Automotive Supply Chain: Data Supply is Becoming Key to Efficient Supply Chains

January 9, 2017 - posted by Rachel Bonello

“Primarily, large multinationals are looking for data these days.” So says Brandon Stallard, CEO of Michigan-based TPS Logistics, a full platform logistics management company which maintains a very transparent model. Sam Ogle reports.

“We are seeing a retraction from globalisation since the recession because long supply chains, say to China, are really hard to turn off and on. Most particularly with letters of credit, and commitments and relationships with overseas suppliers. We have a lot of data requests to make sure that we’re talking about the absolute lowest landed cost. Often, we will see people rush to an overseas low cost country solution only to find that, with the many caveats and hiccups along the way, it is not actually the lowest cost. There are so many variables. A longshoremen’s dispute on the west coast, or strikes, or some form of glitch in the supply chain can lead to a $150,000 international air charter. When you start to add up all those things, we are seeing a real retraction to what we call local low cost and how the decisions now being made are really being based on data that we provide in an upfront and a retrospective way.”

Stallard started the business 24 years ago with his father. They felt that, with data becoming more accessible and with people looking more closely at their supply chain, and inventory levels as well as deregulation really taking hold, it was time to start a full platform logistics management company which maintains a very transparent model, something which, these days, is pretty unique.

“Today, we are managing around $1 billion,” says Stallard. “We will go into a client or prospective client, an automotive supplier, and manage some 50 or 60 locations, really trying to centralise everything from a small package to import/export ocean freight and everything in-between. We negotiate those rates, collect the data and optimise the supply chain trying to get a level of integration so that we can be looking forward with more dynamic planning. We get really involved with their financial people so we can be a part of their budgeting, setting standards for their freight costs. We have people throughout North America who make sure that we are implementing these programmes locally, a phrase we use is “from the shipping dock to the boardroom.” We are completely non-asset based, we don’t believe that you can serve two masters and we are a 100 percent advocate for our client in a very transparent model. Any work done or rates negotiated for our clients are done in their name.”

Companies today are increasingly looking at their inventory turns and for how long they have their money tied-up. In a longer supply chain it’s really easy to miscalculate the true total landed cost.

“The data that we are providing today is very sophisticated to help them get ahead of the curve and make good purchasing and sourcing decisions,” says Stallard.” Today, we are hearing a lot about a more localised low cost supply base. We have sent a letter to all our clients saying that our international data rates are spiking because Hanjin went out of business. This leads to a spike in rates, particularly for the Pacific Rim. There are GRI’s (General Rate Increases) of literally 50 percent. It seems that there is always something disruptive happening to be discussed at the forefront of the boardroom these days.”

Longer supply chains lead to the holding of greater supplies of inventory, which may not be the heinous crime it was once thought to be, but may be a necessary buffer against supply chain disruption.

“When we started out in the business, this was one of the reasons we thought it would be a good time to do so. Here in the States, traditionally we’d always looked at transportation and supply chain as a necessary evil. We started to hear about principles such as canban, kaizen and just-in-time which became the fashion,” says Stallard. “Often we were not on the popular side of that because we were talking about absolute total lowest landed cost. If you look at the benefit of inventory turns, they stop with transportation. We have always sought to ensure that the equation is correct and that there really is calculation. It’s not our job to make a decision like that on behalf of our clients, but we need to get them the data to help them look at what the true carrying costs of inventory are versus the, hopefully, lower cost of supply from lower cost countries.

“Inventory is not the dirty word that it once was as long as it is properly managed and calculated. We are starting to see the labour markets become more expensive in regions such as Asia. We’re not seeing the cost benefit that we had traditionally seen. What we are seeing today in those traditional low cost countries is that the automotive supply base is still adapting in order to serve the domestic market rather than adapting to serve our market here. In our automotive business we’re seeing 32 percent of the volume that had been sourced in Asia now having been moved to Mexico and the US. That is a strong trend.”

TPS Logistics has three offices in Mexico and Stallard sees nothing to prevent the Mexican automotive boom from continuing.

“Our relationships there are workable when, often, Asian relationships are culturally difficult. We are talking about a two week supply chain as opposed to six months. The degree of investment in infrastructure from the OEMs as far as production facilities are concerned is state of the art. When they build something like that in the middle of Mexico it isn’t going anywhere for twenty years at least. I think we will continue to see new highways, less trailers stolen, and a decrease in having to transload at the border.”

The automotive industry needs to create a more efficient supply chain that provides big data to help target production pain points, and save time and money.

“You need a good partner with an open and honest relationship,” says Stallard. “We are most effective in supporting our automotive clients if we’re not seen as a vendor or a supplier, but rather as a part of their organisation. That allows for integration and running optimisation models, and the understanding of pain points and making sure that there are procedures in place to react if things don’t go as planned. We put a lot of effort into planning. The old adage says, “measure twice, cut once.” With the high stakes and dollars we are talking about in the automotive supply area there is very little, if any, margin for error, especially when the economy is doing well. Companies are being run much more efficiently, however, there are around 17 percent fewer truckloads being moved, yet the weight is the same year on year. We’re not seeing a slowdown in volume, but rather a better optimised supply chain that is more efficient, hence fewer trucks. That is the environment today, but I will always come back to relationships, transparency, and good, reliable and meaningful data in real time so that we can make adjustments along the way. Additionally, integrating with the ERP systems is vital so that we see what is coming down the pipe and have a more forward-looking, optimised supply chain.”

 

To read more, visit www.automotivesupplychain.org.