The advent of better technology in the '90s and beyond provides automotive companies with a greater degree of control when it comes to knowing what's going on with inventory at any given moment. And because 3PLs have been leading the way in logistics technology development over the past 20 years, auto companies have reason to have a greater sense of control than ever before.
In addition to wanting a better sense of control over their own operations, automobile manufacturers also wanted to be able to have better controls with their supplier base. Auto manufacturers depend on hundreds of suppliers to feed their assembly lines with raw materials and components. Without better control over the purchasing and logistics, it would be difficult to realize substantial cost savings over time.
In order to improve the quality of products being built, the automotive industry realized it was essential that they focus on core competencies. In this case, the core competency is building and selling their products. This opened the door for non-core activities - such as logistics - to be outsourced to those having expertise in that area.
As the movement toward logistics outsourcing accelerated in the 1990s, so did the quality of the products the automobile industry was turning out - especially domestic U.S. brands with manufacturing operations based in the traditional U.S. "iron belt." The shift towards quality improvement helped improve market share for the "Big 3" and enabled them to regain some of the ground they had lost to imports in the '70s and '80s.
But something else began to happen as the U.S.-based manufacturers became accustomed to building a better, more competitive product. Automobile manufacturers that had previously been building their products abroad and shipping them to the United States began to set up shop throughout the country. Toyota, Honda, Mercedes-Benz, and BMW, to name a few, launched manufacturing operations in the United States in the '80s and '90s.
Raising the Bar
Domestic automakers have become increasingly strategic in how they manage their supply chains and associated logistics. For Ford Motor Company, as an example, these times require creative solutions and cost savings innovation. Ford is drawing on network and plant strategies to reduce inventory, increase quality, and reduce total costs for each unit built. Ford is working from the online worker cell backwards to support lean efforts at every phase of the building of their vehicles. Logistics supports these concepts at every turn by reducing wastes and increasing productivity to the plants. Transactions are analyzed for waste. Time is measured for productivity.
More than 20 years have passed since third-party logistics providers began to help change the face of logistics within the automotive industry. Many of these relationships began because of the need to lower costs, create greater controls, and focus on core competencies to improve quality.
Logistics outsourcing will continue to grow in the automotive arena, but not because there will be more auto companies that will outsource. It will be because 3PLs will continue to look "outside of the box" and identify areas for improvement that have yet to be fully tapped.
Kerry Zielinski is director of business development at CEVA Logistics. CEVA Logistics designs, implements, and operates complex supply chain solutions on a national, regional, or global scale for multinational and large local companies. Mr. Zielinski can be reached at (248) 483-9943. Visit CEVA Logistics' website at www.cevalogistics.com.