A panel of OEMs and vehicle logistics experts discussed the present and future of Europe's vehicle logistics industry at the end of the ECG Conference in Vienna. Most expressed a desire to work more closely together – and perhaps they have even found a way to do it.
While Europe has returned to growth, the a number of capacity and other familiar issues continue to plague the vehicle logistics industry. Driver shortages, congestion, uncoordinated government policy, a lack of industry collaboration, and a general slowness to adapt to new technologies and powertrains all represent barriers as well as opportunities for carmakers and their logistics providers. After years of falls starts and stops, is now finally the time that the industry is ready to act?
At the close of the 2015 ECG Conference, powered by Finished Vehicle Logistics, executives spoke about the need for real change, the stubbornness of OEMs, and how sometimes, the automotive industry needs to stop complaining about issues it can’t change, and instead focus on what it can.
Sitting on the panel were (above photo L-R): Peter Weiss, vice-president supply chain Europe, Fiat Chrysler Europe; Chris Godfrey, general manager outbound engineering, Renault Nissan; Gareth Williams, head of distribution, Jaguar Land Rover; Wolfgang Göbel, vice-president, ECG; and Christopher Ludwig, editor, Automotive Logistics Group, with Mike Sturgeon, executive director, ECG as moderator.
Are you facing capacity issues in your European vehicle logistics?
Gareth Williams, JLR: We’re all conscious of the capacity issues, and we recognise that output from OEMs is variable. It’s worrying that investment hasn’t been there and that there aren’t enough trucks. It is a perfect opportunity – if we integrate different modes then no one should lose. This is a call to arms: how do we integrate the assets we already have better? I can go on road, or rail, but these don’t work effectively together. We should collaborate together: put everything on rail, then go last mile with trucks. This would work most effectively across Europe.
Chris Godfrey, Renault Nissan: There have been difficult times but examples like the [relaxation of] cabotage [restrictions during peak periods] in the UK have helped us a lot. I took an unusual step this year – we did a direct contract of 53 trucks at peak time in the UK. A lot of that was from the continent. Sometimes you have to think differently to solve a problem. We’ve talked about collaboration, and multi-modal solutions have to be the way of the future. The move to urbanisation and big cities means there will be more places where you can’t get to with a truck.
Could the industry do more to actively recruit employ unemployed people, or drivers from eastern Europe?
Wolfgang Göbel, ECG: There have been companies doing things like this, educating drivers and pushing them into the market. I think we have to look at this. The question for ECG is, are we getting active ourselves, or pushing other companies to do this on a market level? The problem will continue in the future though, and it is one topic we will tackle.
Peter Weiss, FCA: In the US we have had this problem since 2006. Since Katrina we have had truck driver shortages in an environment that is unionised. In the past there were people trying to drive 18-wheelers with synchronised manual transmissions through the country, but they’re now using automatic transmissions and finding different ways of running the network. We’re also looking at changing trucks or hot-seat swapping like the Pony Express so a driver can go back home.
I challenge the panel here, and ECG, to go over to the US who have been dealing with this and see what some successful companies are doing to get drivers and retaining them. That includes paying car carrier drivers better than normal truck drivers. We need to attract talent to the industry and benchmark what others have been doing. We can lobby government and other institutions, and help with programmes in other countries.
The vast majority of the industry doesn’t differentiate between whether a vehicle is going to a customer, or going to a dealer. Does the industry still need to improve supply chain visibility?
Chris Godfrey, Renault Nissan: My personal opinion is that yes, we can work smarter. If you look at DHL, and UPS, you know up the minute when your parcel is meant to arrive. It gives visibility to the customers. In countries like the UK you can track a small parcel, so of course I’d want to trace my expensive car. The logistics solutions need to be smarter. Not only should we think bigger, we should also think convenience and smaller sometimes.
Do marketing peaks generated at the month and quarter end cause significant problems? Is there any possibility the demand peaks could be smoothed out?
Chris Godfrey, Renault Nissan: The common suppliers in the room will say that we have had this discussion before, and sales and marketing would say absolutely. In terms of smoothing, we’re working to try to improve the position. We have had some success but there’s still a long way to go. The seasonality in markets affects suppliers differently around the world. UK people are very keen on buying new cars in March and September – we try hard to keep it smooth but it’s not perfect.
Gareth Williams , JLR: I think it’s going to get worse. We’ve talked about computers and how the industry will go through significant change. Take Argos, for example, a UK retailer – you can now order something online and have it delivered in three hours in some cases. As the internet progresses, you’ll be delivering parts and have to be more flexible and agile, rather than having big deliveries. We will have to be a lot different over the next 20 years.
Peter Weiss, FCA: The reason for our being is that we have to sell vehicles. Whatever sales do, we are here to support it. We are here to fulfil customer demands – you know Christmas is coming every year and in the UK there is the March and September registration period. It’s a fact of life. Let’s do something with it. We shouldn’t moan, we should just plan accordingly.
Talking as OEMs with new cars, there are also used cars out there. There’s probably twice as much demand. What is the used market doing? How are they selling? We need to look at the new picture, and pre-plan. Christmas will be coming for sure this year.
Wolfgang, as a supplier, if you could change anything what would it be?
Wolfgang Göbel, ECG: We have also been discussing volatile markets and peaks and so on a lot. Perhaps it’s something we will continue to talk about. It is as it is and we can’t change it. We cannot change Christmas and we cannot change the peaks. We have to accept this and find a solution, or due to capacity constraints, the peaks will flatten out in the end. The car market is interesting in Germany as only 35% of cars are registered privately – which means that 65% are fleet sales, which is a different market. There are some fleet markets that only hold cars for 3-12 months. A car going to a private buyer is done in two moves, but cars going to fleet markets move four times in 12 months. This is coming on top of registered new cars.
Does the issue of marketing peaks and troughs affect OEMs globally?
Christopher Ludwig, Automotive Logistics Group: It’s not just a European issue. If you go to the US, China, India… there are the same peaks and troughs. One of the few exceptions that I've seen is Subaru in the US, which takes a lot of pride in precise scheduling in its dispatch and port processing, and ensuring there is the same labour working on the cars every month. In that example, the executive responsible for logistics is also doing the sales allocation and distribution planning, so maybe they have a bit more control over the distribution process. If you follow the US market, Subaru has been the hottest selling car for six year so this consistency doesn't seem to have hurt them. But nevertheless I agree that for most companies this situation is a fact of life.
I feel something of a change in thinking though. I was at this event two minutes and everyone came with the same points: we need to change the way we work; we need to work more closely with providers. However, having been around the industry, I’ve heard it all before. What’s the next step to make it a reality? The ACEA Automotive Logistics working group broke down a few years ago. What’s the agenda for ECG and OEMs to have consistent communication?
Wolfgang Göbel, ECG: We are happy to have re-established a common platform with OEMs. We have used the experience of the AIAG working group for the first time, and found out how it is working in the US with 1,200 members, and how OEMs and suppliers can work in the same association. There are legal processes in place so anti-trust laws aren’t an issue. We need to put together the ‘pain points’ and prioritise them – we tried with ACEA to solve a lot of issues.
Would it be possible to use geo-fencing and paperless processes to improve efficiency and save time in logistics?
Gareth Williams, JLR: Throughout the sessions today we’ve seen opportunities for technologies. What we don’t do at the moment is use technology for efficiency savings. We’re all working on technology, and suppliers we’ve seen are saying that they’re innovating too, but what we’re not doing is putting it together and utilising the technology. Think about the hubs we go through – the majority of companies use the same places. We go through the same ports, and we should be able to optimise hubs. It would take OEMs and carriers to align standards, but we don’t want to do something different. OEMs are stubborn.
Chris Godfrey, Renault Nissan: The number of common suppliers is high and there are common ports we use. We all think our way is the best way, but knock that down and there’s a standard way of working. Dealers and dealer networks are a different animal in terms of how they behave and operate. We would like them to be open 24/7, but if they’re franchised dealers, they can move quickly. An extension of technology may be a bit more difficult, but internet, smartphone, and the use of ePod should be standard throughout Europe. It’s critical for visibility and it’s what we should be pushing.
What is next for the automotive logistics industry?
Christopher Ludwig, Automotive Logistics: There were comments when we started the day today about looking for the next innovation, and talk about driverless cars, but the industry is still focused on the 'rubber on the pavement'. It’s the capacity crunch that everyone is still talking about today. We can see the technology coming, but we can’t use it yet. At the end of the day people need to get the basics down, and get things like ePod sorted first – it’s not complicated, but it’s not implemented or standardised. Chrysler led the way in the US. I imagine it will take someone to step out and do it here.
Clearly there are opportunities out there to address current problems, even to things like driver shortages. I was with [tier supplier] Magna earlier this week and it is really stressing the importance of training refugees arriving from the Middle East in Austria and Germany. People can be trained and it could be very relevant to automotive logistics, perhaps even to the driver shortage. It’s a matter of working together and identifying those things.
Gareth Williams, JLR: We have started again, time after time, and we expect the same result. As OEMs we have a responsibility and as carriers there’s responsibility to work together. We have a capacity shortage and there should be enough work for everyone. It’s a good opportunity.