Ford’s Stephen Harley officially assumes his new post this week as the OEM’s Executive Director for Global Material Planning and Logistics (MP&L) and for North American Parts Supply and Logistics (PS&L).
It is an interesting time for Ford and a particularly crucial period for the MP&L organisation, as the company continues to unify its global supply chain and production, and also seeks to respond quickly to meet the demand spurred by as incentive programmes in the US and in various European countries.
Harley, who was most recently Director of MP&L for Ford of Europe, is now overseeing an inbound-to-outbound supply chain organisation that is increasingly trying to act as one unit globally. As Ford has organised regional engineering bases, such as Europe for small cars, North America for medium-large cars and some pickup trucks, and Asia Pacific for other trucks, MP&L is acting on the front line for supporting that production and its suppliers. “As vehicles are built in different locations with common suppliers, that is going to increase the amount of material movement, and we have to make sure that we keep our eyes on the total landed price and not just the component cost,” Harley told Automotive Logistics.
Harley’s responsibilities also include PS&L for North America, which includes parts purchasing as well as logistics on behalf of Ford’s Customer Service Division. The alignment of these two functions into one role has been in place since last year in North America, and was in recent weeks put together in Europe as well, responsibility for which will be held by Harley’s successor, Matthias Schulz. Harley noted that this alignment is natural, and it represents an ongoing focus to bring the functions of inbound and spare parts logistics together. He noted the potential that combining the two from suppliers of a similar origin could provide more transport options, such as for less-than-truckload volume or even rail.
“On some routes PS&L material and volumes for manufacturing parts might be able to justify a swap body on a train of 30 swap bodies available as part of a single plan,” he said. “And likewise, if PS&L is using direct shipments on long distance to service a particular distribution hub that might be interesting as a backhaul from somewhere near there for manufacturing volume.”
A good problem to have
An immediate challenge that Harley and his team are facing is the frenetic swings in the market recently, from the sudden drop brought on by the financial crisis, and now the surge created by incentives that continue to keep markets strong in France, Germany and Italy, and have reinvigorated, at least temporarily, markets like the US and the UK. “Suppliers had cut back [production capacity to demand], as Ford had, but the response has been incredible, because you can’t let an opportunity like this pass you by,” Harley told Automotive Logistics.
Earlier this year Ford, along with other OEMs, had trimmed down its inventories in response to the decline. Now, it must flex its production and logistics capacity. Some suppliers are working 20 shifts or more per week and just managing to churn out the necessary material, whether by taking on temporary staff or running some premium time, Harley said.
The incentive-led surge has led to longer delivery times for customers of many brands in some markets, such as the UK, according to a report this past weekend in The Guardian. Interviews with dealers revealed that some models, particularly those built in Germany, had waiting times up to six months. Such a wait could jeopardise the cars’ eligibility for both the UK’s reduced 15% VAT (which reverts to 17.5% January 1st), as well as the country’s scrappage incentive, which stipulates that models must be delivered within four months to be eligible for the £2,000 discount.
Ford, which supplies UK demand from Germany, but also from Spain and Belgium along with the locally-produced Transit Van, appears to be beating those lead times, as Harley said that he has not heard of complaints from dealers, national sales organisations or end customers. He does acknowledge that such peaks and troughs puts a strain on the supply base and transport network, but it is “a very good problem to have,” he said.
“There is not much [demand] being satisfied from stock or aging in the pipeline,” he said. “The order bank is quite strong, but the response from our supply base means that we’ve been able to get the cars to customers and keep dealers confident that they can select a car that matches the customer’s requirements.”
Building more cars to fresh orders is also a strategy that helps extend profits and an approach that may not necessarily change even after the incentive period. “We will see things in the current process that help protect our cash and drive our profitability that will carry on even when the demand shifts,” he acknowledged.