Time Critical Update September 2015


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.

Calais fallout provides supply chain with long term benefits

The automotive industry has faced uncertainty in the face of protracted Calais disturbances, the lengthy nature of which provided a range of threats to the supply chains of companies moving components between Europe and the UK. It has presented a challenging array of supply chain pressures, which drives the need to develop emergency logistics solutions that will help safeguard the automotive supply chain from turbulent factors in future.  

“Various issues emerged over the course of the unrest due to the nature of the delays and uncertainty over how long suppliers may be affected: from a huge number of initial enquiries by vehicle manufacturers speculatively looking to plug early gaps in their supply chain, to the requirement for complex operations as struggles became more intensive, delays lengthened and supply routes clogged,” says Evolution Time Critical managing director, Brad Brennan.

The backlog of shipments caused by Channel crossing delays resulted in the need for a proactive resolution, which led to Evolution Time Critical analysing an OEM customers’ supplier networks and devising ways of ensuring time-sensitive delivery of components.

“The supply chain pressures caused by the Calais disturbances were a classic example of the advantages to be gained by having proactive contingency plans in place. The most testing situations challenge traditional resolutions and sometimes force the need to think outside the box to devise the most innovative solutions,” says Brennan. “It is true that whatever does not break the supply chain simply makes it stronger.”

Changes to Dangerous Goods guidelines serve as warning to suppliers

Following the chemical explosion in China that tragically took over 100 lives, new guidelines have been announced by the British International Freight Association (BIFA) regarding the storage and transportation of cargo in the country. A tightening of regulations relates to the accurate and clear labelling of dangerous goods, and failure to comply with the new requirements could have severe consequences for the automotive supply chain.

“It is of vital importance that OEM logistics suppliers are fully up to date with regards recent changes to legislation in China; we have already heard of instances where cargo has been seized due to not conforming to regulations that were introduced in August,” warns Evolution Time Critical operations director, Andrew Hampson. “Regulations have already been in place, of course, but following the disaster the existing rules are being enforced to prevent a repeat, by refreshing customs’ focus on regulating cargo that goes in to or out of the country.”

Import and export cargo must be labelled in Chinese and English, include all content and shipment details, an emergency contact and ‘warning signs’ such as GHS pictograms. “There are often teething problems when implementing new regulations and China is, understandably, taking no risks with regards the handling of Dangerous Goods,” says Hampson. “It is therefore crucial that logistics suppliers liaise carefully with suppliers and vehicle manufacturers to ensure that all parties are aware of the new standards to avoid unnecessary delays.”

European growth good news for auto industry globally

The European new car market is enjoying sustained growth, with many markets reporting significant year-on-year growth in 2015 to date. Domestic success is representative of the European automotive industry’s strength, in which ongoing investment persists: two major vehicle manufacturers recently announced nine-figure investments into existing production locations, which provides a huge boost to the Continent’s supply chain as it continues to export globally.

“Europe’s success is a welcome boost for the industry globally, and works to balance the wider impact where regions are currently experiencing more turbulent times: South America, for instance, is currently hit by falling demand in Brazil and Argentina. Some locations there are temporarily suspending production, which could have its own knock-on ramifications for the supply chain,” says Evolution Time Critical head of business development, Graham Little.

European vehicle production forecasts are for just over 13m units in 2015, with a 6.8% year-on-year growth during the first part of 2015. This figure us up from 12.6m in 2014, and although short of the European record of just under 16m in 2007, is a further indication that the industry goes from strength to strength following the economic crisis and benefits from a stabilised supply chain.

Strength of US and China recoveries crucial for global automotive industry

China’s economy is of vital importance to the global automotive industry, and its recent downturn has been well publicised. However, its strength in automotive suggests that no long-term negative impact will be felt and that further prosperous times lie ahead. A recent trend has seen Chinese companies buy Tier suppliers with existing OEM agreements to expand their automotive supply chain footprint, while one major vehicle manufacturer continues to sell more vehicles in China than it does in the US. A further boost to the global industry comes from the US’s continued rejuvenation, with strong domestic sales being reported.

“Automotive is a high-growth industry in China and is still relatively new, but as companies become more experienced we are witnessing an evolution of supply chains to become more mature and incorporate streamlined strategies,” says Evolution Time Critical Germany director, Steve Risby. “Leaner supply chain strategies, for instance, were developed over time by established vehicle manufacturers and OEMs, and can help the Chinese market gather pace as they are introduced. Working towards supply chain optimisation will help continued growth and secure the country’s future economy and that of the companies operating within China. If China-owned and based Tier suppliers become more common then we can expect to see a further stabilisation of the supply chain.”

Reports suggest that China’s automotive industry will remain stable, or that growth will be sustained but at a less phenomenal rate. A gradual resurgence is expected to be displayed over the next 12-18 months, before a further boom is experienced in 2017. “The continued emergence of China as a global industry power and the recovery of the US is excellent news for the automotive industry and for the complex supply chain that feeds it,” concludes Risby.

New product recall insurance must not lead to supply chain complacency

It has been claimed this month that enhanced product recall insurance will protect vehicle manufacturers from the costs of increasing supply chain risk caused by recalls. While financial recompense may soften the blow for OEMs it cannot, however, protect from the reputational damage caused by late delivery of completed vehicles – the most effective way of protecting against failure is by concentrating on ensuring that robust supply chain practices and suitable contingencies are in place.

“In the last 18-24 months vehicle manufacturers have made great strides towards optimising their supply chains. This can be attributed to a clearer understanding of the value of supply chain visibility, and a greater appreciation of the vital role this can play in streamlining production strategies; it is of vital importance that these advancements are not compromised,” says Evolution Time Critical managing director, Brad Brennan. “The financial benefits of insuring are clear, but this feeling of safety does not protect against reputational damage or stop supply chain operations going wrong in the first place. Insurance provides a crashmat for when you fall, but robust supply chain contingency can catch you before it’s required. It is crucial that the automotive industry maintains its focus on its supply chain operations and safeguarding against potential problems.”

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