Logistics and Supply Chain Basics
for Automotive Application
• numerous and technologically complex products;
• production activities at more plants, linked together through multi-purpose transport systems;
• sales and after sales branched networks, geared towards guaranteeing good service.
Let us take a look at the main historical periods in which the most significant changes for logistic systems occurred in the automotive industry.
6.1.1 1925–1975: Logistics as ‘‘Material Management’’
Support
Through the ‘‘products diversification and production activities delocalization’’
policy adopted by A.P. Sloan in the United States during the ’20s, ‘‘material management’’ had to approach more complex problems, compared to those of the previous era. ‘‘Material handling’’ studies were placed beside manufacturing engineering studies of a Tayloristic origin. Means of transport were defined on a standard basis, as were the equipment and buildings dedicated to inventory and material handling.
During the ‘60s, logistic processes improved principally for second generation information technology systems, developed by specialized companies begun in North America and grown worldwide (IBM, HP…). Data electronic elaboration allowed for sped up planning and control processes. Nevertheless, at the time, transmission networks were still based on analogic techniques and did not allow for the exchange of real time information.
Manufacturing systems operate at a high rhythm, but are not flexible;
changeover requires long ‘‘set-up-time’’. Production is normally set by economic batches, and the logistic process assures continuity of production only through high levels of stock and long lead time at the plant level. The work in progress includes a significant portion of the financial resources and there is still consid- erable inertia in answering commercial variation requests.
This logistic model was revealed to be inadequate when two important oil crises occurred in 1973 and 1979, reflecting negatively on market trends and transport costs and generating high demand instability. Furthermore, an increase in oil and energy costs resulted in severe consequences for inflation, the consequent cost increases obliging carmakers to reduce their working capital dramatically.
Top-management realized they would need to reform logistic processes deeply and turn to organizational consultancy specializing in the introduction of new systems, especially for the purpose of overcoming internal resistance to changes in management.
6.1.2 1975–1990: Logistics Oriented to ‘‘Time-to-Market’’
and ‘‘Commercial Network Service’’
During the second half of the ‘70s, ‘‘New Generation’s Information Technologies Systems’’ became available; these systems had applied software models, specifi- cally developed for the planning of operations and management of supply pro- cesses (Product Data Management systems, Material Requirement Planning…).
Big Information Technology Enterprises offered interesting and convenient solu- tions for investments with an advantage breakeven point, thanks to a reduction in people employed in data collection and input processes, paper reports consulting processes, and so on. With automation, the availability of logistic processes also increased and production flows were under control in real time, especially with the introduction of ‘‘PC-based’’ peripheral information technology systems.
At the same time in Japan, Taiichi Ohno of Toyota was introducing a visual management system for material supply, which worked in a kind ofpulllogic for application of the Just in Time principle called ‘‘kan-ban’’ (tag), a simple and effective method, as seen in the section on basic concepts.
Productive flow organization is definitively oriented to a pull logic, especially for final assembly of cars and big components. Production is based more on customer orders than on forecasts.
Nevertheless, with WEB networks still not widely spread out, it was not pos- sible to extend information technology systems along the ‘‘supply chain’’, oper- ating interactively and with direct connection to the dealer’s network. So, during the ’80s, logistic processes improved at the plant and delivery levels, but pro- duction and material supply planning was still performed in cascade along the supply chain, with a monthly re-order system. At any rate, production flow appeared leaner compared to the past, and lead times in reacting to customer demand changes were shorter, also thanks to the diffusion of programmable manufacturing systems (numeric control machines, robots…).
It is important to consider that, even in this historical period, ‘‘time to market’’
and ‘‘customer service levels’’ were recognized as strategic factors for an enter- prise’s success. Logistics focused on these new important targets.
6.1.3 Actual period: Logistics as an ‘‘Integrated Process’’
to Support ‘‘Supply Chain Management’’
As seen in Chap. 1, major ‘‘carmakers’’ adopt product strategies based on the concept of a ‘‘world car’’, with ‘‘global sourcing’’ purchasing policies (that we will analyse inChap. 7). Many industrial co-operations through ‘‘co-makership’’ are signed between makers of powertrain systems and carmakers. So, it becomes very important to connect the different worldwide productive sites through an integrated information technology system, assuring homogeneous product from a technical
point of view and homogeneous logistic procedures. Integrated Product Data Management Systems, as described inChap. 2, can easily accomplish this task.
During the ‘90s, the availability of ICT systems and development of the WEB network allowed for a new deep change in logistic processes.
In conclusion, we observe that, according to new trends, Logistics is not only a specific company department, but an interfunctional integrated process that supports Supply Chain Management.
Let us conclude this short historical overview of Logistics, emphasizing that it has always been influenced by information technology and communication sys- tems progress. Nevertheless, although much evolution has occurred, the primary target is stillproviding materials in the right quantity, at the required quality, at the right point of use, in the right time and with the minimum cost.
By this definition, ‘‘right’’ means what is established between Customer and Supplier through the several stages of the ‘‘supply chain’’, in relation to final customer expectations and the commitment assumed by the producer. Minimum cost means having an economic global logistic process, including: dedicated system working cost, committed services cost, and financial burdens due to work in progress capital (production and distribution).
To the reader that still does not know production planning and inventory management criteria, we suggest looking at the final section, on basic concepts, at the end of this book. It deals with general basic concepts not specifically related to automotive logistic processes that, conversely, are treated as such in this section.