The Russian market has often confounded this magazine. Sales can change drastically between print and distribution. We’ve written about customs only for governments to reset policy. Today, amid escalating sanctions and shaky ceasefires, no one can guess the outcome for automotive (some are already forecasting plant closures, read more here).
Imagine, then, the trouble for supply chain managers, who must adjust output and supply. Good logistics alone cannot subvert an economic crisis, but it can be the difference between collapse and stability, and with a Russian scrappage programme starting, carmakers’ supply chains need to be prepared for further whiplash.
Bo Andersson has been in Russia long enough to appreciate supply chain flexibility. Now chief executive officer at Avtovaz, he is bringing to it the reforms he used to help return Gaz to profitability, including switching to order-based production, reducing inventory in-plant and using milkruns for inbound deliveries. [sam_ad id=6 codes='true']
At General Motors, where Andersson spent most of his career, improving the supply chain is also a major strategy for volatile emerging markets. Edgard Pezzo, now global head of logistics and a veteran supply chain executive from Brazil, understands the currency, logistics and delivery risks of a supply chain relying heavily on imports. Pezzo says that markets like Brazil have renewed efforts to increase local sourcing and parts production.
In more established markets like North America, Pezzo, like other OEM executives, wants to reduce risk and logistics cost by bringing suppliers closer to plants. However, suppliers cannot simply extend capacity or be beckoned at will to Russia or Brazil (especially during such difficult times). As Pezzo explains, the logistics team must work in advance with material purchasing to ensure the right deals are put into place to encourage such moves. Better still, he says, the more logistics managers understand the design and planning phase of a vehicle, the more they can influence it.
Not every problem can be addressed over a three-to-five-year planning period, or even in annual purchasing tenders. The situation in Russia and eastern Europe is changing everyday, while the North American winter – so harmful last year – is around the corner. Logistics managers need to understand what they’re doing today without ignoring what may come tomorrow – since by then it could be too late.