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Indiaexportnews.com

High cost of production delays highlighted by survey

  27.08.2008    

Delays at the supplier’s facilities now account for almost twice as many late deliveries as failures in logistics processes, according to a new survey of European vehicle manufacturers and first tier suppliers. Automotive supply chains may reach increasingly deep into lower cost regions, but simple issues like the unavailability of packaging are still a significant cause of supply chain failure. The cost of late deliveries has escalated to as much as €1 million an hour in penalties imposed by vehicle manufacturers if production lines have to be stopped.
The annual Supply Chain Strength survey, conducted by emergency logistics specialist Evolution Time Critical, asked vehicle manufacturers and first tier suppliers for the reasons underlying supply chain problems over the past twelve months. The results were consolidated into seven categories. The most frequently occurring are transportation problems, production delays and order processing.
“It’s astonishing how many of the failures are due to scheduling issues, a significant number of which arise from a change in demand for a particular vehicle or option,” says Evolution managing director Brad Brennan. “Transportation problems are often as simple as the lorry not leaving the supplier on time, or the driver’s break not being factored into the travel time leading to a missed connection. Similarly with production delays, which are often attributed to second tier suppliers not providing components or materials on time. Dispatch has even been delayed due to lack of product packaging.”

Robust supply chains from Eastern Europe
Another surprising finding is that the new, extended supply chains from low-cost manufacturing regions in Eastern Europe have not led to a rise in late deliveries. “The frailty of East European transport networks has increased the overall incidence of transportation problems from 19 percent last year to 25 percent this year, but high levels of contingency are protecting the customers from late deliveries,” says Brennan. “This is certainly a good policy when in the ramp-up phase, but subsequently the additional costs can substantially reduce the savings made through low cost manufacturing.”
Evolution Time Critical is the only company that focuses exclusively on emergency logistics for the automotive industry. When conventional logistics processes cannot facilitate a delivery within the required time window (sometimes as small as two hours), Evolution Time Critical’s specialists react immediately, using their considerable experience and resources to ensure that assembly lines receive enough components to keep them running.
The company manages the full range of critical delivery modes, including aircraft charter, helicopters, onboard couriers, a 100-aircraft night freighter service covering 70 European airports, scheduled aircraft, and rapid road transport with local vehicles and drivers, but it is the expertise that delivers the solutions. As Brennan points out, “having a must-fly booking on a scheduled aircraft is useless if air traffic control won’t let it take off, or if strikes at customs stop you getting your shipment on-board. A light aircraft can often slip out of a small regional airport, with all the correct documentation, in a faction of the time. It’s about knowing what works and where to find it.”
The expertise of Brennan and his colleagues is also increasingly called upon to prevent issues occurring by identifying the points of potential failure in a supply chain and either resolving them or putting contingency plans in place. “The true benefits of manufacturing in low cost regions will only be felt when supply-chains can be leaned to world-class levels,” he explains. “This process can reduce costs and release significant amounts of capital tied up in stock as well as ensuring that customer schedules are met.”

Growing strategic use of high-speed deliveries
Another growth trend highlighted by the survey is the strategic use of high-speed deliveries. “Ultra lean supply chains tend to be inflexible, which can have an impact on their ability to service spikes in demand or to provide rare parts for unusual customer orders,” explains Brennan. “Appropriate use of high-speed deliveries improves the supplier’s responsiveness to customer demand and also allows further supply chain leaning. It’s a clever development that reflects the sophistication of the best automotive logistics operations.”


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