Nobody likes a downturn, but sometimes in business, as in personal life, you have to learn the hard way. Automotive Logistics Publisher Louis Yiakoumi presents his six essential lessons from the hard times
- No rest for the wicked. Despite the downturn – which led to vehicle stockpiles, shutdowns, parked or scrapped trucks, railcars and ships – automotive logisticians have never been so busy. Too much stock meant you had to be innovative in storing vehicles, and quick to react when they were sold. The effort that had been taken to plan a smooth flow into countries like Russia were suddenly worthless when the market sank, so new strategies had to be developed. And a closed plant did not mean sitting at the desk with your feet up, but meant re-evaluating every part of the supply chain to be leaner and better equipped when the plant opened. And of course, it wasn’t just stocks and capacity that were slimmed down; we have all faced staff cuts and redundancies, and effectively have had to do more with less help.
- Let’s work together. Is it possible that the downturn has turned talk about collaboration into action? We have seen mixed messages. Certain efforts from recent years might have been set back by other concerns – not least bankruptcies or question marks over ownership – but I believe it is happening, albeit slowly. Perhaps as the industry overlaps in alliances and production platforms, logistics will follow.
- Green must stay on the agenda. I have been pleasantly surprised to see that greener logistics is still a priority for many. We know that it is not all altruism, as there is the need to reduce emissions ahead of government regulation, which is certainly a likely possibility in Europe, but could also occur in some form in China where the government wants to be seen as taking a lead. But also, good supply chain managers know that green is not always a cost but can eliminate waste.
- Success in emerging markets is not a given. I detected a bit of arrogance in recent years from some of the companies in fast-growing regions. In many cases the success of those companies was not particularly because of anything great they did other than being in the right place at the right time. Some in those markets thought growth would just continue unabated, and that their businesses needn’t evolve so quickly. Their attitude was: “If you want to be part of our great market, then you have to do things our way, because you need us.” Now some have changed: “We have a potential market for you, and if we work together we could develop a great automotive industry here.”
- The new strategic flow is cash flow. The old saying, “Logistics is more about information flow than material flow,” suddenly gave way to “cash is king” again and again. In more than 12 years of working on Automotive Logistics I had never quite heard this talk of cash flow before. For inbound it was how logistics frees up cash by reducing inventory, controlling production and balancing capacity. For outbound it was also inventory reduction, along with quality features, like reduced damage and insurance costs. I suspect that this thinking will not disappear even as we move into recovery.
- Stay committed to globalisation. Whether it was because of long supply chains, or the arrogance mentioned before, recession suddenly scared some off globalisation. We’ve witnessed several carmakers and logistics companies pull out of developing regions to concentrate on their home markets back in Europe or North America. Although I understand that is where the bulk of their revenue is still earned, and therefore the source of much investment that would flow elsewhere, it still confused me as those were economies where the recession had the most impact, whereas even a slowdown in emerging markets does not deny their long-term potential. I suspect that given the domestic resurgence of India and China, some are regretting those decisions. But what do I know? I’m just a publisher.