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Excel - Managing the supply chain for globally
integrated products
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| Introduction |
| Today many of the products that we consume have been
brought to us through globally integrated distribution systems. Striking
examples are the fruit and vegetables that we purchase in our local
supermarket that arrive fresh from far flung corners of the globe, and
the motor vehicles that we drive around in which contain components from
many different countries. We tend to take the delivery of these products
for granted without realising the real complexity of the planning that
is involved in making sure, that for example, all of the components for
a modern VW Beetle arrive at their final assembly point at just the
right time. This case study, therefore, introduces you to some of the
processes that go on behind the scenes by examining supply chain
management. |
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| Supply chain management requires specialist skills
and is all about efficiently bringing together all of the links and
stages involved in creating a high quality supply chain. In this case we
show how Exel manages the supply chains for many of the world’s
leading businesses. Exel is a global leader in supply chain management,
providing customer focused solutions to a wide range of manufacturing
and retailing industries. Exel’s comprehensive range of innovative
logistics solutions encompasses the complete supply chain from design
and consulting through freight forwarding, warehousing and distribution
services to integrated information management and e-commerce. Exel now
has contract logistics operations in 31 countries accounting for 84% of
world GDP. Combined with Freight Management activities that cover over
120 countries around the world, Exel has unrivalled global coverage. |
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| What sorts of activities are involved in supply
chain management? |
| Based on years of experience and application of state
of the art technology, Exel is able to design improved supply chain
systems for organisations which add more value for consumers. Creating
an effective supply chain involves not only increasing the speed of
delivery, but also the quality of delivery – so that the end-consumer
will benefit from more desirable and hence more valuable end-products.
With Exel managing the supply chain for a business like Volkswagen or
Ford the company is able to concentrate on its core business. Meanwhile,
Exel provides innovative solutions as to how to reduce costs and
accelerate the movement of products locally, regionally and globally. |
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| As well as providing the systems and solutions Exel
also manages freight by providing airfreight and seafreight backed by an
extensive transportation network. Customers can track the movement of
their goods through an extensive Internet based tracking system. Because
Exel manages the movement of freight for many companies it is a major
purchaser of transportation and is thus able to pass-on the benefits of
economies of scale, substantially reducing transport costs for customers
that do not have the same purchasing power. In addition Exel organises
the warehousing and distribution of goods along the supply chain. With
considerable experience in this field it is able to design large-scale
distribution outlets which are often shared between various customers
who again benefit from economies of scale in storage and distribution. |
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| In recent years Exel has also enabled a range of
businesses to take advantage of business-to-business (B2B) and
business-to-consumer e-commerce activities. For example, a company
selling goods to customers using the web is then able to deliver
speedily to the end consumer using Exel’s supply chain network. |
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| Exel has helped many leading companies across the
globe to build effective supply chains including Pepsi-Cola, Unilever
and Ford, and plays a key part in many industries such as: |
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- chemicals where safe delivery is essential
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- healthcare where prompt delivery and temperature controlled
conditions are important
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- retailing where cost effective and waste eliminating systems
are essential
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- high-tech where instant and regular delivery is essential.
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| However, this case focuses on the contribution
that Exel makes in the automotive industry where Just-In-Time and
Lean Production systems are essential. |
| Just-In-Time and lean production |
| Just-In-Time (JIT) is a very simple idea but one
that is essential in modern supply chain management. JIT sets out to
cut costs by reducing the amount of goods and materials a firm holds
in stock. JIT involves: |
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- producing and delivering finished goods ‘just in time’
to be sold
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- partly finished goods ‘just in time’ to be assembled
into finished goods
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- parts ‘just in time’ to go into partly finished goods
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- materials ‘just in time’ to be made into parts.
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| The principle that underpins JIT is that
production should be ‘pulled through’ rather than ‘pushed
through’. This means that production should be for specific
customer orders, so that the production cycle starts only once a
customer has placed an order with the producer. Stocks are
delivered when they are needed. Consequently, this approach
requires much more frequent delivery of stocks. Developing a JIT
approach requires sophisticated planning and considerable
experience in this field. This is why leading companies contract
out their supply chain management to a specialist company like
Exel with considerable experience of this area. |
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| Just-In-Time is the key element in what is
termed lean production. Lean production is a philosophy and a
way of working involving eliminating all forms of waste (where
waste is defined as anything that does not add value in the
production process and supply chain). |
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| The idea behind lean production stems from
Japan where for many years supply chain managers have been
seeking to eliminate ‘muda’ ie any activity which involves
wasted effort, materials and time. Exel is particularly
effective in ensuring lean production because it is able to
reduce ‘muda’ at every stage in the supply chain from
designing efficient warehousing systems, to sophisticated
tracking methods in freight forwarding, developing e-commerce
links, and cutting out any wasteful processes at any stage of
distribution. |
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| A further advantage of JIT is the benefit
derived from eliminating lineside storage of parts and the
associated “clutter” which inhibits efficient movements
to/from the production line. By reducing the storage of parts at
the production line, a manufacturer is often able to increase
the speed of the production line and produce more cars with the
same number of resources, lowering the overall unit cost of
production. |
| Helping Volkswagen to transfer its JIT
system from Spain to Mexico |
| One of the best examples of modern supply
chain management is in motor vehicle manufacturing. Modern cars
are an example of global products containing research and design
features which involve the collaboration of many people from
many nations. The components that go into the final assembly are
likely to be produced in many separate locations and involve a
range of assembly and sub-assembly activities. |
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| For young people one of the most exciting new
cars is the new VW Beetle. Traditionally a German product, a lot
of VW models are produced today in North and South America,
taking advantage of a pool of skilled labour in countries like
Mexico and Brazil – and with ready access to the lucrative
United States market. |
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| The challenge for supply chain
management |
| When Volkswagen decided to produce its new
Beetle model, the goal was to transfer the lean manufacturing
technique and highly effective just-in-time supplier park model
from the VW/SEAT assembly plant in Martorell in Spain, to Puebla
in Mexico. |
| The solution |
| Exel has worked with car manufacturers to
develop a park system of managing end operations of the supply
chain for motor vehicle assembly. Many of the key end component
suppliers are located close to the final assembly point. Exel
has created and manages the JIT system that ensures a smooth
running supply chain of parts to the new Beetle final assembly
plant which eliminates waste from the process. |
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| Volkswagen collaborated with Exel, which
designed, engineered and now operates the innovative Park in
Spain, to transfer the park model to Mexico. The Supplier
Industrial Park in Spain was created near the factory and now
includes 35 suppliers. Subassembly activities are carried out at
the Park, guaranteeing JIT delivery and zero stocks at final
assembly lines. |
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| Exel is responsible for primary transport
from the component suppliers’ main plants to the Park. The
company is also responsible for warehousing, picking,
subassembly and sequencing operations, and deliveries to the
assembly lines. When new deliveries are required for assembling
the cars messages are communicated from the plant by EDI
(Electronic Data Interchange) giving Exel sometimes only 105
minutes to notify suppliers and prepare and deliver
subassemblies to the final assembly line. The Exel JIT
sequencing operation is the cornerstone of the supplier
industrial park that serves the Volkswagen assembly plant. |
| The results |
| Adopting the supplier park model in Mexico
has helped VW to reach its present level of 1,380 vehicles per
day. Exel is providing supply chain services not only for the
new Beetle, but also for the A4, a redesigned Jetta and also the
Golf models. |
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| As an experienced logistics leader, operating
globally, Exel has an established infrastructure in Mexico,
servicing clients such as Procter & Gamble and
DaimlerChrysler. However, Exel had to virtually start from
scratch to staff the supplier park in Puebla. It created a team
of skilled and experienced managers from Mexico, America and
Europe, and hired line workers and sequencing personnel from the
Puebla area who were provided with intensive training. Exel
employs around 850 people at the Puebla facility. |
| Conclusion |
| Supply chain management is an exciting and
important area of study. Specialist companies like Exel are able
to save the world’s leading businesses large amounts of money,
time and effort by creating an effective supply chain. Next time
you see a new VW Beetle you will be better able to appreciate
that the high quality of the product and its value for money are
not only a result of high quality design and engineering, but
also a direct result of lean production, just-in-time methods
and premium supply chain management. |
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