In a future industry where automotive components developed and built in China are just as highly engineered and innovative as those built in Europe, logistics and supply chain management could become one of the most important distinguishing advantages for a company to increase its sales, according to John Sobeck, Corporate Head of Logistics and SCM for major tier supplier ZF Friedrichshafen.
“We see on a mid-to-long term basis, that logistics and even more so, supply chain management, will be one part our competitive advantage,” Sobeck told Automotive Logistics last week at company headquarters in Friedrichshafen. He predicted that North America and Europe’s engineering advantages over China would clearly shrink in 20 years time, so that winning business will become much more dependent on maintaining stability and flexibility in the supply chain.
“We [European suppliers] won’t have this strong advantage of product superiority anymore,” he said. “But our infrastructure is stronger, and that takes much longer to develop. That will be our advantage.”
Sobeck said that the current crisis had raised awareness about inventory management, highlighting just how important supply chain management is for a company across departments, and not only for logistics. “Not long ago, logistics was seen as just moving stuff, but now we see the roadblocks for good logistics come in other areas of a company too,” he said. “If HR, for example, takes a long time to come to a decision with the worker's council about closing a factory for a day, then that factory not only continues to produce finished goods to be stockpiled, but it pulls material from suppliers that is not needed.”
Sobeck said that increasing flexibility was made more difficult by long distance sourcing, which makes a higher case for using more local or regional suppliers today. “We’re not only talking about material or transport costs,” he said. “If we have a huge number of parts on a containership for six weeks, if we realise the quality problem in Europe, then we’ve already produced the next couple of thousand parts. That has to be considered too.”
Sobeck admitted that ZF had heard complaints in the recent past from its customers because of its relatively low proportion of parts sourced from East Asia. While the company does have a growing presence in Asia, Sobeck said the sourcing policy was “best cost country” rather than “low cost country”.
“The best cost country, when you calculate for quality and risk, can also be Germany, for example,” he said. “We’re seeing examples where our competitors are bringing sourcing and production back to Europe.”
ZF is taking specific measures to raise the profile and awareness of logistics and supply chain management both within the group, as well as with suppliers. Since June last year, the company has run a ‘Year of Logistics’. “This is not just a one year focus,” he said. “But we wanted something to give it some “umph” at the beginning, to emphasise that never before has logistics been so vital for the company.”
The “Year of Logistics” includes company newsletters, training, brochures, events and posters to raise the profile of logistics at the company – it has even seen the creation of a “logistics-Wikipedia” and logistics knowledge quizzes with prizes offered to participants.
It has also included specific initiatives with suppliers and freight forwarders. As part of the monitoring process, ZF will launch an electronic performance feedback on its internet platform Supply On, where suppliers and forwarders can monitor their performance levels. Sobeck said that the company would work together with suppliers who struggle to improve performance, but that if they failed to make improvements after a certain period, they would face losing business.
“A few years ago we were more concerned with the right product at a good price,” he said. “But today, if a supplier is not able to deliver to the minimum quality we need, it does not help us, and we will have to shift to another supplier. We cannot allow ourselves to have partners in the supply chain that are hindering an optimal flow.”