The recovery in sales for BMW – which has seen volume in the first nine months of the year surpass pre-recession peak levels – has made a lack of truck capacity for vehicle logistics across its major markets in Europe, North America and China more obvious, according to Mathias Wellbrock, head of worldwide distribution for the German carmaker. But in Europe, and particularly Germany, where sales are more tempered, BMW has faced a unique problem, where a rise in subcontracted trucks may be having a negative impact on service levels.
In an interview last month with Finished Vehicle Logistics, and published this week in the October-December issue (read here ), Wellbrock spoke at length about outbound capacity. He was optimistic about the ability of the US vehicle logistics industry to rebuild its fleet in the next six months to match the current demand, and he also gave high praise to Chinese logistics providers that are performing as well as can be expected given the market’s high growth and infrastructure limits. But he was slightly more concerned about BMW’s European vehicle logistics supply chain.
“There are situations where we are waiting for trucks to pick up the cars from our plant and in some cases we see poorer quality,” Wellbrock said. “We believe that the main reason is that some providers are working with subcontractors and we don’t want to see much more of that in future.”
The rise in outsourced trucking among providers is somewhat surprising, given that last year many European providers reduced their sub-contracted fleets substantially to avoid cutting too deep into their own fleets during the downturn. However, with domestic sales sluggish in Europe (and falling sharply over the summer), few providers are willing to make large investments to renew fleets. Such a lack of investment may be more evident for a carmaker such as BMW, whose sales are outpacing the market and whose production has risen with dramatic export increases (driven by sales growth in China and the US, in particular). Some providers are struggling to respond to this demand, and so rely on subcontracted trucks.
Wellbrock said that he appreciated the uncertainty that providers face and wants to tackle the issue together with them. “There is no drama, but it is something that we need to work on with [LSPs],” he said.
BMW is responding to the situation with changes of its own to the European network, including a recent tender for a new IT distribution system, as well as loosening certain restrictions for distribution – for example, a vehicle compound in Spain can now hold vehicle inventory for delivery across the border in France, and vice versa, where as the past such compounds were only structured for national markets.
In the US, Wellbrock was confident that investment would soon begin to trickle down the supply chain and alleviate the stress on a limited number of car haulier assets. In China, somewhat surprisingly perhaps, he praised Chinese providers for their transparency and openness with BMW. “We are very happy with our [Chinese] service providers. They have been capable, fingers crossed, of getting our volume into the market so far,” he said. “We have had very open discussions together, and have proved very reliable.”
The topic of subcontracted fleets and outbound capacity levels will on the agenda next week in Berlin, for the 2010 ECG Conference (read more here)