As OEMs push manufacturing toward a 24-hour business in response to demand, lead times for tier suppliers are being tested and logistics providers must look at adapting delivery schedules at all points in the supply chain, says Brad Brennan
As an increasingly buoyant automotive industry drives the need for intensifying production schedules, a greater stress is placed on the supply chain and offers a genuine test of manufacturers’ and suppliers’ existing contingency plans. The heightened pressure that is placed on tier one and two suppliers can have potentially hazardous knock-on effects for the supply chain if suitable preventative measures are not taken. Direct and indirect consequences can be felt both in the short and long term depending upon the strength and swiftness of action taken to mitigate such effects.
For instance, a number of major vehicle manufacturers have recently either switched to 24-hour production schedules or announced plans to do so. The immediate implication of such actions is that there is suddenly no downtime in which to carry out line maintenance, restock reserves or fill a void left by component failures: a higher scrappage rate is the inevitable consequence of continuous production. Premium freight is able to provide a last-minute delivery solution for replacement vehicle components or even tooling maintenance, as a short-term solution that enables deadlines to be met, or even as a temporary measure built in at the inception of the new schedules to head off the risk of stoppages. The longer-term solution requires adaption of delivery schedules at all points of the supply chain to meet evolving demand.
The leeway within which logistics professionals can build in contingency is becoming much tighter as production runs increase, deliveries are required more frequently and when unexpected events occur to jeopardise continued service. The margin for error becomes tighter and the cost of failure to meet demand increases, which means overall supply chain efficiency is crucial: unpredictable variables such as freak weather or sudden strike action can place added pressure on suppliers already nearing peak capacity due to increased manufacturer demand.
This problem is intensified by a sudden change of shift pattern. For example, a two-shift pattern leaves a nine-hour window, whereas a three-shift system leaves a far smaller gap within which to operate. The problem for suppliers is clear, but the impact of such a shift in demand can be increased by vehicle manufacturers’ flexibility: a change in material type for interior trim specified for a special edition model, for instance, can have an adverse knock-on effect by impacting existing stocks and generating a pull on tier one and two companies to replenish supplies in order to meet fluctuating demand. The potential scattergun combination of intensified production and difficult to forecast demand can lead to vehicles being made out of sequence, as flexible assembly is required to ensure that lines remain in operation when the supply chain is stretched.
This increasing demand from vehicle manufacturers tests tier one and two supplier lead times and physical capacity limitations, which places an added strain on the supply chain and helps highlight any potentially fractious links. Suppliers often buy on a long-term basis using forecasts from as far back as 2010, which often lack the failsafe contingency required to meet a sharp increase of supply volume and shipment frequency – a mid-to-long term rescheduling of deliveries is required to avoid a prolonged period of short supply.
During such times, when ongoing supply becomes more fraught, emergency logistics is required to not only facilitate last-minute deliveries to avoid a breakdown of the supply chain, but identify and analyse less robust working practices to help avoid reoccurrence of similar issues. To manage short-term supply while companies increase tooling capability and work to replenish buffer stocks, the availability of a reliable, robust emergency delivery system is indispensible.
Throughout a period of transition it is crucial to factor in the requirement of emergency logistics, to enable a harmonious changeover without jeopardising supply chain integrity, end delivery times, supplier relations or facing reputational damage through failure to deliver. This expertise is vital in ensuring fluid delivery throughout the supply chain and avoiding costly production stoppages just at a time when manufacturers are seeking to optimise outputs.
Brad Brennan is managing director of Evolution Time Critical