India is one of the fastest-growing markets for automobile manufacturers worldwide, and an emerging automobile exporter. It is expected to maintain the projected trajectory of booming sales; it is predicted that in the next two decades, India will be among the top three nations globally with respect to automobile sales. In fact, by 2035, it is estimated that India will overtake the US as the top automobile market.
The Indian automotive industry is gearing up to cope with the latest economic realities, changing consumer preferences, and new technologies for higher energy efficiency, comfort and safety. At this critical juncture, there is a pressing need for a strong and efficient logistics system. Some of the other challenges faced by the automotive supply chain industry are as follows:
Supply Chain Visibility: Visibility across the supply chain is one of the main issues in the automotive industry today because of a broad range of SKUs, and variation and breadth of stock from body panels to windshields to crankshaft, etc. with different levels of stock turnover. Ensuring enterprise-wide trace-ability includes having effective inventory planning and deployment programs. Better clarity into the entire supply chain will also reduce risk and make the network resilient to unexpected disruptions.
Flexibility and Responsiveness: The latest trends of automobile customization according to individual customer demands have changed the face of automotive manufacturing. Moving away from generalized features, customers now expect specific features, requiring made-to-order vehicles on demand. This demands more flexibility and responsiveness on the part of the supply chain logistics.
Cost Containment: A study by IBM (Global Chief Supply Officer Study) has shown that 2/3rd of top automotive supply chain executives rate cost management as a top priority. The dual, conflicting demands of maintaining efficient systems as well as catering to picky customers can be a tough challenge to overcome.
Globalization: Leading auto manufacturers are now looking India as their one of major manufacturing and assembly centres; as a result, OEMs and suppliers are required to match the demand for high-quality, cost-effective parts, along with time-sensitive deliveries. They also need to address issues related to energy efficiency, cost efficiency, and regulation compliance in the best ways.
As a result of the above general challenges, warehouse managers of automotive parts routinely come up against the following dilemmas:
> How to maintain lean operations with varied SKUs? With most automotive companies following the lean model of production and operations, the inventory stored in a warehouse has to be kept at a minimum; simultaneously, the range of SKUs has to be wide enough to facilitate flexibility and on-demand customized orders. Having a range of SKUs is also necessary to cover a wide range of current and old model parts.
Solution: In a warehouse, racking and storage systems such as Selective Pallet Racking, Multi-tier Shelving, and Mezzanine Floors can add significant amounts of available storage space for a large and varied inventory.
- Selective Pallet Racking: The ideal racking systems for warehouses that host a wide range of fast-moving SKUs and have high throughputs. It provides high storage density and has adjustable beam levels.
- Multi-tier Shelving: It provides storage space at multiple levels, thus maximizing the utilization of vertical space. It is ideal for manufacturing operations and spare parts storage.
- Mezzanine Floor System: The quick-to-install modular interlocking system, that can expand the storage area without the need for hard construction, is a hassle-free solution for creating additional storage space.
> How to implement accurate and correct picking and feeding of components into assembly lines? Quick and error-free picking of orders/components plays a major role in the overall efficiency and speed of operations in the automotive manufacturing line. Therefore, the use of appropriate picking equipment is very critical; it depends on the type of picked material and operations.
Solution: A material retrieval system such as the Bin/Carton Flow System (live storage system) is preferred for precise and speedy component selection, as it reduces errors and the costs associated with wrong part being picked.
Similarly, automated systems – Automated Storage & Retrieval Systems (AS/RS) – also decrease the chances of manual errors and help to speed up the process with accuracy. As the picking is done with the help of automation, items can be packed more densely. This increases the storage space availability. Due to the automated nature of AS/RS, inventory tracking is effortless and precise.
> How to maximize the given storage space in a warehouse?
Solution: As mentioned earlier, storage systems such as pallet racks, multi-tier shelves and mezzanine floors are helpful in ensuring creation of maximum possible space so that all necessary SKUs are accommodated without compromising on efficiency and speed of picking. Suitable storage systems also protect the parts/components from damage. The storage space should also be responsive to changes in demand.
> How to reduce logistics costs?
Solutions: There are a few efficient ways of reducing the expenditure due to logistics:
Vendor-Managed Inventory: For ensuring prompt fulfillment of on-demand orders of spare parts etc., suppliers and OEMs maintain warehouses at key points of the network, the inventories of which are managed by the vendors. The parts are invoiced just a few hours before they go into the assembly line. This results in a reduction of the order-to-delivery time and also of the inventory that the OEM needs to keep in their warehouse at any given time.
3PL Services: As automotive companies strive to make their operations more efficient, they increasingly rely on third-party logistics (3PL) providers for inventory management, insurance, transport, warehousing, and other functions. Automotive companies should consider the following factors to find the best possible fit for their requirements:
- Does the 3PL provider possess the required capabilities? 3PL providers should have adequate infrastructure, physical resources and capabilities to fulfil the needs of the partner company.
- Is it IT-competent? It is critical to have modern IT capabilities that can enable real-time sharing of data, which, in turn, is vital to maintaining a smooth supply chain operation.
- Is it flexible? An ideal 3PL provider should be open to customizing their services and products for their partner, when required.
Reusable Pallets & Crates: Instead of using wooden pallets and/or crates, those made from recycled plastic can greatly reduce the cost incurred, because they can be reused multiple times and then recycled again. This reduces the overall packaging costs and increases the performance of the pallets and crates. Metal pallets are also the best option due to its rigidity and longevity, and come approximately at the same price as plastic pallets.
Concepts such as Vendor Managed Inventory (VMI) and Collaborative Planning, Forecast & Replenishment (CPFR) enable 3PL companies to go beyond just transport to handling inventory management, demand management and product line replenishment, thus greatly increasing the value they bring to an automotive company.
Clearly, the Indian automotive industry stands at the cusp of great possibilities and major challenges. With tried and tested organizational philosophies, and solid infrastructural systems, it can make steady progress in the coming decades, propelling India to the forefront of automobile manufacturing.
SILVER LINING provides a wide range of storage systems and solutions for the automotive industry. If you would like to see how we can add great value to your storage and material handling operations, drop us an email and we will get in touch with you soon.
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