateway to Mexico, and seems well placed to service Northeastern Mexico which is a key area for automotive component manufacture.

"Mexico is currently the low-cost area of choice for many Tier 1 suppliers servicing North American vehicle manufacturing," says Evolution Time Critical director Chris Read. "However due to its relatively immature infrastructure it still carries risks. To have a US cargo facility just over the border helps to reduce that risk greatly. The creation of a dual customs operation will also help to ease the process. I can see this as a very sensible investment which will boost not only the US, but Mexico as well."

Evolution Time Critical expands its European operations

Evolution Time Critical is expanding its support for European vehicle manufacturers as they grow their global footprints. Steve Risby has been appointed in a newly-created position of director - Deutschland, where he will be responsible specifically for supporting auto makers and suppliers in Germany. He will be based at the company's control centre in Dusseldorf and will work alongside three other new positions, each bringing specialist expertise in global supply chain robustness and problem resolution.

With Germany being one of the largest manufacturing countries in the world, along with multiple German speaking neighboring countries, developing the German operation is essential for expanding Evolution Critical's Global presence. "We have been operating in Germany for a number of years," says Risby, "however we will now have, for the first time, a board member responsible for operations there. Germany is a key area in the automotive market and we understand the nuances of working within that culture. We are undertaking a significant expansion and it renews our commitment to expanding our global capability."

Evolution in the news

Evolution Time Critical was invited to submit an Expert Opinion piece to leading global publication Automotive World this week. With numerous accounts of unavoidable manufacturing disruptions being reported across the globe in the past month, managing director Brad Brennan urged OEMs and Tier Ones to ensure they have robust contingency plans in place. A high level of supply chain analysis is essential to keep production moving during any disruptions and cope with the recovering manufacturing volumes once the issues have been resolved.

The full article can be read here

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