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| The Automotive Industry Gears Up for Growth |
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Contrary to popular opinion, the automotive sector is not a twilight industry. As it celebrates its centenary, it may be considered a mature industry in the traditional markets of North America, Western Europe and Japan. However, from a global perspective, it is only now about to enter its prime. People around the world are seeking more freedom and mobility, and this, coupled with increasing affluence in emerging markets, means that future growth in the automotive sector is all but certain. In fact, a Booz and Company study estimates that the global automotive market will grow from 672 million vehicles in 2008 to 1.1 billion in 2013, and to a staggering 1.5 billion in 2018.
Demand in such growth markets as China and India, along with other rapidly emerging economies, like Brazil, Russia, Argentina, Mexico, Malaysia, Indonesia and Turkey, is expected to power the greatest upsurge in the industry’s history. Meanwhile, the established markets in North America and Western Europe are showing signs of recovery, and not just due to government stimulus measures, as dealers replenish their stocks, and manufacturers respond to the trend towards leaner, greener mobility.
However, each of these widely varying markets has distinctive consumer demand patterns and needs. At the same time, competition within the automotive sector is also becoming much more intense, and consumers around the world are demanding vehicles at ever-lower prices. Add to this the environmental sustainability imperative, and automakers really have their work cut out for them if they are to be successful in this new business environment.
To respond to these challenges, global vehicle producers will need to innovate rapidly to meet diverse local requirements, while incorporating suppliers, assemblers and distributors from around the world into their value chain. Automakers that are agile and responsive, and ready to rethink their business models, will be in a position to reap the bonanza of this new market reality.
While the automotive sector has always been advanced in terms of logistics, and well-versed in continuous improvement, today, under the cost and competitive pressures of recent years, and the new global paradigm, it needs to completely rethink the supply chain. The industry now requires more modular supply chain solutions and global partners able to adopt local approaches and expertise. In fact, the supply chain – and by extension, logistics service providers – will play a crucial role in the automotive industry’s makeover.
“This is an exciting time of transformation in the automotive industry – and the supply chain will play a central role in this process,” confirms Fathi Tlatli, SVP Global Automotive/Aerospace, DHL Global Customer Solutions.
In this new era, manufacturers are looking for a more collaborative, creative approach from their logistics service providers, emphasizing joint solutions development. Sustainable logistics as well as a total value chain strategy will be indispensable. This means not just thinking in terms of improving the productivity of a manufacturing plant, but of the end-to-end supply chain. They also want their logistics partners to be global, to leverage best practices rather than reinventing processes, and to be more proactive in coming forward with solutions.
“Because DHL is involved in all aspects of the automotive logistics sector, and in all regions, we can leverage successful best practices between regions, markets, customers, and even industries,” explains Pascal Kemps, Strategy Director Automotive, DHL GCS. According to Pascal, this requires a more creative line of attack, bringing together sector expertise from across the Deutsche Post DHL Group to work jointly in multifunctional teams, to design solutions around sets of customers, or segments, within the broader industry. These segments include passenger vehicles, commercial vehicles, component suppliers, and the up and coming Asian manufacturers, particularly in India and China.
For example, in its Control Tower concept for transport optimization of inbound to assembly for passenger vehicles (see box), DHL is working on different modules that would be useful for more than one company in this segment. In this way, DHL can ensure better quality of service, while maintaining the flexibility of customization according to particular customer requirements. And, consistent quality is assured through the Group’s Six-Sigma quality program, First Choice.
At the same time, DHL is looking beyond the confines of the automotive sector when it comes to harnessing best practices. “We see more and more convergence between industries and a willingness to collaborate and benchmark, such as between aerospace and automotive, because of common challenges and opportunities, like sustainability,” explains Fathi. For example, the automotive industry is embracing such aerospace schemes as maintenance on demand and emergency spare parts. For its part, aerospace is borrowing the concept of lean supply chain and some aspects of inbound to manufacturing from automotive.
The growing importance of environmental sustainability – as evidenced last December when automakers reaffirmed their commitment to sustainability at the Copenhagen climate conference – also means that this will be an important area of opportunity for logistics providers. This is because a logistics service provider like DHL has the knowledge and experience of product and information flows in the supply chain, as well as the ability to track and trace, which can be used to monitor performance. DHL’s GoGreen climate protection program, as well as its experience in measuring the environmental impact of the supply chain, further reinforces its credentials as a partner in sustainability for its customers.
“Automakers are evolving,” says Manoëlla Wilbaut, Marketing & Business Development Director Global Automotive/Aerospace, DHL GCS. “As demand increases in emerging markets, they are moving production to stay close to their customers, and reduce costs. Because these markets have their own specific characteristics (infrastructure, legislation, customer habits…), having the full support and expertise of a leading logistics provider in these regions represents a strong competitive advantage.”
All the major global vehicle manufacturers count on DHL’s automotive logistics know-how for their supply chains. Having built up a level of trust over the years with companies such as BMW, Daimler, Ford, GM, and Volkswagen, among others, along with newcomers like India’s Tata, these manufacturers have put their confidence in DHL to help them manage the transformation of their global supply chains.
BMW, for instance, recently awarded DHL a key contract for the airfreight transportation of production material and spare parts from Germany to plants and spare parts distribution centers at more than 30 destinations across Asia. DHL also handles the intra-Asia transport from Malaysia via Singapore to BMW spare parts distribution centers in over 20 destinations in the Asia region. A DHL global Control Tower in Munich is responsible for ensuring overall quality, program consistency, continuous improvement, and contract management.
As the automotive industry emerges from one of the most difficult periods in its history, it is now poised to enter a new era of global growth. To fulfill this promise and meet the new challenges this will entail, such as rebalancing global production (Brazil, India, Russia…), responding quickly to variations in local demand, stricter sustainability requirements, and nimble new competitors, the industry will need a supply chain partner with sector expertise and global capabilities to match. It is precisely these qualities that make DHL, the logistics provider of choice, delivering sustainable solutions for the industry going forward.
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| One particular automotive customer has achieved savings in excess of €100m, while another has reduced their logistics cost per vehicle produced by 50% in a timeframe of just four years. |
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The Control Tower View
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Like the airport tower with an unimpeded view over all operations at an airfield, a Control Tower to manage the logistics flow is a smart way to maintain an optimized supply chain. DHL offers three types of Control Tower services for the automotive industry, each providing particular value for customers.
Proactive Performance Management
A good example of Proactive Performance Control Towers is the Quality Control Centers (QCC) that DHL Express has in use around the world. A QCC continuously checks timeliness of aircraft arrivals and departures, sorting activities, etc., and, as soon as a potential issue is detected, triggers actions to avoid service disruptions. As the global market leader for time critical spare parts distribution, DHL’s automotive customers highly appreciate this service, which is reflected in the results of our annual customer satisfaction survey.
Dynamic Supply Chain Management
Because just one missing component can potentially stop the production line in a lean manufacturing environment, perfect visibility of incoming materials flows is essential to avoid disruptions. To this end, DHL has established three interconnected regional Control Towers (in the Americas, Europe and Asia Pacific) to monitor the progress of production material against the customers' actual production planning. The routing of the material occurs using the most efficient method of transport – ensuring the shipments arrive at the plant exactly when required.
Supply Chain Planning
DHL runs several Control Towers whose task is to continuously optimize customer supply chains. These services range from "basic optimization," such as improving container planning over materials management, to lesser known services, such as packaging design. Thanks to our in-depth knowledge of both the logistics and automotive markets, we have been able to deliver significant savings to our customers. One particular automotive customer has achieved savings in excess of €100m, while another has reduced their inbound logistics cost per vehicle produced by 50% in a timeframe of just four years.
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Changing ways for components
In a context of growing pressure on margins and sluggish production in domestic markets, components suppliers have been busy dramatically expanding their operations abroad (in Asia and South America). To meet the significant, long-term investment required for a new era of greener cars, added to the shorter replacement cycles and larger product range of the automakers, components suppliers have been forced to slash costs and improve business efficiency. The most internationalized and diverse players have also seized the opportunity to reinforce their positions in the market by expanding their operations through opportune mergers & acquisitions.
Given these new demands on components suppliers, this is a good opportunity for DHL to harness its long-term partnership with the sector and make the most of the next growth cycle through its focused industry strategy.
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For more information, please contact your Customer Manager or gcscommunications@dhl.com
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