Time Critical Update October 2014


Automotive Supply Chain Issues

Welcome to Time Critical Update by Evolution Time Critical – the emergency delivery specialists. Providing you with the information you need to help you keep your supply chain running.

Volcanic ash creates increasing uncertainty for vehicle manufacturers

Volcanic eruptions in Iceland continue to increase in magnitude and threaten a repeat of the 2010 ash cloud that resulted in grounded flights, delays and production uncertainty. In response, a number of major OEMs are looking at contingency planning to effectively safeguard operations should global flight schedules once again be devastated.

“Vehicle manufacturers are understandably keen to avoid a repeat of 2010, and the timing of the uncertainty caused by the Bardarbunga eruptions couldn’t be much worse in terms of drawing on existing supply and logistics capability,” says Evolution Time Critical operations director, Andrew Hampson. “The autumn is traditionally a busy time for automotive logistics – lean supply strategy and the requirement of a diversifying range of components to meet broadening model ranges means that 2014 buffer stocks have been smaller and less malleable that previous years. Due to the possible threat of flight disruption it is therefore crucial to work harder than ever to ensure contingencies are in place wherever possible.”

Evolution Time Critical is speaking with a number of customers that are proactively looking at contingency planning in the face of ash cloud uncertainty, who are increasingly aware of the cost of supply chain failure and the widespread ramifications of delays within globalised production. “The worst case scenario of utilising proactive contingency is that there is no direct impact from the eruptions, but OEMs are protected against future supply chain pressures, whereas the cost of failure through a lack of preparation could run into millions,” warns Hampson.

Evolution Time Critical shortlisted for prestigious supply chain excellence award

The time-sensitive emergency logistics work of Evolution Time Critical has been recognised by the prestigious European Supply Chain Excellence awards with shortlisting in the new Austere Environments & Contingency Logistics category. Fellow shortlisted companies are MOD operations advisors PJHQ, Royal Logistics Corps and World Food Programme.

“It is a great honour to be recognised by these awards, and humbling as the only automotive-operating company alongside such worthy organisations working in genuinely life-endangering environments,” says Evolution Time Critical managing director, Brad Brennan. “It is testament to the regard in which the automotive supply chain is now held, and recognition of the crucial work that Evolution Time Critical does to ensure robust practices are in place and vehicle manufacturers are protected against costly delays and reputational damage.

“Not only that, but effectively utilised emergency logistics are increasing in prominence as an enabler for the automotive industry as it seeks to optimise operations through higher risk strategies. In a competitive marketplace where supply chain collapse and failure to deliver cannot be an option, we are providing OEMs with a crucial competitive advantage,” continues Brennan.

Free trade agreements help place Mexico at centre of American car production

As investment and productivity continue to grow, Mexico expands as a base for automotive production, to position itself as central to car production as finances improve. Currently 80 per cent of the vehicles produced in Mexico are exported for manufacturers who have identified the country as providing the capability to become a production hub, with two-thirds of exports going directly into the US.

“Both as a near-shore option for the US and as a base for manufacturers operating globally, Mexico has a lot in its favour: its free trade agreements with 44 countries is unique, and allows the country to fully utilise its production capability,” says Evolution Time Critical Germany director, Steve Risby. “Purpose-built logistics centres, affordable yet dependable labour and supportive infrastructure allow Mexico the opportunity to provide a broad capability that can meet demand for an ever diversifying automotive industry. A dollar-based economy also provides security for European OEMs against fluctuating exchange rates, and a cheaper alternative for Japanese manufacturers.”

Further premium vehicle manufacturers have announced plans to step up Mexican investment to develop production capacity, which looks set to make the country central for not only the US car industry, but vehicle manufacturers globally.

New EU transport infrastructure policy to benefit supply chain connectivity

Europe’s growing automotive industry has been bolstered by news that new EU transport infrastructure policy has identified the need to invest in the transport network to increase connectivity in the EU. A total of 26 billion Euros has been allocated to develop transport networks by the European Commission in 2014-20 with the aim of reducing bottlenecks, upgrading infrastructure and streamlining cross-border transport operations for businesses in the EU.

“There has been a disparity in quality of Europe’s transport networks that has made cross-border connectivity more difficult than it should be,” says Evolution Time Critical operations director, Andrew Hampson. “Romania, for example, despite growing substantially and showing real promise as a production location for vehicle manufacturers, suffers from poor road networks and notoriously slow border control into Hungary. This will limit the country’s growth potential, so the announcement of further infrastructure investment is great news for countries such as these, and the entire EU network. It provides vehicle manufacturers with confidence that the infrastructure can support the capability for a robust and dependable inter-European supply chain, encouraging further long term investment from major OEMs seeking optimal production locations.”

The policy, which aims to provide safer, less congested travel, and smoother, quicker journeys, has identified nine major transport corridors throughout the EU. It will strengthen airports and rail links, ports and road links, build 15,000km of high speed rail and work to develop 35 cross-border projects to reduce bottlenecks.

Supply chain complexity increasing automotive production risks

Delegates at a recent global supply chain conference in Detroit warn that the increasing complexity of supply chains operating within globalised production strategies is escalating the risk of failure. As global vehicle assembly continues to grow year-on-year (3.8% in 2014), greater focus on logistics planning is vital to safeguard operations, the delegates advise.

“In the last 18 months we have seen vehicle manufacturers embrace the importance of supply chain efficiency, and grow in awareness of the cost of failure,” says Evolution Time Critical managing director, Brad Brennan. “As manufacturers adopt higher risk strategies in a bid to optimise processes, increasing pressure is placed on supply chain logistics and emergency logistics are vital in safeguarding operations and ensuring robust practices are maintained. While OEMs are adapting to display a greater understanding of the importance of supply chain visibility, it is crucial for this to continue developing as it is factored into planning supply chain activity at all levels. An efficient supply chain can flow fluidly, but it requires knowledge, visibility and support in the form of effective contingency planning.”

Recent trends in automotive production are also driving the complexity of some supply chain activity. Fluctuating supply requirements or diversifying model variance, for example, can place added pressure on supply chain links where OEM fixed forecasts become inconsistent and are at odds to Tier 1 or 2 schedules, which often work to longer lead times and lead to a struggle to meet demand. “Such trends, when combined with appreciation of the need to safeguard supply chain links to help mitigate the growing cost of failure, is leading to an increasing demand for premium logistics from vehicle manufacturers and suppliers globally,” says Brennan.

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