OEMs and logistics providers must reach an agreement on common quality handling standards through co-operation, increased visibility and better data collection.

Establishing processes for quality vehicle handling begins at home, but must be finished in the community. Although each OEM, distribution centre, vehicle handling terminal and port might have different modal links, reporting requirements, labour agreements and, not least, customer expectations, the best route to improving vehicle handling requires at least a collective agreement over what the term ‘quality’ means in this context.

logisticsTom Swennes, vice-president, strategic planning and administration at ICL Systems in the US, highlights the fact that damage prevention is an area in which, at least in North America, there have been considerable collaborative efforts between OEMs and LSPs in developing common standards and practices, particularly in the area of rail transport. The Automotive Industry Logistics Steering Committee (AILSC), the Association of American Railroads (AAR) and the Automotive Industry Action Group (AIAG) have all been active in the damage prevention area “to the benefit of all”, according to Swennes.

On the marine side, there have also been some successful efforts involving OEMs, port processors, shipping lines and longshoreman’s unions to improve handling at the ports of entry. On the other side of the Atlantic, the Association of European Vehicle Logistics (ECG) has developed quality handling standards and manuals that have been widely adopted by carmakers (as well as by the AIAG).

Private companies and ancillary suppliers have also had an important part to play in shaping standards. “You have companies like Alliance Inspection Management and Vascor that have played a key role in improving how damages are measured and reported. When I entered the industry, it was not unusual for around 5% of vehicles shipped to arrive damaged at a dealer. Now, it is closer to 0.5%,” says Swennes.

Beyond damage prevention, Swennes points out that all OEMs have some type of key performance indicator (KPI) reporting in place to monitor transit velocity, dwell time, and data quality. While the criteria may differ from one OEM to another, the measurement process is generally the same.

“For our customers, the minimisation of dwell time is always a top priority, so it is not surprising that some of the most actively used KPI reporting focuses on this particular area,” he says.

Planning every movement and pause

Indeed, developing plans, standards and processes for when a vehicle is stationary appears to be just as important as for when it’s being transported. According to Diane Reichenbach, vice-president and general manager for Turning Basin Service (TBS), a processor at the port of Houston, Texas, the workflow at the terminal is “strategically planned and prioritised” to minimise vehicle movement. For processes that require movement, detailed standard procedures are “defined, trained and followed” to ensure that every employee handles the vehicle the same way every time. TBS staff use radio frequency scanners so that every touch or movement of a vehicle is captured, including information on the employee, location and work completed. The collection and analysis of this data enable accurate tracking when damages occur and assist with the design and implementation of any necessary corrective actions.

“Yard management provides a detailed focus on yard design and traffic flow with clear visibility and well-marked directions for movement, including stop signs, one way signs and speed limit signs, strengthening the level of safety for all drivers,” says Reichenbach.

Weekly audits, performed by the operations management team in conjunction with a customer representative, also provide current KPIs to assess qualityhandling performance. Results and trends are “charted, graphed, published and utilised” to develop key quality and safety points to cover with employees and to pinpoint areas where further training is needed. Data is also collected on damages specific to type, severity and location on the vehicle.

“This data is graphed and used to structure training sessions, bringing attention to minimal adjustments that can lead to significant savings,” says Reichenbach.

Taking a cue from OEMs

Some vehicle handlers also make use of existing OEM vehicle handling systems to inform their own operations. For example, staff at Promax Automotive, a subsidiary of Japanese trading giant Itochu Corporation, currently use the Isuzu Quality Systems Management policies and procedures manual as a guide for vehicle processing and handling (Itochu is also the distributor for Isuzu in North America and many other parts of the world).

“The manual was created and is updated frequently by Isuzu’s quality systems management team to be our guide for logistics handling at port operations and with carriers while units are being transported,” explains Chuck Ave, manager of finished vehicles port operations at Promax Automotive.

promaxAlthough vehicle handling systems are often sufficient to eliminate the majority of damage incidents, most vehicle handlers are aware of the need to constantly improve procedures in response to changing conditions and OEM requirements. At Promax, the quality systems management team is continuously making changes to the manual, according to Ave, which is distributed within its operational circle in PDF format.

“Quality systems management is in contact with the finished vehicle logistics team to make any revisions we see necessary, both at port operations and while in the possession of our partners in transport,” he explains.

The quality systems management team also provides training whenever there are new accessory items to install or new vehicle handling processes, adds Ave.

The operations team at TBS is also committed to continual improvement, according to Reichenbach. TBS uses the latest scanner technology and is testing numerous handheld devices to communicate issues as they are identified.

“Once identified, our production software is designed to quickly accommodate additions or revisions in order to enhance the production environment,” says Reichenbach.

The role of IT and data collection

Another area of improvement, currently under development as part of a collaborative effort between ICL Systems and one of its customers, is focused on measuring consistency in operations, and how it impacts ETA accuracy. For example, says Swennes, while an “origin-destination pair” may appear to be performing well in aggregate, there may be “wild swings” in performance from one day of the week to the next.

“Advancements in business intelligence software [have] dramatically expanded our ability to analyse transit data in a way that was virtually impossible only a few years ago. Over time, thanks to improved business analytics, I expect to see more focused and sophisticated KPI measurements,” he adds.

German software developer Inform is also using advances in information technology to help companies improve their quality handling performance. In one innovation, Inform has developed software that links existing damage codes certified by the AIAG or the ECG to available ‘butterfly’ car pictures from rental car companies, where damages are noted at handover. This software enables users to report or communicate damages via handheld or other web-enabled devices.

As Matthias Berlit, vice-president of manufacturing logistics at Inform explains, IT solutions can also be used to improve yard management and prevent damages by streamlining vehicle parking and organisation strategies. For example, the company’s software can be configured to reduce damages by ensuring that passenger cars and ‘high-and-heavy’ commercial vehicle units, or left and right-hand drive cars, are stored at separate locations. Other applications focus on the reduction of movements inside the yard and the consideration of damage probabilities in network planning.

“For example, when a car goes from the yard to the modification centre, the car could go directly to the load lane after the modification centre instead of bringing it back into the yard and later from the yard to the load lane. But this is only possible if the different operations are inter-connected and synchronised, [which] is something modern IT systems can organise automatically,” says Berlit.

“In our ‘cost function’ to optimise the path of a vehicle from the production [site] to the dealer, we also consider damage probability at the various sites and transport legs, since a potential damage represents costs. Here, the number of handling steps are reduced, or locations with a high damage probability are less likely to be used,” he adds.

Berlit also describes how the Inform software can be used to facilitate the establishment of a “central damage web portal” to enable the more efficient management of a damage case involving multiple participants at ports, compounds, claims agencies and OEMs. Another important application, described by Berlit as the company’s core competence, is focused on increases in load factor via the use of mathematical algorithms to ensure optimum load building.

“The optimisers may consider the sizes of the different [vehicle] models, truck types with different possible load configurations and special considerations at the dealership, such as opening hours or narrow streets,” says Berlit.

Volkswagen in Mexico has used the optimiser for more than four years, he says, while Inform is currently working on further studies involving carriers and OEMs in Europe and Asia. “We are currently working to extend the optimiser to allow multiple, dynamic pickups,” adds Berlit.

Defining KPIs clearly

In spite of the innovations outlined here, a number of challenges to effective quality handling remain. For Swennes, it is vital that OEMs clearly state their vehicle handling objectives to logistics providers – and then commit the time and resources to monitor and measure the process. In his view, it is vital for OEMs to clearly define what measures they will use and how they will be calculated.

“This may seem like a basic thing, but it is surprising how many times an OEM neglects to explain to the LSPs exactly what events and business rules are used to generate a particular KPI. The LSPs need to know what they are being measured on and how the data is being calculated. Open, regular communication and transparency are the keys to a successful quality handling programme,” he says.

Although Swennes believes that industry players have done a good job of working together to develop effective standards and processes to limit the occurrence of transport damage, he argues that improvements in efficiency and equipment utilisation present a bigger challenge, and one that will be more difficult to address.

According to Swennes, ICL has been supportive of the efforts of the AIAG to improve overall supply chain visibility, beginning with the creation of a standardised data model. Shared assets such as rail ramps and ports are a critical component to every OEM’s supply chain, but he recognises that it is hard to use such assets efficiently if an OEM does not have a complete picture of what is happening beyond their own supply chain.

“For instance, if you know ahead of time that two other manufacturers have already gobbled up all of the open capacity at a particular rail ramp for the next five days, perhaps you will think twice about sending your own product into that same location, and instead take a proactive approach to divert that freight to a location with open capacity.

“However, the level of visibility necessary to be able to make these kinds of tactical decisions requires a willingness on the part of the OEMs to openly share and exchange data, something that will not happen overnight,” Swennes adds.

To justify the adoption of a common data model, which would require efforts on the part of the OEMs to implement, Swennes also argues that there has to be some “demonstrable benefit”. In this light, he thinks that a pilot project, or series of pilot projects, perhaps under the aegis of the AIAG or another industry organisation, could be beneficial and it is something that ICL would be open to supporting.

Defining standards that encourage flexibility

Elsewhere, Reichenbach points out that, when thousands of vehicles are being moved multiple times throughout a month, damages are bound to occur. As volume fluctuates, it also becomes more difficult to recruit reliable drivers as new or temporary hires become necessary. Although driving records and driving tests are completed, human error remains “an ever present cause of damages”.

To reduce small dents to vehicles on a yard, she also argues that sufficient distance is required between vehicles. “Some of the larger vehicles, with wider door spans, can be caught by wind and ding a vehicle parked in the next slot.”

Reichenbach believes that, from the standpoint of a port processor, the crucial factors will remain a continued focus on standardised processes, the training of staff on the basic details of vehicle handling and the tracking of safety performance. She also believes it is important to celebrate success in the reduction of damage claims.

For Ave, one of the key challenges still faced is the pressure to process and transport finished vehicles for customers expeditiously from the port locations to the customers. There is a fine balance to maintain between shortening delivery times and maintaining quality handling.

“We want to provide the best service possible in terms of processing and transportation times,” says Ave. “The challenge is to make sure that our logistics partners in port processing and vehicle transportation know that we consider quality vehicle handling and processing more important than the overall speed of delivering the product the customer. Communication to the customer is – and always has been – the best way to ensure the quality standards are accomplished and shipments arrive timely to the customer.”

In achieving this, he thinks that working with dealers to get them to accept units subject to inspection would be a good place to start, since it is apparent that some dealers are hesitant to allow carriers to deliver units after normal working hours, partly because of a fear of damage claims processes for such procedures.

“If the industry as a whole can develop common standards and practices that would allow units to be received at the dealers [or] customers after hours, the industry as a whole would benefit from an expansion of productivity,” Ave says.