Logistics & Supply Chain Management. Improve Local Component Manufacturing Supply Chain Competitiveness

Transcription

1 Logistics & Supply Chain Management Improve Local Component Manufacturing Supply Chain Competitiveness

2 Executive Summary Logistics is a key part of Nissan South Africa s business. Nissan South Africa significantly improved all elements of its Supply Chain over the last 2 years: Customer Satisfaction Index improvement of 83%. Quality Improvement of 77%, 3 rd best in Global Rankings. Time: 40% reduction in delivery lead-times. Consistency: Improvement in On Time Delivery. Significant Cost Reduction in Production Parts, Vehicles & Aftersales Supply Chains. Share a simple yet effective technique that can be used by local component manufactures that will: Reduce Logistics Cost. Improve Supply Chain predictability & efficiency. Case Study#1: Global Inbound Logistics 18% Cost Reduction Case Study#2: Local Inbound Logistics 35% Cost Reduction

3 Benefit of Freight Consolidation Background Many philosophies or best practice (JIT, JIS, TOC and many other) have been developed to reduce non value adding activities in the supply chain. One simple yet powerful strategy often overlooked is Freight Consolidation. Key Benefits from Freight Consolidation Reduce logistics cost through: Shipping optimal consolidated shipping quantities. Better rates due to higher consolidated volumes. Fixed cost sharing through combined use of assets (e.g. trucks). Reduce complexity in the supply chain. Creates predictability (volume & time) for the downstream supply chain. Freight Consolidation Solutions are: Less labour intensive. Less dependent on external factors. Easier to establish a solution.

4 Freight Consolidation Configuration Types Configuration Type#1: Shipper consolidates own volumes when sending to receiver. Inventory: Shipper Receiver Time: Cost: Configuration Type#2: Shippers consolidate freight to collectively enjoy economic shipping quantities transported to the receiver. Inventory: Shipper Time: Shipper Consolidation Facility Receiver Cost:

5 Freight Consolidation Configuration Types Configuration Type#3: Shipper sends economic shipping quantities and then uses Cross Dock Facility for deliveries to Receivers. Receiver Inventory: Time: Shipper Cross Dock Facility Receiver Cost: Configuration Type#4: Shippers consolidate freight to collectively enjoy economic shipping quantities and then uses Cross Dock Facility for deliveries to Receivers. Receiver Inventory: Shipper Time: Shipper Consolidation Facility Cross Dock Facility Receiver Cost:

6 3 Types of Consolidation Policies 1.) Time Policy The Shipper ship the freight on predetermined shipping dates regardless whether the shipment reached its full economic consolidation quantity potential. This Policy is normally used in industries where supply consistency is important and where there is limited buffer stock holding in the downstream supply chain. 2.) Quantity Policy The Shipper ship the freight only when the optimal economic consolidation quantity is reached. This ensures that the full cost reduction benefits are realised. This Policy is normally used in industries where its possible to have enough downstream buffer stock to offset the supply volatility or where volumes are high enough to quickly achieve the required consolidation quantities. 3.) Hybrid The Shipper ship the freight when either the predetermined time or quantity is reached first. Type + Policy = Solution

7 Case Study#1: Global Inbound Consolidation Japan Overview Japan is a main source for Nissan South Africa. Expensive route due to long distance. Small volumes from China. Ideal example for freight consolidation. Consolidation Solution Type#2: Shippers Consolidate Freight Time (every week)

8 Case Study#1: Global Inbound Consolidation Low volumes from China 18% Cost Reduction Case Study Example: Japan to Nissan South Africa Supply chain complexity reduction. Good example of Configuration Type#2 & Time Policy (ship every week). In this case it makes sense to also include parts from China. Consolidation solution reduced cost through: Improved container utilisation (+/- 98% full). Reduced freight cost and strengthen negotiation power. Reduced handling charges & cargo dues. Reduced fixed cost by sharing common assets & service providers.

9 Case Study#2: Local Inbound Consolidation Consolidation Solution Overview There are various local component manufacturers supplying Nissan South Africa from various locations within the country. The suppliers are mainly located near OEMs. Long distances from coastal supplier to Nissan Manufacturing Plant. Complex inefficient logistics. High Cost. High KM per end product. Type#4: Shippers Consolidate & Cross Dock Time (every week)

10 Case Study#2: Local Inbound Consolidation Before After Comments: Simple, predictable & efficient logistics. Low cost. Low KM per end product. 35% Cost Reduction Case Study Example: Local Supplier Milkrun Good example of Configuration Type#4 & Time Policy. High level of truck utilisation and fixed cost sharing. Consolidation simplified the logistics and offers greater predictability. Share synergies with other OEMs. Consolidation also supports reverse logistics (flow from Gauteng to coastal).

11 Conclusion 1) We all want South Africa's local component manufactures to prosper and become globally competitive. 2) Freight Consolidation is a simple but powerful strategy & tool to improve supply chain efficiency and reduce cost. 3) Freight Consolidation Opportunities: i. Applied individually to improve Inbound, Local & Export supply chain flows and cost. ii. Unlock synergies between local component manufactures by consolidating flows for: i. Component manufactures that source from the same country. ii. Component manufactures within a province or region. iii. Component manufactures that export to the same country. 4) How do we take a holistic & collective view on South Africa s local component manufacturing supply chain to make it more cost effective?

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