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Automotive LOGISTICS

BREAKING DOWN BARRIERS IN AUTOMOTIVE SUPPLY CHAINS

JANUARY-MARCH 2018 20TH ANNIVERSARY YEAR

Simplifying supply chains Colin MacDonald on increasing standards for Renault Nissan’s production in India

(`LHYPUYL]PL^ Trade agreements/ disagreements, takeovers, disruption and more from 2017

9LKLÄUPUNUH]PNH[PVU How the What3words start-up could change [OL^H`SVNPZ[PJZÄYTZ read global maps

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Audi’s digital control The carmaker continues to introduce advanced technology into its supply chain processes

Who you gonna call? The supply chain is turning to data, IT and specialists to better respond to disasters

US e-logging mandate Long-awaited ELD requirements come into force with worries over limits to truck capacity

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Automotive LOGISTICS Content director q Christopher Ludwig q [email protected] Editor q Joanne Perry q [email protected] Senior editor q Marcus Williams q [email protected] Managing editor q Robin Meczes q [email protected] Online editor q Gareth Tredway q [email protected] Associate editor q David Fagan Contributors q Chris Lewis q Greg Thompson q Vladislav Vorotnikov q Malcolm Wheatley q Andrew Williams Design director q Matt Crane q [email protected] Senior designer q Steven Singh Bains q [email protected] Junior designer q Nicole Masterman q [email protected] Group sales manager q Gavin Andrews q [email protected] Account managers q Brett Dempsey q [email protected] q Alistair Newton q [email protected] FVL publisher q Matt Allard q [email protected] Group publisher q Louis Yiakoumi q [email protected] Advertising sales support q Kate Rooney q [email protected] Circulation manager q Justyna Makowiecka q [email protected] Head of marketing q Chris Mott q [email protected] Finance manager q Piers Marshall q [email protected] Managing director q Karen Parks q [email protected] Circulation enquiries To register for a free subscription to Automotive Logistics, visit www.automotivelogisticsmagazine.com Ultima Media Circulation, PO Box 179, Ely CB7 4YN, UK Tel: +44 (0) 1353 665576 Fax: +44 (0) 1353 669030 e-mail: [email protected] Single copies available at €30 / $40 / £20 Ultima Media Ltd. 401 King Street, Hammersmith, London W6 9NJ, UK Editorial Tel: +44 (0) 20 8987 0968 Advertising enquiries Tel: +44 (0) 20 8987 0944 Copyright© 2018 Ultima Media Ltd. All rights reserved. No part of this publication may be reproduced in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this publication) without the written permission of the copyright owner except in accordance with the provisions of the Copyright, Designs & Patents Act (UK) 1988 or under the terms of a licence issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1P 0LP UK. Applications for the copyright owner’s permission to reproduce any part of this publication should be forwarded in writing to Permissions Department, Ultima Media, 401 King Street, Hammersmith, London W6 9NJ, UK. Warning: The doing of an unauthorised act in relation to a copyright work may result in both a civil claim for damages and criminal prosecution. automotivelogistics.media

ISSN 1471-6003

JANUARY-MARCH 2018

EDITOR’S NOTE

M

anaging the complexity of the supply chain is a badge of honour for manufacturers and providers, whether it’s the varieties of part numbers, long distance supply, changing demand patterns, or new technology. However, no matter how complex, the goal of new processes or systems should be simplicity. The more standard and repeatable the transport, packaging or paperwork, the more an operation will benefit in lower costs, errors or time. Take Renault Nissan in India, whose plant, near Chennai, is one of the Alliance’s largest globally. But as Colin MacDonald, managing director of the division points out, it is also among the most complex, including four vehicle platforms and 12 model derivatives. The variation has often made production and logistics, including parts kitting and packaging, more difficult and costly. But thanks to more standardised platforms, the plant is reducing parts types and simplifying logistics. It will never be easy to meet demand in India, or navigate its congestion, but standardising engineering, production and logistics will make the Alliance more competitive (see p24). It isn’t easy, however, to integrate new technology, whether for efficiency or regulations. Look at the challenges of adding electronic work logs in the US trucking sector (p53). However, the simplicity principle still holds: don’t add tech, no matter how basic or advanced, or change a process, if it makes things harder. Audi understands this better than most, as it rolls out advanced technology with the aim of reducing walking and errors, for example (see p34). Speaking of positive changes, I’d like to flag something new for 2018. After more than eight years as editor of Automotive Logistics, I’m taking on a new role responsible for the content across our automotive brands at Ultima Media, which includes logistics, Automotive Manufacturing Solutions (AMS), Car Design News and our latest addition, automotiveIT International. I will still be closely involved with our logistics titles and conferences, but my colleague, Joanne Perry, will take over as editor starting in January. Most recently the deputy editor at AMS, Joanne will bring manufacturing experience along with creativity and new ideas to logistics. She will also work closely with our experienced team, including Marcus Williams and Robin Meczes. Consider all of us at your disposal and be in touch with ideas and thoughts. In the meantime, we wish you all a happy and healthy New Year. q Christopher Ludwig, Content director tel: +44 (0) 20 8987 0968 e: [email protected]

BRAND REPORT

AUTOMOTIVELOGISTICSqJANUARY-MARCH18

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Automotive LOGISTICS contents JANUARY - MARCH 2018

06 Comment, analysis and headliners 2017 timeline – 06 Executives on the move at Audi, Ford, DB Cargo, Hellmann Automotive Logistics and Höegh Autoliners – 08 Seat and Telefónica’s blockchain link-up – 10 Magna spotlights skills and technology – 12 Indian executives call for collaboration – 14 Still signs of survival in Brazil – 15

16 New: Spotlight on start-ups In the first of a new series highlighting the innovative new companies who may one day break into the automotive supply chain, we highlight the online map and mobile app, What3words

p16 Mapping the future with What3words

18 Global conference: Desire for disruption At this year’s Automotive Logistics Global conference in Detroit, delegates said the sector needed to challenge traditional practices to attract the next generation of digital talent

p18 The right kind of disruption

20 UK summit: Chances out of uncertainty From the confusion over Brexit to the impact of in-car technology and electric powertrains on logistics, change was very much on the agenda at the Automotive Logistics UK summit

22 UK summit: Mini plant, huge complexity Delegates at the UK summit were offered a tour of BMW’s Mini plant at Cowley, near Oxford, during which they saw first-hand the complexities, capacity and constraints of the brand’s logistics operations

p22 Maximum ambition for Mini

34 Audi: Prepared for a new reality Audi’s head of brand logistics Dr Michael Hauf joins plant logistics heads at Ingolstadt and Neckarsulm to reveal how the OEM is moving fast to bring new types of automation and technology into its logistics

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p34 Audi’s advanced automation

on the cover 24 A strong link in the Alliance Colin MacDonald (right), managing director of Renault Nissan Automotive India, talks to Christopher Ludwig about how far the carmaker has come in building multiple brands at its Oragadam plant, near Chennai, and how it is navigating the complexities of both the country’s supply chain and its own varied production output

44 Materials handling: no small change With manufacturers focusing on productivity and waste reduction, the increases in speed, efficiency and safety brought about by automated materials handling mean investment is set to increase

48 Stopping a disaster becoming a crisis With a series of extreme weather events causing havoc in global supply chains in 2017, we investigate the measures required to protect just-in-time deliveries against such eventualities

p44 The business case for handling automation

53 ELDs: End of the road for paper logs While some carriers may initially be feeling the negative effects of the now mandatory electronic logging of driver hours, the US trucking sector also stands to gain from a new safety-led culture

58 Russia supply: Get local, or get out To increase supply chain localisation, the Russian government’s ‘Special Investment Contracts’ will end current incentives and look to encourage more tier two and tier three investment

p48 Weather-watching to expect the unexpected

62 Drones in logistics: Going up While there is huge potential and interest in the use of drones within both inbound and outbound automotive supply chains, the technology has a way to go before the dream becomes a reality

65 Whatever makes you appy

p53 Logging on to a new system p62 Drones take flight in logistics

As carmakers’ technological requirements outgrow their legacy systems, there is an increasingly powerful business case for partnering with developers of apps that provide flexible solutions

69 Company list and next issue preview Track every company mentioned in this issue and look ahead to our April-June issue

70 Last Mile: Look ahead to 2018

p58 The writing on the wall in Russia’s future supply chain

From trade negotiations to the EV supply chain, we highlight some of the coming year’s hot topics


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COMMENT & ANALYSIS 2017 TIMELINE

2017: a year of negotiations, electric plans and cyber attacks

Ford cancels plans for a new assembly plant in Mexico, diverting investment to the US and consolidating new Focus production at an existing Mexican plant. Later in the year it cancels the Focus plans for Mexico as well. The carmaker cites changing market demand rather than criticism over imports from Mexico from Donald Trump

JANUARY

/"+ % /*("/ /,2-" ,+‫ޖ‬/*0 it is in talks to acquire General Motors’ European business, which includes the Opel and Vauxhall brands. The deal is completed in July, with major implication for the brands’ logistics and supply chains Chipmaker Intel enters the autonomous car sector with the acquisition of Mobileye for just over $15 billion, in a strong signal over which companies may be shaping the future supply chain

FEBRUARY &*)"/ ,+‫ޖ‬/*0 investment of more than €250m ($263m) &+&10‫ޖ‬/01200&+ production facility to begin manufacturing Mercedes-Benz cars in the country from 2019. In November, BMW also announces plans for a Russian plant

Donald trump is inaugurated president; he immediately signs a declaration removing the US from the 12-nation Trans &‫ ޖ‬/1+"/0%&- (TPP) trade deal, and starts making preparations to renegotiate the North American Free Trade $/""*"+1ҙȇҚ

06

MARCH The UK triggers /1& )"цсѸ,Ȅ& &))6 starting the two-year countdown to Britain leaving the EU. The UK’s plans to leave the single market and customs union raise questions about integrated supply chains. In December, ȇ"/*2 % (+! forth, the UK and EU reached an interim agreement over key separation issues that would allow trade negotiations to begin in 2018


&,1,/0 ,+‫ޖ‬/*0 the signing of an agreement with the State Government of Andhra Pradesh, India, to build its ‫ޖ‬/01*+2# 12/&+$ facility in the country for $1.1 billion. Hyundai Motors, which controls Kia, is already the country’s second largest OEM

APRIL

China’s president Xi Jinping announces investments of $124 billion toward further developing transport and logistics links across the ‘New Silk Road’. Government subsidies have been supporting many new automotive services along the China-Europe rail route, including Volvo Cars from China handled by Changjiu Logistics BMW factories in Germany, China and South Africa are temporarily disrupted by a shortage of steering parts from supplier Bosch

MAY

GM suspends operations in Venezuela ȇ"/1%"$,3"/+*"+1 seized its plant in the country without explanation amidst heavy protests. The Valencia plant had already virtually halted because of government import restrictions and shortages of raw materials over the past two years

JUNE

A massive cyberattack hits global shipping companies in a move later estimated by FedEx’s TNT Express division and containershipping giant Maersk to have cost as much as $300m each

COMMENT & ANALYSIS 2017 TIMELINE

A look back at a year that could point to major changes ahead... *For an outlook on 2018, see p70

An economic partnership is agreed in principle between the EU and Japan that should eventually remove duties on the large volume of goods traded between two regions, including cars and parts Volvo Cars announces that all its cars launched from 2019 will have an electric motor. MercedesBenz and JLR later make similar commitments to ,Ȅ"/")" 1/& *,1,/0 in all model lines

JULY A Goods and Services Tax ҙ Қ&0‫ޖ‬+))6 introduced in India, replacing multiple individual state taxes and encouraging the redesign of supply chains with a 0*,,1%"/‫ޗ‬,4,# goods around the country – although the initial rollout is somewhat messy

A high-speed rail tunnel being built underneath the German town of Rastatt collapses, resulting in major delays and diversions as the existing main line railway, used by 200 freight trains per day, is shut for almost two months Toyota and Mazda form an alliance to build a $1.6 billion plant in a yet-tobe-determined US location. At the same time, Toyota delays plans for a new plant in Mexico until 2020

AUGUST

2014""(0ȇ"/ Toyota produced &10‫ޖ‬+)3"%& )" in Australia, GM marks the end of production at its Elizabeth plant in South Australia and with it the ,Ȅ& )"+!,# / manufacturing in Australia. A year earlier, Ford closed its factory in Broadmeadows

Mercedes-Benz announces plans to invest $1 billion in the US for electric vehicle and logistics capabilities; it follows multiple EV and battery-related investments by the OEM this year in Germany and China

SEPTEMBER

Talks to renegotiate ȇ,Ȅ& &))6 begin between the US, Mexico and Canada. The US has since demanded major increases in the local and US content requirements in the agreement for manufactured vehicles, which the other two countries have opposed as “unworkable”, putting the 24-year old agreement at risk

Volkswagen reveals plans for nearly €22.8 billion of global investment to prepare its plants for modular production and electric vehicle manufacturing capabilities

General Motors and later Volkswagen Group announce major investments in Argentina and Brazil as the South American market shows some signs of recovery

North American ȇ"/*/("1-/10 distributor Genuine Parts Company moves into the European region with the buyout of Alliance Automotive Group (AAG) for $2 billion

OCTOBER

The long-awaited mandate for electronic logging in the US goes &+1,"Ȅ" 1Ѹ/&0&+$ questions over compliance and capacity (see p53)

NOVEMBER

Several corporate scandals ripples through Japan’s supply chain. Kobe Steel admits to having shipped thousands of tonnes of products in the previous year which did not *""10-" &‫ ޖ‬1&,+0Ѹ)"!&+$ to production slowdowns and extra checks. Separately, Nissan later admits to inappropriate -/ 1& "0&+1%"‫ޖ‬+)&+0-" 1&,+ of vehicles, and is forced to halt production across Japan for two weeks. Subaru also admits to inspection issues, but maintains output

DECEMBER

Tesla unveils its electric class-8 truck, which it claims has a range of 800km at maximum weight. A number ,#),$&01& 0‫ޖ‬/*0Ѹ including JB Hunt and Girteka, announce orders of the truck


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COMMENT & ANALYSIS PEOPLE

Peter Kössler has been appointed board of management member for production and logistics after a major Peter reshuffle was announced Kössler at Audi. He has replaced Hubert Waltl, who held the position from April 2014. The appointment is part of a host of management board changes as the company looks for change following the diesel emissions scandal that has affected several Volkswagen Group companies. From 2007 until 2015, 58-year-old Kössler was the director of Audi’s main plant in Ingolstadt, responsible for all production-relevant areas and sitespecific duties such as plant logistics, environmental protection and plant security. Also at Audi, Andreas Lehe has moved from his role as paint shop manager at Audi’s Ingolstadt plant in Germany to become Andreas Lehe managing director of production and logistics at the carmaker’s plant in San José Chiapa, Mexico. He took up the role in October 2017 and replaces Klaus Peter Körner, who has retired from the company. Lehe has worked for Audi for 23 years and according to the company he is considered “a proven expert in surface technology”. In his last role, he helped in the production launch of the firstgeneration Audi Q5 and its process through the paintshop. In Mexico, Audi plans to make 150,000 Q5s this year. “With Andreas Lehe, we will have a proven expert heading production and logistics at Audi México,” said Alfons Dintner, CEO of Audi México. To fill Lehe’s role at the paintshop in Ingolstadt, Audi has appointed Carsten Mohr, currently head of paintshop at the Audi Mexico plant. Mohr was due to start on January 1st. (For more on Audi, see p34.)

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Lisa Drake was due to replace Birgit Behrendt from January 1st as head of global powertrain purchasing and global Lisa purchasing operations Drake at Ford. In the new role, Drake will be responsible for all powertrain purchasing operations worldwide, as well as global operational purchasing performance. She will report jointly to Hau ThaiTang, executive vice-president, product development and purchasing, and to Raj Nair, executive vice-president and president of North America at the carmaker. Drake joined purchasing in 2013 as director of global programme purchasing and most recently served as director of global interior purchasing, a position she took on in August 2016.

and founder of Hellmann Automotive Logistics. Wehner has worked for Hellmann Worldwide Logistics for 15 years. He began his career in 2002 as a team leader in air and ocean freight at the Hamburg site. In 2005, he joined the automotive unit in the Osnabrück group headquarters. There, he developed automotive manufacturer and supplier business, particularly in the Asia Pacific region as a global sales manager, and also played an important role in establishing Hellmann Automotive in the market for contract logistics. In December, meanwhile, Dr Dieter Schramm moved to the position of head of global IT at Hellmann Worldwide Logistics. He was formerly engaged as head of IT operations and organisation at Mitteldeutsche Erfrischungsgetränke.

DB Cargo appointed Roland Bosch to the role of chief executive on December 1st. The move followed the resignation from the Deutsche Bahn division of former CEO Jürgen Wilder in

Ivar Myklebust, formerly chief financial officer at Höegh Autoliners, has taken on the role of CEO, following the departure of Ingar Skiaker, who has Ivar Myklebust moved to Leif Höegh & Co, the Høegh family’s shipping holding company, in the role of director. Prior to joining Höegh Autoliners as CFO in 2014, Myklebust was head of strategy and special projects in Nordea’s shipping, offshore and oil services division. He has also worked at D/S Norden as CFO, at Anders Wilhelmsen & Co and at Pareto Securities. “I am pleased that Ivar Myklebust has accepted to take on the role as CEO of Höegh Autoliners,” said chairman, Leif O. Høegh. “He knows the company very well, and his energy and focus will greatly benefit Höegh Autoliners as we seek to further develop our business.” Skiaker decided to step down after six years as CEO of Höegh Autoliners, following the company’s recent settlement with US authorities after a price-fixing investigation. q

Roland Bosch

October. Bosch moves into the new position from his role as head of production at DB Netz, the railway infrastructure subsidiary that owns and operates the majority of the German rail network. He joined DB Netz as chief financial officer after working at what was then DaimlerChrysler, where he was CFO for its north-east Asia region. As CEO of DB Cargo, he will be responsible for 30,000 employees in 16 European countries.

Martin Wehner


Martin Wehner has been appointed as the new head of Hellmann Automotive Logistics, following the retirement of Bernd Oevermann, a 30-year company veteran

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COMMENT & ANALYSIS SEAT & TELEFÓNICA

Seat and Telefónica form inbound blockchain partnership In a move that demonstrates how the high-tech, communication and automotive supply chains are converging, Spanish telecoms provider Telefónica has become an IT supplier to carmaker Seat. The companies signed an agreement in November that covered both in-vehicle and business IT areas, including plans to develop connected car technology, as well as to digitalise the supply chain and manufacturing process. Among the aims of the agreement is the application of high-speed 5G connectivity in the car, including applications in autonomous driving. Telefónica is rolling out its 5G networks, which will support device-to-device connections with better capacity, reliability and speed. “With this agreement, Seat consolidates itself as a benchmark in the sector’s digitalisation,” said the OEM’s

December that it would build the tallest warehouse in Spain for automated package handling to feed inbound supply at its plant in Martorell, near Barcelona.

Blockchain database Blockchain is the digital ledger technology behind cryptocurrency bitcoin and is increasingly seen as an effective and secure way of holding and sharing data across multiple parties. It is one of a number of developments in digital connectivity that have huge implications for freight and logistics.

Luis Miguel Gilpérez (pictured above, right), president of Telefónica Spain, with Luca de Meo, president of Seat, which is building a huge automated warehouse near Barcelona

president, Luca de Meo, in a statement. “Joining forces with Telefónica as a strategic partner enables us to take a major step forward in our commitment to offering mobility solutions that make lives easier for the drivers of our vehicles.” The deal is also a sign of continued efforts at Seat, and the wider VW Group, to gain advanced levels of supply chain control, automation and optimisation. For example, the agreement also covers research into the potential applications of big data – including both predictive and behavioural analytics – as well as blockchain applications, which could offer solutions for parts shipments. The agreement also accompanies further investments from the carmaker, including an announcement in

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Seat’s head of innovation and smart factory, Francisco Requena, told Automotive Logistics that the company had been exploring blockchain applications at its factories to improve production processes for logistics, manufacturing, maintenance and quality. “Currently, we are working on a pioneering innovation project to assess the potential of blockchain technology in the automotive industry in collaboration with Telefónica and Ficosa [a technology research firm],” said Requena. He explained that, in collaboration, the companies were using blockchain technology to create a distributed database system shared with multiple participants in the automotive business network, including suppliers, carriers, factories, dealers and customers. “Our blockchain database system will enable an immutable, secure and


confidential record of transactions of assets, including parts, containers, finished cars and customer claims,” said Requena. Permission to access the database would be based on participants’ needs, he added, and new transactions would be validated by those participants before being recorded in the database to ensure a consensus on recorded information.

Blockchain and IoT The cooperation with Telefónica also covers the development and application of industry 4.0 technologies in the vehicle manufacturing process, according to the companies. Using blockchain with existing parts tracking technology means those involved in the inbound supply chain with access to the database system will have an enhanced view by being connected with internet-of-things (IoT) sensors and smart devices. Using such technology will help to give an accurate and transparent end-to-end view of part location, quantity, status and other useful information, according to Requena. As a result, Seat’s plants should be able to plan production schedules more accurately, improve the traceability of parts and increase the speed of flow of goods in a just-in-time network. “Suppliers will be able to lower or optimise inventory levels, reduce the quantity of lost or erroneous orders, lower warehousing costs and raise inventory turns,” said Requena. “All in all, a blockchain database system can build trust and reduce disputes between parties, accelerate transactions, increase efficiency and reduce costs.” Seat is also planning to use IoT technology in conjunction with blockchain technology for enhancing and streamlining procurement management and supplier relations. According to Requena, a blockchain database system would enable greater transparency of accurate information between the different parties and faster processing of payments and procurement documentation. q Marcus Williams

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COMMENT & ANALYSIS MAGNA

Magna debates future skills and technology At Magna Logistics’ annual meeting in the autumn, executives from the tier supplier’s various divisions and service providers gathered to discuss questions of talent, technology and innovation. “There are three core priorities when it comes to what we need from our service providers,” said Magna Logistics Europe’s director and global logistics lead, Dr Jörg Blechinger. “Worldclass processes and manufacturing, innovation and people development and leadership.” Recruiting talent was a concern for both Magna and its partners because the millennial workforce had different priorities when it came to career path and working culture. According to Bridget Grewal, director of packaging continuous improvement at Magna International, millennials prefer a broad scope of understanding and would rather employ the latest technology to solve problems rather than serve decades becoming specialists in areas like packaging, IT or transport. “A millennial is not going to go into depth like we did, in our generation, to find out how to cube a truck and how to create a package design that is most cost-effective across all the different groups,” said Grewal. “What they are going to want is a tool that we create with our knowledge to make a simple calculation and get an answer that is within 5-10% accurate.” Avoiding frustration and flight among this new generation was seen as a real challenge by speakers at the Magna event; good leadership that understood the latest disruptive technology was the answer, they said. “Focusing on leadership skills is important and it has to do with execution – to take on the responsibility for a function means also to act as a leader,” said Alfons Dachs-Wiesinger, director of logistics services at Magna Steyr, the company’s contract manufacturing division. “We are still finding a lot of good people but to integrate them into our teams is quite demanding. A leadership attitude is really necessary.” Nick Beard, managing director of global sales at FedEx, pointed to one of

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the company’s ‘coach to grow’ training principles and its emphasis on people as the foundation of the company. He said inclusion was essential for a millennial worker. “If you don’t include [millennials], they will switch off,” said Beard. “You have to really engage them and bring them into the project to make it happen. They want little successes and if you can culture that environment for those individuals then you are a long way

Dr Jörg Blechinger emphasised the need for Magna’s suppliers to develop their workforces

there; but ignore them and just give them a task without any explanation, and they’ll go.” Beard has some figures to back up the importance of garnering talent for the industry and said succession planning was critical to the future of any organisation. “There is a danger in our logistics industry that the next 10-15 years we are going to lose 25% of our management because they are retiring,” he said. “We need to rapidly develop the young millennials and others through structured organisational value programmes because if we don’t, we are never going to keep them.” Executives were also interested in disruptive technology, including equipment and the software integrated into it. For example, electric trucks were already being trialled in Austria, according to Dachs-Wiesinger. He suggested such equipment could be very effective for Magna Steyr’s local suppliers and deliveries at its plant in Graz, although it would not currently work for the company’s growing number of long-distance suppliers. For suppliers further away, including


long-distance, just-in-sequence deliveries, truck platooning could be an interesting solution, said DachsWiesinger, although there were still many things to work out. “Suppliers have a long distance to the plant and they deliver in sequence, so transport is critical,” he said. “If one truck is affected, the company can’t pull forward the next one because it will have the wrong parts.” Grewal talked about the potential of new technology inside the plant, including vision-guided systems that could move autonomously, replacing fixed-path automated guided vehicles (AGVs). “Flexibility within the four walls of our plants is becoming important,” she said. (See p44 for more on AGVs.) Dachs-Wiesinger said one of the most important considerations for the company was understanding the internal processes that its service providers used, and how to make that transparency mutual, including improved data exchange and richer analytics. The company has a strategic project involving the data analytics of transport designed to identify the patterns and improve processes and planning, along with quality and cost.

Cyber-security Digitalisation in the supply chain, however, brings concerns over data security. This past year saw a number of notable security breaches and attacks, including the NotPetya cyberattack in June, which hit Maersk and TNT Express, among others. Magna has implemented a risk group that is investing big sums in cyber risk insurance. Nick Beard detailed how TNT Express, now owned by FedEx, last year dealt with the complete breakdown of the company’s global service systems, something that was estimated to cost it $300m. “The whole organisation, involving 60,000 people, had to go into survival mode, supported by FedEx,” said Beard. “We had to rebuild every server in the business and every laptop.” He said the company reverted to old

COMMENT & ANALYSIS MAGNA

systems last used in the early 1980s, supported by company-wide use of the messaging service WhatsApp to communicate at different levels. “To give you an idea of the scale of what our team achieved, we shipped 12m consignments in the 100-day period [when the company systems were down],” said Beard. “All those people [were] pulling together and going back to the old ways: communicating by phone, using paper and having control of the command routes. We are through it and we are a lot stronger – but it has been a hell of a journey.” Vehicle electrification is also set to have big impacts on logistics. Dirk Lichtmann, senior director for Global SCM at Magna Powertrain, pointed to the weight of batteries and difficulties in transporting them. “Each battery is 400kg plus and you have to transport them across Europe; think about what changes this will mean,” he said. Jörg Blechinger said that production and logistics would change globally and

that the increased value of high-tech parts would put a new emphasis on quality control and security. “There will be a significant change in our production and we will have to improve our packaging,” said Blechinger. He said Magna had set up an expert team looking at packaging planning in Europe, alongside the transport lean management expertise it had in place. That expertise involved people at a plant level working together with corporate management. Grewal said the company needed to develop smarter and more flexible packaging that could be used for different types of parts. “The packaging engineers are the ones that are going to have to develop that and we have to start making the packaging more effective by using it in different ways, such as using it to cool the part more slowly to help the rust situation, for example,” she said. “We will have to develop this at a faster pace; we will not have seven months to develop it, we will have seven weeks.

Flexibility and having smart packaging will be very important to us.” Preparing for future supply chain operations will demand a greater focus on the planning and strategic parts of the business, according to Blechinger; he emphasised that Magna was looking for experienced partners to support it in these developments. Lichtmann, meanwhile, stressed the importance that partners should play in eliminating waste and unnecessary shipments. “The best logistics is no logistics at all. Every freight move you can avoid is a good thing,” he said. Ultimately, Blechinger suggested, the changes coming to logistics would touch every part of an organisation such as Magna and its partners and would require close cooperation and training, from the newest starter to veteran managers and suppliers. “The future of logistics means a digital transformation of the supply chain. We have to prepare our people for those digital challenges,” he said. q Marcus Williams

COMMENT & ANALYSIS AUTOMOTIVE LOGISTICS INDIA

Once in a lifetime Many discussions at this year’s Automotive Logistics India summit, in Chennai, would have sounded familiar to those who attended the first conference a decade earlier: infrastructure deficits, underdeveloped connections, a lack of rail transport options, a fragmented logistics market, a highly bureaucratic and unproductive customs regime, and the proliferation of state border delays. However, most delegates would also recognise undeniable progress, especially given the once-in-ageneration reforms that have been implemented in the country. These have included road investments and new focus on rail services and equipment for the automotive sector, as well as new truck standards. Perhaps most importantly, last summer saw the implementation of the long-awaited Goods and Services Tax (GST), which some expect will improve multimodal logistics and distribution. “GST was the talk of the town, now it is the walk of the town – everybody is busy adjusting their accounts and reporting systems,” said Achal Paliwal, head of Tata Motors’ outbound logistics and sales division, TML Distribution. The legislative changes have been significant, especially after the “policy paralysis” of previous years, as one delegate put it, and are regarded as essential for the country’s logistics industry to compete on a global basis. Probably the most significant legislative change has been the introduction of the GST as a means to simplify interstate trade, reduce tax bureaucracy and create a common market in India. While speakers admitted that some aspects of the GST rollout have been confusing – including six different tax classes and a number of changes in the first months for some vehicle categories, as well as an initially negative impact on sales as consumers waited to assess the tax’s impact on prices – executives also pointed to the benefits starting to show, with improved journey times on some of the country’s major routes. “This GST is one thing that we have been wanting for a very, very long time.

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I would say there are certain policy changes that have happened in the last two years related to the logistics industry [and] I do not know when we will see this type of reform again,” said Prem Verma, project leader logistics at Tata Motors, who has led much of Tata’s vehicle logistics for the past decade.

Signs at the borders Several speakers pointed to positive signs for the logistics industry in the wake of GST as state barriers start to come down, even if they may take a while to filter through the supply chain. Amit Bhardwaj, senior research officer for transport at the National Institution for Transforming India (NITI Aayog), a government-sponsored think-tank, said the issue of implementing the new tax system was at state level, where existing border checkpoints had to be removed.

TCI’s Jasjit Sethi said there were no more excuses to avoid improving logistics

“This is something that was very close to the states’ hearts because they earned revenue from them, so they don’t want to do away with it immediately. Slowly, slowly, we are pushing them to remove them. Some states are done and in some it is still going on,” said Bhardwaj. “By [the end of 2017] we will see the major states removing these.” Anand Venkateswaran, senior general manager, sales logistics at Hyundai in India, told delegates at the summit that while it was still early days, there was anecdotal evidence of improvement, thanks to GST. “We have been hearing that the truckers have been able to move much faster, and we have seen it translate into a quantifiable reduction in transit times,” he said. As an example, said Venkateswaran, typical transit times on the Chennai to Delhi route had gone down to around 6.7 days, from 8 days previously.


Mohd Shahid, head of logistics operations and supply chain management at Daimler CV India, said he, too, had seen initial reductions in transit times. Consultant PR Ramakrishnan, former general manager of supply chain management at Honda Cars India, gave an example of a border where there were already signs of major improvements. “During my visits before the implementation of GST, I saw 500600 trucks [lined up]. During my last two visits at the end of August and in September, I did not find any trucks,” said Ramakrishnan. Seamless inter-state access is seen as key to speeding up the movement of goods in the country. Delays average as much as 4.3 hours at some inter-state borders, said Bhardwaj, who pointed out other government initiatives such as standardised documentation, electronic tolling and integrated checkpoints as further ways to speed things up. In its recent IPO document, Mahindra Logistics, a major automotive logistics service provider in the country, indicated it, too, was positive about the implementation of GST. “We expect the GST regime to benefit the inter-state movement of goods, which may lead to opportunities for the growth of our business. We expect companies across several industries in India to make their storage and transportation decisions on the basis of logistical efficiencies instead of their tax efficiency, and restructure and optimise their storage, logistics and supply chain systems,” said the company in the IPO prospectus. OEMs also agreed that further collaboration between carmakers in logistics could help unlock further success in the country’s automotive industry. “We feel the government has done its bit. Now it is really up to us to see how we can take advantage of that and see a leapfrog [forward] in terms of logistics. We have no more excuses to give,” concluded Jasjit Sethi, chief executive of TCI Supply Chain Solutions. Gareth Tredway • Interview with Renault Nissan India, p24 • For full coverage and videos from India, visit: bit.ly/ALindia2017

COMMENT & ANALYSIS SOUTH AMERICA SUMMIT

Holding on to the hard-won gains in South America The Brazilian economy has had it rough over the past few years, experiencing its deepest recession since the 1930s and a drought in new vehicle sales from 2013 through to 2016. This long crisis laid waste to many parts of the Brazilian and wider South American automotive sector and its supply chain. Suppliers went bust or closed factories; several carmakers, including China’s Chery, mothballed or sold production sites; other manufacturers cut back investments and scaled back former plans; and logistics firms went out of business, sold assets or consolidated to survive a decline in rates and volume. But there were some positive developments. The government, though in significant turmoil, has made moves to improve some business processes, such as customs clearance, while lowering taxes in certain areas; efforts have been made to support exports, including fast clearance lanes at ports. There have also been moves to improve trade relations, especially with the Mercosur trade bloc, which includes Brazil, Argentina, Paraguay and Uruguay (Venezuela is currently suspended). Companies have made many changes to survive, including cutting costs and working to become more competitive for an eventual return to growth. Finally, light is appearing, with GDP growth up, inflation down and the Brazilian real at a competitive level. Forecasters expected new light vehicle production to finish almost 25% higher in 2017 than in 2016, at 2.6m units, according to Helton Arsenio, senior marketing analyst at PwC Autofacts in Brazil. The assembly growth has been driven by double-digit gains in domestic sales and a surge in vehicle exports. Only the strong survive Speakers at this year’s Automotive Logistics South America summit in São Paulo expressed clear relief at the official end of the recession. Luis Santamaria, vice-president of supply chain for Latin America at Fiat Chrysler, the largest carmaker in Brazil, said companies that had survived the past few years would probably have come out stronger.

“Just being here after this turbulent year is already a victory,” Santamaria told delegates. But executives also warned that gains made and lessons learned during the crisis should not be lost now that growth had finally resumed. While Santamaria was optimistic about the future, he stressed the importance of maintaining recent supply chain improvements. Efficiency in internal processes is often still Brazilian carmakers’ best hope in overcoming the country’s chronic infrastructure shortages, inefficient customs and thick bureaucracy. “Not losing what we have gained in terms of costs will be a great challenge, not only for our internal processes but also in terms of the lack of investment over the past decade in ports, airports and bureaucracy and customs,” he said. “We will have to be very close to these things and interact with them.”

Continental’s Marcio Machado urged suppliers to reduce costs and add value

Marcio Machado, head of supply chain management for the central electronics plant in Brazil at tier supplier Continental, said the company was now focusing not only on getting better prices from providers, but improving load factors, labour productivity, packaging and logistics engineering. “Only looking at costs is not enough, so you must look at how to reduce costs and add value for the customer,” said Machado. Neuton Karassawa, director of logistics at GM Brazil, pointed to efforts by the carmaker to bring better logistics systems and processes to South America. The company will incorporate more of its Global Logistics Integrated Design and Execution (GLIDE) programme into the local market, for example, part of a multi-year business transformation project that encompasses several IT initiatives. And the ongoing changes for

GM’s global logistics include centralised systems to improve visibility, global sourcing of goods, automated freight authorisation and cost forecasting. “Since this is a global project, we have a schedule that is essentially divided by inbound and outbound. Within each one there is planning, sourcing, execution and freight. We have implemented part of the international system for inbound in Brazil as well as North America, and now we are at the stage of implementing the local inbound system,” said Karassawa. Along with maintaining costefficiencies, executives also stressed the importance of manufacturers and suppliers partnering to avoid waste. “Over the last year, we have talked about what we could do to overcome this period of crisis in terms of relationships with our customers – not only logistics operators, but also OEM companies and all of the suppliers in the chain,” said Paulo Sarti, managing director for South America at Penske Logistics. “The crisis forced companies to innovate and do things differently and we must not lose sight of this, because we tend to forget these things; when volumes start going up again, we tend to go back to the old ways of working,” he added. Alex Feijolo, director of sales and marketing at Gefco Brazil, also stressed that the automotive logistics sector in Brazil needed to improve collaboration, as most relationships between OEMs, suppliers and logistics providers were extremely transactional, based on shortterm contracts and annual bids. He called for more efforts to work together beyond the cheapest bid each year, pointing, among other things, to the high implementation costs and risks to supply chain operations that came with frequently changing logistics providers. “We should look to implement a real partnership model that involves manufacturers and service providers,” he said. q Christopher Ludwig & Gareth Tredway For complete coverage of the Automotive Logistics South America summit and videos of the sessions, visit bit.ly/ALSA2017


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Innovative.addressing.solution

START-UPS & INNOVATIONS WHAT3WORDS

This new series in Automotive Logistics looks at start-ups and new technology that are gaining ground in the transport and logistics sector, regardless of whether or not they have yet entered the automotive supply chain or logistics marketplace. New, strange and disruptive ideas will be featured In our first article, Gareth Tredway speaks to What3words, an online map and mobile app that could have huge implications for locating specific areas for deliveries, including in some of the hardest to navigate corners of the globe

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he headline to the left neatly summarises the product that the founders of a start-up came up with over three years ago. It also happens to be the co-ordinates of an exact 3m x 3m location in the middle of the Pacific Ocean. The original concept that would become What3words was born when co-founder Chris Sheldrick was involved in booking bands and managing production for live events around the world. Becoming more and more frustrated with suppliers not finding site entrances and bands unable to find gig locations, he sought a better way to give pinpoint locations beyond addresses and 18-digit GPS co-ordinates.

Enter Mohan Ganesalingam, the mathematician who helped co-design the What3words system and wrote the subsequent AutoSuggest algorithm that powers it. The first part was to split the entire surface of the planet up into individual 3m x 3m squares that could then be identified individually. There are around 57 trillion of these squares. The next part was figuring out how to name each one. Using 40,000 simple, everyday words in different three-word combinations supplied more than enough names for each of the locations, and so the algorithm was built to name them all using three words for each. The company’s online map and mobile app are free to use. Revenues are sourced from businesses paying to build the code into their services.

Adoption.uptake.traction The potential benefits of the app for transport and logistics are significant, especially in tough-to-reach locations. One of the earliest integrations was with an offline navigation system company called Navmii. It lets users type a three-word address in before recognising them and providing turn-by-turn directions to that spot. Another early win was when the United Nations

The granular level of information provided by What3words could have big implications for transport and logistics

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START-UPS & INNOVATIONS WHAT3WORDS

What3words navigation technology allows users to locate the precise geographical position of goods

adopted it into its disaster reporting apps. Ministers from Mongolia saw the potential of the system for their postal service and it is now a recognised address system there. “Now you can order a credit card from the bank to be delivered to your three-word address. You can use it to have Pizza Hut deliver to your door. More and more businesses are accepting three-word addresses,” says What3words chief marketing officer, Giles Rhys Jones. Things have gathered pace since those early days and the system is now being adopted by a variety of different sources. From 2018, Mercedes-Benz will start using it in its satnav devices; logistics provider Aramex, meanwhile, is adopting it for more precise deliveries in Dubai; and more countries’ governments are officially adopting What3words as part of their national addressing system. The company has just signed its eighth national postal service, with certain African countries obvious candidates given the lack of formal addressing systems in some parts of the continent. They include the likes of Nigeria, Djibouti and the Ivory Coast. It is now available in a total of 14 languages with plans to grow this even further, according to Rhys Jones.

The drivers who used traditional addresses spent a total of 7 hours and 39 minutes finding delivery locations and made 25 phone calls to customers asking for directions. Those supplied with three-word addresses found all of the locations easily without a single phone call – and they were only on the road for 4 hours and 28 minutes (a saving of 42% on their counterparts). Using three-word addresses also allowed the drivers to use route optimisation software, shaving more than a fifth off the distance travelled by those with traditional addresses. “Three-word addresses allowed the drivers to find their way quickly and reliably in an area they were not familiar with,” says Iyad Kamal, chief operating officer of Aramex. “They completed their deliveries overwhelmingly faster and more efficiently than drivers who knew the area very well, removing the need for extensive training of new recruits. They didn’t waste time calling customers, drove a more efficient delivery route and had a much easier day at work. “The business benefits are unquestionable. This is an exciting development within Aramex. That’s why we are encouraging our customers to use three-word addresses,” adds Kamal. The next year should be a busy one for What3words, with more language versions being launched and the first Mercedes-Benz vehicles rolling off the production line that can use the addressing system. The company is also working on a number of apps that take advantage of the software. They include an image recognition mail sorting app that will recognise a three-word address and tell the person handling it which delivery bin it needs to go into. Another app in development will scan a three-word address and give drivers precise directions to that point. “We are making it super-easy for logistics companies and delivery companies to build us into their system,” says Rhys Jones. q

Delivery.proof.pudding Initial funding support came from Intel and in later rounds, from logistics group Aramex and DB Digital Ventures, the umbrella for Deutsche Bahn’s strategic investments in emerging mobility and logistics solutions. To prove the system works, Aramex recently ran a test in Dubai to compare deliveries using standard postal addresses and the What3words system. The trial took place in two welladdressed areas of Dubai: Al Khawaneej and Al Muhaisnah. Four Aramex drivers delivered packages to the same 100 locations. Two of them knew the areas well and used regular street addresses; the other two had never worked in these areas before and used What3words addresses.

In recent tests, the use of three-word addresses was found to reduce delivery time and smooth drivers’ navigation processes


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AUTOMOTIVE LOGISTICS GLOBAL CONFERENCE

On the lookout for disruptive new talent

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here is non-stop talk these days about changes to the automotive industry thanks to connectivity, electrification and software developments. While all that is impacting on supply chain and logistics operations, it is worth considering the huge impact it will also have on the skill set for automotive logistics. Speakers and delegates at this year’s Global conference in Detroit stressed that the industry desperately needed a new generation of talented people to handle the disruption and developments ahead. That includes more knowledge about data analytics and even coding, for example. But it also means being an attractive employer to prospective talent. For example, tech-savvy engineers need to be persuaded to look beyond Silicon Valley (or at least beyond Tesla). Jeffery Estes, group manager for logistics operations and export at Toyota North America, said finding Toyota North America’s Jeffrey good talent continued to Estes was be a challenge, especially among those among the current who addressed generation of “thinkers the challenges and innovators”. He said of recruiting dynamic young the carmaker wanted talent “disruptors”. “We struggle to try and market ourselves and be the attractive employer of choice for this next generation,” said Estes. “Those of us who have been in this sector for a long time know it has never been that way, it

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Given the pace of change in digital technology, the automotive logistics sector cannot risk losing out on the new generation of talented disruptors, write Marcus Williams and Gareth Tredway has always been people knocking on your door saying, ‘I want to come work for you’. That appears to have changed.” On the other hand, connected-car developments have already started to change the nature of the automotive logistics business – so much so that there is attraction even within slow-to-change sectors like vehicle logistics. Andrea Amico, president of Jack Cooper Logistics and head of the vehicle carrier’s research and development department, said what was attracting young engineers was less the money and more the opportunity to work with “fun stuff ”. “The ideas they come up with are fantastic,” said Amico in reference to engineers contributing to Jack Cooper’s R&D. “The next generation is going to be even better. They are highly impatient and very creative. They have disrespect for the rules. We need people who are impatient and want to get stuff done, and get it done in different ways.” Amy Broglin-Peterson, manager of the North American Transport Management Center at Robert Bosch, said the millennial generation brought a natural curiosity that was critical to creating a culture of innovation. “You have to be constantly challenging the processes that are in place and the technology that exists. The things that made sense 10 years ago maybe don’t make sense in today’s world,” she said. In terms of the skills required, Nissan North America’s Guillaume Quentin, senior manager for vehicle logistics

AUTOMOTIVE LOGISTICS GLOBAL CONFERENCE

engineering and Industry veteran quality assurance, Dana McBrien of Honda said the industry emphasised the needed more longunpredictability term strategic of working in thinking that was auto logistics driven by data analysis. However, what was also considered important in securing the people with those skills was the right type of leadership. “I think if we are not freelance innovators and not looking to the future for our customers’ needs, our business needs and our talent acquisition, what is going to happen is we are not going to match people to our systems or our process,” said Eduardo Huante, general manager on the service parts side at Toyota North America.

Outbound out of the stone age For innovation to flourish, generations old and new need a new approach to the business, according to speakers in Detroit. On the outbound side of the business, for example, there is a feeling in some corners that those responsible for vehicle delivery need to be dragged out of the stone age when it comes to innovation and the digitalisation of processes. However, there have been significant advances. William Wappler, president and chief executive at Surgere, the digital supply chain and packaging expert that has recently made a move into vehicle logistics, stated it clearly: “The automotive industry spends more on technology than any other area, but people think it is slow to adopt. It is really just the opposite, they are spending more and going further than other sectors. They are more demanding.” Nissan North America’s Guillaume Quentin said that, when looking at the transformation of the vehicle and how it is delivered, organisations needed to ensure that the seed of innovation was nourished and that meant a change of mindset. He added that it was a case of finding out how to get more agile and adaptable, become better aligned, and plan for the digital transformation that was coming to the sector. That included the technology but also the need to attract people with the right attitude and approach. In its move towards a vision of the future under the Nissan Intelligent Mobility forecasts, the carmaker is looking at three areas where digital technology applies, namely in office functions, yard management and the delivery of the vehicle to the dealer or end customer.

Talent and energy required This year’s conference also featured a student forum in which executives at the OEMs, suppliers and logistics providers talked about the merits of a career in automotive logistics. Students from supply chain programmes at a number of

universities expressed an interest in a career that provided workplace stability while also offering stimulating challenges and variety. The good news is that the industry may well be able to offer much of this. Honda’s Dana McBrien, associate chief advisor for North America, who has been in supply chain and purchasing for more than 30 years, said working in automotive logistics meant working in an ever-changing environment. “If you are an adrenaline junkie it is a good place to be, because you don’t know what you are going to see on a daily basis,” he said, pointing to recent hurricanes and earthquakes in the US and Mexico to illustrate this. But there is still concern that carmakers will have trouble attracting talent over the newer competitors. “We are fighting for talent,” admitted Ford’s Matthias Schulz, head of material planning and logistics for North America. “If a young engineer has the choice to work for Tesla or one of [the traditional carmakers], I have a suspicion that the choice is being made.” A clear mission to drive change on a grand scale was the raison d’être at Tesla, according to Mike Polich, director of global logistics at the company. “Tesla’s mission is to accelerate the world’s transition to sustainable energy – that is the purpose of our company,” said Polich. Polich also said that Tesla’s existence was about solving engineering challenges head-on – “the stuff that is really hard to do”. “All the companies [Elon Musk] has been involved in are about taking on engineering challenges,” he continued. “Tesla’s existence has probably accelerated all of the other companies getting into electric by ten years.”

Mike Polich (front) claimed Tesla’s mission to accelerate the transition to electrification made it attractive to millenials looking for an ‘awesome’ job

Polich said the goals he set for his supply chain team were driven by this mission to transform. “I don’t think anyone I work with now wants to take a job that is mediocre; they want to strive for awesome,” he said. Likewise, Tesla was not going for second best when it came to developing systems and supply chains but was “going for perfect”. Polich said logistics had become a target-rich environment attracting technological talent in a way that Wall Street used to attract those good in artificial intelligence. Over the next five years he predicted there would be more transformation in logistics than had been seen in the last 30 years. q Full coverage and vidoes from Automotive Logistics Global conference coverage at: bit.ly/ALglobal2017


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AUTOMOTIVE LOGISTICS UK SUMMIT

Tales of political and technological disruption Marcus Williams reports on the frustrations and opportunities identified by attendees at the 2017 event

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nder the shadow of a ‘hard Brexit’, the question of how the UK will maintain a competitive automotive sector into the next decade is harder to answer than ever. With much uncertainty surrounding future trade terms, including the prospect of tariffs, customs checks and new barriers between the UK and the rest of the EU, many in the automotive logistics industry are concerned. More than 70% of delegates surveyed at the 2017 Automotive Logistics UK summit expected a negative outcome for their businesses and the supply chain when the UK finally leaves the European Union in 2019. Such uncertainty comes as the UK automotive sector faces annual sales and production declines for the first time since 2009. Passenger car sales in the first 11 months of 2017 declined by around 5% compared to 2016, even as most countries in Europe grew; vehicle production was supported by strong exports but was still down around 1.5%. Forecasts for 2018 anticipate further declines. However, there also positive signs for the UK market. Local sourcing of tier one supplies for vehicle assembly has grown to 44% from 36% over the last five years, according to SMMT figures, demonstrating investment in the local supply chain and presenting local logistics opportunities. Investment for innovative projects in areas like autonomous driving and electric vehicles has also improved, including after the Brexit vote, according to David Tozer, programme manager for automotive at Innovate UK, a government agency that promotes and subsidises R&D. “The amount of Achim Glass money going into of Kuehne research and innovation + Nagel believes has greatly increased EVs will since the Brexit soon require announcement, which is their own fantastic for us because separate battery it means that we supply chain position more money with organisations in various different competitions,” he said. Indeed, regardless

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From left: Automotive Logistics’ Louis Yiakoumi, Mercedes-Benz’s Juan Manuel Santiago Mendez, Kia’s Awais Ajmal, Honda’s Bob Mountain and Automotive Logistics’ Christopher Ludwig

of whether the UK is part of the EU or the single market, its supply chain will be impacted by an industry in full transformation. Already, the government has announced a move towards banning most petrol and diesel vehicle sales by 2040. Meanwhile, carmakers are exploring new shared vehicle systems as well as online vehicle ordering and sales. Manufacturers and logistics providers are also looking to automation and new connectivity opportunities to improve logistics and supply chain efficiency.

Looking for clues on Brexit All those with a vested interest in the continued health of the UK car sector are hampered by a lack of clarity on the direction the government will take on Brexit and what it will mean for their businesses. “We are working in all divisions of the company to get a real picture of what could happen,” said Juan Manuel Santiago Mendez, managing director for Mercedes-Benz Parts Logistics UK, responsible for the distribution of service parts and accessories in the country. “Brexit is a tricky thing because no one knows what is going on; we are waiting to see.” Mendez said that obscurity was affecting the company’s ability to move forward. “We are not doing everything we would like to do because of Brexit,” he admitted. Awais Ajmal, general manager of supply chain and business process at Kia Motors (UK), responsible for vehicle logistics, said there had to be a logical solution because the impact of Brexit, not only to the end customer but to manufacturers around the world, would be massive. “End consumers will be paying significantly more for their vehicles [in the event of tariff and trade barriers],” he warned. Martin Benecke, manager of light vehicle sales forecasting at IHS Markit, suggested that, while the immediate aftermath of the Brexit announcement had shocked many, OEMs who have

AUTOMOTIVE LOGISTICS UK SUMMIT

invested a lot in UK plants and technology had confirmed programmes beyond 2019. “I think they are optimistic that they [the UK government and the EU] will find a solution,” said Benecke, adding that carmakers, including the German OEMs, were dependent on the UK market to both sell and make vehicles there. Nevertheless, many carmakers in the UK could move production to other locations quickly – possible shifts including BMW’s Mini moving to the VDL Nedcar plant in the Netherlands, Nissan models going from Sunderland to other Renault Nissan locations, Toyota moving UK production to mainland Europe – and even Jaguar Land Rover switching some UK assembly operations to its new plant in Slovakia, set to open in 2019. That flexibility, said Benecke, gave the OEMs the ability to exert pressure on the UK government.

Disruptive technology Besides Brexit, disruption of other kinds could affect future supply chains – namely the technology in the car itself, whether connectivity, customisation or powertrain technology. The move towards electric vehicles, for example, comes with questions for automotive logistics providers. Batteries require their own specialised supply and storage logistics, something that logistics provider and freight forwarder Kuehne + Nagel is working on with its battery supply chain service, according to Achim Glass, head of global automotive vertical and senior vice-president at the provider. “I believe that we will soon have enough critical mass and enough EVs on the road to justify a separate [battery] supply chain,” said Glass, highlighting the strict rules for transporting and storing materials classed as hazardous materials. EVs may also impact on logistics by changing the number of part numbers and sourcing locations. Citing figures from Volkswagen Group, Benecke said the carmaker was expecting fewer model variants and lower material costs because there would be a 40% reduction in the number of vehicle platforms and 15,000 fewer component variants, as well as a 30-40% reduction in propulsion systems. This will mean reductions in inventory, but there are other consequences that are difficult to predict. While future vehicles may have fewer parts, today’s supply chain is more typically characterised by parts variety and proliferation, which makes logistics more complicated. Robert Garratt, executive partner at IBM Global Business Services, recognised that range proliferation created “a nightmare consequence in the supply chain”, especially as manufacturers made more efforts to improve customer service. “The consequences for the aftermarket were that proliferation of parts means very complex decisions have to be made about future stocking options and knowing what to have available is also a challenge,” he said. “So we absolutely recognise that customer centricity is a good thing for the automotive industry but a tough ask for logistics.” In dealing with this complexity, Garratt pointed to the applications of cognitive technology to the everyday concerns of a supply chain manager, such as artificial intelligence that can perform tasks only humans used to be able to do. He said there was a range of applications and a lot of interest in them.

“The stuff we are developing in cognitive technology is systems that can learn from large amounts of data, observe what has been done in the past when similar patterns of data appeared, and advise and save time and intellectual energy in advising what should be done in the present situation,” he said.

Digitalisation of the network Digital communications are becoming cheaper and more accessible. Achim Glass from Kuehne + Nagel agreed that there were new opportunities and that its freight forwarding operations needed to exploit the technology now available. “Digitalisation, together with automation, opens the door to tremendous opportunities,” he said. “I believe that our freight forwarding industry and our logistics industry, also in automotive, are running behind. I think we could be much further ahead.” Glass said the main area of focus for the company was productivity improvement and he highlighted that with 40,000 warehouse staff, improving even a couple of minutes through the use of digital technology could have massive gains.

More than 70% of delegates surveyed at the summit expected a negative outcome for their businesses and the supply chain when the UK finally leaves the European Union in 2019

“The relevant trends in freight forwarding are technological developments,” said Glass, adding that this included blockchains, artificial intelligence, machine learning and the internet of things. For the last year, for example, Kuehne + Nagel has been using predictive analysis of the 180m messages it sends each day to improve predictive forecasting for its customers, or what Glass called “now casting”. “We are leveraging the largest possible inventory of logistics data from public sources, such as airlines, ports and weather forecasts, but also from our proprietary data as one of the largest logistics providers in the world,” he said. Technological disruption and the risk-to-fail approach that goes with it adds another level of uncertainty to the UK automotive sector, which could hold back the innovation needed to deal with the potential issues ahead. The carmakers at this year’s summit summed up the cautious appetite for new technologies that could revolutionise the supply chain. For Mendez at Mercedes-Benz Parts Logistics, it was time to look at the global tech start-ups and see which ones were worth investing in. “Start-ups are risky but [OEMs] don’t have all the ideas to change the world,” he said. “You need to keep the basics working but also keep an eye out for expertise.” q To read about BMW Mini’s plant in the UK, see p22 For full coverage and videos from the UK, visit: bit.ly/ALUK2017


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AUTOMOTIVE LOGISTICS UK SUMMIT MINI PLANT TOUR

Mini plant, massive complexity Christopher Ludwig reports on a tour of BMW’s Mini factory in Cowley, UK, taken by delegates as part of the Automotive Logistics UK Summit mostly from the carmaker’s press shop in Swindon, about 50km (30 miles) from the assembly facility. Some body parts also come from Germany. While BMW has a range of just-in-sequence and justin-time suppliers in the UK, it imports many parts from abroad, mainly from Germany and central Europe, with several truckloads per day also coming from other continents including North America and Asia. Engine supply is similarly divided between relatively local and distant suppliers, with petrol engines, which currently go into around 60% of vehicles built in Oxford, coming from BMW’s engine factory in Hams Hall, in the Midlands, and the remaining diesel engines imported from Steyr, Austria. According to Meiler, the average part for a Mini built in Oxford travels 660km. Once the UK actually leaves the EU in March 2019, what do you expect the impact will be for your business and the automotive supply chain? The impact is likely to be somewhat negative 50% The impact is likely to be very negative 22% The impact is likely to be somewhat positive 12% There is likely to be no notable impact 12% The impact is likely to be very positive

Going the distance Production at Oxford is notable for a number of reasons. A large share of the vehicles built at the plant are customer orders, with high levels of options and customisation. Mini follows BMW’s global production system, which fixes the production sequence six days before assembly but allows customers to make changes and choose options up to that point, thus demanding a considerable amount of flexibility in material flow, IT systems and assembly. Mini’s inbound supply chain is also notable for its distances and international make-up. The Oxford plant does not have a press shop on site, for example, with body parts coming

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Live polling result from Automotive Logistics UK summit

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MW’s Mini factory in Cowley, near Oxford in the south of England, is a striking example of managing high levels of supply chain and production complexity, set against space constraints and long lead times for inbound parts delivery and exports of vehicles. However, thanks to well-defined supply and logistics processes, along with strong IT systems, the plant continues to meet a high level of productivity and quality. Even more variety is set to come to the Oxford plant as it prepares to build a new electric model – and as the carmaker and the rest of the UK industry grapple with the potential barriers that may follow Brexit. Markus Meiler, general manager of logistics planning for BMW in the UK, told delegates during a plant visit as part of the 2017 Automotive Logistics UK summit (see p20) that the factory, situated close to the city of Oxford and buttressing a major motorway, is difficult to expand, with logistics space especially hard to come by. Nevertheless, the plant has 65,000 sq.m of logistics area on site, which helps support deliveries from 500 suppliers, delivering 12,000 different part numbers. Currently the plant builds around 1,000 vehicles per day across three-door, five-door and Mini Clubman models. Of more than 210,000 vehicles built at the plant in 2016, 80% were exported.

Around 270 trucks arrive at the Mini plant each day, including from ports. About 95% of material coming from Europe is shipped via the port of Calais, in France. The outbound chain is also spread across large distances. While the UK is currently the biggest market for Mini, its largest export markets are the US, followed by Germany and China, with a high share also moving to other European countries. Mini models are also assembled at the Nedcar contract manufacturing plant in Born, the Netherlands. To manage this supply chain volume and geography, the

AUTOMOTIVE LOGISTICS UK SUMMIT MINI PLANT TOUR

Oxford plant uses a number of standard delivery and supply processes. Across the inbound supply chain, three different network procedures are used, according to Meiler. The JIS/ JIT process, for example, includes full truckloads delivering in high frequency from supplier locations, some of them close to the plant and in the UK, but also several part groupings delivered in sequence from as far away as Romania. Another procedure, according to Meiler, is BMW’s ‘steered network’, which includes material delivered in high volume with low fluctuations, actively directed by the OEM, typically in full truckloads direct from suppliers or via milkruns. Finally, the base network is for consolidation of parts, and includes low-volume, highly volatile supply that is steered and combined by hauliers via crossdocks or consolidation centres.

Counting the ways to handle For the plant, which has 44 loading docks, there are five essential processes for handling material, which follow BMW global standards. The first process is by onsite warehouse. Of the 12,000 part numbers delivered to the plant, 2,772 are warehouse parts arriving in bulk in unmixed load containers, meaning each box has the same part number or family, to the onsite warehouse. Parts are supplied directly to the assembly line from there, with only a small number sequenced for line feeding. Suppliers receive detailed call-offs four weeks prior to delivery, with updated 12-month forecasts for each part. A second process is direct delivery to assembly – also known as ‘DIMO’ – with parts delivered again in unmixed container loads to a buffer zone close to the assembly area, often once a day or once every several days. The parts are booked directly into the assembly inventory system, with most warehousing and handling eliminated. Suppliers also receive a rolling prognosis for DIMO parts and detailed call-offs four weeks before delivery. The third process is just-in-time delivery, in which unmixed loads are also delivered to a buffer zone close to assembly, but without any inventory booking. In this process, the required parts are shipped for actual vehicle orders rather than forecasts and are called off four-and-a-half days prior to assembly – the point at which vehicle schedules are set, known as ‘status 50’. Using a system called SPAB for synchronised calls, the call-off is for targeted delivery times. The order window here is shorter and therefore typically much more accurate. According to Meiler, Mini uses seven JIT part families for Oxford, all of them based in the UK. The other processes are different types of just-in-sequence delivery, known as JIS50 and JIS53. These methods deliver parts in the precise production sequence in the container to a buffer close to the line. For JIS50, which refers to status 50, just as for JIT parts, the call-off is submitted to suppliers four-anda-half days before assembly via SPAB with a target delivery date. However, between ‘status 50’ and actual assembly there can be further adjustments to the final sequence. A vehicle may be delayed because of a missing part or a constraint, for example. To manage these changes, a cumulative backlog is created, and parts for delayed vehicles are taken out of sequence and stored in buffer zones until assembly. According to Meiler, BMW Mini uses JIS50 for 17 part

families – 15 in the UK and five in the rest of the EU (some part families are provided by two suppliers). Parts outside the UK delivered in sequence include main harnesses from Romania, cooling modules from Poland, diesel engines from Austria and fuel tanks and centre consoles from Germany. Suppliers delivering according to JIS53 receive call-offs only a few hours before assembly – at ‘status 53’ – at which point there is no cumulative backlog and no further changes to the production sequence. These parts would typically be in very close proximity to the plant to ensure delivery in a short period. Mini Oxford has three part families delivered using this method, including exhausts and headliners from Oxford and front ends from Banbury, about 50km away. In total, Oxford receives around ten JIS or JIT deliveries per hour, which make up around 2,800 pallets per day (out of a total of 5,500 pallets of parts per day). Around 160,000 parts are sequenced daily. For outbound logistics, the Mini plant benefits from good

According to Markus Meiler (on stage), the average part for a Mini built in the UK travels 660km to reach the plant

rail links, with about 70% of daily output – or 700 vehicles – leaving the plant aboard two daily train services, including to the port of Southampton for export. A further 18 vehicle transporters per day supplement rail for exports moving to Southampton and the port of Immingham. About 50 vehicle transporters leave the plant each day for domestic distribution. The Mini supply chain represents a carefully crafted flow that depends on delivery accuracy and smooth shipments across the UK, and notably between the UK and EU because of the high amount of European content in the vehicles. This connection across Europe is set to continue and strengthen. Earlier this year, BMW announced that Oxford would build an all-electric three-door Mini starting in 2019. However, the electric drivetrain parts will be built at BMW sites in Dingolfing and Landshut, Germany. This supply chain setup could face extra costs and delays once the UK leaves the European Union, including the single market and customs union that ensure zero tariffs and no customs clearance requirements. Delays at Channel crossings and rules-of-origin requirements, for example, would present a significant challenge for Mini in the UK. Steve Wrelton, external communications manager for the Oxford plant, said the company hoped to see no change to current trading, tariff and customs arrangements as the UK government negotiated Brexit. q For a summary of of the UK Summit, see p20 For full coverage and videos from the summit, visit: bit.ly/ALUK2017


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COVER STORY RENAULT NISSAN AUTOMOTIVE INDIA

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mong the many global plants of the Renault Nissan Alliance, the factory in Oragadam, close to Chennai in India, stands out in several ways. Though other Alliance factories now also produce multiple brands, the Indian site was the first planned from the beginning as a joint facility, including shared production as well as local research and development. Indian operations are “the most Alliance-orientated” of any in the world, says Colin MacDonald, chief executive and managing director for Renault Nissan Automotive India, the Alliance subsidiary and joint venture for Indian operations. For example, the Oragadam plant – which opened in 2010 and is owned 70% by Nissan and 30% by Renault – produces IN THIS STORY... Renaults, including models that p24 Allied powers are Dacia-branded elsewhere, p26 Roots of the and Nissans, including its Oragadam plant emerging-market brand, Datsun. p28 Packaging harmony Meanwhile, the Renault Nissan p30 Exporting Indian talent Technology Business Centre of India (RNTBCI), the local R&D unit, which is also in Chennai, is owned 70% by Renault and 30% by Nissan; its engineers and software developers work on shared engineering, product development and IT for both brands in India, but also support Alliance back office functions, software development and engineering globally. “The sales companies in India are separate, but other than that we are combined from R&D through to production and logistics,” says MacDonald, who became MD of the company

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in April 2015 after arriving as deputy MD in January 2014. However, sharing operations is not always the same as having standardised, common processes. In fact, the evolution in turning Renault Nissan Automotive India from a joint venture of two companies operating side by side into a truly mixed Alliance operation has been and remains a long process. MacDonald points out that when the plant was first designed, the companies envisioned that one assembly line would be for Renault and the other for Nissan. Likewise, the RNTBCI was originally organised with each company separate, rather than sharing functions across both. Renault Nissan Automotive India has come a long way since then, including shared production lines that today build multiple brands. However, establishing and operating a shared manufacturing facility efficiently has not been easy, as there was no template to follow. That is partly why it is no coincidence that the Indian division is the most ‘Alliance’ of any operation globally, and also recognised across the carmakers as the most complicated Renault Nissan facility, especially in terms of its production variety and supply chain. The plant currently handles four vehicle platforms on two assembly lines, producing nine models – or around 12


Renault Nissan Automotive India’s Colin MacDonald says the company has combined the two Alliance partners from R&D through to production and logistics

Working towards a single standard As MD of perhaps the ‘most Alliance-orientated’ of all the carmaker’s operations, Colin MacDonald explains to Christopher Ludwig how Renault Nissan Automotive India is successfully navigating the complexities of both the country’s supply chain and its own varied production output versions, including different model types – across Renault, Nissan and Datsun brands (as of now, at least, there are no plans to bring production of Mitsubishi, the newest Alliance member, to the plant). Line one alone, including derivatives, produces nine models. That has made Oragadam, which has a capacity of 480,000 vehicles per year, a significant feat of production control and parts-handling engineering. While the plant operates on a common manufacturing system, the separate platforms have different engineering and assembly requirements, as well as differences in component production and sourcing. Those differences mean that the operation requires many handling processes, with large, separate kitting zones that feed the line, and an assembly area busy with material flow traffic. Logistics for the plant is effective – but far from simple.

On the way to progress Outside manufacturing, Renault Nissan Automotive India faces similar challenges to any manufacturer in India. Infrastructure limits and road congestion are often

compounded by incomplete projects. At the plant itself, it took nearly six years to finish a bypass road that moves around the facility, while many other local roads remain unfinished. Port connections and access are often underdeveloped. Vehicle exports from the plant ship from the port of Ennore, around 80km away, yet the truck journey takes around eight hours each way, says MacDonald. India also suffers from well-reported delays around tolls and state borders, as well as limited multimodal transport capacity. Renault Nissan’s location in Chennai, in the southern state of Tamil Nadu, has the added complication of heavy flooding and weather disruptions during the monsoon season late in the year, as well as issues over fresh water and energy supply. Still, for all its challenges, MacDonald and his team point to encouraging developments for the Indian market, along with the plant and its supply chain. With forecasts for growth of around 8-10% over the coming years, India remains one of the world’s most significant emerging markets and the Alliance is starting to make progress amidst its aggressive model introductions. After a drop in production in 2017 at the plant – the result of moving the European version of the Nissan Micra to France from India – MacDonald now expects the plant to reach capacity within five years. Along with rising volume, there is also a clear effort


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RENAULT NISSAN AUTOMOTIVE INDIA AT A GLANCE ORAGADAM PLANT Year opened: 2010 Shareholders: 70% Nissan, 30% Renault Annual capacity: 480,000 units

Production

Export share

2016

317,000

38%

2017 (projected)

250,000-260,000

26%

LINE 1

LINE 2

436 units per day over two shifts

522 units per day over two shifts

Platforms M0 – Renault Duster, Lodgy and Captur, Nissan Terrano V – Nissan Micra and Sunny K2 – Datsun Go, Go+

Platforms CMF-A – Renault Kwid, Datsun Redi-Go

SUPPLY CHAIN SOURCING BY PART NUMBERS ACROSS ALL MODELS Indian suppliers (70%)

International (30%) Renault: France, Spain, Romania, Morocco. Nissan: Japan, China, Thailand, Vietnam SOURCING BY PART NUMBERS FOR CMF-A MODELS International (4%) Indian suppliers (96%)

INBOUND LOGISTICS Truckloads: 100 per day 40ft containers: Four per day

The Renault Kwid is produced on the CMF-A platform at Oragadam

OUTBOUND LOGISTICS Truckloads: 90-100 per day Rail services: 2 per week (average of 210 vehicles per week) DEALERS 312 Renault dealers, 225 Nissan (including 60 Datsun)

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to reduce complexity. If part of the facility’s challenge has been that it works across so many Alliance models and standards, part of the solution will be to make Indian operations even more ‘Alliance’ – but in the sense of using truly common processes across engineering, supply chain and manufacturing, as has been the objective of Renault Nissan in recent years. Meanwhile, the introduction of the Goods and Services Tax (GST), which should lead to the removal of state border tolls and simplify inter-state trade, is expected to be a boon for the country’s logistics. There is also investment in new roads and multimodal, with Renault Nissan aiming in particular to increase rail services from Chennai.

A history of difference Renault and Nissan have made significant efforts to harmonise manufacturing operations in recent years. In 2015, the companies merged their global management organisations for manufacturing and supply chain into Alliance functions, and switched from individual Nissan and Renault production systems to an official ‘Alliance Production System’. Nevertheless, there are still varying standards for each brand, with different, often complicated processes between them. Oragadam, though a combined plant from the beginning, exemplifies the Alliance’s history of ‘together but separate’, as well as its progress towards harmonisation. Each of its two assembly lines are examples of the different stages in this evolution. Line one is a study in variation of platforms and models, while line two, which now uses just one platform, has become a basis for deeper sharing at the Alliance. Line one features three different platforms and eight models, and even more derivatives. The M0 platform, a Renault architecture, is used to build the Renault Duster, Lodgy and, most recently, Captur, as well as the Nissan Terrano. The Nissan V platform, meanwhile, undergirds the Nissan Sunny as well as three different Micra versions. Finally, the Nissan K2 platform is used for the Datsun Go and Go+. The plant’s manufacturing and logistics teams do well to handle the huge variety on line one. However, there are inefficiencies that result from its inherent variations. The Renault Duster and Nissan Terrano, for example, are effectively the same car cross-badged, but with different design and engineering features. Across line one, there are a variety of different process and technical controls for each model. “The Renault body structure for Duster is sensitive, and requires a lot of geometric control, whilst the Nissan Sunny is simpler for mass assembly,” says MacDonald. “We’ve had to beef up our engineering team in the bodyshop to support the dimensional accuracy requirements of the Renault models.” Such distinctions are replicated in materials handling and the supply chain. The different platforms and models result in around 12,000 part numbers at the plant, with the most variety on line one. There are many different suppliers for parts like roof liners, headliners and carpets, which increase pick-up locations, while also requiring re-sorting and sequencing at the plant after delivery. To manage all the part numbers, around 50% of components move through

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SHARING THE BOX While India lags behind markets in Europe and North America in terms of using returnable packaging equipment, Colin MacDonald and his team at Renault Nissan Automotive India say it is a priority to use as much standard and returnable packaging in its operations as possible, as well as to avoid non-degradable material. However, packaging is an area where differences in the Alliance can still be seen, though they are slowly starting to close. Nissan uses very little disposable packaging, for example,

Renault is starting to follow Nissan’s example in using more standard returnable packaging for international parts and kit exports

even for parts imported into India from other regions. Renault, on the other hand, has historically used more cardboard, especially for its parts imports and exports. “If you go into the plant or into a knockdown-kit warehouse, you will see Nissan parts in standard V5 containers and using returnable claps of packaging, where for Renault there is more cardboard and wood,” MacDonald says. However, things are starting to change. One-way equipment requires extra work and money to dispose of, which can be even more challenging in India than elsewhere, leading to changes in Renault’s processes. “Both carmakers are increasingly sharing and deploying best practices in logistics areas,” he says. Even within Nissan, most of the packaging is returned back to the original shipping location, rather than triangulated to another plant where it may be needed. “So far, we can only pool on a very limited number of flows globally where it is simple to manage,” says MacDonald. “Pooling is very complicated, and you could easily end up with a packaging shortage if you do it badly.”

internal kitting, which requires a lot of space and extra labour. “But we have no choice,” MacDonald says.

A vision for the future on line two However, Renault Nissan has begun to address these challenges in India. Since the end of December 2016, line two uses only one platform to build two models: the Alliancedeveloped Common Module Family-A (CMF-A), which is used for both the Renault Kwid and the Datsun Redi-Go. The lower variation has had tremendous benefits for simplifying

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processes in materials handling and production control. The current setup is the latest stage in a clear evolution. When the CMF-A models were first launched, including Kwid in September 2015 and Redi-Go in May 2016, the K2 Datsun Go/Go+ were also built on line two along with the Micra models, even though the other V platform model, Sunny, was on line one. As sales for Kwid started to surge, with as many as 100,000 back orders at one point in 2016, the plant moved line two onto three shifts, running six days a week. Initially, even that wasn’t enough to meet demand, and so MacDonald and his team decided to move Micra onto line one, which freed up capacity for Redi-Go as well. But that left line two on three shifts, with line one on two shifts. The solution was to move the Go/Go+ onto line one, which had spare capacity after European exports of the Micra ended. Moving Go/Go+ allowed the plant to run line two on just two shifts. Today, output on line one is about 436 units per day, while line two is around 522 each day. “Running each line on different shift patterns is inefficient as you have to manage different working times, including higher transport costs for workers and for material,” says MacDonald. “Having the entire plant on the same shifts means we can optimise transport better.” Among the benefits of the consolidated production on line two is that MacDonald could challenge his material flow planners to reduce kitting on the line, since it no longer needs to handle hundreds of different items across five models and three platforms. He admits that the switch back to kanban delivery to the line has been a transition, with plant engineers determining how to avoid too much inventory on the line, but MacDonald sees benefits; for example, less complexity has reduced the need for sequencing, which has freed up both space and labour. That is not to say that everything is perfectly simple on line two, either, where different manufacturing approaches require varied logistics processes. For example, the bumpers for the Kwid follow Renault’s strategy and are purchased from suppliers, while those for Redi-Go follow Nissan’s principle and are built in-house. The good news, however, is that the future direction of the plant, as well as manufacturing across the Alliance, resembles line two more than it does line one, according to MacDonald. The plant is slated to gain the CMF-A+, which has the same standards as the CMF-A, and will be used on line two to build small and medium cars. Line one will also see further consolidation as additional models will be introduced using the M0 platform, including the Nissan Kicks. “Our alliance engineering teams, manufacturing and supply chain management are all starting to work on one single standard: hallelujah!” he says. “It will take a while to flush out the old models but the companies are working together and that is great news.”

A strong supply chain Despite the complexity of its production in India, as well as the country’s own infrastructure challenges, Renault Nissan’s logistics operations are advanced. Logistics management is fully combined across brands, for example. Alliance

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teams oversee the full scope of ex-works, inbound collections, as well as outbound deliveries, which are executed by logistics providers on contracts that typically last 2-3 years. The inbound network is engineered for consolidation and milkruns to improve efficiency alongside direct supplier deliveries. A network for parts exports and knockdown kit packaging is also in place in Chennai and in Pune. Price rises following recent trucking regulation changes have led to increased use of rail to the north and north-east of the country

MacDonald points to a highly localised supply base: 89% of the volume by weight for production is procured from suppliers close to Chennai. “Even the tier two supply base is well concentrated in Tamil Nadu thanks to so much vehicle and two-wheeler production here,” he says. “We encouraged some of our tier ones who were importing to switch to local sources, which helps on total delivered cost (TDC).” Other supplier clusters in the country are mainly in northern India, close to Maruti Suzuki production in and around New Delhi, as well as in Pune, east of Mumbai. The carmaker avoids using local warehouses in these locations as much as possible, but instead delivers directly to Chennai or through milkrun and groupage networks. According to MacDonald, who was previously responsible for logistics across the Alliance in Europe and Russia, the utilisation rates

for Indian trucking are at a good level. “Our truck fill rate is typically around 74-75%, which is very similar to what we were getting in Europe, and we were happy with that,” he says. Outbound logistics is also run with good consistency, says MacDonald. He does, however, point to a powerful trucking community, which has at times been willing to halt operations in protest. A change in trucking regulation last year has also limited car carrier size and capacity, leading to price increases of about 20-25% for outbound logistics. In response, the carmaker has increased rail usage to the north and north-east, with weekly services. MacDonald and his team would like to increase rail shipments and to use coastal shipping, which they have so far only trialled, but options and capacity remain limited. (For more on Renault Nissan’s vehicle logistics in India, see p28 of the latest Finished Vehicle Logistics.) While the Oragadam plant benefits from localisation, its international supply chain remains complex. Around 30% of part numbers for most models, or about 5,000 different parts, are imported. These stretch from across the different geographies of the Alliance: for Renault models, many parts come from France and Spain, as well from Pitesti, Romania, close to Dacia production, and Tangier, Morocco, where Renault has another large plant. For Nissan, parts come mainly from Japan, China and Thailand, with some from Vietnam. Both the land-based consolidation and shipping routes from these locations to India can be very long – as much as 16 weeks from parts of Europe, for example. “It is tough to manage that, especially when you are making engineering changes during a launch phase,” says MacDonald. However, just as the consolidation of platforms on line two has simplified material flow and line feeding, economies of scale in purchasing and engineering have helped to localise a much larger share of part numbers for the shared CMF-A platform: 96% for Kwid and Redi-Go, with almost everything local on these models except for special items like the navigation system and other electronic parts.

USING INDIAN IT TALENT FOR THE WORLD One of the major advantages of Renault Nissan Automotive India is its captive R&D division, the Renault Nissan Technology Business Centre of India (RNTBCI). The R&D group is in Chennai, close to the plant in Oragadam, connecting the manufacturing and operations team closely with development engineers. RNTBCI has around 6,000 engineers, including 2,000 software developers; about 80% of the work they do is for global operations across the Alliance. “As both the R&D and the plant operation are still young, we occasionally have teething problems during launches and start of production that take longer to stabilise, but that is constantly improving,” says Colin MacDonald. The plant’s proximity to these engineers has helped address a number of IT and supply chain issues. For example, RNTBCI helped to develop an extension to Renault Nissan’s manufacturing resource planning (MRP) system specific to India that includes peripheral, web-based features key to the market, such as visibility of material and vehicle inventory in the production pipeline. “Our MRP screens are pretty basic and would require three or

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The RNTBCI is involved with a range of R&D activities, from extending the company’s MRP system to developing a new breed of low-cost AGVs


“This reduces our global supply chain complexity and improves our TDC,” says MacDonald.

GST – slow steps in the right direction However, logistics in India remains very challenging. The holiday season around Diwali, for example, creates large surges and shortages of trucking capacity. Monsoons often lead to closed roads, as well as damaged or flooded facilities. Roads are often highly congested, with access in and out of ports particularly clogged. India has a high number of toll roads, and traditionally long queues at borders for checks and duties, which slows already lengthy transport times. India’s long-awaited GST, which came into effect in July, is aimed at eliminating many of the different taxes across state lines. However, the early rollout of the tax has been mixed. The government quickly changed several tax rates a short while after initial introduction, including increasing those for some vehicle types, such as SUVs, which have driven growth in the sector. The initial impact appeared negative, with sales dropping, although that effect appears to be wearing off. Still, there are a number of legal and technical uncertainties. However, MacDonald thinks the government deserves

Seasonal trucking shortages, heavy congestion, the effects of monsoons and bottlenecks in trucking all mean that road transport in India remains a tricky balance

four screens to see all of our production and inventory data,” explains MacDonald. “We worked with our local software guys with R&D support, who in a short space of time were able to develop a process that extracts data out of the mainframe system into a secure data warehouse, which we can then access and see on web-based screens in a user-friendly way.” The software team has also helped the logistics team to develop and implement a warehouse management system, which the carmaker has now rolled out across its manufacturing operations in India. Previously, plant workers controlled warehouse and inventory using spreadsheets. The local R&D team is set to be even more involved in improving material logistics and in-plant efficiency. The Oragadam plant has low levels of automation, thanks to India’s still relatively cheap labour rates. That goes for in-plant logistics handling as well, which is managed and operated entirely by in-house staff. Currently, for example, there are no automated guided vehicles (AGVs) moving between kitting zones and supermarkets, or other kinds of

credit for implementing the new regime quickly and believes the impact will be positive over time. Already, some state border tolls are being removed, albeit slowly as they adjust to the new system. Renault Nissan, as well as other carmakers, are also engaging closely with the federal government and the state government in Tamil Nadu over GST implementation, infrastructure and other logistics issues. “Overall, the support from the government from both central and state levels has been good, even though it is not without difficulties and we always want things to go faster,” says MacDonald. “We want more infrastructure improvement, uninterrupted power supply, the speedy renewal of licences and less paperwork. “The GST is a definite step in the right direction but there are many things left to address.”

Changing export strategies Renault Nissan’s manufacturing operation in India began life targeting exports, at least for the Nissan brand. The plant started exporting the Micra to Europe in 2010, and it eventually grew to be among the most exported individual car models from India. However, in January 2017, the European version of the Micra moved to a Renault plant in Flins, France. As Europe was the model’s largest market, the shift represents a decline in production of around 55,000 units per year in India. “The loss of this volume was a bit of a blow to us, but that is the decision that was made and we are moving on from it,” says MacDonald. Overall, the plant’s export share has fallen from nearly 40% of production in 2016, or around 110,000 units, to around 26% of production this year, with exports likely to finish around 68,000. In response, the plant is building more models geared especially for lower cost, emerging markets. For example, the Alliance is already shipping the Nissan Sunny to Asia, Africa and the Middle East; meanwhile, about 37,000 units per year of the Datsun Go/Go+ are exported to the Middle East. And although the Micra built in India

automated storage and retrieval. Workers push karts or drive lift trucks. Although the plant, excluding depreciation, ranks as the fifth lowest cost globally for the Alliance (Mexican plants have the lowest costs), MacDonald says that the lack of automation is hurting the factory’s productivity measurements. Indian wages are also rising fast, albeit from a low base. MacDonald’s vision is thus to introduce a fleet of basic AGVs developed by local engineers. “I have challenged our local R&D team to strip down an AGV and to figure out how to make the world’s cheapest but scalable AGV,” he says. “We have already done some small-scale pilots in the trim and chassis area just to get the engineering and production guys thinking about how we should do this.” Several prototypes are already under development for the AGV and MacDonald expects at least some versions of it to be in use during 2018. “It will be a great example of taking advantage of Indian engineering, materials and technology to make it cheaper, but still effective,” he says.


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won’t be updated to the same platform and version as for the export volumes,” points out MacDonald. “It’s an important European market, the Alliance is studying upgrades of the strategy to protect both our own profitability as well as the Indian-built Micra both for the domestic and other export supply base.” markets, such as Africa and the Middle East. Renault, which has exported very few vehicles from India, Allied in skills is also increasing overseas shipments, although on a smaller Although difficult to crack and even harder to earn margins scale to Nissan’s total. The Kwid, for example, is now exported in, the future of the Indian market looks bright for Renault to several Asian countries including Sri Lanka, Nepal, Bhutan Nissan. The local product offensive across both brands, and Bangladesh, and this year also started shipping to Africa. particularly in its small car and utility vehicles, should help it The Duster is exported to various markets in continue to gain share. There are high hopes Asia. for the Renault Captur, for example, which We need While vehicle exports from the plant have launched production earlier in 2017 and our younger trended downwards, component exports have recently begun domestic sales. The next year been growing for both Renault and Nissan. will see the launch of the Nissan Kicks as well. engineers to go According to MacDonald, around 100 40ft MacDonald expects annual production at the and understand containers are exported from India every month plant to surpass 400,000 units in the next 3-5 for each of the two, shipped to more than 20 years and approach its capacity. other parts of Just as there has been progress in India the Alliance so in sharing and combining engineering, that they can production and the supply chain, MacDonald sees further integration of human resources come back older across the Alliance as just as important. When and wiser and he first came to India in 2014, MacDonald noted that the management team at the plant apply useful more weighted towards Nissan, reflecting experiences here was the carmaker’s larger ownership share. in the plant and MacDonald, who himself started at Nissan the supply chain. in the UK but has since held Alliance-wide roles, set out to add more managers with a Developing our background at Renault. Automotive Logistics’ Christopher Ludwig (left) with “I wanted to make us more Alliancetalent is a key Renault Nissan Automotive India’s Colin MacDonald orientated in planning and management,” success factor plants across the world, including Japan and Asia, he says. “We have to be able to work in both for continued Europe, the Middle East and South America. brands’ world every day, because they are Engine components, for example, are shipped improvement and still not homogenous. We need people to to Spain, Turkey and Brazil. Semi-knockdown understand the terminology and vocabulary sustainability. kits of the Nissan Sunny, including painted of both companies.” bodies and assembled components, are shipped MacDonald has also sought to develop Colin MacDonald, a more to assembly plants in Egypt and in Myanmar, local management team in India, along with disassembled knockdown kits of the Renault Nissan recruiting and training local employees who model to Nigeria. come with previous expectations or Automotive India don’t With parts and kit exports on the rise, Renault loyalty to one brand over another, and thus Nissan has reorganised its parts logistics strategy. are more inherently comfortable in both Previously, Renault and Nissan each had an export parts Renault and Nissan “worlds”. Over the next three years, he warehouse in Chennai, but both of these have now been expects the number of expats working in the plant in India to combined into an Alliance international logistics network reduce dramatically. (ILN) facility. Renault also had an existing ILN in Pune that By the same token, he hopes to take more Indian talent has also been combined into a shared operation, which now outside the country to other Alliance locations. Up to now, he includes exporting parts to Europe on behalf of Nissan. admits, only a handful of Indian managers from the plant have MacDonald points to considerable improvements in overall been sent overseas. The numbers from R&D and IT are higher, quality, packaging and parts handling from India. Whereas but he believes such development should be increased, both to four years ago, Renault and Nissan had relatively high damage the benefit of the local operations and the wider company. and error rates for export, today its error rate per million “We need our younger engineers to go and understand parts has been brought down to fewer than ten. other parts of the Alliance so that they can come back older “Everyone is a winner in these exports. If you are building and wiser and apply useful experiences here in the plant cars in France or the UK, your TDC improves by taking and the supply chain,” MacDonald says. “Developing our advantage of India’s cost-competitiveness. Our Indian talent is a key success factor for continued improvement and suppliers, meanwhile, can supplement their business with sustainability.” q

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OEM FOCUS AUDI’S DIGITAL LOGISTICS

Prepared for a new reality

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he recent history of the Audi brand is written deeply into the company’s supply chain and logistics, and can be read across the carmaker’s expanding geography, plant and parts-handling operations. It is here we see the complexity of Audi’s production network, which continues to see significant investment and transformation. Today, it produces vehicles in its own or Volkswagen Group plants across Europe, Asia and the Americas, including the launch, in late 2016, of production of the new Audi Q5 in San José Chiapa, Mexico. The company is also in the midst of the most aggressive phase of new model launches in its history, from the 2016 start of Audi Q2 SUV production at its plant in Ingolstadt, at its headquarters in Bavaria, to the more recent launches of the flagship Audi A8 and the Audi A7, both in Neckarsulm, south-west Germany. Next year, Audi is adding the Audi e-tron electric SUV to its plant in Brussels, Belgium, which is the start of a huge push to offer battery electric options across its range of vehicles. This push includes plans to significantly increase output and electric vehicle production in China, where Volkswagen Group joint venture factories built around 550,000 Audi models in 2016; Audi plans to double its locally built model portfolio within the next five years, with five electric vehicles as well as another model powered by a combustion engine.

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Audi is moving fast to implement new types of automation, big data and wearables into its logistics processes, with results already evident, writes Christopher Ludwig It is not just volume and distances that distinguish Audi’s supply chain. Plants like Neckarsulm and Ingolstadt are especially notable for their highly diverse range of models and part numbers, which demand precise parts handling, packaging engineering, as well as IT and logistics process stability to manage under significant space constraints. A look inside these German plants reveals the extent to which the carmaker must engineer supermarket areas with multiple kitting and commissioning zones to pack and sequence tremendous parts variety in an efficient way. Dr Michael Hauf, head of Markenlogistik (brand logistics) at the carmaker since 2011, sees the management of this variety and complexity as one of the key success factors in Audi’s expansion, which includes sales in 2017 likely to end up close to the record 1.87m sold in 2016, and a strong profit margin. Despite handling a parts variety in excess of 50,000 at some plants, errors, measured in parts per million (PPM), remain exceptionally low, while stability and flexibility across the supply chain remain high, including the ability for customers to make changes to their orders up to seven days before a vehicle begins assembly. The supply chain is furthermore supported by a highly utilised and consolidated transport and returnable container network engineered and managed together with Volkswagen


We spoke to: Konzernlogistik (group logistics), the carmaker’s central logistics function, based in Wolfsburg. What’s more, such processes are proving effective across new locations. Audi’s plant in Mexico will produce more than 150,000 vehicles in 2017, according to Hauf, on pace for its target. Meanwhile, the factory has also implemented processes mastered by the brand in Europe, including ‘pearl chain’ or long-distance sequencing for delivery, as well as pick-by-voice assistance in parts picking. Furthermore, it is using an RFID scanning system for returnable containers. Collaboration across Audi’s brand logistics, group logistics and local teams in Mexico has helped manage the challenges of establishing new suppliers and infrastructure, ensuring good costs and reliability for logistics, adds Hauf. “We have been able to use our combined experience to

Dr Michael Hauf, head of bran d logistics, Audi

features and electroJohannes Marschall, head of mobility, its transport, plant logistics at Neckarsulm, Audi material and vehicle Simon Motter, head of plant logistics are once again logistics at Ingolstadt, Audi helping to rewrite Audi’s future. Broadly, Audi’s pursuit of the ‘smart factory’ – a digitalised, highly connected and automated production environment – is coming to life across its logistics, both in pilots and fullfledged programmes in serial production. For example, Audi has been introducing advanced automated guided vehicles (AGVs) with uses expanded in a number of new supermarket concepts, as well as in finished vehicle handling. The brand is also introducing new picking assistance programmes, such as pick by light, glove or tablet, with a view

We have been able to use our combined experience to install a new network for transport, combining inbound supplier transport across Mexico and the US, moving from point-to-point connections into a true network of consolidated Dr Michael Hauf, Audi and group haulages.

install a new network for transport, combining inbound supplier transport across Mexico and the US, moving from point-to-point connections into a true network of consolidated and group haulages,” he states.

A new, digital chapter Such global expansion and rising complexity have been defining characteristics for Audi. However, as the company seeks to lead in connected vehicles, autonomous driving

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towards the potential of connected devices and augmented reality technology. Meanwhile, its production and logistics teams have introduced data analytics and visual tools, including those to better predict the flow of supply and assembly through to vehicle release (see feature in Finished Vehicle Logistics p20). Recently, the company has held hackathons together with production teams, in which students are encouraged to work on new programmes, including for logistics.


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AUTOMATED VEHICLE HANDLING One of Audi’s most unique uses of AGVs occurs in the vehicle logistics area as part of processes that have rarely seen much automation. At its Ingolstadt ‘Process House’ – a multi-storey centre for handling and storing vehicles built ahead of dispatch from the plant – the carmaker has expanded the use of the Ray robot, a six-by-three-metre AGV that automatically sorts vehicles for rail shipment according to their destinations. The robots, provided by Bavaria-based startup Serva, help to reduce labour and walking requirements in the Process House. After clearing the assembly line, vehicles move by lift to the first floor of the facility, where the AGVs sort them according to destination, using laser sensors to adjust forklifts to the appropriate length and width of the vehicle. The equipment also uses laser sensors within the Process House to move autonomously.

Audi has increased to 12 the number of Ray robots used to sort finished vehicles at its Ingolstadt Process House

While Hauf acknowledges that such robots may be something of a stopgap technology until vehicles reach higher levels of autonomous driving, they are today able to have a significant impact. The project has been expanded to 12 Rays, which are able to move up to 2,000 vehicles per day. While the Ray robots are currently used for finished vehicles, Michael Hauf says that similar technology can have other applications, including for moving containers or large parts, such as large lithium-ion batteries. Audi is currently working with Serva on a number of projects, including for transporting electric motors during assembly. (For more on the Ray system, see article in Finished Vehicle Logistics p20.)

Among the end goals of the smart factory is an increase in modular production, in which more assembly occurs simultaneously and flexibly across cells rather than sequentially along the assembly line. While Audi is currently far from abandoning the assembly line, its plant logistics are already making innovations in modular directions – including a new supermarket concept that automates the flow of inventory and kits between workers and which, among other benefits, frees up space where parts are picked. Audi’s push for electrification and sustainability will reverberate across the supply chain. The carmaker already announced two years ago that it would develop the battery for its pure electric SUV from cell modules from South Korea’s LG Chem and Samsung SDI, which are in turn expanding factories in Europe (LG Chem is building Europe’s

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largest battery cell factory in Poland, though Audi has yet to confirm where exactly the e-tron battery will be built). The implications of transporting lithium-ion cells, as well as handling heavy batteries and electric motors, will introduce new packaging, shipping and regulatory requirements. Audi is furthermore introducing more sustainable freight transport processes. In Neckarsulm, it is already using biogaspowered trucks to deliver from a bodyshop supplier in nearby Heilbronn to the assembly plant every hour. It is also trialling several battery-electric trucks within its production plants, including those from the Terberg Group in Neckarsulm. “We still face the challenge of the range of these kinds of trucks [being limited] but we are planning to enlarge our battery electric vehicle fleet,” says Johannes Marschall, head of plant logistics at Neckarsulm. While Audi looks to all of its plants to develop innovations, those in Ingolstadt and Neckarsulm often lead the way in new logistics concepts and technology applications. Regardless of origin, these processes and technologies are then extended to other factories, with implications for suppliers, logistics carriers, dealers and end customers. Audi’s logistics teams have visions of connecting more parts, trucks, packaging and finished vehicles seamlessly into Audi’s IT systems to offer maximum visibility across the supply chain, for example. “We are really on the way towards digitalisation of the entire supply chain, and it is happening in a bigger and faster way than previously thought,” says Simon Motter, head of plant logistics at Ingolstadt. “The next big step we are moving towards is higher automation of logistics, perhaps on the path to using artificial intelligence,” agrees Marschall. “Today, with driverless transport systems, part handling and supermarket automation, we are seeing continuous change.”

Advanced types of AGVs Audi has worked with equipment specialists to implement new kinds of AGVs, while also developing its own technology through its Technical Centre for Production Assistance, a department dedicated to new production technologies that support employees from new materials handling equipment to ‘cobots’ in production cells. There are two main types of AGV that Audi is currently developing. The Audi Laser Tracking System can recognise and guide a group of driverless transport vehicles, similar to the way truck platooning works. A central computer on a mobile unit locates the other transporters by means of their reflectors using a laser scanner, and then gives them transport commands by radio to create an autonomous tugger train. “At today’s level of development, the central computer can control the transport robots within a radius of 18 metres – individually or in trains,” says Michael Hauf. “To cover a large hall, it would be necessary to have either several laser scanners or a computer with a laser scanner as a mobile unit that drives through the hall, guiding a group of driverless vehicles.”

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Audi’s technical centre is developing several types of AGVs, including a laser tracking system that recognises and guides several vehicles similar to truck platooning

and [they] integrate well alongside a number of manual trucks in the area as well,” Motter says. “The driverless floor conveyors are bringing materials and then returning with empty packaging, automating the returns process.” Other types of self-navigating AGVs from other firms have also been increased at Neckarsulm across a number of areas, says Johannes Marschall. For production of the new Audi A8 at the plant, the assembly line is linked to a parts supermarket via automatic lifts; 35 AGVs move material for 29 part families from the supermarket to the lift, signalling it to go up or down to the production cells upon arrival. The AGV retrieves empty containers from the assembly line and returns them to the supermarket. At the new bodyshop for the Audi A6, meanwhile, Marschall points to the use [Driverless floor conveyors] are working very well, of an older but still effective with high rates of availability... bringing materials type of AGV that blurs the line between production robots and then returning with empty packaging, and materials handling. Eleven automating the returns process. AGVs deliver material from the receiving area to the production Simon Motter, Audi cells, moving between parts from body-in-white robots and empty containers and and, according to the principle of machine learning, it always requiring no manual labour. “It is a complete blending and searches for the optimal route,” he says. matching between logistics and production,” he says. Audi is using similar equipment in Hall B of the plant’s AGVs also move car bodies for production of the Audi R8 logistics centre in Ingolstadt, where driverless floor conveyors at Neckarsulm’s offsite assembly and logistics area in Böllinger are supplying the cockpit pre-assembly area in series Höfe, Heilbronn, where batteries and wiring harnesses are production with about 25 different parts for each vehicle. among the parts delivered automatically to the point of use on With 16 currently in operation, these conveyors provide the the assembly line. benefit of performing transport more efficiently and reducing “We are now at a similar point with logistics in some areas the risk of both accidents and damage to parts, according to as we were with body-in-white automation 15-20 years ago, Simon Motter. An eShooter on the back of the tractor also improves the precision of loading and unloading. when we first started to use a lot of robots,” says Marschall. “These are working very well, with high rates of availability, While many carmakers had previously installed older The technical centre’s second type of AGVs, called Audi AGVs, are even more advanced. This equipment uses intelligent navigation software developed by Audi on the basis of automotive software used for autonomous driving. The AGVs can thus supply goods from the warehouses to the assembly line freely and autonomously, recognising and reacting to traffic situations. They do not require magnetic strips as older generations of AGVs have. Simon Motter points out that this equipment is especially significant as it has machine-learning capabilities. The Audi AGV can be programmed to drive along a defined route, or it can learn a route on a manually controlled drive and store it. “On the basis of this map, it moves freely within its radius

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generations of AGVs dependent on magnetic strips, Audi had used very little of this technology; most of its existing AGVs are in body-in-white production on fixed routes. As a result, the new AGVs are typically replacing forklift trucks, lifters and other man-driven or pushed equipment. “We don’t have many legacy AGV systems to replace. However, in several years we may have to look at replacing the body-in-white system” says Marschall. While Audi is developing its own technology for AGVs, it continues to work with equipment suppliers on the market. However, Hauf points to a challenge for carmakers in using multiple providers of such specialist equipment: currently each provider tends to use its own control system, each of which is not always compatible with others. To be able to link more seamlessly across different types and brands of equipment, including its own, Audi is working on an interface system that could work as a ‘plug and play’ across AGVs. “Suppliers are not interested in such interfaces, which other carmakers are also developing, so this will become a challenge,” says Hauf. “However, we will continue to develop this to keep the market open and flexible.” (For more on AGV developments, see p44.)

New supermarket technology The use of advanced AGVs is also heralding a number

The other AGV that Audi is developing uses autonomous driving software to fully selfnavigate around the factory floor

of important new processes with wider implications for production in the Audi ‘Smart Factory’ strategy. For example, Audi’s use of supermarkets in its production for parts picking, kitting and sequencing is among the


The carmaker is also considering a similar or even greater variety of systems for its various picking processes. At its German plants, Audi has parts-commissioning zones that use almost all types of picking systems available, including pickby-light, pick-by-voice, pick-by-beam, pick-by-motion and pick-by-tablet processes. According to Marschall and Motter, the type of picking system depends on the commodity, sequencing and kitting process. Smaller parts, for example, might be better suited to a

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ProGlove is a very good technology if you have to scan every part to make sure it is the right part. [However] not every kitting process requires scanning of every single part.

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carmaker’s most complex operations, as it depends on accurate parts handling and systems, ergonomic and well-designed packaging, and sufficient space at plants. While work of such variation has made operations difficult to automate, Audi has recently made breakthroughs in improving overall processes thanks in part to AGV innovations, as well as new kinds of parts-picking technology. Specifically at Ingolstadt, following a successful trial, Simon Motter is overseeing the rollout to serial production of what Audi calls its ‘supermarket 2.0’ concept. As Motter explains, traditional parts supermarkets have sequencers who walk through zones pushing stillages to pick and sequence parts in a so-called ‘man to goods’ process. Now, following similar advances by other industries, such as in e-commerce fulfilment centres, Audi is changing the process towards a ‘goods to man’ process. In such supermarkets, an AGV brings the stillage and the shelf of parts to the picker, who then uses assistance systems, such as pick-by-voice or by light, to help him pick parts more accurately. “Supermarket 2.0 avoids the walking and is more ergonomic for the sequencer because he doesn’t have to push,” says Motter. “It also requires less space, as you have freed up the wasted space that would be between the shelves, and have instead only the dedicated space for the AGVs.” A pilot has already been running at Ingolstadt for distributing the paperwork inside vehicles, such as owner’s manuals, and will now be rolled out in serial production at the plant. “This was a very nice project and it proved that the new supermarket concept works,” says Michael Hauf. “Now, putting it into serial production requires several more dimensions.” Audi’s supermarket 2.0 depends on AGV technology and effective picking-assistance programmes. In either case, there is no one-size-fitsall solution, as demonstrated by the variety of AGV types Audi is currently testing and deploying.

Simon Motter, Audi system like pick-by-light, while a voice-based system is often more effective for larger parts. “In Ingolstadt, we use pick-by-voice systems for 88% of our sequencing, which has had positive results and a low PPM ratio,” Motter says. “However, we still decide which system to use on a case-by-case basis for each part or sequencing zone.” For some commodities, especially in the completely knocked-down area at Ingolstadt, where parts are packed for overseas shipment, Audi uses the ProGlove scanner, a glove with a built-in scanner that the user can trigger by pressing the thumb and forefinger together. The device allows workers to have two hands free for picking, which helps them to move more freely within the picking zone. However, glove scanners are not right for every type of part and picking situation. “ProGlove is a very good technology if you have to scan every part to make sure it is the right part, as you don’t need to take the scanner in your hands” says Motter. “However, that requires time to scan and not every kitting process requires scanning of every single part.” As part of Audi’s ‘Smart Factory’ project, the goods-to-man parts supermarket concept is more ergonomic for workers and reduces the space required for picking

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Few technologies have excited as much hype in the logistics space as drones, which companies such as Amazon have heralded as a potential solution for last-mile delivery. Up to now, companies have also turned to drones for operations such inventory counts in large container or finished vehicle yards, or The use of drones is being considered of goods stored in high-bay but applications are currently limited racking. Audi’s logistics department, though wary of hype, has also been exploring drone potential. The company ran a pilot to verify whether drone technology would be able to handle parts deliveries, for example. “We wanted to identify what problems such deliveries would pose,” explains Johannes Marschall. “We tested how the equipment would fly carrying parts, what sort of orientation it would have, and whether it could have a type of ‘electric eye’

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productive and user-friendly for workers. As such, Audi has a strict process of trials and pilot before launching them.

Digitalising inbound delivery Audi’s ambitions for automating and digitalising logistics processes are not limited to within factory or warehouse walls, but also extend to goods transport and delivery. One of the most effective delivery tools for the carmaker over the past several years, for example, has been an automated check-in process for inbound direct supplier truck deliveries. Known as ‘Quick Check-in (QCI)’, and supported by technology from German IT provider Inform, trucks approaching the plant register by smartphone via a geofence, and are thus verified and gain automatic entry to the plant without stopping at the gate and signing in, while also receiving a digital allocation to a delivery bay at the plant or logistics centre. QCI started as a pilot in 2014 at Ingolstadt – the year it won a Volkswagen Group Logistics innovation prize – and then expanded to additional inbound transport companies. It has since also been implemented at Audi’s plant in Neckarsulm. “Despite the conditions of model launches and the phase-

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LEARNING TO FLY

We tested how the [drone] equipment would fly carrying parts, what sort of orientation it would have, and whether it could have a type of ‘electric eye’ that would allow it to move fluidly within a plant or outside of it.

Johannes Marschall, Audi that would allow it to move fluidly within a plant or outside of it.” The pilot was carried out with a start-up company based in Munich, which uses equipment built by Intel. Audi declines to give much detail about the test results so far, but Marschall says that they were positive, although there are still many limits, such as battery life and the fact that drones can’t handle heavy parts like engines or other large components. Michael Hauf points in particular to technology on the market that is able to carry out inventory counts, including one such device under development at the Fraunhofer Institute. But he does not yet see an application for series production. “At the moment, we are not pursuing further the plan to use drones in our production. The current legal framework [in Germany] does not allow to use drones in closed surroundings, such as a production hall. If the regulations were changed, we could think about reviving this project,” he says. (For more on drones in logistics, see p62.)

Other wearables, such as smart glasses, are also regularly tested for application. Though Audi does not currently use them in its logistics supermarkets, it does deploy smart glasses in other areas of production, while it has also expanded its use of augmented and virtual reality in various tasks, including logistics. A VR programme is now used for training for parts handling and logistics, for example; workers in Germany can use the system to train for the production and logistics environments in other plants, such as in Mexico. Motter emphasises that ultimately the type of technology is less important than achieving the result that is most

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out of old models, we were able to maintain the number of QCI transports,” says Michael Hauf. “During these phases, we were able to solve all technical and organisational issues.” The next stage of the project is the development of an app that will make QCI independent of any specific smartphone device, which was set to be ready by the end of 2017. “That will give us more flexibility and allow us to set the QCI process as the standard for the majority of direct supplier deliveries,” says Hauf.

Seeing everything HERE Audi has wider ambitions for the digital supply chain. It has already introduced RFID tracking in some plants to verify parts, for example. In Mexico, where it has had to build up a new returnable container network with suppliers, Audi now tracks all load carriers and returns via RFID. While the project is less applicable in Europe, where it is part of a network of more than 20m containers managed and steered by Konzernlogistik, it nevertheless reveals the potential of having automated location data for packaging and parts. Michael Hauf thinks that it is not far-fetched that in the near future all vehicle parts, or at least critical ones, could have their own IP address, making them fully traceable throughout the supply chain. Along with parts, containers, racks, forklifts and AGVs will also have internet addresses, as well as finished vehicles, which can be further identified by in-vehicle telematics systems. While in some cases tracking groups of freight or vehicles


– such as a trainload or a ship – may be more effective than individual items, both Hauf and Simon Motter agree that the industry should not exclude the possibility that tracking almost everything has value. For example, by gathering data on all parts, Audi will be able to better track and forecast production and delivery times, identify bottlenecks in the supply chain and provide real-time updates to dealers and customers. “In future, I think we will track more individual parts. We will need to know where the material is so that we can carry out big data analysis and calculations to optimise flows and reduce inventory,” says Motter. “The more data we gain, the more robust we can design our processes and forecasts.” “It can indeed be worth tracking the individual parts,” agrees Hauf. “If you were to tag every part, or at least major parts, you could verify a finished vehicle at the end of the assembly line or elsewhere in the supply chain just by reading the tags. In this way, we can get value out of tracking every part, rather than just a container ship or a truck.” Audi is currently working with Germany’s Fraunhofer Institute, a technology research centre, on a project to increase transparency across the supply chain, from suppliers through to end customers. Again, the challenge here is not really technology. In preseries logistics, Audi already uses internet-based tracking for critical parts. For example, every engine for pre-series models built at the carmaker’s powertrain plant in Györ, Hungary, has a GPS tag that allows it to be tracked during transport. Working with HERE, a developer and provider of cloud-

“ to provide advance information to outbound truck carriers, who in turn must use that information to optimise their own pick-up and delivery processes. “We have to bring a new expanded point of view across supply chain operators,” says Hauf. “Currently a logistics planner or a logistics provider looks at perhaps just one section of the whole material and delivery process – but in future they must think about what is happening at suppliers, on the shopfloor and at the logistics providers. We have to enlarge our view of the supply chain.” q

Currently a logistics planner or a logistics provider looks at perhaps just one section of the whole material and delivery process – but in future they must think about what is happening at suppliers, on the shopfloor and at the logistics providers. We have to enlarge our view of the supply chain.

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In the fututre it is possible that all parts and vehicles could have their own IP address, making them traceable throughout the supply chain

based mapping services, in which Audi holds a stake along with other German carmakers and technology partners, the logistics team monitors the real-time location of each engine. “There is a clear business case, since the first batch of models and engines are very expensive, and it is worth controlling them individually,” says Hauf. Realising the potential of such visibility won’t just be a matter of plugging in a system and watching the benefits roll in. Drastically increasing the amount of data in the supply chain will mean that logistics planners must master predictive analytics, for example, if the data is to be properly used. Likewise, both supply chain analysts and logistics providers will need to learn to look much wider than their current responsibilities in the delivery chain. A current example can be seen at Neckarsulm, where Audi is using big data processes

Dr Michael Hauf, Audi

Audi and the Volkswagen Group are looking to sustainable transport options including LNG and electric trucking equipment


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PACKAGING & MATERIALS HANDLING AUTOMATION

A

sk automotive manufacturers what their primary concerns are today within warehouses and factories and they will probably allude to one of three key things – productivity, safety and waste. Although a variety of solutions are available to help alleviate problems in these areas, one of the most important is materials handling technology. In recent years, such technology has improved production systems and inspired greater focus on automation across many manufacturing sectors. This has driven change both within automotive factories and warehouses and outside them, as sectors including e-commerce and retail have also looked to materials handling advances to improve their logistics performance, labour productivity and ultimately customer fulfilment. For automotive logistics, a combination of pressure on costs,

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Automated materials handing technology is becoming ever more central to the automotive industry’s goals of increasing productivity, improving safety and reducing waste, writes Chris Lewis an operator – including many types of equipment that require those using it to be licenced – and without that worker, the whole handling process is stalled, adds Freer. Little wonder, perhaps, that manufacturers like BMW, GM, Audi (see p34) and many others have been employing more advanced automated guided vehicles (AGVs) to support production processes. Carmakers have already been using various types of AGVs for decades, and equipment providers say that they have done much to shape the direction and technology of such technology. Automotive managers tend to understand

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Paving the way for progress

Automation is robust enough to last many years and flexible enough to be redeployed when processes change to provide a 10-15 year life. The need for a oneyear ROI creates a bar so high that many very good ideas don’t get implemented.

Noel Dehene, Daifuku America worker shortages and an ageing workforce have led to even more focus on automation in materials handling in recent years. According to Hugh Freer, a director at British tug and loading equipment maker MasterMover, many automotive manufacturers have been replacing traditional forklift trucks and other manually operated materials handling equipment with automated solutions. Existing systems often depend on

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how such products works and often feed that back to their automated equipment suppliers to ensure more effective implementation – a critical point now that the automotive industry is so reliant on automation to support its production processes. “In particular, the concept of ‘Industry 4.0’, which encompasses the trend of integrated automation and


return on investment (ROI) have been holding back the takeup of such technologies. “The ‘elephant in the room’ has been – and continues to be – the notion that unless automation can return the investment in 12 months or less, it can’t be justified,” Dehne says. “Automation is robust enough to last many years and flexible enough to be redeployed when processes change to provide a 10-15 year life. The concept of The need for a one-year ROI creates a bar ‘industry 4.0’, which so high that many very good ideas don’t get encompasses the trend implemented.” Despite this, the use of automation in of integrated automation plants’ internal logistics, particularly those in the automotive industry, is growing, suggests and data exchange Peter Mačuš, chief technology officer at within manufacturing data exchange within manufacturing automation solutions provider, CEIT. environments, seems environments, seems to be transforming Automation helps to provide efficient, the way that [manufacturing] customers reliable and safe logistics processes that can to be transforming the think about production,” says Mark be monitored and optimised continually way that customers think and easily, he points out. And as a result, he Longacre, applications engineering manager at AGV provider, JBT says, the future of automotive logistics lies in about production. Corporation. “We’ve noticed that those in its automation. Mark Longacre, the automotive industry are leading this “Numerous manual routines are trend. And since they’re technologically JBT Corporation performed by robotic devices and sophisticated customers, automotive automation of internal logistics is a way to producers are driving innovation from AGV suppliers.” standardise processes and achieve higher productivity and One good example cited by Noel Dehne, vice-president lower costs,” Mačuš explains. “Of course, forklifts and standard of sales at the automotive factory automation division of handling equipment are still a stable part of automotive Daifuku America, is that of AGV companies partnering industry plants, but, for the sake of achieving greater safety, with forklift manufacturers to develop ‘dual-use’ industrial performance and reliability, the deployment of automated trucks, which can be either manually operated or switched to solutions is becoming a key factor.” automatic, driverless mode. Mačuš believes logistics automation could be even more Melonee Wise, chief executive of Fetch Robotics, meanwhile, efficient still, if industrial plants’ planning, manufacturing and suggests that autonomous mobile robots (AMRs) of the kind logistics processes were sufficiently interconnected. her company supplies are also becoming more popular, as “The deployment of automated logistics would be much they are easy to set up and flexible to reconfigure. faster if plants took it into account as early as during the Automotive factories are also increasingly focused on planning stage,” he says. “To me, automated logistics means safety and ergonomics in determining logistics automation. not only the transfer of material from point A to point B, To reduce their employees’ injury risk, manufacturers are but the automatic handling [loading and unloading] of considering options like electric tugs, which single pedestrian operators can use to move upwards of 30,000kg of goods, says Hugh Freer, pointing to high level of handling-related injuries in the UK. “At the same time, automotive manufacturers are also looking to decrease the usage of forklift trucks in pedestrianised areas,” Freer states. “Not only do they delay processes, but they can also pose a safety risk in the busy environment of an automotive factory. “By using handling machines operated by a pedestrian, manufacturers are able to better control the load being moved around the factory, resulting in a much safer environment,” he adds.

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ROI above all else? Increasing use of AMRs and AGVs is hardly surprising in an industry that has been happy to adopt static, multi-axis robotics technologies in manufacturing for years. Some suggest, however, that unrealistic expectations in terms of

Bespoke combinations of automated, semi-automated and manual solutions can now be provided thanks to safety advancements


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material as well, especially in the automotive sector, where we deal with very extensive and complex internal logistics.”

Warehouse automation

LEADING THE WAY IN AUTOMATED HANDLING Among the OEMs leading the charge towards automation in production and warehousing have been German brands BMW and Volkswagen Group, including its premium subsidiary, Audi. BMW’s exploits in this area include the recent deployment of a fleet of smart transport robots (STRs) developed in conjunction with the Fraunhofer Institute at its international parts packaging plant in Wackersdorf, as well as the use of autonomous tow tractors at its Dingolfing plant. The STRs are used to autonomously transport containers of parts from handling to logistics areas, and use a combination of digital mapping and distance measurements generated by wireless transmitters to determine their position. The tugger trains at Dingolfing, meanwhile, are used for such tasks as bringing parts from an automated small parts warehouse to the sequencing centre in the right order for assembly. BMW has already announced plans to roll out both technologies at other plants in Germany and elsewhere. Among Volkswagen’s forays into the field of automation, meanwhile, has been the introduction of a new ride-along platform to help workers at its Wolfsburg plant carry out sequenced parts picking. The system, which consists of a mobile platform that transports workers from one shelving area to the next, based on a pick list they simply scan in as they begin picking, automatically moves them to the required picking point, where an LED shows the worker which side to pick from. A beam of light is then projected onto a compartment in one of two trolleys hooked up to the platform to show the operator which bin to deposit the parts in. Materials being loaded are scanned to ensure they are deposited in the right location. VW was planning to put four more platforms into operation by the end of 2017, as well as to implement the technology at a number of other VW brand sites. Audi, meanwhile, has not only trialled a wide number of new technologies, including drones and smart glasses, but more new types of equipment are being used in serial production. Advanced, self-navigating AGVs are now in use for various functions at the carmaker’s German plants in Ingolstadt and Neckarsulm. Meanwhile, the company’s own engineers are developing several types of advanced AGVs capable of machine learning. Also at Ingolstadt, a new supermarket concept is being rolled out to serial production that includes a ‘goods-to-man’ approach using AGVs and various ‘pick by’ assistance systems for kitting. (For more on Audi, see p34.) by Robin Meczes

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While automation in automotive manufacturing has been quite widely adopted, its use in warehousing has been rather patchier. But manufacturers should take a more holistic view of their businesses as they decide where automation is to be implemented, says Steve Richmond, director of logistics systems at Jungheinrich UK, a supplier of both automated and non-automated materials handling systems. Using automation to implement a ‘goods-to-man’ process rather than the traditional ‘man-to-goods’ approach can help maximise output and accuracy in warehouse operations, he points out: such technology is now quite commonly used at picking stations where individual items are picked and presented to operators, for example, rather than them having to search for the right goods in the right quantities from the right locations themselves. “A key driver for this is the enhanced safety systems that are employed in such solutions,” Richmond adds. “Ten years ago, this may not have been considered good practice, but it is now increasingly common to see direct interfaces between man and machine – a trend that is likely to continue in the coming year,” he explains. Using a materials handling solutions provider to help decide how and where to automate, and where to leave things manual, can be of tremendous benefit, adds Richmond. “With the help of an intralogistics solutions provider, companies can assess and analyse where automation will benefit them the most,” he says. “When done correctly, there is also a place for automated solutions to sit alongside semi-automated and manual solutions as well, for a bespoke setup that caters to the exact nature of the business.”

Retail now sets the bar Technology adoption has historically been greater in the automotive industry than other sectors. The very first industrial robots, after all, were created for automotive manufacturing, lifting chassis and frames and placing them on

Customer expectations, influenced by their retail and e-commerce experiences, are also driving progress in materials handling operations for the automotive sector


full potential of such advances and set the bar in terms of consumers’ expectations in a way that other sectors, including automotive, must now follow – from the timeliness of new vehicle production and delivery to availability of service parts. “The automotive industry has traditionally been an incubator of technologies,” he says. “But now that the retail industry has set the bar, the automotive industry must keep up in order to retain or grow market share.”

Automating the future

Humans are becoming rapidly more comfortable and secure in working alongside their ‘cobotic’ colleagues

assembly lines. Soon after, sensors were added, allowing robots to complete grinding, painting and welding applications. “AGVs have been used in automotive manufacturing since the 1950s with advancements in technology coming from companies such as Volvo, which developed the first nonsynchronous assembly equipment,” says Tom Kroswek, group director of product development and innovation at Ryder. “As a result of these advances, the industrial robots of today are

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The automotive industry’s extensive use of automation has transformed manufacturers’ views of their operations and made workers more comfortable with such technology than ever before. “People are no longer afraid of AGVs. Instead, they recognise the tremendous potential of any kind of automation,” says JBT Corporation’s Mark Longacre. “Plus, as labour rates continue to rise and labour in general becomes harder to acquire, AGVs have developed into a strong alternative to traditional, manual materials handling methods. Implementing AGVs not only provides labour that is hard to come by, but also delivers a tremendous amount of savings to customers.” Automation is now becoming even easier to deploy, points

The automotive industry has traditionally been an incubator of technologies. But now that the retail industry has set the bar, the automotive industry must keep up in order to retain or grow market share.

Gary Bobalik, Comprehensive Logistics Co. capable of many assembly and manufacturing activities.” However, automation has become increasingly important to other sectors, including on the customer-fulfilment side of operations, particularly for retail and e-commerce, especially as consumers’ expectations continue to increase. For example, not so long ago, next-day delivery was very popular; now the potential of ordering and receiving goods within an hour is not just attainable, but expected in some cases. As a result, large e-commerce companies must do what they can to meet their delivery challenges. Lars Otte, vice-president of business development at Schnellecke Logistics, suggests AGVs and automated forklifts are easier to install in the retail and e-commerce industries than they are in the automotive industry, as such sectors tend to handle standard unit loads, like Europallet-based boxes. The automotive industry, on the other hand, features a high number of different types of containers, some of which are quite specialist, making implementation of automation more challenging. “One other differentiator between automotive logistics and e-commerce and retail logistics is that automotive logistics is arranged around production, which is still seen as the key component of the industry’s success,” Otte adds. “However, in the e-commerce and retail industries, the ability to deliver to customers in a shorter timeframe is key instead.” Gary Bobalik, director of marketing at Comprehensive Logistics Co, believes the retail industry has realised the

out Ryder’s Tom Kroswek – in particular using technologies like 2D lasers and 3D cameras to help AGVs to be truly selfguiding, rather than depending on some of the fixed guidance methods used in the past. “No wires, magnets, tape or reflectors are needed with this equipment,” he comments. As customers’ expectations continue to rise, many We spoke to: expect manufacturers of all Hugh Freer, director, kinds to increase their use MasterMover of automated technologies Mark Longacre, applications to streamline their processes engineering manager, and improve their supply JBT Corporation chain efficiency. Noel Dehne, vice-president of sales As Steve Richmond of for automotive factory automati on division, Daifuku America Jungheinrich UK points Melonee Wise, CEO, Fetch Robo out: “With success stories tics and lessons learned coming Peter Mačuš, chief technology officer, CEIT out across a wide spectrum of industries, and with the Steve Richmond, director of logistics systems, Jungheinric changing nature of the h UK Tom Kroswek, group director assembly line – in which of product development and robotics and automation innovation, Ryder can be seen to increase Lars Otte, vice-president of busi speed, efficiency and development, Schnellecke Logi ness stics safety – investment in Gary Bobalik, director of automation is only set to marketing, Comprehensive Logistics Co. rise.” q


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SUPPLY CHAIN RESILIENCE DISASTER RECOVERY

Prepared for the worst?

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s the scale of the destruction wrought by the earthquake and subsequent tsunami that devastated Japan’s north-eastern coastline in March 2011 became apparent, managers within BMW’s purchasing function were asked if it would affect the company. Their answer? No – because BMW had no suppliers in Japan. But that wasn’t quite the case. A few days after the earthquake struck, recalls Alexander Scholz, head of project management in BMW’s sourcing and supplier network, the carmaker discovered that some critical tier four semiconductors came from north-eastern Japan. Probing more deeply, the company discovered several more instances of supply chains terminating in that region – in some cases, at factories that were the sole source of the components and materials in question. Renesas Electronics, for example, the world’s largest manufacturer of automotive microcontrollers, was forced to cut production by 70%, shifting from its badly damaged Naka wafer fabrication factory in the Japanese coastal city of Hitachinaka to a number of other sites around the company. Altogether, output was suspended at seven of the company’s 22 plants. Another case was a metallic paint pigment called Xirallic, which turned out to be produced at only one factory in the world, a plant located in the Japanese coastal town of Onahama, owned by German-owned manufacturer Merck Group. Used on the BMW 5 Series, the pigment was also relied upon by manufacturers as diverse as Chrysler, Toyota, General

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A series of natural disasters recently has brought supply chain resilience into greater focus. But for today’s just-intime supply lines, is such resilience really achievable? Malcolm Wheatley reports Christopher Ludwig contributed to this report Motors, Ford and Volvo – all of which were forced to restrict production of vehicles in the affected colours. The plant was not able to re-open until eight weeks after the earthquake. For BMW, explains Scholz, these events in Japan served as a wake-up call. Rather than continue to respond to supply chain disruption through crisis management techniques, it resolved to be more proactive in terms of supply chain risk management. More specifically, a decision was made to use emerging technologies to digitally overlay disruptive events on a global map of all its suppliers, irrespective of their tier. If something happened, BMW wanted to know about it and wanted to be able to react to it to protect production. It’s a path since followed by others. Data feeds, many of them free, provide rich, real-time information on weather, seismic activity, traffic congestion, aircraft and shipping movements, and many other sources of risk and disruption. And freely available programming tools make available a means of interrogating social media accounts for a selection of keywords. Creating a digital map to show supplier locations


How resilient is the automotive supply chain? Wilding stresses that early response does not in itself add much to supply chain resilience. As BMW discovered, a global map that highlights suppliers located in known danger spots prompts the need to think about sourcing decisions and safety stocks: fairly quickly, a decision was made to hold several weeks’ worth of Japanese-sourced semiconductors as a buffer. And after the events of 2011 and others that followed, the

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seaboard – are the We spoke to: automotive industry’s Alexander Scholz, head of proje supply chains any more management, sourcing and supp ct lier network, BMW Group resilient than they were seven years ago, when Richard Wilding, professor of supply chain strategy, Cranfield 2011’s earthquake and University School of Managem ent tsunami struck? Richard Gane, director, Vendigita l It’s a deceptively complex Nea l Will iams , grou question. To start with, p managing director, Priority Freight ‘resilience’ is difficult to Brad Brennan, managing direc measure: how can you tor, Evolution Time Critical measure the effects of Ron Glowinsky, vice-presiden t plant shutdowns and global sales, CNW-Courier NetWfor ork production disruption Hugh Williams, managing direc tor, that never happen because Hughenden Consulting contingency plans swing Marcell Vollmer, chief digital officer, SAP Ariba into place or because sourcing decisions are Tobias Larsson, vice-presiden t and head of DHL Resilience360, DHL made differently? But the question is important, because in the hard-nosed world of automotive procurement, financial justification is usually required to support any decision that might add to costs – like dual sourcing or near-shoring. It

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isn’t rocket science; nor is displaying disruptive events on a map. But combining the two in real time provides instant insights that might otherwise take days to filter through a supply chain. “For BMW, it was a strategic decision to put itself in the position of being able to respond first and fastest and, as a result, get an edge on the competition,” says Richard Wilding, professor of supply chain strategy at Cranfield University’s Cranfield School of Management. Wilding points to the well-known story about how mobile phone manufacturer Nokia got the edge on rival Ericsson in the aftermath of a fire at a Philips microchip plant that supplied both companies. “If disaster struck, [BMW] wanted to have the option of being a Nokia, not an Ericsson – which paid the price for having taken the decision to single-source.”

Ultimately, it is changes to supply chain and sourcing practices that will render supply chains more resilient. Better information is only part of the story: the trick is to use that information to do things differently.

Richard Wilding, Cranfield University carmaker is not alone in holding more inventory of critical parts sourced from Japan. “Ultimately, it is changes to supply chain and sourcing practices that will render supply chains more resilient,” says Wilding. “Better information is only part of the story: the trick is to use that information to do things differently.” With 2017 once again demonstrating that earthquakes and extreme weather can happen almost anywhere – think the Mexican earthquake as well as the late summer hurricanes which battered the Caribbean and the US south-eastern

Natural disasters such as Hurricane Harvey, which hit the Caribbean and US south-eastern seaboard last summer, are prompting carmakers to rethink their single-sourcing policies to avoid supply chain disruption

is, in short, one thing to think that a supply chain is more resilient and quite another to demonstrate and prove that resilience. Such disasters are diverse in nature and geographical spread, which makes planning for them difficult. Plans made after the Japanese earthquake and tsunami, for example, or after the disruption caused by the ash clouds from the 2010 eruption of a volcano in Iceland – which closed much of Europe’s air space and halted production at multiple plants in the region and beyond – were of little help in the face of the Thai floods of October 2011. These simultaneously hit seven of the country’s largest industrial zones, flooding Honda and Toyota plants as well as many suppliers. Once again, the knock-on effects were felt far away, with parts shortages at Honda’s Swindon plant in the UK causing production to drop to a three-day week. On top of all that, the large-scale natural disasters that cause the most significant disruption are, thankfully, rare – providing infrequent opportunities for carmakers to properly assess their supply chain resilience. Experts are somewhat divided on just how much more resilient supply chains have become. There has been progress, and changes have been made. True resilience, however, is still something of a work in progress. “My suspicion is that not as much has been done as the hype would suggest,” says Richard Gane, a longstanding


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automotive industry expert and director of sourcing and supply chain consultancy, Vendigital. “But undeniably, dualsourcing has become more acceptable: formerly, the push was towards single sourcing, and that has changed. And in terms of the drive to eliminate inventory from the supply chain, that, too, has changed – there’s a greater recognition that longer supply chains are probably riskier supply chains.” No longer, for instance, is paint pigment Xirallic solesourced: these days, Merck keeps months’ worth of supply at warehouses both in Japan and other regions. A second production line was also opened up in Germany in 2012.

More proactive approaches Compared to even five or six years ago, manufacturers and logistics service providers have more visibility over where materials are, too, helping them to better visualise and plan their way around production difficulties, says Neal Williams, group managing director of emergency freight specialist, Priority Freight. “They’ve become much better at understanding what is in their ‘warehouses in the sky’ or ‘warehouses on the ocean’ and are much more adept at switching production to reflect parts availability – which, in turn, has been helped by the prevalence of multi-model assembly lines. When things go wrong, they tend to over-produce those vehicles that they can actually produce,” he says. Brad Brennan, managing director for premium freight specialist Evolution Time Critical, says recent natural disasters and unanticipated market spikes in North America have demonstrated that OEMs have become more agile in reacting to or anticipating disruption. He points to better contingency planning, including with specialist providers, but [OEMs have] also through a deeper become much better understanding of the supply chain, including at understanding down to the tier four level what is in their or beyond. “Re-routing of ‘warehouses in the shipments, resourcing, sky’ or ‘warehouses or moving heavy tooling and live production are on the ocean’ and all examples of proven

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are much more adept at switching production to reflect parts availability.

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Neal Williams, Priority Freight

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contingency methods that have been utilised to sustain production following natural disasters in recent years,” he says. Evolution, which is owned by Canadian logistics group Metro Supply Chain, recently launched a critical project service to manage such operations specifically. Some car companies are also becoming more adept at balancing the costs of dual-sourcing and additional inventory against the costs of emergency freight, adds Ron Glowinsky, vice-president for global sales at emergency freight provider CNW-Courier NetWork. “There’s a greater openness to the possibility that disasters will occur and that a policy of budgeting and planning for them, and choosing the best partner for their own particular critical shipment needs, can provide a more effective response,” he suggests. Priority Freight’s Williams also detects a greater willingness, at least among some companies, to consider emergency freight options more proactively, setting up framework agreements with emergency freight providers to save time when disaster does strike, with contingency plans already set up. “It saves valuable time: when difficulties arise, the framework is already in place for our people to join an auto manufacturer’s own supplier technical assistance team on the ground, and be ready to deal with the logistics dimensions of whatever the root cause of the problem is,” he notes. “Such agreements aren’t universal – particularly in continental Europe, where there can be a tendency to see road transport as a commodity – but where they are in place, the benefits can be considerable.” Brad Brennan also points to a more proactive approach to preparing and reacting to disruption, which, in turn, has helped companies like his to “think more like a vehicle or tier supplier” when developing contingency plans. “Manufacturers [increasingly] display a willingness to work closely with a dedicated multimodal emergency logistics provider in a proactive fashion – not just when things have gone wrong – thanks to an acute awareness of the benefits that can be brought by a flexible, highly responsive approach,” he says.

If you have the data, use it Increasingly, too, companies are seeking to get smarter at taking sourcing and inventory decisions that might impact

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prepare for catastrophic events,” he notes. “But it is possible to plan and prepare for other risks, and so it is sensible to do that: it’s better to take a holistic view of risk, rather than a narrow one. Our customers, including one of the big three automakers, asked us about risk management and if big data could help – and our risk management solution is the result.” For its part, DHL reports year-on-year growth of over 100% in the sales of its subscription- and cloud-based risk management solution DHL Resilience360, says Tobias Larsson, vice-president and head of DHL Resilience360. “Initially, back in 2012 when we first developed it, it was seen as something of a ‘nice-to-have’ solution, but perceptions have now shifted. It’s not quite a ‘must-have’ but it’s getting to that point. Knowing the granularity of the warnings and alerts that it is possible to have these days, customers often look at developing the required capabilities themselves and then come

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on supply chain resilience, says Hugh Williams, managing director at supply chain consultants Hughenden Consulting. The argument is that rather than reacting retrospectively and moving production from regions when flooding, earthquakes or tsunamis have already affected them, it is better to respond in advance, based on known risks rather than hard-won experience. “Globally, there’s a wealth of resilience-relevant data being generated: the challenge is analysing it and getting value from it,” he points out. “And rather than perform that analysis themselves, it can be attractive to use specialist providers, where those providers exist.” Increasingly, those providers do exist. DHL, for instance, offers just such a capability, as does sourcing and e-commerce platform SAP Ariba, information provider Thomson Reuters, and others.

The reality is that it’s not always possible to predict and prepare for catastrophic events. But it is possible to plan and prepare for a lot of other risks, and so it is sensible to do that.

Marcel Vollmer, SAP Ariba BMW has started to go further than supply chain mapping. At its Spartanburg plant in South Carolina, for example, the carmaker has recently installed a new control-room type setup, using a combination of information and weather feeds together with software from SAP-based software provider Leogistics. The control centre combines real-time trucking information, inventory status at the plant and live production information, allowing the carmaker’s material controllers to make highly informed decisions based on real-time data. SAP Ariba’s system, meanwhile, pulls in data from hundreds of thousands of sources and tracks over 130 different types of risk events, issuing alerts to customers as appropriate. Quite deliberately, explains Marcell Vollmer, chief digital officer at SAP Ariba, the solution embraces not just extreme weather and other types of natural disasters, but also a wide range of other relevant risks: financial, compliance-related, environmental and operational risks such as border closures, aviation incidents and maritime disasters, for instance. “The reality is that it’s not always possible to predict and

BMW’s visibility is moving towards combining trucking, inventory and production info with weather updates to guard against disruption

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to third parties like ourselves when they see the costs and complexities of doing this.” As is becoming common with such solutions, DHL’s Resilience360 offering combines conventional data feeds containing information on weather, seismic activity, port congestion and other risks with analytics targeted on searching online and social media early warnings of disruptions, including supplier-specific disruption. “For example, we’ll search for suppliers’ names using a very detailed taxonomy, looking for specific risks, such as a supplier’s name and ‘cyber-attack’,” he explains. “The idea is to give a customer relevant risk information six to eight hours ahead of when they might otherwise have had it, because that six to eight hours is often enough to put in place appropriate contingency and mitigation actions.” That said, the onus is still on customers to be able to identify their tier two, tier three and tier four suppliers, and to know where all of their suppliers actually produce the products and materials destined for them. However, as BMW’s Scholz found out when the carmaker developed its own risk management system, this is no easy matter. “In theory, it’s not difficult: all that is needed is the address. But in practice, when you check that address against Google Earth, there’s no factory there – what you have is the location at which invoices are processed,” he explains. “For supply chain disruption alerts to be meaningful, it’s important to know where production actually takes place.” The bottom line may be that for measures to enhance supply chain resilience to be really effective, both carmakers and their tier suppliers still need to know a lot more about their respective supply bases than they probably do at present. q (For more on disaster response in outbound logistics, see Finished Vehicle Logistics p44.)

US TRUCKING E-LOG MANDATE

Driving into new territory

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The mandatory electric logging of driver hours may havean effect on costs and capacity in the US trucking sector, but a new, safety-led culture can also bring benefits, writes Greg Thompson Similar questions were echoing across supply chains as the December 18th implementation deadline in place at the time of writing got closer. After that deadline, the Federal Motor Carrier Safety Administration (FMCSA) has mandated that drivers of trucks with a gross weight over 10,000 pounds (4,500kg) must electronically log their on-duty status, driving

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ob Poulos, chief executive of V3 Transportation, doesn’t need psychic powers to know what has been on the minds of his customers lately. As the calendar has moved closer to the federal government’s compliance deadline for implementing electronic logging devices (ELDs), most of his expedited trucking firm’s customers – including many in the automotive industry – were concerned about how the regulations, which mandate the electronic logging of driver hours, would impact on capacity across the American trucking market. “It’s the leading topic of conversation in every customer meeting that we have across all industries, and it’s the first question that we get from customers these days,” says Poulos, who confirms that 40% of V3’s 250-truck fleet operates in the

With e-logs, time is going to become even more precious and customers are asking questions to get insights into what the trucking landscape will look like with the entire industry running on electronic logs.

Bob Poulos, V3 Transportation automotive sector. “Customers who utilise trucks, especially those accessing capacity in the expedited market, understand that time is precious. With e-logs, time is going to become even more precious and customers are asking questions to get insights into what the trucking landscape will look like with the entire industry running on electronic logs.”

time, rest periods and other related activities. For many companies, this will mean moving away from paper-based logging systems that date back to the 1930s. Electronic logs that track drivers’ activity in real time have been a part of the American trucking landscape for more than two decades, with large fleets among the first to adopt


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Government efforts to encourage trucking firms to use ELDs began at least in the 2000s, while the legal transition to using the technology has been a long legal process. Their implementation is now characterised by multiple phases. FMCSA’s first full attempt at rulemaking for electronic logging was issued in 2010, but the Owner-Operator Independent Driver Association (OOIDA) successfully challenged the rule in the US Court of Appeals, citing the possibility that carriers could force drivers to drive against their will if the drivers had available hours. In 2014, the FMCSA modified the rule, seeking to address the issues raised in the court’s decision. The OOIDA filed a subsequent lawsuit against the updated ELD rule but, in a move that effectively ended the legal challenge, the US Supreme Court declined in June 2017 to hear the case, allowing the FMCSA to move ahead with the mandate. In September 2017, the US House of Representatives voted down an OOIDA-endorsed bill that would have delayed implementation until 2019. A similar bill has subsequently been introduced in the House, but had not moved forward ahead at the timing of going to press (on the eve of the ELD deadline). While the OOIDA has lobbied the Trump administration through various means, including a Twitter campaign under the hashtag #ELDorMe, the White House has shown little interest in delaying

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them. The cost and implementation of such systems are not especially high or complex, although they do require some training. However, there has been a reluctance to switch to digital systems because of one of the trucking industry’s worst-kept dirty secrets: paper logs have long presented drivers with the opportunity to omit some of their activities, including driving and on-duty time. A driver using paper logs, for instance, could conceivably log time lost sitting in a traffic jam or waiting at a customer location as off-duty time – illegally going over the permitted working hours to provide more time in which to drive. The real-time reporting nature of e-logs does not allow for such ‘flexibility’, however, eliminating a common practice and constraining how many carriers, owner-operators and drivers use time and capacity. The switch to an electronic system with real-time monitoring could therefore impact significantly on overall costs and available trucking capacity. Many small carriers may also not be ready to comply with the regulations in time. This shake-up in the trucking world could have negative impacts for sectors highly dependent on trucking services, too – especially the automotive industry, whose just-in-time supply chains could be put at risk.

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TAKING THE LONG ROAD

For the repeat offender, it’s going to cost you time and money. It’s the time for being stopped. It’s the time of having another roadside inspection. There’s been enough notice of this ELD mandate coming. There is no excuse.

Collin Mooney, CVSA or eliminating the mandate. Raymond Martinez, who is expected to be confirmed as the new FMCSA administrator by the end of 2017, stated his support for the ELD mandate during his testimony before the Senate Commerce Committee. The first phase of ELD implementation has been underway since 2016, which includes voluntary compliance and time to prepare. As of December 2017, carriers must use either a selfcertified or FMCSA-approved system. By December 2019, all systems must be approved by the FMCSA. Enforcement and penalties are also being phased in. For example, the FMCSA will delay putting non-compliant trucks out of service until April 1st 2018. Initial violations will also not be accompanied with the citation of Compliance Safety and Accountability (CSA) points, which are scored against both the offending driver and carrier. This temporary suspension is significant because of how points affect insurance costs. According to Marsh & McLennan Companies’ Shaun Carr, an insurance expert in the trucking industry, a rising CSA score could lead to price increases and eventually be more devastating than the cost of the fines for carriers and drivers. However, despite the grace period in compliance and points accruals, Collin Mooney, executive director of the Commercial Vehicle Safety Alliance (CVSA) said the enforcement community would begin documenting violations of the ELD mandate from December and might issue citations at the jurisdiction’s discretion. “For the repeat offender, it’s going to cost you time and money. It’s the time for being stopped. It’s the time of having another roadside inspection,” notes Mooney. “There’s been enough notice of this ELD mandate coming. There is no excuse.”

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At the same time, however, the move should offer both safety and efficiency benefits, as drivers are forced to work only in legal hours and companies gain more visibility over driver behaviour and combine ELDs with other processes, such as tracking of location and vehicle conditions. This move into more digital processes for the trucking sector suggests that the change to ELDs and to using new technology brings clear risks, but will also have rewards for companies that use them strategically.

Ready for a change to real time, or not? Few, if any, in the trucking industry will admit that they oppose electronic logging because it eliminates the scope to falsify hours of service reports. However, some operations depend on the ‘additional time’ gained through such creative use of paper logging. Based on the experience of fleets that have made the conversion to ELDs over the years, Bob Costello, chief economist with the American Trucking Associations (ATA), believes that the change will reduce overall capacity. Costello suggests that carriers typically lose 3-5% in productivity, while he says fleets that have yet to make the switch might risk losing more. It all depends on how the carrier operates. V3’s Poulos – whose 100% owner-operator fleet has been e-log compliant since it started operations in 2013 – also points to capacity challenges as productivity declines. He estimates that a truck has to make $3,000 a week in line-hauls


to cover equipment payments, pay the driver and cover other costs like insurance and fuel. Solo drivers can typically achieve those costs points by moving about 650 miles (1,050km) logged on paper. “But, with e-logging, he won’t be able to ‘stretch’ the time to make those types of longer runs if there is congestion, [bad] weather, dock delays or other issues,” explains Poulos. “One of the changes that you’ll see is that traffic and supply chain managers will not want to take a risk on anything solo that is greater than 550 miles. We believe that the demand for expedited team capacity will increase. We are already seeing that happen.” Andrew Lockwood, a senior manager in Kenco Logistics’ analytics and solutions design group, anticipates that firms will try to ensure a one-day transit time or plan inventories to accommodate two-day solo moves. “Under the legal guidelines, a driver can drive 11 hours per day. It’s not as much of an issue in parts of the country, like out west, where drivers can average 55 or 60 miles per hour over the hours that they are driving,” observes Lockwood. “Where there is traffic, congestion, delays, weather or accidents, there will be an impact. Drivers will not be able to go as far in 11 hours.” Kevin Hill, president of CarrierLists, a service working with more than 400,000 carriers throughout the US and Canada assisting brokerages and shippers, notes that profits for some smaller operations hinge on unlogged time spent in traffic or delayed at docks. Hill is one of many in the industry who believes that ELDs will initiate behavioural changes in terms of how trucking customers operate. ELDs have been around for decades but many carriers have preferred to use paper logs, in part because they allow for more flexibility

“There are quite a few shippers out there who are very inefficient themselves with their processes, and they are going to need to go through nearly as many changes with what they are doing as truckers are going to make in using ELDs,” he points out. For example, customers who are able to load or unload trucks quicker than competitors could see lower rates than those who cause delays. The automotive industry, however, with its lean management and just-in-time principles, has a significant advantage in this regard, points out V3’s Poulos. “Due to the time-sensitive nature of the freight with automotive, you typically have quick turnarounds with less dwell time at the origin and destination,” he says. “Some industries – like consumer products or retail – have improved over the years, but they still don’t compare with the use of time that we see in automotive.” Contract logistics provider Ryder has around We spoke to: 2,100 of the company’s Bob Poulos, chief executive, 7,700-member driving V3 Transportation community working within Bob Costello, chief economist, American Trucking Associati the automotive sector. Steve ons Martin, vice-president Andrew Lockwood, senior manager, Kenco Logistics of automotive, aerospace and industrial operations, Kevin Hill, president, CarrierL ists agrees that the industry Steve Martin, vice-president of automotive, aerospace and is highly desirable in a industrial operations, Ryder working environment Shaun Carr, national sales lead focused increasingly on er, Transportation Center of tight time schedules. Excellence, Marsh & McLenna n Companies “Automotive has less volume fluctuations, and Collin Mooney, executive direc tor, Commercial Vehicle Safety Alliance

Norita Taylor, director of publ ic relations, Owner-Operator Independent Driver Associati on Noël Perr y, truck and transportation expert, Freight Transportation Research Associates


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SURVEY OF CARRIERS WITH 5-100 TRUCKS

STILL HAVE NO ELDS HAVE ELDS OR PLANS FOR THEM CarrierLists survey, November 3rd 2017

Morgan Stanley survey, for example, which suggested the large majority of carriers on track to be compliant, covered 375 companies with an average fleet size of over 1,450 trucks. According to ATA figures, there are 586,000 carriers in the US, of which 97% have 20 or fewer trucks. “That’s the hidden part of the industry, because all the big boys are touting that they are ELD ready and those are the floating billboards that we see heading down the highway,” says Lockwood. “Anything less than 100% compliance will have major ramifications, and we believe it will fall short of 100%.”

No time to quit carriers are able to build efficient models because they are able to plan on the freight,” observes Martin. “It gives us the ability to have a more a consistent view of where the assets are going to be – something that I think helps carriers manage their business better. There is a need to have high reliability, and that goes back to the level of visibility that has been in this supply chain for a number of years.”

Small firms may fall behind Most of the OEMs we contacted for this article either declined to comment or said they expected their carrier base to comply. But automotive manufacturers could still be affected if a large number of carriers have missed the deadline. By late autumn, there were signs that many companies might not be ready. CarrierLists has been polling an expanding database across the company’s roster of member

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How much capacity could come out of the truck market as a result of ELDs is an open question. The ATA’s latest estimates suggest there is already a driver shortage of 50,000, which could be exacerbated. Norita Taylor, OOIDA’s director of public relations, declines to put a number on the level of the organisation’s 158,000 members who may park their trucks up rather than use ELDs, though she admits OOIDA members thinking about retirement may accelerate their plans. Not everyone is so worried, however. Noël Perry, a logistics economist at Freight Transportation Research Associates, doesn’t believe the dire predictions of a mass exodus following the ELD mandate. Perry contends that, with the combination of constrained capacity from the anticipated productivity losses and rising freight rates, walking away from the industry at this moment of opportunity defies business logic. “I think the quit-the-industry issue is a red herring. If you

No matter how smoothly this comes into place, productivity is going to take a hit. If only productivity takes a hit, that’s probably the best-case scenario.

Kevin Hill, CarrierLists carriers, which range in fleet size up to 100 trucks. Kevin Hill, who has made some of the polling calls himself, says he was in disbelief after seeing the results from initial surveys showing just 23% compliance. “At first, I thought that the numbers couldn’t be right, but they are accurate. I figured that if carriers are going to give us misinformation, it’s going to be a higher number on the compliance side. But that’s not the case.” A poll on November 3rd revealed that 60% of survey respondents had not yet installed ELDs. Meanwhile, the rolling average among the 1,900 carriers surveyed to that point that had installed ELDs, or which had made plans to install a compliant system, stood at only 46%. Kenco’s Lockwood found the survey results to be both fascinating and alarming when considering that the majority of the US trucking market consists of smaller fleets. He cautions companies who might be tempted to dismiss the possible impact of ELD implementation to look again – especially at the risk to small firms not keeping up. He also says recent surveys showing the industry to be fast on the way to compliance may not have captured the full picture including smaller companies. An oft-quoted

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have a $100,000 tractor, you don’t throw it away. And you don’t throw it away when we’re in the middle of the highest prices in the last 10 years,” says Perry, referring to the recent recovery in freight rates. Perry projects a near-term rate increase of 22% on the spot market, and 5-6% on contractual pricing. He points to JB Hunt, one of the largest truckload carriers, which recently sent a letter to customers warning that the company’s freight rates could be increased by 10% or more. “Those companies that have ELDs in place are licking their chops because this is going to be the last golden age of trucking before we see all the autonomous technology sweep into place,” agrees Lockwood. “From a shipper’s perspective, this is going to be like experiencing a hurricane without the benefit of a weather forecast.”

Digital gains Overall, compliance is relatively attainable for most. Many ELD solutions are available through a carrier’s in-cab communications system, while stand-alone platforms are available as apps. Scott Sutarik, associate vice-president of commercial vehicle sales for Geotab, says interest in his


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network, carriers are tested against a 10-point check system. If carriers that delay implementation are seen as habitual offenders by law enforcement, incurring rising fines and losing time at roadside inspections, they risk exclusion. Lockwood hopes that trucking customers will also look more carefully at their loading and freight handling operations. “I believe we are going to see a new-found respect

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app-based ELD solution was growing exponentially as the December deadline approached. Sold as a kit in major truck stops across the US, the app retails for under $200 a unit. “We’ve been very busy and we expect to be very busy as we get closer the deadline and into early [2018],” he says. “We will be working hard to make sure our inventory can meet demand, and we know there’s going to be a high demand.”

I think this is somewhat similar to what we’ve been talking about with the driver shortage. We know it’s there and events make it more acute or relaxed, depending on other factors.

Steve Martin, Ryder In autumn, Penske Truck Leasing released an app for ELD to all its truck leasing customers, which can also use their own systems. In September, finished vehicle logistics IT provider CDN also released an ELD app, which was subsequently being rolled out in the fleet of vehicle logistics carrier, USAL. As well as being low cost, both Penske and CDN apps offer other benefits for logistics. Penske’s app helps drivers find service locations, fuel and CNG stations, truck stops and public weighstations, and also allows for the digital submission of fuel receipts. CDN’s app, together with other fleet software, will ultimately provide real-time reporting on freight status, vehicle condition and locations. Such digital gains could point the way towards gains in productivity and operations that could partly make up for those lost elsewhere.

for their time and for their occupation,” states Lockwood. “I hate to say this, but a lot of [shippers] just don’t care about the drivers and their time. I believe that will change.” Ryder’s Martin admits that the overall impact is still unclear, and may require companies to react, particularly in terms of drivers. “I think this is somewhat similar to what we’ve been talking about with the driver shortage. We know it’s there and events make it more acute or relaxed, depending on other factors,” he says. “We’ve been working for a number of years toward this, knowing that these changes help to drive improvements in other ways. We are staying on course with our plan that is tied to the timelines in these new regulatory requirements. I see us continuing with that strategy.”

Just another day? Hill was planning to continue polling fleets within the CarrierLists’ database as the December deadline neared. The number of small fleets and owner-operators who have not made the transition to ELD-compliant systems may not be known for weeks beyond the deadline, according to the CVSA’s Mooney, as roadside inspections early in 2018 start to yield sampling data for statistical models. “It’s going to be chaotic. It’s going to depend on enforcement. If people really start getting fined, then it’s going to get worse. No matter how smoothly this comes into place, productivity is going to take a hit. If only productivity takes a hit, that’s probably the best-case scenario. I don’t see any way around that,” predicts Hill. “The trucking market is kind of like oil – it’s fungible. To ignore those owner-operators and those fleets who make up 97% of the industry is a mistake. If you take out the people that you don’t use, I believe you’ll have intense competition between shippers.” How smaller carriers respond during a penalty grace period that ends on April 1st (see box on p54) could reshape the trucking market, of course. Smaller carriers feed into large networks like CarrierLists and Kenco, while also often providing support to larger truckload and less-than-truckload fleets when their ‘in-house’ capacity is committed. At Kenco, Lockwood notes that the majority of the company’s brokered loads are placed with smaller carriers across its 100,000-truck network. To be a part of Kenco’s

ELD interface and app suppliers were seeing an increase in business as the December 18th 2017 deadline approached

For all the ELD-related questions Poulos has fielded over the past few months, the easiest has been responding to the intent behind the rule. He has consistently pointed out that the action by the Department of Transportation and the FMCSA is an important step in making the roads safer and putting all carriers on a level playing field. “The fact of the matter is that there are a lot of cheaters out there, and this has been going on for years. This change will help trucking become a safer industry,” confirms Poulos. “People ask me if I think December 18th is going to be a milestone event. I tell them that I believe it’s going to be another day, but every day forward it’s going to be a new playing field.” If the December deadline does turn out to have been just another day, things may well change once enforcement begins in earnest this year. At that point, all bets are off. q


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RUSSIA LOCAL SOURCING

Get local or get going

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he industrial assembly policy that Russia’s government has been pursuing since 2008 initially looked to have played out quite well, encouraging the world’s leading automotive manufacturers to build assembly plants in the country. But after several economic crises, including a sharp devaluation of the rouble in 2014 and subsequent market declines, it became clear that the policy had at least one very important gap: while it included strict requirements about localisation in terms of tier one component suppliers, it did not do the same for tier two and tier three suppliers. Despite localisation levels at assembly plants in Russia being between 40% and 60% around the end of 2014, when sales in the country were still more than 2.5m units per year, many domestically produced components were still being primarily assembled from imported parts and raw materials, leaving the national automotive industry’s dependence on imports less obvious, but still nearly absolute. When the Russian currency collapsed in December 2014, it immediately resulted in an increase in the price of such imports, pulling profitability down at most assembly plants. In a bid to offset these losses, OEMs had no choice but to raise vehicle prices – which eventually became one of the main factors in wrecking domestic demand.

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Manufacturers in Russia are being encouraged to move to greater localisation of tier two and tier three components to reduce the country’s dependence on imports. Vladislav Vorotnikov reports It wasn’t just foreign carmakers’ plants that were caught up in this trap, either. Russian vehicle-maker Avtovaz, producer of the Lada brand, was hit very badly, suffering enormous losses in 2014 and 2015 and being forced, following disruptions in the supply chain and attempts to stem those losses, to stop production at its plants several times over recent years.

Mind the gap Russia’s Industry Ministry, which has determined all the rules of engagement for the domestic automotive industry over the last decade, says lessons have been learned, which is why its industrial assembly agreement will not be extended in 2018. Instead, the government plans to introduce Special Investment Contracts (SPICs), which will allow the regulator to stipulate new and more sophisticated requirements governing the assembly of vehicles in Russia. Maya Sviridova, director of the industrial automotive cluster Autoprom North-West, says that in its current form, an extension of the industrial assembly agreement was impossible, primarily because it contradicts the obligations Russia took on in joining the World Trade Organization (WTO). “Russia’s joining of the WTO and the expiry of the decrees on industrial assembly [in 2018] will end the preferential


regime [of assembly plant operation contained in the industrial assembly agreement] with breaks on customs duties on imports of automotive components. To avoid rising costs, assembly plants have chosen to increase localisation and tighten cooperation with Russian suppliers,” says Sviridova, who is also deputy director of the Russian Association of Automotive Components.

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Russia will cancel prior industrial agreements that gave OEMs reduced customs rates for installing minimum production capacity levels

sales during 2017, which are on track to grow more than 10% compared to 2016, are still off a very low base, possibly ending the year at around 1.6m units – or just more than half of prior market peaks. OEMs have lambasted the idea of being forced to invest more money in localisation projects. Marcus Osegowitsch, general director of Volkswagen Group Rus, in particular, has criticised SPICs. In statements to the Russian news outlet Gazeta, he suggested that while the tool would be useful in times of crisis, it will simply create an unlevel playing field for different market players in the meantime. Carmakers with new projects in Russia will receive state subsidies per allocated investment amount, he points out – but OEMs that have operated in Russia for some time already will not be granted such aid for established production capacities or for localisation levels they have already achieved. “What we need is clearance and transparency in the market. We want equal operating terms for all market players,” Osegowitsch told Gazeta. “Only in this way can we achieve predictability, and respectively, continue our investments in Russia. If, however, the terms of operation are unequal, I will

I believe [localisation] requirements in future may be applied to tier two and tier three suppliers for the use [by local assembly plants] of exclusively locally produced components and raw materials.

Wilhelmina Shavshina, DLA Piper The idea of the SPICs is that OEMs have taken on an obligation to invest money in their production capacities in Russia in various ways – ways that need to be discussed and agreed with the government individually. And where Russia’s industrial assembly agreements have offered preferential customs duties on components, SPICs will instead offer federal tax breaks. For each OEM, the investment plan and the relevant tax breaks will be agreed individually, allowing the Industry Ministry more flexibility in regulating the automotive sector and also to introduce targets for localisation of tier two and tier three components. “We should expect tightening requirements on localisation of products, including in the automotive industry, from the state agencies,” comments Wilhelmina Shavshina, head of the foreign trade regulation practice at DLA Piper. She suggests that in establishing localisation requirements, the Industry Ministry supports the transfer of fullcycle production facilities to Russia, i.e., part-by-part manufacturing as opposed to knockdown parts and kits. “I believe such requirements in future may be applied to tier two and tier three suppliers for the use [by local assembly plants] of exclusively locally produced components and raw materials,” Shavshina says.

Strong resistance It is not certain that the Industry Ministry will be able to turn its plan into reality, as it faces strong resistance from the Ministry of Economic Development. Stronger domestic

have to tell [Volkswagen’s] headquarters that the situation in Russia is vague and that it is unclear what will happen here after two, three or five years.” Deputy minister of industry Alexander Morozov concedes that, for carmakers, it is hard to consider further investments in Russia, We spoke to: including in localisation Maya Sviridova, director, of tier two and tier three Autoprom North-West; deputy director, Russian Association components, but says the of Automotive Components government has designed a Wilhelmina Shavshina, head of solution that should make foreign trade regulation practice, DLA Pipe everyone happy. r “The Ministry, of course, Alexander Morozov, deputy minister of industry, Russian understands that the return Industry Ministry on investment for an Harald Grübel, vice-president, assembly plant starts at a engineering, Avtovaz capacity of 200,000 units per Dmitry Mikhailov, director, Niss an year, while when it comes Motor Manufacturing Rus to the plant producing Lilia Mokrousova, spokesperson , automatic transmissions, PSMA Group this figure is around 500,000 Andrey Kosov, chairman, Automotive Components Committ units per year,” he says. Association of European Busi ee, ness “We need quantity, which Nata lia Zaki is why we have suggested rova, head of sales, Gefco Russia automotive companies Tatiana Hristova, European light join forces and organise vehicle forecast manager, cent ral and joint ventures to produce east Europe, IHS Markit Glob al components.”


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That proposal, which has already been made to Renault Nissan, Hyundai and Volkswagen, involves establishing joint capacities for the production of metal subcomponents that would be used at plants producing automatic transmissions. If carmakers agree to enter into such a joint venture, it could be included in their SPICs. “At the start, they [carmakers] said they would not sit at the same negotiating table. However, as soon as more specifics on the planned state aid scheme were revealed, they changed their minds. Now, they are considering this proposal and negotiating with each other,” Morozov claims. In 2017, a proposal to harmonise production of subcomponents for different OEMs in Russia was put forward by Avtovaz. The proposal suggested Russian carmakers and parts suppliers could unite in an alliance for the creation of a

No small business The problem with producing subcomponents in Russia is not just about gaps in legislation, however: another issue is that there are few suppliers in Russia that can match the requirements of OEMs. “Russia’s suppliers are assembling localised components mainly using imported subcomponents. The only way to solve this problem is to develop the automotive industry in the country,” comments Dmitry Mikhailov, director of Nissan Motor Manufacturing Rus.

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forum designed to entice local supply to the new plant it is building near Moscow. The plant is set to build the E-class sedan in 2019, followed by SUV models. The carmaker’s purchasing executives met with around 100 suppliers.

Russia’s suppliers are assembling localised components mainly using imported subcomponents. The only way to solve this problem is to develop the automotive industry in the country.

Dmitry Mikhailov, Nissan Motor Manufacturing Rus common components platform or at least the unification of key parts, including suspension and transmission parts, as well as engines. Harald Grübel, Avtovaz’s vice-president of engineering, mooted a country-wide alliance among all carmakers and the establishment of a joint procurement system that would lead to the development of shared components. That would ultimately reduce the cost of vehicles as the alliance would be able to place bigger orders for components and therefore get a better price per part. Also, the establishment of such a system could significantly lower spending on logistics, as well as car assembly, testing and other operations, he said.

Following problems with components, Avtovaz suggested an alliance between carmakers and suppliers to create a common parts platform

Grübel also says that the process of planning and cooperation among the different carmakers and OEMs could be organised and monitored by the government. Avtovaz has already entered into negotiations on the issue with some market participants, he says. In the meantime, at least some manufacturers are actively pressing forward with localisation regardless of legislation. In November, for example, Mercedes-Benz hosted a supplier

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“For example, look at the headlight. This is an expensive part and when it is manufactured locally, it significantly increases localisation of the entire finished vehicle,” he explains. “However, three out of the four main parts of the headlight are imported from Japan and only one is manufactured in Russia. So, the Russian share in the added value of the headlight is only around 20%, although it is declared to be a localised component,” he explains. Suppliers of tier two and tier three components are usually small companies and in Russia’s automotive industry, that segment is virtually non-existent, Mikhailov adds. Lilia Mokrousova, a spokesperson for the PSMA Group, the PSA-Mitsubishi joint venture in Russia, confirms that there are some common concerns about subcomponents supply in the country. “It is quite hard to find [in Russia] localised suppliers of electrical and electronic components, as well as competitive machining operation workshops,” she says. “In spite of this, PSMA Rus is introducing best practice in raw materials import replacement, and helping to develop its second and third tier suppliers. At the moment, the greatest vertical integration has been achieved in the details of the interior, exterior and car body.” Shrinking sales in Russia’s automotive market have also had a negative impact on component manufacturers. In particular, in 2015, when the economic crisis in Russia reached its peak, several projects for the production of subcomponents were put on hold, including a new plant plant in St Petersburg from Unipres, a Japanese pressed parts supplier. “Localisation of second and third tier components is taking place slowly compared to first tier components, because these are more compact items, so logistics is not too expensive; on the other hand, these components are often high-tech products, so localisation requires significant investment,” says Andrey Kosov, chairman of the Automotive Components Committee at the Association of European Business.


Although Russian military companies are starting to enter the automotive supplier market, margins may be too low for many

“At the same time, return on investment [on subcomponents projects] is achievable only at high production volumes of the same type. On the Russian market, however, those volumes are rather finely segmented,” he adds. Russian logistics providers suggest assembly plants in the country are increasingly sourcing tier two and tier three components from local suppliers, however. “The localisation level is growing, as OEMs with production sites in Togliatti, Izhevsk, Tatarstan and the Leningrad

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and Bipitron have recently started supplying assembly plants with printed circuit boards and other electronic components for the production of finished vehicles,” Sviridova says. It is too early to say whether these military suppliers will gain significant ground the automotive market, however – not least as such work is likely to generate less revenue than their core business in defence and weapons. “Production of automotive components is a low-margin business; the profit per unit does not correspond with the basic parameters of the defence industry,” confirms Sviridova. “Additionally, carmakers have very high quality requirements, not only in regards to the products themselves, but also in terms of the management and organisation of the production process. This, in turn, requires some effort, time and money – so not every company is up to it.”

Critical balance While greater localisation of tier two and tier three components will depend on meeting government requirements and achieving the right level of profitability, such supplies will be critical to the existence of Russia’s automotive industry, suggests Tatiana Hristova, IHS Markit Global European light vehicle forecast manager for central and east Europe. “The unstable exchange rate and a clear tendency towards devaluation makes the import of components and materials both expensive and risky,” she says. “Production of automotive components from Russian materials by local second and third

The unstable exchange rate and a clear tendency towards devaluation makes the import of components and materials both expensive and risky. Production of automotive components from Russian materials by local second and third tier suppliers will improve the profitability of both tier one component producers and carmakers.

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Tatiana Hristova, IHS Markit Oblast have started to use competitive bidding procedures for incoming logistics of components. Within these tenders, internal flows in Russia account for 30% of all deliveries,” says Natalia Zakirova, head of sales at Gefco Russia.

Military invades the supply chain Much depends on the cost per unit in combined production volumes, though this has been falling in Russia’s automotive components industry in recent years, Sviridova suggests. It is also not such a big consideration for military manufacturing operations, who are getting more actively engaged in the production of automotive components. In a new trend in Russia’s automotive industry, a growing number of companies from the military production segment are applying for so-called ‘conversion’ to allow them to start manufacturing civilian products. The move stems from a shrinking number of new orders by the Russian military, which has forced them to seek other opportunities in nonmilitary projects. “So far, there are only a few [military companies producing automotive components], but the number has recently started growing strongly. In particular, companies like Okeanpribor

tier suppliers will improve the profitability of both tier one component producers and carmakers.” At the same time, she admits, investments in components production will only be made on the basis of production volumes which, in turn, can only be achieved via growth in the local Russian market or growth in exports of vehicles to other countries. “Poor development of export logistics and a rather modest growth outlook for the Russian finished vehicles market itself – IHS Markit currently expects growth in sales of finished vehicles to reach previous highs of 3m units only in 2028 – will not allow some suppliers to increase production to a level where further investment in localisation will be of real value,” she cautions. On the other hand, if production of more tier two and tier three components is not localised, it is likely to affect the profitability of finished vehicles and have a negative impact on the attractiveness of investing in the automotive industry in Russia as a whole, she warns. The message is clear: get local in Russia or, quite likely, pack up shop. q


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TECHNOLOGY REPORT DRONE TECHNOLOGY

Ready to really take off?

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s global giants like Amazon continue to assess the viability of using unmanned aerial vehicles for deliveries, companies around the world are becoming ever more interested in the potential of drones. Aside from making consumer deliveries, drone technology has already emerged as an active area of research and development in the broader automotive industry, with attention tending to focus on potential applications in the supply chain during vehicle assembly, whether in monitoring parts and vehicle locations, or even moving parts around factories. There is also interest in aftermarket commercial applications, where the drone interacts with the vehicle to sense the environment. According to Rahul Bhattacharyya, director of sensor technology architecture and application at logistics technology specialists Surgere, a lot of the discussion relating to the use of drones in the automotive supply chain now centres on inventory control. He suggests RFID readers deployed on drones, for example, could be used to automatically conduct periodic surveys of finished vehicle inventory in open parking lots near manufacturing plants. Similarly, drones fitted with RFID or barcode scanners could automatically conduct stock checks in a warehouse. And they might even be used to replenish those stocks, he adds. “Taken a step further, drones could carry replenishment parts to specified locations in the warehouse once a lack of inventory has been confirmed,” he says. “Most of the advantages of using drones centre around automation, environmental sensing and 3D situational awareness, as well as convenience, safety and extending the reach of delivery or survey vehicles.” Besides inventory control, Bhattacharyya also highlights potential aftermarket applications, which could follow examples in the business-to-consumer field. One such, which he says is being actively considered by Mercedes-Benz, UPS and DHL, is the use of drones on delivery vans to extend the reach of the vehicle; for example, delivering packages to the balcony of a higher floor apartment.

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Companies around the world are waking up to the potential of drones, including those in involved in automotive logistics. Andrew Williams looks at their uses This past autumn, Mercedes-Benz completed a trial using two vans and drones to carry out deliveries in Zurich, Switzerland to customers who placed orders on Swiss online shopping platform Siroop. Around 100 flights were made in total with no issues, and more are planned for 2018. William Wappler, president and chief executive at Surgere, says his company has also investigated the use of drones for data acquisition at various points along a digitalised supply chain, something he says has “tremendous” potential. “However, today, with governmental administrative regulations and other commercial restrictions relating to insurance, operational health and safety interpretations and client legal risk, among others, we proceeded with groundbased wheeled and legged robotics,” he says. Regulations vary not only by country, but also in different locations. In Germany, as well as outdoor limits, there are restrictions over the use of drones indoors, which has made

Mercedes-Benz made around 100 successful drone deliveries of orders from Swiss online shopping site Siroop in autumn 2017


their use in factories and warehouses more complicated. In the US, the Trump administration has recently made moves to improve drone legislation by calling for the creation of innovation zones that would loosen federal aviation rules to allow drone tests and deliveries. However, it is unclear how these zones and operations will be determined at local levels. Many companies are still waiting to see how laws develop. “When the regulatory environment becomes friendly, the true potential becomes realised within the technology, and the opportunity to return a reasonable ROI and level of positive operations impact that we expect to deliver to our clients [is there], we’ll incorporate drones into our overall mix of data collection tools,” says Wappler.

Visual recognition Srini Muthusrinivasan, senior industry strategies director at JDA Software, says most companies interested in drone technology are currently limiting their activities to applications based on visual recognition – such as counting trailers in a yard, or cycle counting in parts warehouses to check on inventory. In the future, however, he predicts drones will be used to speed up shipments, in the process helping to compress lead times for both ordering and distribution. “It’s important to remember that we aren’t there yet, but the good news is that the application of drone technology is bound to skyrocket over the next five years, both within the automotive OEM and aftermarket ecosystem, as well as in wider industrial areas,” he says. While the use of drones is still a new development for the automotive logistics industry, Muthusrinivasan says JDA is currently in the process of “interacting and collaborating” around the concept with several 3PLs. From discussions to date, he envisages that the deployment of drones will take two distinct forms. To begin with, he says, drones could, by themselves, be considered as a fleet or resource. And secondly, he suggests, they have a role to play in data collection. “Once drones are ready in the marketplace, subject to governance, air traffic control approvals and so on, we could help manage the constraints and work effectively within the rules. Secondly, JDA is enabling digital supply chains by being able to sense and respond to the live signals that come from various devices and apps that provide information for certain systems – a drone could be one such device,” he explains.

Real-time location Rafael Granato, marketing director at industrial drone supplier PINC, points out that another potential application of drones in automotive logistics is to use them as part of broader real-time location systems (RTLS), a general We spoke to: area of technology that of tor direc ya, hary ttac Bha Rahul and determines the current sensor technology architecture application, Surgere position of an object William Wappler, president based on real-time and CEO, Surgere information gathered Srini Muthusrinivasan, through a wireless system tor, direc egies strat stry senior indu of some sort. JDA Software Ever since the Rafael Granato, marketing director, PINC

Hartmut Haubrich, director of finished vehicle logistics systems, Inform Software

TAKING A BIRD’S EYE VIEW Swiss logistics services provider Kuehne + Nagel (KN) is currently carrying out a project focused on the deployment of drones equipped with on-board cameras to conduct more rapid inventory checks and counts. Achim Glass, head of global automotive vertical, presented the pilot at the recent Automotive Logistics UK summit (see p20). The key objective of the project, dubbed InventAIRy, is to enable fully autonomous inventory checks by using camera carrying drones to fly around warehouses and capture images of pallet racking. Dedicated software is then used to compare the product barcode and storage location information captured by the drone to the data held by a company’s warehouse management system (WMS) in an effort to identify any gaps. Glass said the main benefit to potential customers is the ability to carry out an expedited inventory count using less manpower, ultimately helping to improve the bottom line. Other, as yet untested benefits cited by the company include improved capacity to assess stock occupation and overall volume levels, as well as to check the optimal pallet location height and identify damage. Audi has also been looking into the use of drones, in particular carrying out a trial to test their potential for parts deliveries. It says the results have been largely positive but that it will not be pursuing the use of the technology for now as drones cannot handle heavier parts and current regulations in Germany do not allow their use in closed environments like a production hall (for more on Audi’s trial, see p34).

adoption of global positioning system (GPS) satellites for vehicle navigation, various techniques have been developed and introduced to the market for tracking people, inventory and other assets in applications spanning healthcare, security, safety and logistics. According to Granato, the common challenge RTLS seeks to address is the need for “timesensitive, location-related information and accuracy, often brought about due to the dynamic nature of the object being tracked”. “For automotive logistics applications, increasing demand for real-time visibility in today’s globalised supply chain means RTLS is becoming an indispensable element for technology investments aiming to improve the the visibility of data critical for management to make informed and effective budgeting, operating and financial decisions,” he says. That said, Granato believes mobile asset tracking in yards or lots presents an interesting application for RTLS because the environment, while outdoors, is still a contained physical space. Until recently, he explains, the most prevalent approach to managing trailers, vehicles and other high-value assets in the yard has been to depend on all-manual, resource-intensive processes to track their location and status, often leaving the integrity of data compromised due to human error and the non-real-time nature of such processes. He also points out that GPS and cellular-based systems are no longer viable for indoor inventory tracking in factories and warehouses because of the lack of sufficient signal strengths to provide satisfactory precision. Most leading-edge organisations use more than one counting approach to keep track of inventory inside


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warehouses, contends Granato. Although sometimes effective, he suggests such approaches have their drawbacks, mainly because the process is handled by error-prone people and can be disruptive to existing operations – possibly requiring a shut-down in normal operations or the use of additional temporary staff to complete in a restricted timeframe. Such approaches can also be unsafe, he suggests, if they require staff to work at height or move around otherwise dangerous and dispersed areas. That’s why some companies are now considering the use of drones, coupled with advanced sensor capabilities like passive RFID, optical capabilities and barcode technology, to improve the operational effectiveness and efficiency of inventory checks in yards, lots, and warehouses, says Granato. “Elevating the sensor platform into the air with the use of an autonomous unmanned aerial system enables automatic, accurate, efficient and safe inventory checks in hard-to-reach locations,” he stresses. Such drones are also able to identify, locate and reconcile inventory information faster and more accurately than a human can, he adds.

Tracking finished vehicles There are some indications that drones could also be useful for tracking finished vehicles in storage and at various transit points in the distribution chain. According to Hartmut Haubrich, director of finished vehicle logistics systems at Inform Software, drone technology could be used to quickly scan large areas automatically or semiautomatically, and certainly where remote identification of items is possible. However, he stresses, such applications depend heavily on the information needed and the environment. “Getting an idea of the utilisation of a storage area is possible by identifying items visually. For more detailed information, barcode reading or RFID tag reading would be necessary,” he comments. Haubrich predicts that security applications could also become “a significant area of application” – for example, using drones equipped with thermal imaging cameras. “This can go together with computing, where a local but still powerful computer performs tasks like image processing and sends the results as soon as a wireless connection is available,” he says, noting that Intel recently proposed this idea. “In finished vehicle logistics, more and more vehicles will have the ability to send their GPS position. This can also be retrofitted to vehicles by using GPS dongles on an OBD [on-board device] connector. We see this vehicle-based GPS as the technology of the future in the field of finished vehicle logistics,” he adds.

Sector interest levels Rahul Bhattacharyya stresses that defence remains far ahead of any other sector in investment and deployment of drone technology, with civilian applications like infrastructure condition monitoring and agriculture also showing a good deal of growth potential. “This makes sense as there is strong appeal for drones to remotely and autonomously monitor large areas of buildings,

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Drones could be used to track vehicles which can even be retrofitted with GPS dongles to provide location information

transportation networks and crops,” he says. “Automotive and transportation has billion-dollar market potential and as a result, companies like Ford are investing heavily in building software infrastructure for connected vehicles that allows your phone and home assistants, like [Amazon’s] Alexa and Google Home, to synchronise with the vehicle. In addition, they could also take input from companion drones to provide situational awareness around the vehicle,” he adds. Hartmut Haubrich argues those industries that operate indoors, in particular those running warehouse facilities, will emerge as front-runners for the take-up of drones. Srini Muthusrinivasan, however, stresses that most commercial industries have yet to adopt drones in a big way and adds: “The delivery piece of the puzzle is where we are likely to see growth in the use of drones over the next few years.” In the near term, he suggests, we are likely to see drones carrying out freight delivery to inaccessible terrains, as well as what he describes as “mission-critical deliveries tied to life sciences and last-mile B2C and B2Me door deliveries”. “Over the long term, bigger developments that could be driven by drones could include the transportation of commercial passengers and bulk weight shipments, and – wider than that – tourism,” he suggests. Granato envisages that drones will soon feature autonomous sensing and object avoidance technology, enabling them to “fly around yards and warehouses 24/7 with no need for human interaction, capturing accurate visual, status, location and count information and sharing this information in real time with other applications”. “Dealers will also use drones to find assets in dealerships and provide a better experience for the end customer,” he predicts. PINC is currently working with customers from all segments, including automotive, that are trying to solve inventory accuracy, identification and location challenges, inside and outside of plants and warehouses, he adds. “We certainly see a huge appetite from the automotive industry to gain real-time visibility inside and outside of their facilities,” he confirms. “It all comes down to knowing where inventory is and to collecting, mapping and timestamping every step of the process so information can be analysed to make sure the entire lifecycle is optimised, products are delivered on time, demand can be predicted and adjusted and, most importantly, customers are kept happy.” q

LOGISTICS IT APPS & MICRO-SERVICES

Is there an app for that?

A

t US finished vehicle logistics specialist Jack Cooper Logistics, recounts president Andrea Amico, as part of a contract for carrying out the collection and inspection of ex-fleet vehicles on behalf of a US carmaker, the need to supply seven images of each inspected vehicle was suddenly upped to a requirement for 31 high-resolution, carefully framed photographs. “It was slowing inspectors down,” recalls Amico, whose division manages multimodal transport, inspection, claims and title management for Jack Cooper, the largest car carrier in North America. “They had an inspection checklist to work through and a simple point-and-shoot camera, and at the end of the shift they had to copy over the photos and match them to the vehicles they had inspected.” Nor was it simply the number of the photographs in question that was the challenge: there were strict stipulations as to how the photographs were to be framed and focused. There had to be a better way, realised Amico. The company’s solution was to use an Android tablet containing a checklist of the photographs to be taken, with full details of the standards required, which automatically uploaded photographs and matched them to the vehicle in question. According to Amico, the app, which the company developed itself, also helped show that highly skilled and trained vehicle inspectors were not needed to take the photographs; instead, with minimal training, almost anyone could snap the photos working alongside the inspector, thus freeing up valuable inspection resources. In a further example of Android-based ‘micro-applications’, another customer’s requirement for vehicle data capture had

Automotive manufacturers, traditionally bound to legacy, mainframe systems, are finding that innovative logistics improvements come in increasingly small packages,writes Malcolm Wheatley

Automotive manufacturers, traditionally bound to legacy mainframe systems, are increasingly finding that, for innovative logistics improvements, the answer is usually ‘yes’, writes Malcolm Wheatley outgrown the capabilities of a simple yard scanner, and so was supplemented by paper-based data capture, recorded on a batch basis. Moving to an Android tablet also helped Jack Cooper to capture and update data in real time. “Micro-applications allow us to be much more agile,” sums up Jack Cooper’s chief information officer, Kirk Hay. “Trying to do these things as an extension to our major enterprise systems would take longer and involve much more testing and training. We can experiment with a micro-application without incurring either the same cost or the same risk. People talk these days about ‘failing fast’, which isn’t how we see it. Instead, we think of it as ‘learning fast’ – there’s a big difference.” Jack Cooper Logistics is not alone in experimenting with niche applications in the automotive supply chain. Many automotive manufacturers and 3PLs are becoming more receptive to niche, ‘bolt-on’ applications, often developed by software specialists, which can work alongside their primary systems.

Not so monolithic any more The Volkswagen Group has become a prime example. Over the past year, the company has begun to roll out a cloud-


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Cloud-based solutions and apps are increasingly available for check-in and processing at yards and at plants, with software providers working to be able to quickly and easily implement them into logistics and enterprise management systems

based software application called Discovery, which captures and shares shipping and transport operations, helping to communicate information between the carmaker’s own mainframe system and the many different systems used by its providers and suppliers. Thomas Zernechel, head of group logistics for the carmaker, recently told Automotive Logistics that the use of micro-services and apps as add-ons to its ‘backbone’ system was becoming more strategic for the group. Many brands are moving in this direction. Audi continues to roll out a ‘mobile check-in’ application at its assembly plants (see p34); BMW uses add-on applications to its mainframe SAP system to better track inbound deliveries and trucks in real time (see p48); meanwhile, many manufacturers are using apps to process electronic proof of delivery and damage claims, as well as generating a host of productivity gains related to materials handling, picking and dispatch. Nor is it difficult to see why such niche applications are finding favour. Once known for their monolithic closed systems and ‘not invented here’ approaches to IT, many manufacturers have already conceded that there are natural limits to their own legacy enterprise management systems, many of them highly customised and self-developed, decades old and often still in the ‘green screen era’ in terms of user experience. Carmakers have been working on improvements and updates – Ford, for instance, has made significant investments in software from German giant SAP, following this up in 2017 with investments in systems from Oracle and Infor – however, only so much can be done with the older systems in the face of persistent technological change. “Automotive manufacturers have invested for many years in keeping their legacy systems alive with patches and extensions,” notes Paul Nurse, chief executive of ProAct International, a provider of just such niche logistics systems. “But a point is coming when this simply won’t be viable: the systems are coming to the end of their usefulness and the costs and risks of developing major software systems in-house are becoming too great to continue.”

However, there are also dangers and drawbacks to possessing an IT landscape populated by a highly fragmented collection of disparate systems and software vendors. It’s one thing to buy a system from major vendors such as SAP and Oracle and quite another for a major manufacturer to place its faith in a company that might have been a ten-person start-up a few years back. As systems proliferate, the number of interfaces and pieces of middleware to be developed and maintained will also grow. At the recent Automotive Logistics Global conference in Detroit, an executive from Volkswagen’s plant in Chattanooga, Tennessee, which only began production in 2011, noted that the plant’s manufacturing and logistics operations were characterised by over 300 separate systems and interfaces, which had begun to be seen as a barrier to rapid change. Ironically, the temptation to add niche systems and microapplications arises in the first place precisely because of the need to achieve rapid change, with externally sourced specialist software seen as a faster, cheaper way of delivering the required functionality. “The move away from in-house systems is increasingly being We spoke to: driven by automotive Andrea Amico, president, manufacturers’ view of Jack Cooper Logistics their own flexibility,” Paul Nurse, chief executive, observes Jan Cirullies, ProAct International head of logistics Jan Cirullies, head of logistics digitisation, Fraunhofer Institute digitisation at Germany’s for Software and Systems Fraunhofer Institute for Engineering Software and Systems Nitesh Arora, head of marketin g, Engineering. “They’re Cloudleaf like supertankers, and Greg Kefer, vice-president of marketing for GT Nexus, Infor know that they can’t turn very quickly. They Matthias Berlit, vice-presiden t manufacturing logistics, Inform of know the drawbacks of systems proliferation, Frank Felten, vice-president of product development, PTV Grou

p

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but if they see a business need for a software capability, they’ll accept those drawbacks if there’s no other way of meeting the need within the timescale.” All the signs point to those needs emerging faster than ever, he adds, as intense competition butts up against a rapidly changing technology landscape, where cloud computing, mobile devices and the ‘internet of things’ (IoT) have all seen significant uptake. “The explosion in the number of smart devices operating within logistics and manufacturing environments only increases the challenge for automotive manufacturers wanting to make use of all the data that they can provide,” Cirullies asserts. “An improved planning and prediction capability is very valuable: it becomes possible to look at activities at a highly granular level – such as individual bins and totes, for instance.”

Straight from the cloud

It might be remarkable that a company that didn’t exist before 2014 has gained such an impressive customer base so quickly. To others, it underscores the extent to which cloud computing has simplified the business of implementing new technology: all the complexity happens in the cloud, managed by the vendor, who generally charges for it as a service. From the OEM’s point of view, the chief requirement is for a connection to the cloud server, something that software vendors go to some trouble to deliver, knowing that the lower the barriers to technology adoption, the easier it will be for customers to say ‘yes’. Moreover, the cloud serves not just as a processing engine, but also as a communications hub, providing a relatively straightforward way to connect businesses together, delivering unprecedented ease of visibility. Some 25,000 businesses, including Case New Holland, Caterpillar, Tesla, Renault and tier suppliers, are connected to the cloud-based trading platform GT Nexus, acquired by enterprise applications specialist Infor in 2015, and through which some $100 billion of trade is transacted each year. Those using GT Nexus’ platform also gain real-time visibility over where their goods are, thanks to a suite of niche supply chain visibility and

California-based Cloudleaf, a startup founded in 2014, is a vendor aiming to capitalise on the demand for just such a capability. Holding over 40 patents, the company has built an integrated ‘mesh’ of IoT sensors, gateways and cloud applications designed to provide visibility into the location and [OEMs want to be] able to view containers at sea as condition of assets in the supply chain, with returnable automotive containers a virtual warehouse, and can’t see how to do it with their and stillages a prime use case.

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existing systems. They’re not always comfortable with what they see as the complexity and risk of buying in that capability, but the appeal is strong. The ROI of eliminating even one 747 freight shipment a month is unmistakable.

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Greg Kefer, Infor

“Once such containers arrive at the vehicle manufacturer’s assembly plant, the supplier has almost no visibility as to where they are and they can often leak out to other suppliers,” notes Cloudleaf head of marketing, Nitesh Arora. “The result is an adverse impact on both profitability and service levels.” Among tier one and tier two suppliers, Magna and Techniplas subsidiary Dickton Masch Plastics use Cloudleaf for such capabilities, while Tesla uses Cloudleaf to track special-purpose tooling within its assembly plant, according to Arora. Customers in other industries include Shire Pharmaceuticals and ArcelorMittal, the world’s largest steel manufacturer.

management applications. Caterpillar, for instance, uses GT Nexus to manage $500m of in-transit inventory, notes Greg Kefer, vice-president of marketing for GT Nexus at Infor. “Auto manufacturers invested heavily in big enterprise systems in the 1990s that were simply never designed for the extended supply chains and levels of international trade and inter-company movements that have become routine 20 years later,” he points out. “They know that they want to move to being able to view containers at sea as a virtual warehouse, and can’t see how to do it with their existing systems. They’re not always comfortable with what they see as the complexity and risk of buying in that capability, but the appeal is strong. The ROI of eliminating even one 747 freight shipment a month is unmistakable.”

Can’t see the cloud from inside Increasingly, software providers – both major enterprise vendors and niche application providers – are not only converting ‘inside the firewall’ applications to run in the cloud but have also begun developing primarily for the cloud, seeing it as a way to replace irregular income flows from initial licence sales and periodic updates with a more attractive, regular monthly subscription income through selling their software as a service.


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However, according to Matthias Berlit, vice-president of manufacturing logistics at Inform, another provider of manufacturing and logistics applications, carmakers can be a tough sell when it comes to the adoption of cloud-based applications. “While automakers are definitely more receptive to niche applications than they were a few years back, what one hears at conferences about openness towards the cloud isn’t always replicated in one-to-one discussions about what a cloud deployment of a niche application might look like,” he notes. “What’s more, that openness towards the cloud tends to end at the walls of the plant: for applications outside the plant, the cloud might be acceptable, but for inside the plant, they still tend not to want cloud-based applications, or indeed [want] no micro-applications at all. Instead, what they generally say that they are looking for is something that can act as a module of one of their major in-plant systems.” In the face of the traditionally closed-off world of automotive The result is often that software providers have to offer production, IT providers aim to supply solutions that are built to work more editions of their wares: traditional licence-based with little or no implications for in-house IT departments software, perhaps capable of acting as a module in an in-plant system, as well as cloud-based software sold on a ‘software as Just such a solution underpins the operations at one of a service’ basis, which is designed to be widely usable. Germany’s largest carmakers, explains Berlit. Along with “The goal is to make it easy for customers to access software Inform’s own scheduling and optimisation software, software – for example, something that isn’t a big project for the IT from fellow German provider PTV Group is in use, accessed department, but which simply works,” he explains. “So we have through the same interface. Specifically, while Inform has its to put in a lot of effort to achieve this and make it cloud-ready. own technology for calculating the estimated time of arrival But the result is a whole new business model, with software of an inbound vehicle, the PTV system delivers a more precise sold as a service, rather than traditionally.” calculation capability, which proved attractive to the carmaker Inform has also invested in simplifying the chore of in question. managing and maintaining all the interfaces “Both our companies are strong in and middleware required to connect [OEMs’] openness optimisation, but Inform’s strengths with niche software systems and microare in optimisation in the factory and applications, by developing a single, common towards the cloud the downstream supply chain, while cloud platform for its offerings, making it our expertise is in route planning and tends to end at the straightforward for manufacturers to start traffic simulation,” explains Frank Felten, walls of the plant: for with one solution and then add others as PTV Group’s vice-president of product applications outside their requirements – or sense of comfort – development. grows. Inform has also made that platform “We’ll calculate an estimated time the plant, the cloud available to other niche solution providers, of arrival based on detailed modelling might be acceptable, holding out the prospect of manufacturers of a truck’s weight, size, applicable running multiple third-party niche systems but for inside the plant, driver regulations over the route, traffic through a common interface. conditions, and so on.” they still tend not to As with other areas where niche software want cloud-based systems are finding a foothold, not every applications, or indeed manufacturer will find such a capability a prize worth having. But for those that do, it [want] no microshould be reassuring to know that it exists, and that accessing it need not burden applications at all. stretched IT functions. Matthias Berlit, Inform already As carmakers continue to update their IT landscapes and move away from inflexible legacy systems, it is likely that a growing number of manufacturers will embrace the flexibility offered by niche systems and micro-applications. It might not always feel comfortable, but the days of those in IT functions saying ‘no’ on principle appear numbered. If a decent business case can be made, then increasingly, the answer to using such apps looks more likely to be a ‘yes’. q

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in the next issue APRIL-JUNE 2018

Volvo Cars – Michel Torreborre, vice-president of logistics for the Geely-owned carmaker, discusses Volvo’s ambitious plans across its global supply chain, including new production in China and the US, and more focus on logistics engineering and optimisation from in-plant to transport logistics The internet of things for logistics – There is considerable hype around IoT and its potential uses in factories and warehouses. We look at what manufacturers and automotive logistics providers are actually putting into use and how the technology might impact the supply chain Central & eastern Europe – Once seen as the low-cost manufacturing area for Europe, carmakers are increasingly looking to the region for investment in electric vehicles and components. What shape will its supply chain take over the next decade? Assembly in Algeria – We travel to Relizane, where the SOVAC plant is working with Seat and Volkswagen to assemble semi-knockdown kits for the market, overcoming logistical challenges Conference coverage – Dispatches from our series of global automotive logistics conferences continue with reports and interviews from Automotive Logistics Mexico in Mexico City 7S\ZTVYLOLHKSPULZMYVT[OLÄYZ[X\HY[LYUL^ZHUHS`ZPZL_LJ\[P]LTV]LZHUKKH[H Extra distribution at

COMPANIES FEATURED IN THIS ISSUE Amazon 62 Anders Wilhelmsen & Co 8 Aramex 16 ArcelorMittal 65 Audi 8, 34, 44, 65 Audi México 8 Autoprom North-West 58 Avtovaz 58 Bipitron 58 BMW 6, 20, 22, 44, 48, 65 Bosch 6 CarrierLists 53 Case New Holland 65 Caterpillar 65 CDN 53 CEIT 44 Changjiu Logistics 6 Chrysler 48 Cisco 70 Cloudleaf 65 CNW-Courier NetWork 48 Comprehensive Logistics Co. 44 Continental 15 Cranfield University 48 D/S Norden 8 Dacia 24 Daifuku America 44 Daimler 6 Daimler CV India 14 DaimlerChrysler 8 Datsun 24 DB Cargo 8 DB Digital Ventures 16 DB Netz 8 Deutsche Bahn 8, 16 DHL 48, 62 Dickton Masch Plastics 65

Ericsson 48 Evolution Time Critical 48 FedEx 6, 12 Fetch Robotics 44 Fiat Chrysler Automobiles 15 Ford 6, 8, 18, 48, 65 Fraunhofer Institute 44, 65 Freight Transportation Research Associates 53 Gefco Brazil 15 General Motors 6, 44, 48 Geotab 53 Girteka 6 GM Brazil 15 Groupe PSA 6 Hellmann Automotive Logistics 8 Hellmann Worldwide Logistics 8 Höegh Autoliners 8 Honda 18, 48 Honda Cars India 14 Hughenden Consulting 48 Hyundai 6, 14, 58 IBM Global Business Services 20 Infor 65 Inform 62, 65 Intel 6 Jack Cooper Logistics 18, 65 Jaguar Land Rover 6, 20 JB Hunt 6 JBT Corporation 44 JDA Software 62 Jungheinrich UK 44 Kenco Logistics 53 Kia Motors 6, 20 Kobe Steel 6 Kuehne + Nagel 20, 62 58 Lada

Leif Höegh & Co 8 LG Chem 34 Maersk 6, 12 Magna International 12, 65 Magna Logistics 12 Magna Logistics Europe 12 Magna Powertrain 12 Magna Steyr 12 Mahindra Logistics 14 Marsh & McLennan Companies 53 Maruti Suzuki 24 MasterMover 44 Mazda 6 Mercedes-Benz 6, 16, 58, 62 Mercedes-Benz Parts Logistics UK 20 Merck Group 48 Mini 20, 22 Mitsubishi 24, 58 Mitteldeutsche Erfrischungsgetränke 8 Mobileye 6 Nissan 6, 20, 24, 58 Nissan Motor Manufacturing Rus 58 Nissan North America 18 Nokia 48 Nordea 8 Okeanpribor 58 Opel 6 Oracle 65 Pareto Securities 8 Penske Logistics 15 Penske Truck Leasing 53 PINC 62 Priority Freight 48 ProAct International 65 PSA Peugeot Citroën 58 PSMA Group 58 PTV Group 65

Renault 24, 65 Renault Nissan 20 Renault Nissan Alliance 24 Renault Nissan Automotive India 24 Renesas Electronics 48 Robert Bosch 18 Ryder 44, 53 Samsung SDI 34 SAP Ariba 48, 65 Schnellecke Logistics 44 Seat 10 Serva 34 Siroop 62 Surgere 18, 62 Tata Motors 14 TCI Supply Chain Solutions 14 Techniplas 65 Telefónica 10 Terberg Group 34 Tesla 6, 18, 65 Thomson Reuters 48 TML Distribution 14 TNT Express 6, 12 Toyota 6, 20, 48 Toyota North America 18 UPS 62 USAL 53 V3 Transportation 53 Vauxhall 6 VDL Nedcar 20, 22 Vendigital 48 Volkswagen 58 Volkswagen Group 6, 8, 20, 34, 65 Volkswagen Group Rus 58 Volvo Cars 6, 44, 48 VW Group 10 What3words 16


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Hot spots Gareth Tredway outlines watch out for in 2018, from trade to the EV supply chain

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year ago, previews of 2017 would have pointed to potential renegotiations of the North American Free Trade Agreement (Nafta) and Brexit as two of the most obvious threats to global free trade and the smooth-flowing automotive supply chains that have become so embedded across the wider regions of North America and the European Union. Unfortunately, the outcomes of either of these negotiations, including just how severe the resultant restrictions on trade will or won’t be, remain largely unresolved – and so both discussions remain two of the biggest events to watch in 2018. Despite an initial delay in getting past the divorce part of the negotiation, the UK has recently agreed to certain conditions that should allow it and the EU to move towards trade talks early in 2018. However, given a weak political position for the British government at home and the complexity involved, finding agreements that satisfy prime minister Theresa May’s own government ministers and members of parliament may prove even harder than working out trading terms with Brussels. In the Nafta region, US demands seem to have gone beyond the initial talk of merely modernising the 24 year-old agreement, after the country was reported to have proposed much greater local content requirements for motor vehicle production, including for a higher percentage of required parts from the US specifically. Canada and Mexico have opposed the proposals and if a compromise is not reached, the US could pull out of the agreement, which would lead to tariffs and barriers across the continent. Presidential elections in Mexico may also play a role in delaying any meaningful progress in the talks during 2018.

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and Services Tax (GST) that was implemented in 2017, which should help to enable a freer flow of goods across the various state borders. At the Automotive Logistics India summit (p14), Amit Bhardwaj, senior research officer for transport at the National Institution for Transforming India, said some states had already removed borders and that major states would have taken them down by the beginning of 2018. Brazil, which finally saw strong recovery in 2017, may not keep up the pace. Despite a 25% increase in production in 2017, the domestic market is forecast to grow only slowly in coming years. (For more on Brazil, see p15.)

The EV revolution The continued growth of electric vehicles is set to continue, thanks to a number of new entrants and the more traditional OEMs ramping up their respective plans, as well as a shift away from diesel vehicles. With this growth comes more activity in building battery cells and lithium-ion batteries, which involve complicated supply chain procedures. EV sales set new records in 2017. According to estimates from Macquarie Bank, November saw the 100,000 global sales mark breached for the first time in a single month, including 80% growth for battery electric vehicles and 90% for hybrids, compared to the same month in 2016. While OEMs have announced a series of significant investments for EV and battery production in Europe and the US, China will drive most of the growth in 2018, and probably for longer than that, thanks to changes in regulations and incentives. This will have implications for the entire global supply chain.

Ups and downs

Deeper into the connected era

A growing global economy could help the supply chain. After a 4.2% increase in the volume of trade in goods and services in 2017, the IMF is predicting similar growth in 2018, which would see the number outpace GDP for a second straight year. However, the WTO and others have pointed to the risks to global trade posed by the Nafta and Brexit negotiations According to data from PwC Autofacts, global light vehicle assembly is expected to continue to rise in the coming year. Having grown by about 1% in 2017 to 94m units, the number is expected to reach 98m units in 2018, an increase of 4%. However, the headline growth masks difficulties in big markets like the US, Europe and Japan, where sales are expected to remain stagnant or decline; low single-digit growth is expected in China. Stronger increases are expected in India. Manufacturers and logistics providers should also see a boost from the Goods

For global automotive logistics, the adoption of new technologies and digitalisation should continue to grow in 2018. Cisco’s internet of things (IoT) director of strategy, Theresa Bui Revon, says that while IoT and big data intersected “in a big way” in 2017, the industry will move into what she described as a “new era” in 2018. “One that requires figuring out who gets access to that data, how it can be used and who owns it,” she said. “And with only 1% of IoT data actually being used today, it is now critical to determine which data is actually valuable and actionable to help drive real results.” Revon also believes 2018 will be the year that most major automotive companies will commit to a percentage of their fleets being used as part of a ride-sharing service, with transport-as-a-service going mainstream. “Some will invest in existing ride-sharing services, while others will introduce their own branded offerings,” she adds. q


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Priority Freight

Changjiu Logistics is the largest independent automotive 3PL in China; in 2016 it transported over 3.1m vehicles. CDC is a subsidiary of Changjiu, providing returnable packaging, ro-ro shipping and other inbound logistics services for the group’s global clients.

Priority Freight is an award-winning, leading provider of expedited logistics solutions to the automotive industry. It provides 24/7 time-critical freight solutions to help you meet complex and urgent logistic challenges worldwide.

Changjiu Logistics/CDC outside back cover

Priority Freight

Introducing the ORBIS® GitterPak™. Finally, a plastic alternative to the gitterbox. Best-in-class 900kg weight capacity. No product damage from rust. Collapsible 1200 x 800 design. 72% more FLCs shipped per truck than steel. Plastic wins every time. Set up an on-site visit today at orbiscorporation.de/gitterpak.

QUICK TO DELIVER GLOBAL SOLUTIONS 24/7 365

Freight wishes PriorityLogistics a happy 20th forward to Automotive and looks for the anniversary their readers supporting years and beyond next 20 WHEN YOU’RE AGAINST THE CLOCK, WE’RE THERE FOR YOU. We’re a leading time-critical freight and logistics specialist, supporting major automotive manufacturers and suppliers with rapid, reliable, secure and cost-effective transport. Our expert multilingual team ensures that your goods are delivered on time, in perfect condition, every time.

t +44 (0)203 805 77 33

Rich Logistics Rich Logistics provides premium logistics services including truckload, less-than-truckload, and expedited freight. With on demand, singlesource trucking services, we offer dedicated freight shipping to and from any location in North America. Find out more at: www.richlogistics.com

Rich Logistics

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RJ & Sons An asset based, C-TPAT certified carrier with a fleet of Conestoga flatbeds, stepdecks and specialized equipment. Serving the automotive, robotics, automation and other industries in the US, Canada and Mexico.

www.priorityfreight.com

SPECIALIZED TRANSPORTATION AND LOGISTICS U.S. and Canadian bonded carrier providing specialized transportation services throughout the US, Canada, and Mexico: ࠮ + VVY[VKVVY[YHUZWVY[H[PVUUV[YHUZSVHKPUN^P[OHUHPYYPKLÅLL[[OH[PUJS\KLZ! M\SS`YL[YHJ[HISL*\Y[HPU:PKL*VULZ[VNH-SH[ILK+YVW+LJR+V\ISL+YVW+Y`=HU :[YHPNO[;Y\JRHUK:WLJPHSPaLK,X\PWTLU[ ࠮ ,_WLKP[LKHUKUVUL_WLKP[LK;Y\JRSVHKHUK3;3ZVS\[PVUZ ࠮ :[H[LVM[OLHY[ZH[LSSP[L[YHJRPUN ࠮ ,UK[VLUKPU[YH4L_PJVHUKJYVZZIVYKLYSVNPZ[PJZ ࠮ *;7(;HUK0:6 !JLY[PÄLK Entrust your specialized cargo and plant move requirements to a JVTWHU`[OH[OHZI\PS[HYLW\[H[PVUMVYKLSP]LYPUNJVZ[LɈLJ[P]L quality-controlled, and reliable transportation services and logistics. 91 :VUZ For more information visit: ^^^YQHUKZVUZSVNPZ[PJZJVT | VWLYH[PVUZ'YQHUKZVUZSVNPZ[PJZJVT

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RJ & Sons

91 :VUZ PZ H WYV\K Gold sponsor at the \WJVTPUN(\[VTV[P]L 3VNPZ[PJZ 4L_PJV *VUMLYLUJLPU4L_PJV City :[VWI`V\Y IVV[O MVY HJOHUJL[V^PUHUL^ (WWSL>H[JO

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Hub Group Hub Group is a transportation management company providing intermodal, truck brokerage, dedicated and logistics services throughout North America with automotive experience including OEM, tier one and tier two parts suppliers.

Hub Group

How to navigate a leading automaker around speed bumps.

WHEN A LEADING AUTOMOTIVE BRAND ANNOUNCED A RECALL affecting thousands of vehicles in North America, the need for a quick and nimble solution posed a potential logistical nightmare. So we engineered a flexible, and scalable, multimodal solution. One that we deployed quickly, was managed from start to finish, and most importantly, saved them time and money. With our strong relationships along the border, we were able to get a crossdock facility up and running to optimize the flow of parts to customer locations. As rapidly as the unexpected can happen, we’re innovating ways to help their business adapt even faster. Find out how our multimodal solutions can get your business up to speed. HUBGROUP.COM

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The Automotive LOGISTICS Marketplace is a snapshot of all the advertisers in this issue and appears in every edition. It is a value-added service offered to our advertisers, free of charge.


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