Time Critical Update March 2016

Time Critical Update

AirfreightAutomotiveContingency LogisticsContingency PlanningSupply Chain DisruptionSupply Chain Visibility

Further investment broadens Mexico capability ahead of further boom

Mexico is benefitting from a continued investment from companies operating throughout the automotive supply chain, from vehicle manufacturers and Tier 1 suppliers to tooling providers. The range of companies committing to Mexico’s future is ensuring that the country is able to offer a more robust automotive supply chain package.

“A major vehicle manufacturer has recently announced a significant investment that will double its Mexican production capacity by 2018; this is representative of the sustained growth that has been experienced by the country and suggests that Mexico will continue to develop as a powerful production location,” says Evolution Time Critical managing director, Brad Brennan. “Continued expansion provides an opportunity for the entire automotive supply chain – Tier 2 and 3 suppliers, such as injection moulders and toolmakers, are confident enough to open Mexican locations and help formulate a complete, robust supply chain based in the country.”

To demonstrate the country’s reliance on imports, components worth $38 billion dollars were imported in to Mexico to support automotive production worth $79 billion in sales during 2014. Added pressure will be placed on the supply chain to support increased production in Mexico, both in terms of physical capacity and the potential cost of failure – emergency logistics expertise can help protect against initial supply concerns, and help to safeguard long-term production.

Top supply chain threats revealed

2015 was a particularly turbulent year for the supply chain, according to figures from monitoring specialist Resilinc. The most common supply chain threat reported across the manufacturing industry has been posed by factory fires and explosions, where the automotive industry has been hit the hardest. Mergers and acquisitions were the second most frequently reported supply chain event in 2015, moving ahead of labour strikes and associated disruptions. It has been estimated, for example, that the Tianjin explosions in China resulted in a revenue drop of more than $9 billion.

“The last 12 months has seen a record number of mergers and acquisitions of suppliers operating within the automotive industry – while this ultimately presentsan opportunity for manufacturers to streamline supply chain operations and improve visibility, the short-term impact is of uncertainty due to changes in terms and conditions of business and trading, which can impact component purchasing,” says Evolution Time Critical head of business development, Graham Little. “The risk of conflicting stock control policies and lead times, which has a similar effect to working with a new supplier for the first time, is another potential concern.”

The prospective impact of supply chain threats can be lessened by proactive contingency planning. “While you cannot always prevent something from going wrong, you can at least take steps to ensure the fallout is minimised,” continues Little, “through working closely with a dedicated emergency logistics partner that can provide a true round-the-clock safetynet.”

Further North African investment keeps supply chain on its toes

The increased uptake of proactive contingency planning is helping to protect the automotive supply chain against the potentially turbulent nature of supply from North Africa. To safeguard production, larger buffer stocks were introduced to protect schedules. Continued investment into the region has been made by major vehicle manufacturers who, in the short to medium term, will increase reliance on contingency provided by emergency logistics expertise.

“In potentially fractious environments the primary focus for OEMs is to maintain supply chain integrity, despite the fact that the requirement for larger buffer stocks contradicts the industry trend for streamlining supply chain operations in an attempt to optimise production,” says Evolution Time Critical operations director, Andrew Hampson. “Continued investment in the North African automotive industry should lead to a more dependable future and a robust infrastructure – in the last 18 months in particular vehicle manufacturers have been intensifying focus on ensuring supply chain security, which is required to operate higher risk production strategies.”

The availability of emergency logistics expertise is crucial while the region’s infrastructure develops to support its status as an emerging production hub.

Growing complexities for electric vehicle supply chain

Airborne lithium-ion cargo shipments have been prohibited by The International Civil Aviation Organisation (ICAO) Governing Council, with effect from April 1st. The extraction of lithium from certain locations could also be under threat from incoming regulations, which adds a further complication for manufacturers of lithium-Ion batteries as used in the latest generation of electric vehicles, and the OEMs they supply.

“The materials used in the automotive industry continue to evolve – the more frequently they are used, the more we learn, and regulations regarding the handling and shipment of such materials are still adapting,” says Evolution Time Critical Germany director, Steve Risby. “We are still in the relatively early stages of the automotive industry using lithium-ion as a primary source of motive power storage. Alternative freight solutions must be investigated and implemented swiftly, to minimise any potential knock-on supply chain effects such as elongated lead times caused by increased shipping times.

“A new lithium battery packaging performance standard is being created through the ICAO, and the temporary embargo on transporting lithium-ion cargo – not as used in mobile devices – on aircraft will remain in place until an announcement is made, which is anticipated by 2018,” continues Risby. “In the meantime, Evolution Time Critical will be aware of the latest regulations and able to advise our impacted customers.”

Automotive logistics: going underground

Overground, on the ground, underground; the future of automotive logistics could be in the dirt. That is, if an ambitious new plan in Switzerland comes to fruition. Cargo sous terrain is a proposal for a “nationwide, underground, autonomous transport network” that could consist of “a three-lane network hosting electric, drone delivery capsules”, with projected costs of $3.6 billion and an online target of 2028.

“It’s an intriguing concept that could help overcome future driver shortages, ease congestion and counter increasingly common – and stringent – low emissions zone requirements,” says Evolution Time Critical managing director, Brad Brennan. “Every logistics manager has a freight route that they wish could just be buried, but we did not think it could ever become a reality!”

A project of this scale is unprecedented. Initial plans centre on a preliminary 70km stretch of tunnels between the busy manufacturing region of Härkingen-Niederbipp and the Swizz city of Zurich. The proposal states that rail-mounted vehicles will be able to travel at up to 30kph and carry two standard European-specification pallets.

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