May 06, 2024
What is Automotive Logistics?
Automotive logistics involves organizing the transportation, storage, and distribution of vehicles, parts, and components within the automotive industry. It encompasses sourcing, inventory management, and transportation to ensure timely delivery and cost efficiency while meeting customer demands.
Challenges and Transformation of Automotive Supply Chain.
The automotive sector is undergoing a significant transformation, driven by shifting consumer preferences, technological advancements, and environmental concerns. As a result, automotive OEM (Original Equipment Manufacturers) companies are reevaluating their supply chain strategies and looking for supplier partners who can address these changes.
As the industry rebounds from years of disruptions, manufacturers and logistics providers are actively seeking to enhance the performance of their networks. They are reimagining the original manufacturing networks and trucking sectors to bolster resilience. This involves implementing initiatives like optimizing vehicle sequencing and scheduling, providing advanced notifications, enhancing load management, offering driver incentives, and enabling direct chartering by OEMs to prevent the recurrence of past errors. Furthermore, providers of finished vehicle logistics are channeling investments into digital technology to enhance tracking, transportation, and yard management, as well as to provide more accurate Estimated Time of Arrivals (ETAs).
Transporting finished vehicles by trucks presents a significant challenge exacerbated by the ripple effects of port disruptions. Events such as the March bridge collapse at the Baltimore port can immediately strain the Finished Vehicle Logistics (FVL) sector, compelling trucking companies to swiftly reroute their operations. This occurs amidst existing challenges such as labor shortages, escalating fuel expenses, and aging infrastructure ill-equipped to manage the increasing volume of freight traffic.
Evolving in a New Landscape of Automotive Supply Chain.
As a 3PL provider, what strategies can you employ to address these challenges and excel in the current business environment?
Proximity Matters: North American automotive OEM companies typically require their domestic suppliers to be located within a relatively close distance (25-50 miles) of their assembly or manufacturing plants. This proximity helps ensure timely deliveries and reduces transportation costs.
Shift from Manufacturing to Assembly: Automotive OEM companies no longer manufacture the majority of automobile components. Instead, they focus on assembling the automobile using parts and components supplied by various suppliers. This shift has implications for suppliers in terms of production and delivery schedules.
Just-in-Time (JIT) Shipments: Automotive OEM companies expect their suppliers to provide JIT shipments, which means delivering components and parts exactly when they are needed for the assembly process. This requires suppliers to be agile and responsive to changes in demand.
Automotive Logistics Software plays a pivotal role in streamlining operations, optimizing efficiency, and enhancing visibility throughout the supply chain. For instance, a comprehensive software solution can automate vehicle tracking, manage inventory levels effectively, and facilitate real-time communication between manufacturers, suppliers, and distributors, ensuring seamless coordination and timely delivery of automotive components and finished vehicles to their destinations.
Sequenced Shipments and Kitting: OEMs often require suppliers to provide sequenced shipments, where components are delivered in a specific order based on the vehicle's assembly line requirements. Suppliers may also be asked to kit parts to streamline the assembly process.
Value-Added Services: Suppliers can differentiate themselves by offering value-added services such as sequencing, kitting, and other assembly support services. This can make them more attractive to OEMs and increase their "stickiness" as a supplier.
Transition to Electric Vehicles (EVs): The automotive market is transitioning from internal combustion engine (ICE) vehicles to electric vehicles (EVs). EVs typically have fewer components under the hood and may require different storage and handling considerations, especially for battery packs, which can pose HazMat concerns.
Conclusion
Suppliers in the automotive sector need to be adaptable, responsive, and innovative to meet the evolving demands of OEM companies. By embracing the changes in automotive logistics management, suppliers can position themselves as valuable partners in the automotive supply chain.
Having accumulated more than sixty years of expertise, Custom Goods has established itself as a reliable partner for multiple automotive companies. We supply the knowledge and experience that enable us to tackle the distinctive challenges of this sector, providing crucial services such as air freight service (next day), freight service (ground and ocean), air freight containerized programs, same-day service parts delivery program, FTZ freight processing (Ocean and Air), damage protection and parts inspection programs, and many more!
By Natalia Kuvelas
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