Uwe Coßmann ZF chassisOn May 15th this year, ZF completed the acquisition of TRW in one of the biggest supplier takeovers for years. TRW is now managed as the fifth division within ZF, maintaining its brand name. The deal makes the automotive supplier the second largest in the world and the combined company has huge potential: operating in 230 locations in around 40 countries and working with almost every OEM. In 2014, the company’s 134,000 employees generated combined sales of more than €30m ($33m).

The focus from here is very much on the future. Dr Stefan Sommer, chief executive officer of ZF said, “There’s a clear objective behind the integration of TRW into ZF: as one of the world’s leading suppliers, we aim to offer the automotive industry complete system solutions for the megatrends of the future.”

The product portfolio of both companies includes everything from automatic transmissions and axle drives, to active chassis systems, advanced driver assistance systems, including camera and radar systems, steering, electric steering and software, and vehicle control systems. The company’s central goals are efficiency, safety and automated driving. But how does the second largest automotive supplier in the world manage the logistics behind its inbound flows?

The logistics model

Uwe Cossmann, executive vice-president at ZF and head of the chassis technology division said that despite the size of ZF’s operations, the company’s outbound business is mostly just-in-sequence. “We do that with around 30 minutes to get to the plants. That means we are based very close to the customer.”

The company works with different models in different areas and regions, but Cossman said that it is important to have local content and that is the expectation of ZF’s OEM customers, too. “There’s a need for local and we try to do as much as possible with our partners and sub suppliers with consignment stocks. It is a tool we offer our customers: a logistics model with local content, that gets to them in the shortest time possible, and just-in-sequence.”

Not everything works on the 30-minute cycle, in part because of the amount of customisation that has resulted from increasing complexity within the supply chain.

ZF concentrates its efforts in Europe, Asia and North America, often serving OEMs on global platforms. “We’ve tried to roll out a system in all countries. If you deliver to a global acting customer, we have to have the same systems in place. For example, we deliver axle systems in North America for Daimler for the E, C, and M Class. From last year we started doing that in Beijing too. We use our existing skills from North America, and apply them to Asia and China. Customers appreciate us working in that way. They understand our system, and the interface between the logistics system, which is well improved,” Cossman said.

For the huge amount of parts ZF moves around the world, its primary mode of transport is trucks, especially in North America, Cossmann explained. “Truck is our main type of transport. Rail is not so popular for us, and for intercontinental we use ships. However, we do prefer to have suppliers in the regions we are operating in,” he adds.

Some of ZF’s sub suppliers, especially in North America can be 1,000 miles (1,600km) away, so a customer will have to have consignment stock, but Cossman said that in general, ZF prefers to be close and ship short distances.

“An OEM could decide to produce in Mexico… we would get in contact with the OEM, and with our suppliers, to work out how to supply a part closely in the region, while taking into consideration the environment and logistics costs.”

As it is for so many, Mexico is one of the most important growth regions for ZF. “We already have five subsidiaries in Mexico in different divisions. The country isn’t new to use, but the production figures will grow, especially with European OEMs – so it’s our bread and butter business,” said Cossman.

While some markets are growing, others are struggling. “Russia is difficult,” according to Cossmann. However, although some OEMs have decided to pull out, others have decided to stay, and many of the Korean OEMs ZF works with do still have a strong base in Russia. “It is an important market for us. We are European driven and Russia will continue to play a role for us,” he said.

ZF uses a mix of its own logistics and outsources other services. “Sourcing out is an advantage. These companies are really professional in logistics and it’s not our main business. Sometimes we use subcontractors to complete logistics using their experience and performance. That is the right way to do it,” Cossmann explained.

Globally, ZF’s main partner is DHL. “We have a huge contract with them. They do door-to-door continental-wise.” But the company also uses some local companies that offer support and flexibility.

IT and technology

To help ZF manage its business, the company has replaced paper in many instances with barcode and RFID technology. “Paper has been gone for several years. We can’t do our logistics with paper. We have to have a system in place where you can always control quality – and you can always check a barcode easily,” Cossmann said.

From an IT perspective, ZF is trying to go global. “For the logistics process we have teams, and they roll out the IT systems in plants or subsidiaries, and we try to have the same system in place everywhere. If you need an interface between different systems and it is global, it could be difficult to have ZF’s performance level in place,” Cossmann said.

For its logistics processes, ZF is also working on projects with telematics. “We have a business unit that focuses on telematics. We are trying to bring this advantage and these systems to the truck,” he concluded.