Untitled-2

local content increasing to at least 25%. The start of production or embedded connectivity). is scheduled for November 2015. Driverless cars continue to grab the headlines. Car The Automotive Council published its findings of a survey of manufacturers continue to launch semi-autonomous features UK automotive OEM factory procurement in November 2014. A such as traffic jam assist and insurers are already offering large £4 billion unfulfilled UK-based procurement opportunity was reductions in premiums for automatic emergency braking. identified. This had grown by a third since 2012 said Leech. Automatic motorway driving (automatic lane changing and UK Tier Ones largely purchase from overseas Tier Two speed) is expected in 2018. factories. The Automotive Council estimates a £2b unfulfilled The Congress’s first panel discussion was moderated by UK-based Tier Two supply opportunity. Bernard Molloy, Global Industrial Logistics Director, Unipart There are approximately 150,000 people employed directly Logistics. Members of this panel were Lars Wrebo; Joannes in UK automotive manufacturing. This is forecast to grow Van Osta, General Manager Group Transport & Logistics, JCB; to 185,000 in 2017. Over 20 Tier Ones have announced UK and Gareth Jones, Managing Director, ebm-papst Automotive investments in the last two years including companies such as & Drives and President of the Society of Motor Manufacturers Bosch, Lear, TRW and BorgWarner. Productivity has been rising and Traders’ (SMMT). at over 6% compound annual growth rate since 2000 and there The panel discussed various hot topics related to has been a raft of investments by automotive suppliers with purchasing and how supply chain played an essential part of much more anticipated. the function. Jones, Van Osta and Wrebo discussed the markets CO2 legislation is requiring the car manufacturers to and market conditions that they dealt with, methodologies continue to reduce emissions said Leech. Diesel technology adopted by their various organisations and the main improvements are key to achieving CO2 targets but city air challenges that they come across. quality concerns are growing. However, the consumers’ view of Molloy asked Van Osta how JCB is able to react as quickly as plug-in hybrids is changing. Models on sale include VW Golf, it does. Audi A3, Mercedes Benz C-Class and S-Class, BMW i8, Porsche “The biggest challenge was realigning production with our Cayenne, Toyota Prius, Mitsubishi Outlander and Vauxhall supply base,” he replied. “Over the last four or five years, we Ampera and the sector is growing. have taken control. Historically, we had 85% of our materials Predictive data analytics, collecting data from machines, is delivered to our doorstep and we were confronted by whatever emerging as a key technology said Leech. It permits the faster had happened in the supply chain. We changed about 30% identification of the root causes of quality issues, warranty and of our incoming material flows from deliveries to ex-works. It rework cost savings are quantified, measured and realised and wasn’t easy, but we are continuing with it. We can now work early warning mechanisms and smart prioritisation will reduce with suppliers and service providers much more easily.” poor quality in future. Van Osta said that, in markets such as Russia and Brazil According to Leech, 2016 will be the year of the connected where volumes are currently down, JCB would consider car. Over half of the new cars sold in the UK in 2015 will be exporting from them. He also flagged up the opportunity which connected to the internet (smartphone tethering, integration exists for northern UK ports. “A lot of manufacturing takes 51

Experts in Prestige    If we go one step further and bring in the cloud technology If we go one step further and bring in the cloud technology If we go one step further and bring in the cloud technology suddenly all this information starts to appear in the cloud in suddenly all this information starts to appear in the cloud in suddenly all this information starts to appear in the cloud in Car Transportation real time real time. We have photographs, signatures, damage codes all . We have photographs, signatures, damage codes all . We have photographs, signatures, damage codes all real time usable by companies lik usable by companies lik usable by companies like Chrysler. e Chrysler. e Chrysler.  Wayne Pollock, Managing Director, Car Delivery Network.ayne Pollock, Managing Director, Car Delivery Network.ayne Pollock, Managing Director, Car Delivery Network. W W place from Birmingham north, but most of our supply volume you can do it faster and it is easily done. The technology is is still coming through ports down south.” changing the shape of our industry with new business models An important issue that was discussed was skill shortage, such as Skype, Zipcar, Uber, Spotify and Netfl ix. where the three panelists gave an insight into what their So what is the value of this technology to the fi nished respective organisations and countries were doing to attract vehicle distribution sector? According to Pollock the answer is young people to the fi eld of engineering. a very simplistic supply chain. All LSPs are using technology to The Internet of Things (IoT) was a topic that nearly every deliver vehicles whether by rail, sea or road. When the car isn’t speaker touched on in their speeches. The advent of concepts in a conveyance such as a railcar, it is in a yard or compound. such as connected car and autonomous technologies has given When you start to put these technologies into a supply chain, much focus to IoT. Technology has always been an essential you get visibility in real time. part of the automotive supply chain and logistics industry Pollock explained what his company has been doing in the and, keeping that in mind, the delegates were given a taste of US. “We started to put the technology into the carriers. Our technological advancement in their specifi c industry by Vikram largest carrier in the US today has 1,000 trucks. We have seen Singla, Supply Chain Director at Oracle and Wayne Pollock, some explosive growth. In July last year, we were moving no Managing Director at Car Delivery Network. vehicles in the US. Last month, we moved 117,000 vehicles. Singla noted that customer service, and not cost, has been By the end of this year that number will be in the vicinity of increasingly driving the logistics strategy. He spoke about the 300,000 with vehicles going through a cloud platform delivering Ontime Global Automotive Transport Service is proud to benefi ts of the cloud and introduced the Oracle Transport ePOD technology to the users. This is an example of how be the supplier of choice for the worldwide distribution Management (OTM) cloud, that would help logistics service technology has started to change the industry. There are now providers get real-time updates at every step of the process. four OEMs who are committed to delivering electronic proof of of prestige cars. We are pleased to be entrusted with the According to Pollock, we are in a new era of information delivery. responsibility for the delivery of all prestige cars worldwide exchange. Consumers, business and governments have “If we go one step further and bring in the cloud technology immediate access to data from any device and the ability to suddenly all this information starts to appear in the cloud in by: air freight, sea freight or road, using our fleet of freely share information. It is also affordable for everyone. real time. We have photographs, signatures, damage codes Cloud computing allows application software to be all usable by companies like Chrysler. The information is also highly specified enclosed transporters. Utilising a team of operated using internet-enabled devices. You can do more, available to the LSP. Chrysler also needed to share damage experienced staff and drivers, we have the know-how to fulfil information with their claims management company. The data sitting in a cloud was usable by those three parties.” all specialist transportation needs, wherever they may be. Cloud technology is pretty simple stuff. ePOD technology on a mobile device has changed the way we visualise our networks. Group Editor Simon Duval Smith then moderated a panel comprising Carol Holden, Chief Executive, North West Automotive Alliance; Cengiz Kabatepe, Assistant General Manager MP&L, Ford Otosan and Martin Dougherty, Vice President, Business Development & Account Management, Automotive, DHL. The panel explored various topics related to automotive production and attempted to answer the tough questions that the industry faces today. Holden, given her background in helping tier suppliers reach their true potential in the North West of the UK, emphasised the fact that the lack of Tier One and Tier Two suppliers in the country mitigates against the UK claiming the title of ‘automotive manufacturing hub’. Holden also stressed the lack of women in the fi eld of engineering, asking delegates and their organisations what they were doing to eliminate this problem as we were fast approaching National Women in Engineering Day on June 23. Kabatepe gave delegates a unique perspective through 52

Experts in Prestige Car Transportation Ontime Global Automotive Transport Service is proud to be the supplier of choice for the worldwide distribution of prestige cars. We are pleased to be entrusted with the responsibility for the delivery of all prestige cars worldwide by: air freight, sea freight or road, using our fleet of highly specified enclosed transporters. Utilising a team of experienced staff and drivers, we have the know-how to fulfil all specialist transportation needs, wherever they may be.

his experience at Ford Otosan in Turkey. He spoke about how terminal due for completion in 2015 will double the port’s the company helped develop the infrastructure in Turkey for existing container capacity and make it one of the country’s the use of block trains, something that benefitted the supply best equipped and connected terminals. chain immensely, especially in terms of cost. However, as “We are spending £300 million of our own money on the company grew, so did the areas to which it had to export Liverpool2, building a container terminal because we think cars. That fact has subsequently led to Ford Otosan opting for there is a really big market,” said Scott. “We think there transport by sea. While Kabatepe agreed that development is a really big opportunity. The capacity is there, and it is of infrastructure was imperative, he also pointed out that easy for people to come and use. However, if we rely on the legislation plays an important role in helping boost automotive infrastructure providers to shell out in the hope that somebody production. is going to come along, then only the safe projects get done. Dougherty observed that a limited warehousing capacity So option one is ‘build it and they will come’. The pioneer and constantly rising real estate prices meant that road is takes the risk and then everybody else joins in. a preferred option for the supply chain industry. However, “We don’t want people to invest a lot of money in this, with the increased reliance on roads, he thinks that the but we want some indication that, if we do build it, they are infrastructure needs tremendous development. going to come. We want them to be involved in designing this In a presentation entitled ‘Playing the game with a different solution and we want a commitment to using it. So no one perspective,’ Hamish Scott of Peel Ports asked what we can partner takes the risk. This is how we can make some really big achieve. advances. “There are opportunities,” he said. “Opportunities to get “200 million miles could be taken off UK roads with smarter closer to the customer and reduce the length of supply chains. use of infrastructure. With fewer than 200 partners we could We can open up new infrastructure and make more use of save the UK plc those 200 million miles which represent an existing infrastructure. We reckon that, with proper use of the awful lot of carbon and cost. What we need to do to secure infrastructure that we have in the north of England, we can take those savings is to help the shipping lines understand that about 200 million miles off UK roads by the end of 2020. We here is a market which is set up for servicing. The cargo owners can do this by making the most of the ship canal, making the will only get involved if the shipping lines are going to come. most of the motorways and some of the development zones With companies such as JLR and JCB on board we can go to the that we have managed to secure. So why don’t we? What is shipping lines and say that there is something here, there is a the challenge? The challenge is twofold. Because everything is reason to make some changes.” so optimised, in order to change things we have to herd cats. The next speaker came all the way from America. Doug Secondly, if we are going to build new structures, then we have Browning is Executive Vice President of Sandler & Travis Trade to make some commitments.” Advisory Services, a company recognised as a leading provider Scott explained that, because we have over time managed of international trade consulting and managed services to the to ‘corral’ people onto vessels and rail services, they tend to public and private sectors. be available on an efficient scale. When a new solution comes Browning pointed out that the global supply chain along, even with a cost improvement opportunity, people are involves a very complex string of relationships and parties. reluctant to embrace it. Facilitating legitimate trade through the supply chain is an “That doesn’t get us to the new opportunity. We need more equally complex endeavour. As governments place additional participants. We now have the critical mass which means that mandates on these parties additional complexity is added. we can get to the efficient scale of this new solution. Then, let’s Customs and border control authorities are key to facilitating imagine that the opportunity is even better but we’ve got to this process. The businesses and service providers that get even further along the curve and get more parties involved. manage, operate and support these supply chains are critical There is a big cost improvement opportunity. So we need to the process. to herd cats. We have different parties all playing their own The traditional role of border control agencies is to collect games, all trying to protect their own objectives.” revenue, prevent smuggling, protect the national borders Liverpool2, a new £300 million deepwater container against various activities and to collect statistical data and

   You can have the best supply chain in the world, capable You can have the best supply chain in the world, capable You can have the best supply chain in the world, capable of moving your products at lightning speed but, if they get held of moving your products at lightning speed but, if they get held of moving your products at lightning speed but, if they get held up at a border up at a border, it doesn’t make any di erence. They are stuck , it doesn’t make any di erence. They are stuck , it doesn’t make any di erence. They are stuck up at a border there there. And if they are stuck there that impacts the supply chain . And if they are stuck there that impacts the supply chain . And if they are stuck there that impacts the supply chain there and your operations and the operations of your customers. and your operations and the operations of your customers. and your operations and the operations of your customers.  Doug Browning, Executive Vice President of Sandler & Travis Trade Advisory Services.ecutive Vice President of Sandler & Travis Trade Advisory Services.ecutive Vice President of Sandler & Travis Trade Advisory Services. Doug Browning, Ex Doug Browning, Ex trade information and share it with the government. We are a number of different systems. You have to be a leader in the seeing additional things now such as counter-terrorism and development of new supply chain and customs programmes public health and safety, immigration and human traffi cking. A and enhancements and to support and expect continuous whole host of things which we didn’t envisage. improvement of all your processes.” “From the standpoint of opportunity for innovation in the Gareth Jones, in his role as President of the SMMT, then supply chain, an area which is often overlooked is the whole informed delegates about the activities of his and other question of border controls that all of us have to deal with organisations which have helped the UK automotive industry when moving product,” said Browning. “You can have the best to achieve its current healthy state. supply chain in the world, capable of moving your products at He told delegates that the Congress was taking place lightning speed but, if they get held up at a border, it doesn’t against a backdrop of an automotive industry which is buoyant, make any difference. They are stuck there. And if they are stuck healthy, robust and continuing to grow. This year, vehicle there that impacts the supply chain and your operations and production is likely to be just under 1.6 million units. We have the operations of your customers. The last thing you want to also seen some signifi cant investments over the course of do is to stop a production line. So how do you address the the last few years, investments which have been made in the issue of ensuring that the supply chain can deal with these face of some stiff competition from competing countries. It is disruptions that occur when something gets stuck at the a real vote of confi dence in our workforce and a huge vote of border? You do it by creating a supply chain management confi dence in the UK as a good place to do business. Jones organisation. The full issue of customs, regulatory compliance suggested that the UK is on the cusp of something really and security shouldn’t be seen as a stop sign. If it is properly special. One forecast has suggested that, in just a few years, we managed and properly integrated into your organisation it has will produce over two million vehicles in one year. That would the potential to be an accelerant for your activities and the surpass a record set in 1972 of 1.9 million. movement of your goods.” “Back in 2012, the Automotive Council identifi ed an Browning advised that there are six building blocks to a opportunity to re-shore £3 billion worth of business, business supply chain management organisation and they are in a sense that was being sourced by British-based OEMs from outside a pyramid. At the base is functional expertise, you have to the UK,” he said. “The Automotive Council is a collaboration have people who know what they are doing. Another important between industry and government. It is co-chaired by a senior element of this foundation is documented procedures and person from the automotive industry and the Minister of State internal controls. Also quality service providers. for Business, Innovation and Skills. The primary purpose of the “Documented procedures and internal controls ensure Automotive Council is to develop a cohesive industrial strategy that your employees know what they are required to do, when for our sector. It encompasses business environment, skills, they are required to do it and how they are required to do it,” international competitiveness and also the supply chain. One he said. “Make sure your service providers understand what of the key elements of the supply chain activity is to reverse their role is in that process. The second layer of the pyramid is the hollowing-out that has gripped the industry for the last systems, data and data analytics. The best systems and data 30 years. Two things have driven this. Out of that £3 billion in the world are no good to you if you can’t do something with identifi ed in 2012, £1 billion has already been re-shored. The them. You have to be able to look into that data and determine other piece of good news is that that opportunity now has whether it has value to you. It could also be a tool to help grown to £4 billion. Based on current capability, existing UK identify anomalies in the supply chain and how you correct suppliers can satisfy 80% of that demand. them. “For the UK to have a strong and vibrant automotive sector “Communications and coordination are next. And this it is critical that the supply chain is strong and dynamic and is is communication and coordination up and down the capable of competing with the best. It is really important that organisation to ensure that everybody is aware of what is the supply chain is resilient enough to deal with the reciprocal supposed to occur, how things are supposed to occur and that nature of our business.” everybody is aware of their role in those processes. Finally, Jones said that the SMMT will continue to facilitate senior leadership must provide clear direction to people as to engagement across the UK sector and supply chain to what has to be done and what the expectations are. ensure opportunities are maximised. It is developing an “You need to develop and implement systems to ensure electronic system to help facilitate opportunities identifi ed that information supply is accurate, timely, consistently in current reports and future opportunities as they arrive. applied and auditable. Ensure that your systems receive, store, Additional meet the buyer style activities aimed at leveraging integrate and transmit important business information from internationally-recognised UK capabilities and engaging on 55

a cross-sector basis premium product manufacture and high standard. This is an example of the problems we have with the performance technologies. OEMs being very protective of their intellectual property and The Automotive Investment Organisation was established technology. This lack of agreement between the OEMs is, in a by UK Trade and Industry in 2013 to secure jobs and growth sense, holding back further developments in the supply chain.” in the UK automotive supply chain. Since then, each month, “In this discussion we are assuming that every car is going the industry has created or secured over 500 UK jobs, brought to be self-drivable, and I’m not sure that will be the case,” nearly £35 million of investment into the UK and created three added Nash. “For people like us who are looking to invest in new R&D centres. automotive transportation which will last for 40 or 50 years this Reduced damage, costs The pace of growth in our sector continues to accelerate is a very real issue. If you have 300 cars on a train they would and one of the key factors driving this technical evolution is all have to be doing exactly the same thing. You couldn’t have the connected and autonomous vehicle. There will be £51 several that were not automated.” billion in value added to the UK by 2030 with a +1% impact on The panel agreed that while this technology was in its and improved supply GDP. 25,000 jobs will be created in automotive manufacturing, infant stages, there might be certain challenges that present 2500 lives will be saved from 2014 to 2030 and 25,000 serious themselves in the course of its development that might not accidents prevented over the same period. even have been contemplated before. Nevertheless, the The automotive industry priorities for government can be opinion on the use of this technology in the automotive supply chain reliability summarised as creating cross-party commitment to long- chain and logistics industry continues to be divided. term industrial strategy and creating the right conditions for The Congress’ fi nal panel discussion was in the fi eld of investment. “We must position the UK as a global leader on packaging. Rodney Salmon, VP European/Middle East Sales, innovation and maintain a strong UK voice in Europe,” said Macro Plastics, moderated the panel, which comprised Bill Jones. Povey, Inbound and Commercial Manager, Unipart Packaging Jones’ presentation marked the end of the fi rst day of the Solutions, David Mayo, Vice President Automotive Europe, Congress, following which delegates were driven to Liverpool’s CHEP and Wendell Smith, Vice President Automotive Sales, famous Royal Liver Building, where they feasted their eyes Macro Plastics. with the sights of the sea and their palates on a delicious gala The panel spoke quite extensively about the packaging dinner sponsored by transport and logistics group GEFCO. industry and its current situation, where it isn’t given its Day two of the Congress started with an intense debate due importance, especially in the automotive sector. Povey about autonomous driving technologies and the opportunities pointed out that despite OEMs and tier suppliers not opting and challenges that they pose to fi nished vehicle distribution. for returnable packaging, it gives cost benefi ts to clients The panel was moderated by Automotive Supply Chain CEO & and health and safety benefi ts to logistics service providers. Editor-in-Chief Peter Wooding and comprised Ray MacDowall, The panel noted that the reason for this attitude is because, Chairman, ECM (Vehicle Delivery Service), Connell Clarke, rather than depending on third party service providers, most Strategic Relationship Manager, Sevatas, Stuart Warren, packaging is OEM or tier-supplier-owned. Some suppliers Managing Director - UK, Groupe CAT, John Stocker, Finished continue to use cardboard boxes, as opposed to using Vehicle Logistics Director, GEFCO and Howard Nash, General specialist packaging. The group pointed out the benefi ts of Manager, ARS Altmann. specialist packaging, especially returnable packaging, and The panel contemplated how this technology might concluded that this aspect of the industry needs much more revolutionise or adversely affect the automotive supply chain attention to fuel future growth. and logistics industry and arrived at the conclusion that while “Who should own the packaging?” asked Salmon. “Should autonomous driving has arrived, we might not see the full use it be the tier supplier, the OEM, the logistics provider or the of the technology until much later. pooler? In America, a lot of it is owned by the supplier, whereas “We will adapt along with the technology as it unfolds,” in Europe, it is probably owned by the pooler or the OEM. said MacDowall. “The earliest they are talking about us seeing “Everyone talks about standardisation. There is only self-driving cars is 2035. Some of the autonomous features are one standard in the packaging industry and that is the sea already in the car, it’s going to be a step change. We will see container. Will we get one standard footprint right across the it happening in small stages. The concept of cars loading and world? Everyone says there is no chance but who knows?” European leaders in the provision of risk unloading themselves onto vessels and car transporters has to The 2015 Automotive Supply Chain Congress brought come after we have seen fully self-driving cars on our highways. together the automotive supply chain and logistics industry. management, claims and logistics quality We all got really excited about the concept of RFID to track Delegates had the opportunity to gain invaluable insights from vehicles from factory gate to dealer and it hasn’t happened. We experts in their fi elds and a chance to network, socialise and can’t get common agreement between manufacturers as to the build their connections and relationships. a solutions to the finished vehicle logistics sector    The concept of cars loading and unloading themselves The concept of cars loading and unloading themselves The concept of cars loading and unloading themselves onto vessels and car transporters has to come after we have onto vessels and car transporters has to come after we have onto vessels and car transporters has to come after we have seen fully self-driving cars on our highways. seen fully self-driving cars on our highways. seen fully self-driving cars on our highways.  Ray MacDowall, Chairman, ECM (Vehicle Delivery Service).ay MacDowall, Chairman, ECM (Vehicle Delivery Service).ay MacDowall, Chairman, ECM (Vehicle Delivery Service). Leading on Quality R R +44 1473 346100 | SEVATAS.COM 56 Sevatas Advert.indd 38 13/05/2015 13:34:29

Reduced damage, costs and improved supply chain reliability European leaders in the provision of risk management, claims and logistics quality solutions to the finished vehicle logistics sector Leading on Quality +44 1473 346100 | SEVATAS.COM Sevatas Advert.indd 38 13/05/2015 13:34:29

Packing it all inacking it all in P Axel van het Kaar is the Carline Supervisor Material Flow provide to all our suppliers shipping on ocean container legs. and Packaging Engineering, Ford Werke GmbH, based in That guideline offers a range of expendable cardboard boxes Cologne. I asked him if there was a solution to the issue of that are all building up to the same footprint pallet. packaging which cannot be effectively stacked and which “We have one standard footprint pallet that is optimised makes it diffi cult to cube out a sea container. for use in ocean containers and by selecting the cardboard “We have various packaging suppliers who are now offering boxes and stacking them on the pallet we can optimise the dedicated, returnable solutions optimised for ocean container utilisation. The service provider who controls our ocean shipments,” he said. “Some of them are offered on a one-way container transports monitors the cube utilisation and advises rental agreement in order to optimise the circulation of these the receiving plant whenever there is a non-compliant supplier containers for different customers. This is one opportunity so that we can immediately get back to that supplier and ask that we are looking into and, obviously, within the Ford for conformity to our packaging guidelines.” environment, we have a global export packaging guide that we There is no worldwide standard for packaging. There is a 58

Packing it all inacking it all in P Packaging quality is improving, but there is little chance of a worldwide standard. Ford’s Axel van het Kaar spoke to Sam Ogle about this and other packaging issues. standard for Europe, a different one for North America and standards. Within Europe we do have a standard footprint that various standards in use in Asia. Kaar does not believe that a we are using for normal truck and railcar sizes and for ocean global standard can be achieved without fi rst standardising containers we use a different standard.” the various conveyances around the world, something which is Kaar pointed out that the problem went even further inconceivable. than the divergence in the dimensions of truck and railcars. “It would be very challenging to adopt a worldwide standard In Europe, for example, there are differences in track gauge because of the difference in transportation equipment,” he between certain neighbouring countries. It seems that a lack of said. “Without harmonising all truck and railcar sizes it would standardisation is a problem which the industry is just going be impossible. We usually follow the packaging dimensions to have to live with. It certainly points up the often-heard to optimise the load for the transportation equipment and, as complaint that companies are shipping too much air around long as we have completely different transportation equipment the world. The optimal cubing of containers is still a Holy around the world, I think we can only achieve regional Grail although progress is being made. Ford’s use of standard 59

   We use a pretty standard footprint, so the dimensions of We use a pretty standard footprint, so the dimensions of We use a pretty standard footprint, so the dimensions of the base of the container are the same for all our dedicated, the base of the container are the same for all our dedicated, the base of the container are the same for all our dedicated, direct suppliers. When we launch a new model, we always run direct suppliers. When we launch a new model, we always run direct suppliers. When we launch a new model, we always run a business case to check the potential reusability of the legacy a business case to check the potential reusability of the legacy a business case to check the potential reusability of the legacy packaging that becomes obsolete when the old model has packaging that becomes obsolete when the old model has packaging that becomes obsolete when the old model has ended its run. If we can reuse it by simply modifying the inner ended its run. If we can reuse it by simply modifying the inner ended its run. If we can reuse it by simply modifying the inner fi ttings and leaving the outer structure as it is or even by making minor ttings and leaving the outer structure as it is or even by making minor ttings and leaving the outer structure as it is or even by making minor fi fi changes to the outer structure changes to the outer structure changes to the outer structure, we do so. , we do so. , we do so.  Ax Ax Axel van het Kaar, Supervisor Material Flow and Packaging Engineering,el van het Kaar, Supervisor Material Flow and Packaging Engineering,el van het Kaar, Supervisor Material Flow and Packaging Engineering, Ford W Ford W Ford Werke GmbH.erke GmbH.erke GmbH. footprints in Europe is certainly a step in the right direction. are not able to effectively have a balanced shipment between “To control the freight network between tier one and Ford different regions we would at least want to try to have a very plants we have a monitoring system for the cubing of the high foldability of the containers so that, if they are empty, we trucks,” said Kaar. “We also optimise the packaging fi ll levels can maximise the number of empty containers shipped back to within the individual containers by using a CAD modelling the correct location.” approach that identifi es the optimised density in the individual It is, obviously, highly benefi cial to the effi ciency of a vehicle containers. The software uses the dimensions of our standard assembly plant if containers are able to be delivered straight to containers and also the CAD data of the individual component lineside, thereby avoiding needless handling or decanting. that is going to be shipped. Then we can advise the supplier “This is always our fi rst choice,” agrees Kaar. “When we what we expect the optimal density to be for that part. This develop a container, it is always looked at from the perspective is done prior to the launch of all new models and it is then of optimised transportation and we also follow a standard followed by checking the physical densities in the plant. When footprint for the container so that, once they are off-loaded we are ramping up for a new model, we have experts in the from the truck, they can be delivered to lineside by a forklift- plant who open all the boxes and check the fi ll rates. CAD free delivery method. We do this for the majority of our modelling can’t simulate everything. There are fl exible parts components. I believe it is absolutely benefi cial to have a and components such as wiring which, within a CAD design, container delivered straight to lineside.” are not showing the same shape as when they are shipped.” When a carmaker is planning the launch of a new model it is The packaging industry has a need for a logistics solution often necessary to re-think the packaging of the components. whereby companies do not have to repatriate empty containers This raises the issue of legacy packaging, which may now be or spend money re-balancing the pool of intercontinental obsolete but which has cost the company a signifi cant sum. containers. Kaar suggests that there are a couple of options Kaar explained how Ford addresses this challenge. available to address this problem. “We use a pretty standard footprint, so the dimensions of “There are service providers who have a range of containers the base of the container are the same for all our dedicated, and manage this pool across all kinds of industries so that direct suppliers. When we launch a new model, we always they can redistribute them over short distances wherever they run a business case to check the potential reusability of the are needed.” he said. “For long distance shipments we utilise legacy packaging that becomes obsolete when the old model one-way containers or cardboard then, if required, carry out has ended its run. If we can reuse it by simply modifying the local re-packing prior to moving the parts to lineside. If we inner fi ttings and leaving the outer structure as it is or even by making minor changes to the outer structure, we do so. We always try to maximise reuse, even across car lines. Standard packaging usually lasts longer than the average model cycle, so we have a repair and maintenance agreement in place so that we can circulate these standard containers over the lifetime of individual models. “Old containers with the potential for reuse in future models are stored on-site in a plant in a location which does not impact on the daily operation of the plant logistics. This reduces the cost of storing them in an outside location so we always try to identify space on the site. Once we have done our check of their reusability, if we have found old containers and pallets that show no such opportunity we dispose of them and they will be scrapped.” Like most, if not all, vehicle manufacturers, Ford keeps itself abreast of new and potentially better packaging solutions as 60

they arise. “We have regular meetings with our purchasing department, which procures the packaging, and there is a constant evaluation of the quality of the material we receive from our packaging supply base,” said Kaar. “When we see good quality, or suppliers that offer new products, we always see if we would like to work with them. This is driven by our purchasing department and the packaging suppliers have understood the need for a range of standard containers for different OEMs. There are many competitive containers around that have the same footprint and the quality has also improved.” In today’s climate of globalisation the accurate tracking and tracing of components and packaging as they are transported around the world is of enormous importance. “We use a system that monitors the shipment of parts and containers,” explained Kaar. “The challenge here is really to align the counting of these containers. We need to do a yearly inventory count to check against what the system is showing us. For the moment, we do this on specific count days, usually a non-production weekend, when all the containers that are not in transit are counted. Traceability is there system-wise, but you always want to have a regular inventory count to see if the system matches the reality.” There has been much discussion and divergence of opinion around the use of RFID technology. Some people think it is expensive and fails to deliver the benefits it promises, others like Kaar are believers. “RFID capability is really integrated now in all the new generation containers available on the market,” he said. “Whoever offers a container for use in the automotive industry has always, within the specification, the opportunity to integrate RFID. We believe that, longer term, it is really worth considering working with RFID Driving perfection technology to improve the tracking and tracing of the container. Currently, we don’t have a plan for the rolling right into your supply chain. out of full scanning across all plants and suppliers, but I believe that it is a technology that is worthwhile looking at and understanding the way of scanning the incoming and outgoing containers and integrating the supply base. Plastic reusable shipping containers aren’t quite as “In the end, you want to monitor where your containers exciting as the cars you build. But cutting costs on the arrive and when they leave the Tier One location. It is parts you ship is an attractive thought. Discover what interesting technology, because it avoids the use of automotive OEMs and suppliers in Asia, Europe and handheld scanners and accessibility to the barcode is no North America already have: ORBIS helps you fit more longer required. If you have the capability of reading a full parts per container and more containers per shipment. load of containers on a truck just by passing through a reading bridge, and the technology is robust enough, it will Contact us to learn how we can help shift your definitely give you a benefit longer term.” a efficiency into overdrive. orbiscorporation.com | a shift in thinking ORBIS_Auto_Supply_Chain_DrivingPerfection_111mmx303mm_071315.indd 1 7/13/2015 11:15:57 AM

A mixed picture for short sea shipping European short sea shipping is something of a mixed bag. Increased volumes in western Europe are offset by the collapse of the car market in Russia. As for Turkey, who knows what the future will bring. Sam Ogle reports. The major European short sea RoRo operators don’t know “The UK is still strong, although we are experiencing some whether to laugh or cry right now. On the one hand, their congestion in some of the UK ports,” says Bjorn O. Gran volumes in western Europe are increasing as countries such as Svenningsen, Head of Sales and Marketing at UECC. “There is a the UK, Italy, Spain and France are all exhibiting growth in their build-up of stocks and it could be that, perhaps, the UK market is automotive markets, both domestically and for export. However, slowing down a little. We are particularly struggling for space in the spectre of Russia looms large, as its decline shows no sign Southampton. In addition, we have the seasonal phenomenon in of ending. Light vehicle sales are forecast to drop by as much as the UK called the cruise season which is also a major challenge 35% this year as the country labours under the devaluation of for us.” the rouble and other economic strictures. “Our volumes have been holding firm,” says Sean Potter, “We are seeing a little growth compared to last year,” says Per Managing Director of DFDS Seaways PLC (Business Unit North Drange Hansen, Deputy Managing Director of Euro Marine Lines Sea). “We have seen increases in some of our European flows and (EML.) “In 2014, we carried around 800,000 units and this year also in our export flows from the UK.” we should do 900,000 to 950,000. Russian volumes are down “The picture is twofold,” agrees Peter Menzel, Commercial but we have seen significant growth in the UK and Scandinavia. Director at Neptune Lines. “At the beginning of the year we saw I hope that the western European and southern European very good increases in volumes in line with our expectations of countries continue to grow as they have been doing recently an increase of 10% over 2014. This was mainly due to the growth compared to last year. Countries such as Italy, France and Spain of the car markets in France and Spain, a very strong market in are becoming more important in terms of exports. I think that Turkey and an increasing market in Egypt. However, the picture Russia will continue to be difficult. I do not believe that the has been slightly impacted in the second quarter by the situation market will recover any time soon to the level it was previously in Algeria. The Algerian government implemented new rules on at.” how imported cars should be specified. 62

lines for a period of three years after taking over, although Safi has committed to spending $300 million on the construction of new, much-needed facilities at the port. In spite of this, Safi promptly increased the usage fees by up to a staggering 450%. According to the Association of European Vehicle Logistics (ECG) this is equivalent to an extra $10 million a year for the four main shipping lines calling at the port. The increased fees simply cannot be absorbed by them and will, inevitably, have to be passed on to their customers, the vehicle manufacturers, among them Toyota, Daimler, Honda and Hyundai. “Safi has not purchased the port, it has obtained a concession to operate it for the next 39 years,” says Svenningsen. “We don’t have the margins to absorb these huge cost increases, and we are looking for alternatives. We were suddenly informed on April 8th that the new tariff was in force from April 6th and that these were the numbers, take it or leave it. There was no prior notifi cation, This came relatively suddenly. A majority of the cars no possibility of a grace period and no room for negotiation. were already produced but were not inline with the required We have, of course, been trying to negotiate with them but it specifi cations. There are now many cars in Europe waiting seems as if their strategy is that there is no room for negotiation. for either modifi cation or shipment to Algeria which are not Perhaps they have realised that they have made an investment permitted to enter the country. that requires a different course and big changes to be able to see “The new regulations cover things such as anti-lock wheel ABS, a return on it.” electronic stability control (ESC, ESP), a speed limiting device “We are in the same position as all the other shipping lines, and/or cruise control plus front and side airbags and other safety it has had a huge effect on all of us,” says EML’s Hansen. “And equipment. This has dramatically impacted imports to Algeria not only the shipping lines, the OEMs as well. It happened and, since we are one of the major carriers into the country, it has overnight and we were faced with huge increases which we fi nd affected our performance in the second quarter. These regulations unacceptable. It is something that nobody counted on. Together were somewhat eased in mid-May however, imports, whilst with the ECG we have sent some letters to Safi Kati Yakit Sanayi slightly on the rise again, are still not at the level they used to be. and the OEMs have also been involved. Our representatives have There are still several thousand cars all over the Mediterranean tried on many occasions to fi nd a way to talk to the new operators which cannot at the moment be imported. The Russian market but it is very diffi cult to get hold of them. I believe that they are KENNis & EXPERTisE collapsed in the middle of last year and we had already planned trying to get as much money as possible out of the car business DEDIC 60°W ON 200 50°W 40°W 30°W 20°W UT 10°W 0° 4,32°E 10°E 20°E 30°E 40°E 50°E 60°E for a big reduction in that volume and have concentrated more on and I don’t see, at this moment, any short term solution which D the export business out of Russia to sustain our calls there. We will return the rates to the previous level. It is very, very diffi cult to N 200% DEDICATION 200% UTSTANDING AN still run the same services but the volumes are not as strong.” absorb these high costs, actually it is impossible. We are talking % E “We do see hope of recovery in Russia, but it is not going to to all our customers to fi nd a solution which may be to fi nd an DE K K happen this year nor, perhaps, next year either,” says Svenningsen. alternative way to deliver the cargoes.” 55°N DEDICATION 55°N KN “It may recover in 2017, but it all depends on the oil price because “We cannot absorb this increase,” agrees Menzel. “We are in E E G 2 KNOW-HOW 20 20 I Russia is an economy driven purely by the revenue from its oil negotiations with our customers as to how we can allocate these GE INNOVATION & TECHNOLOGY 200% W & TECHNOLO business. A part of it, of course, is related to the issues between charges however, the negotiations are more about what the Russia and the Ukraine.” alternatives are. Derince is not only the biggest port in Turkey but U DEDICATION STAN DIC T T There is also much confusion over recent events at the also, up to now, the most economical to use. I believe that the CUTTING-EDGE TIO OUTSTANDING Turkish Port of Derince. Derince is the country’s busiest vehicle- surrounding ports could eventually absorb the volume, however, ED 2 N handling port and is mainly served by four leading short sea this will mean an additional cost for all parties involved. Any 200% RoRo operators, Grimaldi Lines, UECC, Neptune Lines and Euro change in port has a cost impact.” 51,31°N C C C C C C C C INNOVATION ED O 51,31°N ATIO Marine Lines. Last June, a tender for the privatisation of the Such high-handed behaviour calls into question Safi ’s TY C CO STANT CREATIVI & DEDICATION I I AT port was issued by its then owners, the Turkish State Railways commitment to maintaining Derince as a vehicle-handling port. ITY CONSTANT CREATIVITY CONSTANT CREATIVITY CONSTANT CREATIVITY Y Y A KNOW-HOW W W Administration. The bidding was won at a cost of $543 million Could it be that the company would prefer to develop more I N LO G G G N W & TECHNOLOGY PORT OF PORT OF PORT OF by a company called Safi Kati Yakit Sanayi Ve Ticaret A.S. which lucrative container business instead? Whatever the reasons for 50°N T T T ANTWERP 50°N ANTWERP began operations in April. The Turkish government stipulated that its actions, the four shipping companies may be forced to seek SM M M the new operators should not increase usage fees for the shipping alternative ports in the region. And therein lies a problem. The Everything is possible SO SMARTER at the Port of Antwerp SOLUTIONS  Knowledge is power. The power to realise the most NS   The UK is still strong, although we are experiencing some The UK is still strong, although we are experiencing some The UK is still strong, although we are experiencing some impossible projects. The port of Antwerp has established congestion in some of the UK ports, there is a build-up of stocks an extensive network of maritime, technological and SMARTER congestion in some of the UK ports, there is a build-up of stocks congestion in some of the UK ports, there is a build-up of stocks ER and it could be that, perhaps, the UK mark and it could be that, perhaps, the UK market is slowing down a et is slowing down a et is slowing down a and it could be that, perhaps, the UK mark logistics experts. Together we can  nd a smart solution SOLUTIONS T for all your questions and challenges. TI I IO little little Challenge us at [email protected] SMARTER little. We are particularly struggling for space in Southampton. . We are particularly struggling for space in Southampton. . We are particularly struggling for space in Southampton.  A Follow us at www.portofantwerp.com/everythingispossible 45°N 45°N Bjorn O Bjorn O. Gran Svenningsen, Head of Sales and Marketing at UECC.. Gran Svenningsen, Head of Sales and Marketing at UECC.. Gran Svenningsen, Head of Sales and Marketing at UECC. Bjorn O OL f il #eisp13 SOLUTIONS UT #portofantwerp 63 40°W 30°W 20°W 10°W 0° 4,32°E 10°E 20°E 30°E 40°E

   In 2014, we carried around 800,000 units and this year we In 2014, we carried around 800,000 units and this year we In 2014, we carried around 800,000 units and this year we should do 900,000 to 950,000. Russian volumes are down but ,000 to 950,000. Russian volumes are down but ,000 to 950,000. Russian volumes are down but should do 900 should do 900 we have seen signifi we have seen signifi we have seen signifi cant growth in the UK and Scandinavia. cant growth in the UK and Scandinavia. cant growth in the UK and Scandinavia.  Per Drange Hansen, Deputy Managing Director of Euro Marine Lines.er Drange Hansen, Deputy Managing Director of Euro Marine Lines.er Drange Hansen, Deputy Managing Director of Euro Marine Lines. P P alternatives are simply not obvious. In 2013, Derince handled expensive and places an even greater burden on the operators. over 500,000 vehicles, more than twice as many as the next- “We have passed on the extra cost to our customers,” says largest Turkish port, Kocaeli, which is operated by Ford Otosan Svenningsen. “There were lots of discussions, and it was not and Gemport. RoRo capacity in Turkey is very limited, and Safi ’s easy, but fi nally we were successful in getting acceptance for this actions have dealt a body blow to the country’s automotive additional cost. The drop in the price of oil has been quite a factor industry. and the nett effect has not been as signifi cant as initially expected “This is a highly political situation and the OEMs have much in the third quarter of last year. The oil price will creep up again more power than the shipping lines which basically follow but we have a bunker adjustment factor which will regulate it.” their requirements as to which ports they would prefer to use,” “At all times we fully comply with the SECA regulations and says Hansen. “The OEMs are supporting Turkey by employing we are burning marine gas oil in these areas,” says Hansen. “This, thousands of people in their factories and once they are not able obviously, has an effect on our costs. I don’t think that we are able to export, this will have a knock-on effect.” to pass on all of this cost to our customers. We have tried to fi nd Effective from the beginning of this year, the low-sulphur fuel an agreement with them all but we ourselves will have to absorb regulations affecting shipping lines using the English Channel, the some of the extra cost. It places more pressure on an already North Sea and the Baltic Sea were tightened. The EU legislation diffi cult market. Profi ts are already on the low side. It is why we means that vessels operating in the Sulphur Emissions Control are seeking to balance our trades as optimally as possible. We are Areas (SECA) from 1st January 2015 will be allowed a maximum coping as best we can.” sulphur content in their fuel of 0.1% compared to the previous “We were able to pass on the cost,” says Potter. “However, the limit of 1.0%. The low-sulphur fuel is, however, much more cost has been mitigated by the reduction in fuel prices. In our KENNis & EXPERTisE DEDIC 60°W ON 200 50°W 40°W 30°W 20°W UT 10°W 0° 4,32°E 10°E 20°E 30°E 40°E 50°E 60°E D AN % UTSTANDING N 200% DEDICATION 200% DE E K K KN 55°N 55°N E E KNOW-HOW DEDICATION G 2 20 20 I & TECHNOLO 200% W GE INNOVATION & TECHNOLOGY U DIC T T STAN DEDICATION ED TIO 2 N CUTTING-EDGE OUTSTANDING 200% TY C CO STANT CREATIVI INNOVATION & DEDICATION 51,31°N C C C C C C C C 51,31°N ATIO O ED I I AT A & TECHNOLOGY I N LO G G G N W KNOW-HOW W W PORT OF PORT OF T T T PORT OF ITY CONSTANT CREATIVITY CONSTANT CREATIVITY CONSTANT CREATIVITY Y Y 50°N ANTWERP 50°N ANTWERP M M SM Everything is possible SO SMARTER at the Port of Antwerp SOLUTIONS NS Knowledge is power. The power to realise the most impossible projects. The port of Antwerp has established SMARTER an extensive network of maritime, technological and ER logistics experts. Together we can  nd a smart solution T for all your questions and challenges. SOLUTIONS TI I IO Challenge us at [email protected] SMARTER A Follow us at www.portofantwerp.com/everythingispossible 45°N 45°N OL f il #eisp13 SOLUTIONS UT #portofantwerp 40°W 30°W 20°W 10°W 0° 4,32°E 10°E 20°E 30°E 40°E

Corporate Social Responsibility which includes a set of ten universally accepted rules in the fi elds of human rights, labour environment and anti-corruption. There are 12,000 members in 145 countries and it is one of the largest CSR initiatives in the world.” “For us it is not becoming more diffi cult, however, that doesn’t mean that we can sit back and relax and wait for things to happen,” says Menzel. We have to be proactive and invest to make sure that we are doing our best to limit our environmental impact by designing ships and investing in technology that reduces our environmental footprint. Our newbuildings have a couple of new technologies which dramatically reduce fuel consumption. One is D-rated engines, which are basically eight cylinder engines which can run on seven. They have low output shaft generators which eliminate the need for a diesel generator. We have also installed the Promass system which connects the propellor with the rudder and improves the fl ow and effi ciency. All our engines are electronically managed for effi ciency and we can actually have a telemetry system built in so that on a PC you can watch what the engine is doing. We also participate in innovative European projects, such as Poseidon Med, which studies the use of LNG as marine fuel and the subsequent establishment of an LNG bunkering network in Adriatic and Eastern Mediterranean ports in Greece, Cyprus, Italy, Croatia and Slovenia. We have agreed to provide a vessel for LNG conversion.” Short-sea shipping companies are very much in competition with other modes of transportation such as road and rail. It is, therefore, very important to be competitive. The continuous negotiations and review meetings with customers we spent 12 to pressure on rates from the OEMs can affect the ability to invest in 18 months creating an understanding with the OEMs of the new assets and services. regulations, what they meant for business and what they meant “There is always pressure but not necessarily from the for DFDS, our investments in scrubber technology and the fuel OEMs,” says Svenningsen. I think it is from the different logistics charge that would apply from 2015.” providers; they are the ones who are creating the competition. The SECA regulations are not, of course, the only demands It is, of course, a supply and demand situation. If someone has made upon the shipping companies by the environmental space available then it is always tempting to sell it at a very lobbies. competitive price, sometimes maybe even below cost, I suspect.” “It is, of course, a challenge and it always involves additional “We have to be innovative,” says Potter. “DFDS Group as a cost,” says Svenningsen. “We know that we have to do whatever whole, whether in the parts trade, the logistics trade or in fi nished has to be done to preserve the environment, but sometimes the vehicles offers a combination of road, rail and sea transport. We process and understanding between legislators and the shipping will be innovative and link our own sea freight services to a rail industry could do with a better dialogue between the makers of option to enable an OEM to get the best competitive pricing the laws and the people who have to live with them.” model. We are very aware of the competitive position and we “We are part of the Trident Alliance, and we strongly believe are looking at how we can create the innovation necessary to that the regulations need to be followed and monitored,” says maintain our existing business and also to develop new business Hansen. “All players should be treated in the same way. All of opportunities through tenders.” these regulations, however, have put pressure on already low Peter Menzel sees something of a mixed picture. “The pressure, prices in the short sea business.” obviously, is there and the investment is slightly more diffi cult. “It is about having a sustainable business and a social In the area in which we trade the markets are more volatile, so responsibility which most European shipping lines operate any investment in that area has to go hand in hand with a very within,” says Potter. “We all see the need to work and move detailed study of alternative scenarios for each investment. It towards a corporate responsibility for our business. As of April is not purely a straight rate issue, you also have to consider the 2015 DFDS joined the United Nations Global Compact for volatile markets in this area such as Algeria, Russia and even Syria    At the beginning of the year we saw very good increases At the beginning of the year we saw very good increases At the beginning of the year we saw very good increases in volumes in line with our expectations of an increase of 10% in volumes in line with our expectations of an increase of 10% in volumes in line with our expectations of an increase of 10% over 2014. This was mainly due to the growth of the car mark over 2014. This was mainly due to the growth of the car mark over 2014. This was mainly due to the growth of the car markets ets ets in France and Spain, a very strong market in Turkey and an et in Turkey and an et in Turkey and an in France and Spain, a very strong mark in France and Spain, a very strong mark increasing mark increasing mark increasing market in Egypt. et in Egypt. et in Egypt.  Peter Menzel, Commercial Director, Neptune Lines.eter Menzel, Commercial Director, Neptune Lines.eter Menzel, Commercial Director, Neptune Lines. P P 65

   We were able to pass on the cost, however, the cost We were able to pass on the cost, however, the cost We were able to pass on the cost, however, the cost has been mitigated by the reduction in fuel prices. In our has been mitigated by the reduction in fuel prices. In our has been mitigated by the reduction in fuel prices. In our negotiations and review meetings with customers we spent 12 negotiations and review meetings with customers we spent 12 negotiations and review meetings with customers we spent 12 to 18 months creating an understanding with the OEMs of the to 18 months creating an understanding with the OEMs of the to 18 months creating an understanding with the OEMs of the new regulations. new regulations. new regulations.  Sean P Sean P Sean Potter, Managing Director, DFDS Seaways PLC (Business Unit North Sea). otter, Managing Director, DFDS Seaways PLC (Business Unit North Sea). otter, Managing Director, DFDS Seaways PLC (Business Unit North Sea). and Libya. Because of the growing markets in western Europe fed by production sites in eastern Europe or central Europe there is a lot of one-way traffi c which creates a logistical imbalance for the land transportation network. The ocean carrier can benefi t from this. Growing markets always go hand in hand with big volumes which have always been handled more effi ciently by sea transport.” Vehicle manufacturers are always keen to emphasise the need for frequency of service. More frequent services are, however, another cost factor for the industry to bear. “We have some routes with very high frequency services, more than weekly,” says Menzel. “It really comes down to how cost-effi cient the design of the route is. In theory, you can take a smaller ship with lower volume and go up and down more frequently. That means more mileage and additional port calls which don’t necessarily go hand in hand with pressure on rates. By doing that, you eliminate economies of scale. A more frequent service cannot always be sustained with the current rates.” “As long as the users of our services are willing to pay for making a joint effort to support their efforts towards continuous a higher frequency then, of course, we will introduce it,” says improvement. We provided them with a couple of innovative Svenningsen. solutions to improve services and cost structure.” “We are quite fortunate on the major trade lanes in which we Bjorn Svenningsen points to fl uctuating rates of exchange operate in having regular frequency and capacity,” says Potter. as another challenge to the short sea industry. “A lot of our cost ”From Ghent to Gothenburg we have six sailings a week, Cuxhaven structure is in US dollars while in Europe the majority of our to Immingham fi ve sailings a week, Gothenburg to Immingham revenue is in euros. We also have costs in Europe which are in six a week, so we are able to cater for requests from the OEMs for dollars, for instance all our port-related expenses in Russia, the more regular frequency in the supply chain.” Baltic and Turkey. Also in North Africa where we have a lot of Cooperation between shipping lines is not always easy business. This is a big challenge for us. We pay our bunker costs because of the need to avoid being accused of forming a cartel. in dollars, as does the whole industry, and our new-buildings are “There is some operational collaboration and cooperation, fi nanced and purchased in dollars. Vessels we are chartering are but it is something which is sensitive and something that we are also paid for in dollars.” very careful about,” agrees Svenningsen. “We need to fi nd ways So there it is. Happy days for those whose business is of operating in the most effi cient manner, and if that is through concentrated in western Europe, but lots of challenges further purchasing space or selling space to someone else then it is east. Challenges which could take time to overcome. a something we would consider.” “There is a continual, on-going dialogue between shipping lines and the OEMs, and this has always been the case,” adds Hansen. “It is a way to help each other create optimum services.” “We don’t see much collaboration in the RoRo ferry schedule sailings,” says Potter. “The big operators in short sea all have our own business practices. We see more collaboration and discussions around port locations, with the OEMs looking at their strategic port placements. There is now more requirement to look at IT solutions and create collaboration in that area.” “Between the OEMs and the carrier, I would say yes there is more cooperation,” says Menzel. “This is because of the more complicated supply chains with more diversifi cation of markets and production sites and stronger pressure on lead times. There is now very close cooperation and, perhaps, more innovative solutions. We have just been awarded the Renault-Nissan award for Innovation and Agility. The award was for our proposals for 66

Keeping it on the road The automotive aftermarket continually adapts to new trends, so why are there so many regional or in-country warehouses across Europe? Nick Beard, Global Industry Sales Director - Automotive, Roger Needham, Product Manager and John Willems, Industry Marketing Director - Automotive, TNT, reply to this and other issues. European Bypass Channel Partners Monitored by TNT Distribution Center National Distribution (e.g. Dealer Network) Control Tower Centers Many customs-controlled borders have been removed and Dealers with vehicles ‘on ramp’ need to provide accurate, the transport infrastructure dramatically improved, so is there a real-time assessments of completed repair times to deliver historic reason or is the industry reluctant to change? customer satisfaction. TNT has provided European and global aftermarket parts ■ Model proliferation - driving an associated increase in services to the automotive industry for the last 25 years. As you SKUs. In turn this is creating ever more complex inventory would expect, TNT is constantly reviewing its service proposition management challenges which are also made more to the aftermarket to take advantage of the improved challenging with multiple country warehouses. Maintaining infrastructure and has invested more than €200 million in the correct SKU mix and levels by region, drives inventory 2014/15 in its road networks enabling more early morning, into the supply chain and fi xed cost warehouse operations. next day and two day services by road across Europe and ■ Extended service intervals - with many cars now only seamlessly integrating its premium air services for critical VOR requiring two-year/30,000 km service intervals, customer (Vehicle Off Road) parts. TNT invests time studying developing vehicles tend to visit dealers less frequently. Scheduled aftermarket trends and their impact on cost and service to the service part requirements are more predictable; associated end customers – your dealers and their customers. repair and maintenance, less so. ■ Uptime-inclusive contracts – on-highway trucks and off- If you consider some of the recent trends: highway plant and machinery are increasingly being sold ■ Combination of through-the-night and in-day deliveries with uptime-inclusive contracts. Vehicles ‘on ramp’ cost the – extended workshop operating hours designed to deliver operator time and money. Manufacturers increasingly require greater on-ramp throughput and associated effi ciency. In-day predictable, visible supply chains to ensure vehicle downtime deliveries support technicians’ requirement to turn round is minimised. same-day vehicle repairs. ■ First time fi x – customers expect replacement vehicles whilst ■ Hybrid technologies – increasing use of hybrid technologies their own is off the road for repair. The associated cost of and integrated electronic components is contributing to vehicle rental days supplied is a KPI high on any dealer extended service intervals. Dealers and service agents principal’s agenda. increasingly need to differentiate on service to retain revenue ■ High fi xed cost multi-country warehouse operations - the streams and customer loyalty. traditional country-centric sales structures have encouraged ■ Supply chain visibility - the global nature of the automotive the traditional national DC infrastructure across many aftermarket and the complex extended supply chains aftermarket parts organisations, despite the ease of freight increasingly demand part level visibility for VOR/back orders movement across the majority of European borders. 67

As automotive technology continues to develop rapidly, TNT has a signifi cant presence within the automotive complex component parts are frequently acquired from single or aftermarket sector and operates several large-scale suppliers dual source specialist parts suppliers. Whilst this global supply to DC and outbound parts distribution services for high-profi le chain remains generally robust, there have been recent occasions customers across the sector. when global recall programmes have created peak demand for What makes TNT unique within this supply chain is its emergency VOR orders placed back through the supply chain ability to provide a range of network services to the OEM central to the parts supplier. Engaging with a transport partner that aftermarket parts teams and their dealer networks through a truly understands the critical pain points of the aftermarket single point of contact. Users of TNT’s networks have the ability parts supply sector and who can provide a cost-effective and to control the velocity of their aftermarket fl ows, rather like the predictable service direct from supplier to dealer if required, will gearbox of a car. drive real benefi ts for the OEM and dealer alike. Take the example of urgent, parts-related recalls. Occasionally Following an automotive aftermarket study in 2013/14, TNT has such recalls can place a severe strain on the aftermarket supply made the decision to invest signifi cantly in its service capabilities chain, creating backorders and a rapid build up of VOR. Pressure with recent investments in both air and road networks providing is created as alternative supply sources are often required in a more choice and certainty within this area. In addition to the short space of time. This can be compounded if the tooling is network investments, TNT has invested heavily in staff training to proprietary to the OEM. Once supply is adequately sourced, it is further develop its automotive teams’ expertise. now critical to collect the parts from the supplier and expedite The car, how it is used and made, is undergoing substantial them into the OEM dealer networks. By having a single point of changes. Governments are placing increasing demands on contact and the ability to integrate air, road and special services, automotive manufacturers to create safer and cleaner vehicles. TNT can quickly and effectively collect material and either deliver Simultaneously, customers expect their cars to provide a level into central and / or regional warehouses; or if required direct to of connectivity to a variety of external information sources – the the dealer, thereby ensuring workshop productivity is improved connected car. To what extent will these developments impact the and associated downtime costs are minimised. manufacturers’ aftermarket parts supply chains? The last fi ve years have seen the dynamics of the aftermarket The technological advances will increasingly have a signifi cant supply chain change rapidly. The connected car and its ability impact on the traditional automotive supply chains and in to self-diagnose service intervals and support extended service particular the aftermarket. How do the inventory planners and intervals, has in many respects made it more challenging to parts operations teams manage such complexity that extends ensure workshop revenue streams are maintained. Think back globally across tens of thousands of suppliers? TNT has the to the early 1990s when a typical fl eet vehicle was serviced every proven ability to support these complex supplier and logistics 9000-12,000 km. For some high-mileage drivers that meant a visit networks. To ensure that dealers can fl ex their workshop to the dealer every six weeks or so. Many cars today are serviced schedules, TNT can deliver parts using its extensive road and air at two-year or 30,000 km intervals. Contrast this with the ability networks and can respond quickly to the changing demand for to personalise vehicles, which has in turn generated an ever- scheduled service and ad hoc maintenance repairs. expanding range of complex SKUs. 68

OEMs and their parts organisations must increasingly support and manage this rapidly-increasing number of SKUs. In order to support brand loyalty from the customer, the supply chain must ensure parts availability for up to twenty years and in certain commercial/off road sectors, even longer. Inventory planners need to find ever more complex algorithms to ensure maximum parts availability at the minimum inventory and associated logistics cost. The European aftermarket across the automotive, on and off highway and the materials handling sectors has been historically driven by the sales organisation’s desire to ensure stock levels were maintained at a dealer, national and/or regional level. TNT has established an effective ‘control tower’ concept, enabling rapid interaction between central parts organisations and local sales and parts organisations. Recent developments within TNT’s traditional customer base have created a dialogue aimed Having multiple carriers for pallets and another for cartons at using a combination of air and road networks to deploy VOR adds complexity and waste in the supply chain. The modern and stock orders direct to market, thereby avoiding the high cost automotive consumer can configure their vehicle with an ever- of national warehouse inventories and operations. increasing range of specifications and options. The ability to Our expert teams are empowered to execute important service deliver the wide variation of parts demand to ensure effective upgrades, recognising that time is critical in such situations, and dealer workshop planning is a key feature of TNT’s operational support the customer teams by providing the following: expertise. ■ Detailed understanding and experience of aftermarket demand TNT expert teams, in conjunction with the inventory structures and sales processes. planners, schedule collections within mainland Europe and ■ Detailed knowledge of the TNT network and available options. the rest of the world. In Europe, many of these collections are ■ Detailed knowledge of the supplier base. executed by TNT’s extensive road network and in the event that ■ Local language skills to ensure direct communication with key a faster transit time is required the service is simply changed so staff at the supplier and dealer operations. either air or charter options can be used all from a single point. Inbound planning for an aftermarket warehouse requires The automotive aftermarket is not getting any easier. The the coordination of resource across multiple receiving docks pace of change is accelerating and customers are demanding and shift patterns. Any opportunity to simplify these processes higher levels of service. As the old saying goes – “time is through the reduction of and/or streamlining of truck flows will money”. Vehicles and drivers not on the road will cost money provide a direct operational cost benefit to the warehouse. TNT’s somewhere along the supply chain. TNT can ease the strain network and specialist teams allow it to collect variable loads by offering cost-effective pallet and parcel deliveries direct to ranging from cartons to multiple pallets and deliver them to the dealer, through one point of contact. a warehouse in one coordinated movement. 69

Looking ahead Despite the worsening Russian economy, GAZ Group remains upbeat about the future, reports Simon Duval Smith. GAZ Group is the largest manufacturer of commercial help to modernise the company’s facilities and ensures the vehicles in Russia. The company produces light and medium training of its employees to meet the high standards of the commercial vehicles, buses and heavy-duty trucks as well as global automotive industry. passenger cars, powertrains and auto components. Within the framework of these joint enterprises, new Headquartered in Nizhny Novgorod, GAZ has 13 plants assembly and welding shops were introduced, the new paint in eight Russian regions. Its GAZelle light truck brand is so shop was built, the logistics and quality control system was popular and universal that it has become a symbol of light improved and new jobs were created taking the number of commercial vehicles in Russia and is synonymous with the GAZ employees to just over 45,000. entire sector. Vadim Sorokin is President and CEO of GAZ Group. Since 2012, GAZ has been actively developing cooperation Formerly head of the Group’s Light Commercial Vehicles projects with non-Russian OEMs such as Volkswagen, Division, he was appointed to his new role at the beginning General Motors and Daimler for the contract manufacturing of last year and is in charge of strategic and operational of the Skoda Octavia, Skoda Yeti, Volkswagen Jetta, Chevrolet management of the company. In parallel, he also stayed at Aveo and Mercedes-Benz Sprinter. The company has also the helm of the LCV Division until May 2015. established joint-venture partnerships with the European Asked about the biggest challenges facing GAZ Group manufacturers of automotive components, Bosal and Bulten today Sorokin replies; ”The opportunity to increase our and a similar arrangement is expected to be signed with market share. We are a very well-trained and prepared the Italian company Magnetto Wheels. These joint projects company. We have a very good team and we know how to 70

drive down cost as we react to the market. We have created a in the market will go under. The fi rst hit will be to passenger special purchasing room to monitor all our problem suppliers car dealers but many of our dealers sell both cars and LCVs. so as to be able to react promptly and to take corrective The maintenance of the dealer network is a challenge for us. action. We must also help our suppliers by teaching them Firstly, to keep it afl oat, not to let them lose their business, how to be more effi cient and how to reduce costs.” and secondly to take the opportunity of the current situation According to Sorokin, the second challenge facing the to expand our dealer network.” company, which is no less important, is its interface with its Gaz Group has around 450 suppliers, most of them dealer network. GAZ has the largest sales and service network Russian. This year sees the fi fteenth anniversary of the for commercial vehicles in Russia and the CIS. Since 2013, 25 consolidation of machine-building assets by the industrial new sales and service centres have been opened and service group Basic Element, the main shareholder in GAZ. Prior to is now available in all cities with a population of over 250,000. this, all GAZ Group plants were independent companies with “Back in 2012, total Russian sales of cars and LCVs their own company cultures and supply chains. Today, the totalled 2.9 million units. In 2013, 2.7 million and in 2014, plants at Nizhny Novgorod and Yaroslavl are surrounded by 2.4 million. Now we are in 2015 and we have to guess total large supplier clusters. sales. I have seen all sorts of forecasts and projections, I have “After the consolidation of GAZ Group, we also seen 1.7 million and 1.3 million and 1.5 million. Our dealers consolidated our suppliers and we formed a single to whom we distribute are absolutely on par with European purchasing department for the Group,” explains Sorokin. standards and they cost money to upkeep. It is absolutely “The fi rst thing we did was to concentrate all steel purchasing clear that, in the current environment, quite a few dealers for the whole Group in one location, fi nding suppliers    Back in 2012, total Russian sales of cars and LCVs totalled Back in 2012, total Russian sales of cars and LCVs totalled Back in 2012, total Russian sales of cars and LCVs totalled 2.8 million units. In 2013, 2.5 million and in 2014, 2.2 million. Now 2.8 million units. In 2013, 2.5 million and in 2014, 2.2 million. Now 2.8 million units. In 2013, 2.5 million and in 2014, 2.2 million. Now we are in 2015 and we have to guess total sales. we are in 2015 and we have to guess total sales. we are in 2015 and we have to guess total sales.  Vadim Sorokin, President and CEO, GAZ Group.adim Sorokin, President and CEO, GAZ Group.adim Sorokin, President and CEO, GAZ Group. V V 71

and negotiating price and good terms for all consolidated suppliers to the Group. The logistics for inbound supply is controlled by each individual plant. They know what they need and how much. Our purchasing department signs a contract with the steelmakers and other suppliers. Then it’s the job of the logistics departments in Yaroslavl and Nizhny Novgorod to advise the supplier how much of which steel they should send to the plant and at what time. We have two steel suppliers delivering directly to the plants. One supplies 80% of our requirement, the other 20%.” Sorokin reports no issues with the Russian rail network nor with the third party carriers, forwarders or logistics providers serving the company. On an annual basis, these services are put out to tender and those whose bids offer the best terms and conditions are those with whom GAZ enters agreements. In terms of component suppliers, the company often single- sources but ensures that there is always a Plan B in case of disruption of supply. “Historically, we have had quite a large number of suppliers around us,” he explains. “Some of them duplicated one another and there we had to make a choice. If you take ZF of Germany as an example, they supply steering gear for our GAZelle Business and our GAZelle NEXT models. Are they a single source supplier? Yes they are. If they cannot If we look at our typical customer, he is an entrepreneur, a supply do we have options? Yes we do. There is a good small to medium-sized businessman who makes the decision alternative company which manufactures similar products. to buy our truck when he has the money and when he sees You cannot build one truck with a certain steering gear and that he is going to grow his business. In a situation where have something different on the next one. GAZelle NEXT and orders are dropping, he doesn’t buy a new truck, he repairs GAZelle Business are built with Cummins diesel engines. his old one. Or, if he is a slightly bigger businessman, out of Cummins is a monopoly supplier, a single source supplier. his fleet of ten trucks he will sell five and run the business If we run into a problem with Cummins we can temporarily with the remaining five.” replace their engines with petrol engines made in-house, and Oleg Deripaska is the Chairman of the Supervisory Board there are some other options open to us as well.” of the Basic Element company and, as such, is the leading GAZ keeps a close eye on what is happening in its supplier shareholder in GAZ Group. With an estimated net worth base, their investment and their cash flow. If a potentially of US$6.2 billion in 2015, he is amongst the 20 wealthiest promising supplier finds itself in trouble, the company is people in Russia. prepared to countenance ways to help it. In 2003, Oleg Deripaska introduced the production system “We might change payment terms and go from 60 days to to GAZ plant. The system is based on the principles of “lean 30 days or even to pre-paying,” says Sorokin. “The decision production”. Responding to the question, for what purpose to change temporarily will be made in the purchasing shareholder introduced the system and what it gave to department. We have learnt pretty well how to manage our GAZ, Sorokin says that he had not worked in GAZ Group working capital. On the Nizhny Novgorod site we are working during that time, but he may try to explain the logic of the with negative working capital because we get paid for the cars shareholders’ decisions in respect of the newly acquired that we have yet to build and the average credit terms for assets. suppliers is 60 days after delivery.” “The natural question he would have asked himself would Asked if he was satisfied with the level of innovation be ‘what am I going to do with these assets?’ He started by coming from Russian suppliers Sorokin replies, “Not all of visiting the facilities and walking through the workshops and them, I’d like to see more. I am not even satisfied with some the shop floor he saw old facilities, old equipment and old international suppliers. We would like to be successful not technology. The simplest solution was to start immediately only in Russia but globally, and we must be really price- modernising and investing huge sums of money. If he had competitive with a technical level the same or better than started pouring money into his automotive business at that our competitors, not worse. If you are worse, you will sell time fifteen years ago, most of that money would have been nothing.” wasted. So he engaged independent consultants from Japan The overall state of the Russian economy is, of course, and those consultants came here and worked in different the driver for GAZ’s success because it determines how many production areas to show how we could raise productivity trucks the company will sell. Sorokin accepts that the Russian several fold, reduce inventory and increase quality without government has not always made decisions favourable to the particular investment. He had courage enough and manufacturing industry. perseverance enough to force people really to take this up in “A couple of years ago, the taxation of small and medium- earnest in all production divisions. sized businesses was a bad decision. Many of the companies “After a period, it became an inherent philosophy. In the had to close down and some of them were used as forwarders, process it also identified the people who were talented and they were our clients. Today, we see that the government has who not only borrowed the knowledge but built on it and learned lessons from those errors and that they are trying to further adapted the system to the local requirements. It first create real incentives for small and medium-sized businesses. started at high level but now it has cascaded down to each 72

   We believe today that the casting and foundry operation is We believe today that the casting and foundry operation is We believe today that the casting and foundry operation is our core competence together with vehicle production and we our core competence together with vehicle production and we our core competence together with vehicle production and we can clearly see what losses and waste we would now have if can clearly see what losses and waste we would now have if can clearly see what losses and waste we would now have if we had decided to sell it off we had decided to sell it off we had decided to sell it off . . .  Vadim Sorokin, President and CEO, GAZ Group.adim Sorokin, President and CEO, GAZ Group.adim Sorokin, President and CEO, GAZ Group. V V and every production area. There is a technology university and applied it to our product. From the start, we had 1,200 in Nizhny Novgorod and we established the department of plus demerit points. However, at the start of production of production systems there. We also train our suppliers in the GAZelle NEXT, we were down to only 80 points. At the our own production system in our own corporate university. same time, we were launching the Mercedes Sprinter and It became embedded in the culture of the people here, we saw that its customer satisfaction audit was more. We resulting in the elimination of most of the waste and making asked ourselves if our vehicle was better! Their customer the company attractive and ready for real investment. Now satisfaction approach is based on how a Mercedes customer the people who are calling for investment in production looks at his van and it’s the same team of people turning out technology are very precise and can pinpoint exactly where it those vehicles at GAZ, the same quality department, same is needed and that means high effi ciency of the investment.” production team. We had to accept Mercedes’ measure and Some people in Deripaska’s position would simply have apply it to our GAZelle which immediately grew from 80 to stripped out and sold the company’s viable non core assets 435. And then we began to work on the quality of GAZelles in – for example the casting or foundry operation. It speaks accordance with the more strict requirements”. volumes for the man that he did not do so. Asked which company he most admired in terms of how “The reasons were purely economic, the result of economic it handles contract and own-product manufacturing, Sorokin feasibility studies. Moreover, the funds were invested to the cites Austria-based Magna Steyr. assets, professional specialists were raised, and it gives the “We are a very versatile company. We produce buses and results,” says Sorokin. “We believe today that the casting all kinds of trucks. If you are talking about corporate contract and foundry operation is our core competence together with manufacturing alone, of course Magna Steyr is there as a role vehicle production and we can clearly see what losses and model. There are a lot of things that we learnt from them. waste we would now have if we had decided to sell it off. When we were launching all those contract manufacturing “When we were making the decisions about which products operations, we had to invite the Magna Steyr specialists to to invest in, we saw that we had different market shares for help us. Magna Steyr mostly assembles premium cars and different models. Common logic suggested investing in the that is where they make their money. We have learnt to earn panel van and bus segments because we had lost that market fairly good money on cheaper cars.” share. If you start to invest in the bus segment the investment Sorokin gives credit to Oleg Deripaska for his focus on the kick-in period takes two to three years. In those three years, education of the young generation of future engineers who you would lose your chassis cab market share which would are also trained on the development of autonomous vehicles. drop from 80% to 40%. Then, when that investment starts Deripaska has set up a Volnoe Delo Foundation which to pay back, you don’t have any source for new investment. sponsors the research and development of robotics to which That’s why we started to invest in the chassis cab and the GAZ Group contributes. Whilst welcoming the opportunities effect of that was to increase market share in chassis cabs afforded to bright people, Sorokin is still cautious about from 68% to practically 82% last year. We kept up a steady when such vehicles might appear on Russian roads. infl ow of money for the company by doing this.” “I see huge and multiple opportunities; fi rstly developing According to Sorokin, GAZ Group’s entry into contract people then picking out non-standard, non-routine manufacture of passenger cars in 2012 has had a benefi cial approaches and solutions and identifying at an early stage effect upon its truck manufacturing. the rising stars who will become chief engineers of world “First of all there was the fi nancial effect. All the fl oor renown. This is the key idea of this programme. Prototypes space where we have contract manufacturing now was a are being produced of vehicles which orient using GPS generator of overheads for the truck division. Now those or optical scanners and sensors. But the promotion of overheads are paid for by the passenger cars. It is a autonomous vehicles is not the main goal of this project, we profi table business with practically zero risks and we are do not see the immediate prospects for them on the Russian generating more cash by doing it. Incoming supplies are the market. When will we see these vehicles on the Russian road? responsibility of the contract partner and we are free of the Not in my lifetime.” distribution and sales risks. Even if the cars don’t sell, our GAZ Group will continue to optimise its production partners still have to set up the overheads we have to build processes using the tools inherent in the company’s them. production system. It will look to increase its share of sales of “We have also lifted our quality threshold. We started a high margin products while reducing unproductive spending customer satisfaction audit in the spring of 2009, borrowing and optimising its transport logistics. New products with high the expertise and the methodology from Chrysler. The export potential will be launched and prospective markets for basis of that audit is taking a look at the product through these products include the Middle East, North Africa, Latin the customer’s eyes. We took Chrysler’s measuring tape America, Southeast Asia and Eastern Europe. a 73

Let’s make use of what’s available EU-Korea FTA offers competitive advantage for automobile industry suppliers. By Tomasz Dziechciarz, Vice President, Global Client Services, STTAS. This summer marks the fourth anniversary of the European remain hesitant to take full advantage of the duty-free and Union-South Korea Free Trade Agreement, the first of a new low-duty provisions of the FTA even though doing so could generation of comprehensive trade liberalisation agreements provide a significant competitive advantage by reducing for both sides. The FTA’s goal of eliminating duties on 98.7% overall costs. Their reasons include requirements that can of two-way trade by value will soon be achieved, and non- be complex and bring repercussion for noncompliance that tariff trade barriers are coming down. The effect of these can be severe from delivery delays and loss of benefits to changes on the automotive trade is unmistakable, with EU financial penalties. exports of auto parts to Korea up 6% and EU imports from Korea up more than 20%, including a 50% jump in imports of Origin requirements and the approved exporter rule cars with medium to large engines. While there are many criteria that must be met to qualify However, many automobile and auto parts manufacturers products as eligible for duty savings under the EU-Korea FTA, 74

two that cause particular challenges are the origin rules and the customs administration of one of the EU member states the requirement that the exporter be approved by government or Korea. Being an approved exporter means that not only authorities. does the company understand the FTA rules but it also has a To benefit from the FTA’s duty-free or lower-duty rate robust origin management system that is not limited to origin provisions, a product must originate in either the EU or solicitation and FTA eligibility qualification. This system Korea; i.e., it has to meet the rules of origin set forth in the should allow customs authorities to verify the originating agreement by being either wholly obtained or sufficiently status of products claiming FTA preferences at any time. processed in Korea or an EU member state. However, While meeting these rules is challenging enough, it compliance with this requirement can be tricky given that becomes even more so for companies operating in multiple the criteria for determining whether a certain part or product EU countries with distinct customs authorities and separate meets the FTA rules are extremely detailed and product- ERP systems. For these companies, being able to provide specific and can therefore vary widely. necessary information both internally among their business For example, a passenger car can be considered as units and to government authorities on demand can be originating in the EU if the value of the materials imported daunting. It is small wonder that so many companies that from outside Korea or the EU and used in the assembly stand to reap significant benefits from this trade agreement does not exceed 45% of the vehicle’s selling price. This can have opted out. be difficult for original equipment manufacturers in the automotive sector to track because they tend to purchase Taking advantage of the FTA on a global scale parts from numerous suppliers worldwide. Close attention Fortunately, there are streamlined, efficient and cost- to the FTA’s provisions on country of origin and the proper effective ways a company might overcome these obstacles tariff classification of the constituent parts is thus vital to and incorporate FTA savings into its operations. The most obtaining the savings possible under the FTA without running robust and risk averse solution is to adopt an external web foul of customs authorities. platform operated by a dedicated team with a high level of Further, to apply for preferential treatment under the proven expertise in the complex and constantly-changing EU-Korea FTA, OEMs must have a valid origin declaration. global trade arena. A system that combines an automated Country of origin information can be declared on an invoice, solution with established global trade expertise can reduce, a delivery note or any other commercial document that if not eliminate, the administrative burden of compliance, describes the products involved in sufficient detail to enable freeing businesses to enjoy the lower costs that the FTA was them to be identified. In practice, this obligation generally designed to offer in the first place. results in the following text being inserted into one of these documents: “The exporter of the products covered by this About the author: document (customs authorisation number ___) declares that, Tomasz Dziechciarz is the Vice President of Global Client except where otherwise clearly indicated, these products are Services for STTAS, the world’s largest dedicated Global of ___ preferential origin.” Trade Compliance Management company. He oversees the It should be noted here that this FTA is the first concluded firm’s operations in Europe, RCIS the Middle East and Africa. by the EU that does not allow the EUR 1 movement certificate With more than 750 global trade professionals serving North to be used as proof of origin. America, South America, Asia, Africa, Europe and the Middle To obtain a customs authorisation number a company East, STTAS provides import and export compliance services has to become an approved exporter, a status granted by to multinational corporations in all major industry sectors. a 75

Mexico is open for business but infrastructure considerations need to be addressed Is there anywhere in the world where automotive production is growing as fast as in Mexico? The challenge, however, is for the logistics infrastructure to keep pace. Sam Ogle reports. The increase in Mexican automotive production is a latter-day “We’re very concerned,”says Mike Casidy, Managing Director phenomenon. Mexico’s automotive industry is mature, dynamic of Penske Logistics Mexico. “We have a lot of freight headed and in continuous growth. In 2014, light vehicle production southbound into Mexico and a lot going northbound into the reached a new historical record of 3 million vehicles. US. We are concerned about the shortage of drivers in both Mexico is now ranked as the world’s seventh-biggest producer countries. We have a very large carrier base and we are trying of light vehicles surpassing French and Spanish production.The to expand our operations into Mexican regions where they automotive sector accounts for 6% of the national GDP and 18% currently don’t operate in order to fill future needs. The carriers of manufacturing production. Forecasts indicate that production are working very hard to recruit new drivers.” will reach 4 million units by 2018 and 5 million by 2020. In Mexico, Penske doesn’t employ the drivers, just the Seven Asian and European automakers have opened new carriers. But in North America, out of the company’s 13,000 Mexican assembly plants, or disclosed plans for one, in little employees, 4,000 are truck drivers, around 400 of them in more than a year. Other car companies have financed significant Canada. Some of those, of course, are cross-border operators. expansions in Mexico, among them Nissan, General Motors, In the US, Penske’s retention rate is really high for the industry, Ford and Fiat Chrysler Automobiles. Currently, more than 48 car around 80%. A lot of its drivers get to go home the same and light truck models are produced there. night, they drive new equipment and Penske hires drivers with Penske Logistics Mexico has been operating for 19 years and experience and good safety records. This is one of the single is based in Saltillo. The company provides a variety of logistics biggest needs that Penske Logistics has in North America, solutions for manufacturers and shippers in Mexico. These specifically in the US, and it, of course, impacts cross-border include cross-border shipments via truck, intermodal shipments, operations in Mexico. transportation and carrier management, distribution centre and In many places, the state of Mexico’s road infrastructure warehouse management, lead logistics and cross-docking. Who leaves much to be desired. better to know and understand the challenges for an already “The main freeways in Mexico are fine,” says Benavides. “They stretched supply chain network. are toll roads, and there is some cost associated with them, “The biggest challenge is definitely the availability of but the market is getting used to them because the alternatives equipment and drivers,” says Hector Benavides, Penske’s are not very reliable. There are many parts of Mexico that do General Manager in Mexico. “It’s a challenge we are already not have the required infrastructure. Even in some of the cities, facing even though it has not yet reached the point where it may such as in the Bajio area, currently booming with lots of OEMs be four or five years from now. Our carrier base is struggling right opening plants there, the infrastructure right now is not going now with the demand. The demand is growing and the carriers to last for long. This area is growing incredibly rapidly with an and logistics providers have the challenge of keeping up with it.” average of 300 people moving in on a daily basis from other 76

areas, and we anticipate big issues there.” To travel by road from Mexico to the United States you must, Penske expands through the of course, head north. And it is in the north of the country where drug-related violence and cartels have captured a lot of media acquisition of Transfreight attention. However, according to Benavides, the situation is improving. In May,Penske Logistics announced that it had successfully “A couple of years ago there was a major concern. It has completed its planned acquisition of Transfreight North become a lot better; there is a lot of security on the roads. I America, a provider of third-party logistics and supply chain personally travel back and forth from Saltiillo to Laredo, Texas, solutions, from Mitsui & Co., Ltd. Financial terms were not on a weekly basis and, recently, I drove with Mike Casidy all the disclosed. way to San Luis Potosi which is in central Mexico. Some of the “We’re pleased to have successfully completed the problems that existed a couple of years ago don’t happen any acquisition,” said Penske Logistics President Marc Althen. more.” “We look forward to working with the Transfreight team to “Nowadays, it’s more a case of lightweight incidents occurring implement a fl awless integration for customers and associates. from time to time but not very often,” says Casidy. “There is a Transfreight is a customer-focused organisation with excellent lot of police presence along all the highways so it’s getting a lot customer relationships.This acquisition provides us with a better.” very complementary mix of business and services as well as Mexico’s rail network has come in for criticism in some new team members from a highly customer-focused culture. quarters for its lack of capacity but, according to Casidy and Customers from both companies will benefi t from the Benavides, the situation at the moment is just about okay. strengths of the combined organisation’s industry expertise, “Currently, the Mexican rail services are meeting our technological capabilities, and the breadth of supply chain and expectations,” says Casidy. “The rail providers are investing logistics solutions.” heavily in Mexico and improving and adding track and rail cars The acquisition adds new customers and associates as well to increase capacity to meet future needs. If it’s not done in as warehousing, cross-docking, and trucking capabilities to the time, then it will be an issue fi ve or ten years down the road.” Penske Logistics business portfolio. Transfreight North America “It is defi nitely an area of concern,” adds Benavides. “Are currently operates from 27 locations across the Midwest, they meeting the current expectations? Not really from an Canada and Mexico with headquarters in Erlanger, Kentucky, automotive standpoint. We are hoping that the investments the and in Kitchener, Ontario, Canada. rail companies are making will really make a difference.” Mexico is not blessed with an abundance of sea ports and relies heavily on those at Veracruz, Lazaro Cardenas and capacity issues we have in the US,” says Benavides. “Apparently, Altamira. there was going to be an intermodal link between the port and “We were with a major exporting customer recently and we the state of California, and even Texas, but it hasn’t happened. went on a tour of Lazaro Cardenas, Altamira and Veracruz,” says In my opinion it should. That was the original purpose of Benavides. “I asked their impression of the capacity there and spending so much money in Lazaro.” they told me that they were impressed with the infrastructure. “Short haul is going to be quicker, but you have to have the However, in Lazaro Cardenas for example, even though the volume in order to make it justifi able,” adds Casidy. “We have infrastructure is there, for some reason the port is not working talked with a couple of clients about this but nobody has pulled at capacity. Even though there is already enough fl ow of traffi c the trigger yet.” they were falling behind and it caught our customer’s attention For many companies the interface between their operations that there were a lot of customs offi ces that were not even in Mexico and the US would be critical but for Penske it is not an being manned. The government is, however, planning to add issue. Penske Logistics globally has around 13,000 employees additional customs facilities.” and Penske Logistics Mexico has just under 2,500. There are a A regular short sea service out of Mexico to the United lot of support services from the corporate offi ces in the US that States would certainly take some of the pressure off road and work pretty seamlessly with Mexico. rail transport. Some OEMs and shipping lines are already “We have the same company culture worldwide,” says Casidy. using such a service but progress in this direction is slow. “We operate on the same systems, so it’s seamless, and we The shipping lines, not unreasonably, are waiting for volume collaborate on projects from a global perspective. We don’t guarantees before committing themselves to a regular service worry about borders and distance interfering with our solutions. and most of the OEMs have yet to decide. We work as one global team. We are just like another region to “I understand that the original plan when they developed the company. We have a western region, eastern region, central Lazaro Cardenas was to be able to assist with the west coast region and Mexico region and we work together on solutions.    We have a lot of freight headed southbound into Mexico We have a lot of freight headed southbound into Mexico We have a lot of freight headed southbound into Mexico and a lot going northbound into the US. We are concerned e are concerned e are concerned and a lot going northbound into the US. W and a lot going northbound into the US. W about the shortage of drivers in both countries. about the shortage of drivers in both countries. about the shortage of drivers in both countries.  Mike Casidy, Managing Director, Penske Logistics Mexico.e Casidy, Managing Director, Penske Logistics Mexico.e Casidy, Managing Director, Penske Logistics Mexico. Mik Mik 77

   The main freeways in Mexico are fi ne, they are toll roads, The main freeways in Mexico are fi ne, they are toll roads, The main freeways in Mexico are fi ne, they are toll roads, and there is some cost associated with them, but the market et et and there is some cost associated with them, but the mark and there is some cost associated with them, but the mark is getting used to them because the alternatives are not very is getting used to them because the alternatives are not very is getting used to them because the alternatives are not very reliable reliable reliable. . .  Hector Benavides, General Manager, Penske Logistics Mexico., Penske Logistics Mexico., Penske Logistics Mexico. Hector Benavides, General Manager Hector Benavides, General Manager For example, if we need a warehouse management system in if you have a quality issue and your part is in China. How much Mexico, we don’t run a different system from that which we is it going to cost to react to that? Our clients in Mexico are use in the US or anywhere else. As a matter of fact, we have very good at putting all these pieces together prior to making just got a new warehouse management system that we want to their decisions. Everybody today seems to be working better introduce globally. Mexico got that fi rst.” together.” As a Lead Logistics Provider, Penske’s relationship with its In an ideal world there would be one seamless IT web where customers need to be of the highest order. information could be exchanged effortlessly among all parties. “Our mission as an LLP provider is to bring the most effi cient Penske is working towards just such a scenario. transportation network to that OEM,” says Casidy. “We look at “We are almost there,” says Benavides. “We provide visibility ourselves as an extension of their business, providing additional to the customer and we are always trying to bring new ideas services such as premium freight management and product to the table such as applications for their iphones so that they compliance so that the OEM can concentrate on building quality can have total visibility at all times. A big effort is being made products.” to meet the customer requirements and to provide availability “The OEMs have lost the expertise that they had in logistics of information at all times. Of course, there is always room for by outsourcing their logistics networks,” adds Benavides. “It improvement.” would be very hard for them to take it back. Most of the experts “If you’re looking up information on ports or on rail services in transportation and logistics that they had ten or fi fteen years or trucking there is nowhere you can fi nd all that information ago have retired and they have lost that experience. At Penske, in one single place,” adds Casidy. “From a company standpoint, we have been the LLP for some OEMs for over 15 years.” we are trying to put everything on one platform where all our “At the end of the day they look at costs and other factors. customers can easily see everything that we are tracking for They realise that, as long as they are controlling their costs, them.” we are the logistics experts and they can just concentrate on More than ever, environmental considerations are becoming building a quality product.” a factor in contract discussions between logistics service Globalisation means longer supply chains with a providers and their customers. Mexico is a country where these corresponding need for greater risk management and potentially issues are taken very seriously. higher inventory levels. I ask how we can minimise inventory “There is a lot of awareness of environmental issues here,” while continuing to be lean, or does lean manufacturing says Casidy. “All the operations we run in Mexico are run just automatically mean fat logistics? as they are anywhere else in the world. We are seeing these “In Mexico over the last three or four years we have seen issues come up almost every single time we enter into contract a concentrated effort to in-source suppliers to reduce the negotiations. Green is becoming really important in Mexico and logistics cost and the inventory carrying costs,” replies Casidy. it is great to see.” “By shipping from overseas you have to carry 15 to 30 days of There are people in the automotive logistics industry who inventory and have to pay for storage. Longer supply chains believe it is too conservative, and that it should bring in people also make it harder to change your model base. We try really from other industries and take examples from non-automotive hard to work with our customers on a long term schedule so sources. Neither Casidy nor Benavides fi nd themselves in that that we don’t have these gigantic deviations in what they’re camp. manufacturing.” “From a general, corporate point of view, automotive is really “Some of the OEMs have started to bring in products from a key part of our operations and is the majority of our business South Korea, Brazil and other countries,” says Benavides. “Their at Penske Logistics globally,” says Benavides. “We take best supplier base, of course, is originally overseas and it means a practices from automotive and apply them to other verticals. longer supply chain. There is defi nitely a risk but sometimes An example of that is working with Whirlpool, the home they have to take the challenge. It’s all based on business cases.” appliances manufacturer, and their network and importing best The ultimate goal should be to optimise logistics not just as practices from automotive. Automotive is the gold standard a standalone function but as a part of the entire business and and is the industry we are by far most experienced in. We have supply chain. In practice, logistics decisions are far too often applied that for the benefi t of our industrial and manufacturing taken in isolation and too late in the product/process lifecycle. customers.” “We saw this a lot fi ve to ten years ago, but things have “I have been in automotive all my life and I think it is really changed a lot since then,” says Casidy. “I look at logistics as one setting the standard for transportation,” adds Casidy. Says it all branch on a tree of decisions that need to be made. Factors really. a such as piece price, transportation, packaging and storage have to be considered. You also have to think about what happens 78

OPTIMISE YOUR PACKAGING Automotive & Industrial Solutions Fine automobiles deserve special care – down to the smallest components. CHEP is the global car industry’s No. 1 partner for top-quality reusable packaging solutions that protect parts throughout the supply chain. Safely, securely, effi ciently. CHEP Deutschland GmbH I Siegburger Straße 229b I 50679 Cologne I Germany Phone: +49 (0)221 - 93571-700 I Fax: +49 (0)221 - 93571-701 E-mail: [email protected] I www.chep.com AD_UK_A4 (17.06.15).indd 1 17.06.15 19:56

DELAYS CAN CHANGE EVERYTHING. 74601 That’s why Penske Logistics has customized supply chain solutions to help keep your business moving forward. Visit gopenske.com or call 844-868-0818 to learn more. © 2015 Penske. All Rights Reserved. 3721A0039_8.26772x11.6929_Chicks_Logistics_1.indd Cyan Magenta Yellow Black