Firefighting supply chain disruption in Mexico
The backbone of the Mexican automotive sector needs to be limber in dealing with daily disruption. That depends on reading from the same playbook and leveraging the right technology.
Maintaining productivity in automotive production these days means adapting quickly to counter volatile, uncertain and complex situations on a daily basis. Central to that is better communication within organisations and between carmakers, suppliers and logistics providers. It is also crucial when firefighting supply chain disruption to have the right strategies in place backed up with the right people and supported by the most appropriate technology.
Speaking at this year’s Automotive Logistics and Supply Chain Mexico conference, Francisco Bravo Gomez, senior director of supply chain at Audi México said productivity was previously measured in cost-per-unit but that has completely changed. It is now about continuing to make cars while adapting to daily changes with agility and still creating value for the organisation, according to Bravo.
“It is about working to overcome macroeconomic effects and challenges, including tariffs, and deliver a result which is better for the company and the customer,” he said.
Adapting to unforeseen disruption depends on the right balance of resilience and flexibility, making standardised practices more adaptable and responsive. For Bravo, firefighting has some literal lessons for the automotive industry. A firefighter has standard procedures to follow depending on the type of fire they are fighting, and it is the same for Audi México when confronting supply chain disruption, approaching different situations with a predefined ‘playbook’ of planned responses.
“In recent years we have learned that we need to have playbooks where we know what type of crisis team needs to be established when it happens,” said Bravo, adding that those preplanned actions helped to establish what decisions need to be made at the operational and management levels. “We need to be able to react quickly under the same framework [together] so everyone knows who has to communicate with whom immediately to create the best possible solution.”
Managing risk together
Dayan León, deputy director of parts logistics at Nissan Mexico, said that standardisation is not in conflict with flexibility. Maintaining a stable supply chain means having two or three key options to choose from in any situation which makes the best sense for all parties involved.
“The OEMs need to build this with the LSPs so that everybody knows when something is happening and what option to pick,” said León. “Communication and sharing is key so we can act quickly.”
Bravo said that once the competency to deal with the disruption is established, the right team can work with the right processes and frameworks from the same playbook for the most effective decision making and communication.
Risk management may require more effort at the beginning but in the long run it gives an organisation previously unseen flexibility and creates resilience in the people to deal with disruption like it was a normal day, according to Bravo.
“Since [disruption] has become the new normal, we really need this kind of mindset, and the procedures and tools in place to give enable people to make decisions and react fast when disruptions appear.”
León said it is crucial to establish a clear goal that is well understood by each partner involved in the tactics employed to deal with disruption and that real innovation in doing so requires having time to think rather than rushing in to respond. Logistics performance in the face of disruption is about establishing how long it will take to get operations back to normal, according to León.
He said that required everybody working together. “Everyone creates their own playbooks but sometimes we don’t connect them or look at processes of the logistics providers,” he said. “[Nissan] is in middle and logistics providers may not be talking to each other, so I need to step out and bring everyone together in a common processes and goal.”
Stable but agile
Being able to counter disruption and remain productive relies on having agile partners. Victor Monroy, managing director for Mexico and Central America at MSC, said the global container shipping line has been focused on growing its fleet to stand alone as a service provider. “We are very agile in making decisions and reacting to disruption, whether it's a maritime disruption such as the Panama Canal being closed or simple weather conditions in Veracruz,” he said. “How can we quickly adapt to that? How can we quickly turn our service to ensure that we can adapt and deliver seamlessly for the customer.”
As an example of how to be flexible with a stable fleet, Monroy looked back to the shortage of capacity in the pure car and truck carrier (PCTC) network which began during the Covid crisis and was compounded by factors including global port congestion and a rise in volume exports from China through 2022. In Mexico the situation was leading to a build-up of vehicles at the plants and ports and Monroy said MSC stepped in with a car-in-containers service that has grown.
“We were able to shift many of the cars that were traditionally shipped in PCTC vessels to container vessels,” said Monroy. “Last year we shipped 1.3m cars in containers. That speaks at how we have had an impact on productivity in delivering to the final customer and the OEM.”
Trustworthy tools
The adoption of digital tools to manage disruption and complex supply chains continues apace. Bravo said Audi is running agentic AI pilots and analysing data from inbound, in-house and outbound operations in order to predict with accuracy the next big disruption and anticipate how many days in advance it would need to ship vehicles out of Mexico to meet delivery targets. Audi México is using AI to be more productive and increase the reliability of its processes because reliability is a big topic right now.
“Anticipation is the main word for me,” said Bravo, “but also analysing the data because the amount of data that we generate right now is five times what it was five years ago. We really need to make good use of the right data, and ask the right questions,” he continued. “Also, there is no point having the right tools if you don’t have the right people to use them.”
León said Nissan Mexico is testing AI in different areas and trying to understand where it can get benefits. “We are looking at where we need to focus the AI to prevent and react earlier to challenges,” he added.
DP World is running toward digital technology as fast as seems prudent, according to global vice-president and vertical lead for automotive, David D’Annunzio.
“Like everybody else, we're trying to figure out… where are appropriate applications for AI – where we can be confident that… they are going to do what we want them to do for ourselves and the customer.”
He said DP World thinks considers new innovations from several different contexts, including how it applies to an existing operation to make that that operation better. “When we're confronted with a new operation request from a client, we consider how we can bring that to bear in the new operation?”
D’Annunzio said DP World’s technology team tries to figure out what makes sense to explore in the face of the challenges the sector is facing. “All of us are trying to figure out where does it make the most sense and how should we do it,” he said.
D’Annunzio used Amazon’s purchase of Kiva Systems and its warehouse automation as a lesson in forward thinking. “Pre-Covid people were building big warehouses and Amazon bought Kiva Systems, which made a robot system that was goods-to-man,” he explained. The robots autonomously navigate Amazon’s large warehouse floors to retrieve inventory pods and bring them to workers stationed at fixed picking station. Since then however, the trend in warehouse automation has been toward vertical storage and retrieval systems in the face of increasing costs for warehousing space.
D'Annunzio said productivity means how to get the best bang for your dollar and not have your investment become obsolete.
Monroy said digitalisation was central to the successful expansion of port infrastructure on both of Mexico’s coasts, and would be the advantage in Mexico’s continued automotive expansion.
“We see the ports in both the Pacific and Gulf coasts expanding their infrastructure in the next year and we see strong efforts by port authorities and customs to integrate more digitalisation in to the processes,” he said. “We believe it is important that the processes become more agile and robust so that they can support the growth in infrastructure. The combination of physical infrastructure at the ports and better digital integration is going to give us an additional nudge in Mexico next year.”
Choosing the right data
Sharing data is also a big consideration for maintaining resilient production and logistics in the face of disruption. Bravo said it is a case of being selective because often a large amount of the data being shared is not helpful. “You have to cherry pick what is meaningful from a lot of information when cooperating with your partner, and that can be difficult and takes a lot of effort.”
Bravo said Audi strives for transparency and is alert to any legal and compliance issues. “Fulfilling the law in Thailand can mean you are not fulfilling it in the US,” he noted. “It needs to be managed very carefully. We need to focus on what is absolutely necessary at the right time.”
D’Annunzio said that partners need to be willing to share data because without it you risk a suboptimal response or project. He said that somehow the automotive industry needs to get past being selective with what it shares on the grounds of competition and proprietary protection.
“We need to share data even though we compete and work together at the same time, so that everyone can see what is going on. All the data in the world won’t help you if you are not able to do something with it.”
Love the programme
Monroy said that common understanding of what the industry wants to achieve goes beyond just sharing data and there needs to be a focus on the same successful outcomes. He said that the automotive industry is unique in many ways and an LSP has to have a mindset that is aligned with its OEM customer and he pointed to the port of Veracruz.
“Veracruz started processing cars in the 1960s and now the entire ecosystem of shipping lines, terminals and customs has a shared mindset that is focused on serving the automotive sector and it does so in a very efficient way,” he said. “As logistics partners we want to understand the mindset of the customer – what they need in speed, agility and sense of urgency.”
Aligning the right mindset has to be about falling in love with the programme not the solution, according to Bravo. He said it is about analysing the root cause of a disruption to that everyone understands the bigger consequences of not working on it together. “We are all in the same boat and want to be successful, therefore it is important that everyone understands the problem to the roots so that we get the best common solution.”
For Bravo it is about speaking a common language that not only the supply chain people will understand but also the finance and legal people. He said this is why Audi México is sending its managers to other Audi operations in China, Germany, the US and other locations.
“We want these managers to gain a different perspective and understand other legal compliance and financial frameworks we have faced in other countries,” he said. “What are the weather conditions in China or the US that may affect us; real life things.”
Bravo said it is about creating knowhow in terms of experience but also what technology is being used in different areas. That way managers are fluent in creating solutions for Audi when disruptions flare up.
