Interview with Dr Hans-Bert Bong, Ford’s manager of vehicle logistics and customs, about changes in the carmaker’s European distribution network.
Improvements in service and efficiency within a mature distribution network, such as that used by Ford of Europe, are more likely to come about by way of incremental changes than by major redevelopments— opening a new sea route here, shifting a rail leg there. Few understand this as well as Dr Hans-Bert Bong, who’s been manager of vehicle logistics and customs at the company since 2001.
Indeed, since he started, Bong has overseen many changes— big and small—at Ford’s vehicle logistics. It was back then, for example, that the European Commission set out objectives for expanding short-sea shipping on the so-called ‘motorways of the sea’. It’s a principle that Ford of Europe has long since subscribed to, with around 30% of its freight spend for vehicle distribution allocated to sea and river transport (another 30% is spent on rail, with the balance on truck transport). Although it’s a split that hasn’t changed much in recent years, the financial breakdown masks the incremental improvements that have had an important impact on the company’s bottom line.
For example, wherever possible Ford has engineered its own backhauls by bringing imports into a port already being used for export. An excellent example of this can be seen at the Benelux ports of Antwerp and Vlissingen, which receive vehicles shipped by barge along the River Rhine from Ford’s plant in Cologne. Ford now also brings to these ports vehicles produced in Spain or Turkey, some of which are shipped back into central Germany on the barge’s return leg to Cologne. Bong points out that the cost benefits of such engineering are substantial, even if they do not move the overall freight calculation very much.
“The 40/30/30 split [between road, sea and rail] doesn’t change that much because before we had one-way traffic on the Rhine and the barges were going back and forth anyway,” says Bong. “Now, the imported vehicles get a free ride on the backhaul, and we improve our network efficiency.”
Bong points to a range of fine-tuning work across the carmaker’s network, such as filling return trucks with other OEM volume from the Midlands in the UK back to ports at Dagenham or Southampton. But while it may be making many tweaks in its European vehicle logistics engineering, Ford has also made some substantial innovations. Bringing production online in Craiova, Romania, for example, prompted the creation of new multimodal flows: vehicles are sent by rail to the port of Constanta for export, or moved directly by rail to Western Europe.
Ford has also taken a rare step in the sector by combining finished vehicles and material flows on some lanes. In Dagenham, for example, where Ford owns and runs its own jetty and vehicle distribution centre, a dedicated shipping service from the Dutch port of Vlissingen calls three times a day with a mixture of vehicles and materials for import and export for Ford’s engine and powertrain plants at Dagenham and Bridgend, Wales.
Ford also runs a shuttle train between its plant in Saarlouis, Germany and Valencia, Spain where vehicles and materials have been combined on the same train.
Furthermore, Ford has been a notable leader in the use of IT and RFID solutions. Ford of Europe’s order-to-delivery (OTD) system, which gives dealers a more accurate estimated delivery date, was expanded to Asia Pacific several years ago and has influenced new systems in North and South America as well. And along with expanding the use of RFID tags at its European production plants, the tags are now being used at Cologne in a ‘drive-in’ concept that validates drivers automatically as they enter and leave compounds.
For Bong, the cost of vehicle logistics is substantial enough to warrant constant attention and innovation at Ford—while he will not reveal an approximate budget, he admits that the company spends as much on vehicle logistics as it does getting production materials to factories. “The number is high enough to deserve considerable attention as it can drive investment decisions for the future,” he says. “Our target is to increase efficiency by challenging the current status and by continuous improvements, such as network redesign, to drive the cost down.”
Dealing with emissions and regulation
Christopher Ludwig: With around 60% of Ford’s vehicle logistics in Europe moving by boat or rail, how high on the agenda has reducing carbon emissions been for the company’s vehicle logistics? And are encroaching environmental regulations a worry?
Bert Bong: Reducing emissions is very high on our agenda. Quite a few years ago we started measuring carbon for material and vehicle flow, and I think we were one of the first to do this. In terms of regulation, we are professional enough not to be worried, but we work to mitigate the total cost as much as possible, and to consider measures such as as road taxes and environmental regulations.
CL: Some shipping lines have expressed concern about the pending sulphur restrictions that look set to come into force over the next few years in Europe. Does Ford have a strategy to deal with the potential rise in bunker prices?
BB: As a buyer of transport services, we won’t actively get involved with the shipping lines to tell them that they have to change their engines to deal with the sulphur limit. There are vessels out there that would need significant investment or have to be scrapped. As always, the most efficient companies will win business.
But otherwise it might be that certain transport modes will change as a result of these regulations. Very often we have artificial borders through a country in which the price point divides service through a port or by train, for example. If certain costs change, then these borders will simply change. The technical things are up to the shipping lines—they have to make sure that they are competitive against each other and other transport modes.
BB: On service we don’t have a general issue on any mode, but the market and capacity situations are different for road, rail and sea. For road, we’ve seen quite some changes, with on-going consolidation at the same time that new providers have entered the market. For rail, it is a quite stable set of providers, but with liberalisation it is a different market compared to ten years ago, with more private wagons and private traction.
Some of the ports are suffering more from unbalanced trade than others. Continental Western Europe has become more of an export than import region, but there are big regional differences, too. In Western Europe, Ford and our competitors are exporting a lot through a limited number of ports in Benelux and Germany, with a smaller number of imports leading to imbalanced services on the land side. This gives the operators more of a problem than it does Ford, however.
In terms of transport capacity and investment on road, we do not really have much concern in the current market, as this is an issue based on supply and demand.
CL: Is Ford feeling cost pressure in the supply base with rising fuel prices, or is the slack in the economy keeping rates low?
BB: There are always cost pressures, especially from fuel, and that is why we do constant improvement actions to mitigate whatever happens in the economy and the supply base.
BB: The UK market is very specific compared to others, with the two registration peaks in March and September when customers prefer to get the latest plate numbers. This roughly doubles demand compared to the rest of the year and all OEMs use a similar carrier base. Since 2010, the cabotage rules in the UK restrict the use of foreign providers, which provides an even bigger challenge to the existing carriers to deal with the volumes, especially during the peaks that I mentioned. In this environment, owning in-house capacity can be considered a strategic advantage. In addition, we have been successful in securing backhaul flows from Midlands-based manufacturers, which optimises the utilisation of our own fleet.
CL: Has it taught Ford anything about the car trucking market that it has applied elsewhere?
BB: Running our own fleet provides an in-depth understanding of the cost structure and operational needs of that sort of service, which is a knowledge that can be helpful in the context of the wider European network. If you want to improve things, it is extremely useful to have a fleet that helps you understand what the cost elements are.
CL: Is it an operation Ford intends to keep in-house, or to expand elsewhere?
BB: We do intend to keep it in-house. We regularly discuss this business model for other areas of the globe as special needs arise, but for the time being so far it is just the UK.
Sharing forecasts in the supply chain
CL: Ford of Europe’s order-to-delivery (OTD) system has been an important development in predicting delivery dates and managing the outbound supply chain. In general, how advanced would you say Ford’s systems are for visibility, forecasting and information sharing? Ford, which spends about 30% of its freight budget for vehicles on sea and barge transport, now moves vehicles imported through its Benelux ports from Spain and Turkey back to Cologne by barge as a backhaul Ford communicates its volume forecast up to seven weeks before the build day of a particular vehicle, so service providers, such as carriers, port and compound operators, get a specific volume forecast to plan with in advance BB:We started the order-to-delivery system in Europe, but it has since been developed into a global strategy. The growth in Asia Pacific required specific actions to enable logistics to deal with the volumes in an efficient way. So we have launched the OTD in China and Thailand in recent years, while North and South America are supposed to roll out systems based on our experiences.
In terms of the visibility and forecasts that we provide to our provider base, we communicate our volume forecast up to seven weeks before the build day of a particular vehicle. Based on the production schedule, engineered routes and lead times, the service providers, such as carriers, port and compound operators, get a specific volume forecast to plan with. IT is transmitted via EDI and gets updated as plans and times materialise.
If you are a port operator a few hundred miles away from the production plant, you will know when the vehicles are going to be built, the gate release, and the estimated time it will take on the engineered route to get to that port. The port operator gets information on the vehicles’ estimated time of arrival so that it can start its capacity planning. That goes for the whole supply chain all the way to the dealer.
CL: Are LSPs using this information to build their loads based on geographic planning?
BB:Yes. It is very important for the shipping lines, for example, as they have various customers with thousands of vehicles in ports and it is very important to know well in advance the vehicles that they will get.
CL: Does Ford have a track-and-trace system for vehicles in the supply chain?
BB: So far we track and trace every departure and arrival for vehicles by scanning them at the hard points, such as at compounds or ports. For every vessel leaving a port, for example, our system knows about every one of our cars on that vessel. What we don’t know is where the vessel might be exactly on a particular route. But we don’t need to know exactly where the vessel is on a scheduled service, so long as we know when it will arrive. The same goes for trucks and rail. We monitor the whole journey whenever a car gets loaded or unloaded and we match that against the engineered routes and service, which we communicate to the dealers and to the carriers.
BB: Our track-and-trace system is currently based on barcodes but Ford has used RFID in production for a few years at Cologne, and we’re expanding it to all plants. At Cologne we have taken it even further with the development of a ‘drive-in’ concept, which is unique in this industry. Trucks are equipped with RF tags and when they approach a compound they are verified without the need to check in, and the gate is opened automatically. Without leaving the truck, the driver gets a list of vehicles he has to pick up through the driver window, just like at a drive-in hamburger chain. Then, when he has loaded the vehicles, the truck gets scanned as he drives through the gate and the system checks the load and releases the truck by opening the barrier automatically again.
CL: Will this system be expanded beyond Cologne?
BB: As the business case is developed we will roll it out piece by piece. I think that the big benefit will come when you have all of your trucks equipped with the tags because then you can monitor external compounds more efficiently. Ideally, it would become a sort of industry standard, because then the big ports that serve many OEMs would be able to use it.
CL: Was this project carried out with any government support, as there has been for some RFID projects in Germany?
BB: We did this without government support and implemented it fairly quickly. There are all sorts of groups working on RFID and we participate on that, but we are inviting anyone interested in it to come and see the system. Again, we believe the biggest benefit will be if it is rolled out as an industry standard. Frequencies are now quite standardised for RFID, and there are many suppliers producing tags. The standards just need to be pulled together.