Latest research reveals real reasons manufacturers use emergency logistics

Research by emergency automotive logistics specialist Evolution Time Critical indicates that recovering production volumes and increasingly low inventory levels are leading manufacturers to use high-speed emergency logistics as part of their supply chain. The company surveyed a sample of 50 supply chain managers from vehicle manufacturers and Tier One suppliers.

Rebuilding production volumes after the worst of the recession and the natural disasters has presented supply chain managers with new challenges. Increased production currently accounts for 16% of the issues identified by Evolution Time Critical’s customers.  The 2011 survey identified this as an emerging trend, with a significant number of supply chain managers citing increased production as the cause for needing emergency transport. As manufacturing levels recover with rises and falls in demand, manufacturers are relying on emergency logistics to provide the necessary flexibility in their supply chains.

“The recent natural disasters have encouraged manufacturers and Tier One suppliers to look deeper into their supply chains and companies who were once invisible to OEMs will now be on the radar,” said Evolution Time Critical managing director Brad Brennan.   “OEMs and Tier Ones are now geographically diversifying their supply chain, sourcing material from new suppliers to avoid losing the whole supply due to one localised issue.  This diversification and upheaval naturally produces its own set of challenges.

When manufacturing levels experience sharp increases due to recovery, pinch-points in the supply chain are created. These pinch-points can often be short term issues that do not justify increased investment in personnel or infrastructure, therefore demand is created for immediate, flexible solutions such as emergency logistics to ensure that costly failures are avoided.

While scheduling issues and human error still accounts for 22 percent of emergency logistics orders, 14 percent reported that high-speed deliveries were a planned part of their logistics operations. Evolution Time Critical attributes this to the increase in manufacturing levels since the recession, the continuing trend towards lean supply chains and deeper analysis undertaken since the ash cloud of 2010 and the Japanese Tsunami of early 2011.

Automotive supply chains have always been lean, but during the recession inventory levels reduced dramatically, and this trend has continued even as the economy recovers. Reduced inventory produces economic benefits but carries a higher risk and requires a greater reliance on emergency logistics.

“The survey clearly depicts a sustained use of premium freight within the post-recession automotive supply chain, and shows that manufacturers are using emergency logistics as an enabler to keep their increasingly lean production lines running,” said Brennan. “The figures paint a picture of a highly-evolved supply chain, responding to world events. Although our clients are based all around the world, the same issues and trends affect them.”
 

Reasons cited by supply chain managers for using emergency logistics

Scheduling issues (22%) included: human error, changes to engineering schematics; shortfall of parts on the line; and suppliers failing to meet delivery schedules

Transportation issues (18%) included: supplier not able to deliver on time; industrial action; bad weather; breakdowns; and inability of normal logistics to deliver to the required schedule

Increased Production (16%) included: unexpected spikes in demand

Planned high speed deliveries (14%) included: logistical programmes and operation planned in at the design stage

Quality issues (12%) centred on part rejection due to quality checks

Stock level issues (10%) included: over estimation of stock holding, in terms of both on-site and in the supply chain; and stock loss

Order processing (4%) included: supplier discipline issues; short shipping; and wrong part delivery and labelling errors

Production delays (4%) included: tooling problems; machine breakdowns; and supplier shortfalls

Quelle: Evolution Time Critical