Friday, 27 May 2016

Industry Practice - 'Value Stream' Exploitation - Identifying New Possibilities (Part 5.6)

The next and often over-looked aspect within the overall automotive value-chain is that of Distribution.

A vital, though unglamorous, aspect of a corporate's activities which sees vehicles leave the inspection bay of the production plant, placed upon transporter truck with an increased smothering of protective wrap to ward off dirt en route, and either taken directly to domestic dealership or transported to rail-hub or sea-dock for international (or long-distance national) travel; thereafter similarly typically placed upon a double-deck, single deck or enclosed truck carrier for ultimate delivery to the brand specific foreign dealership.


As with the logistics of production and the need to deal with 'optimised variability'.

When undertaken very professionally, Delivery and Distribution (D+D) entails a great deal of invisible costings and scheduling planning. It includes everything from the provision of expected delivery dates to overtly hungry or reluctant dealers, to highway toll rates to rail-freight network scheduling to the forward contract vs 'spot' prices of vehicle-container shipping availability, with at the margins issues regards insurance cover for en route accidental vehicle damage.            

Obviously, 'in toto', the activity consists of a plethora of necessary close-coupled efforts that sit between the realms of 'end of line' production and 'front of house' retail.

Many decades ago, as part of the very much unified and integrated firm, Distribution was yet another link of an extensively long in-house value chain. The latter Ford Model T's and the Ford Model A's demonstrated the total control dictum of Uncle Henry with  activities which ranged from S.American rubber plantations to retail agents in the African bush; yet General Motors, Chrysler, Austin, Morris, FIAT, Opel and others also sought such a massively coordinated orchestration to ensure their pre-WW2 world-markets could be both
obtained and maintained.

However, with the post WW2 economic boom, national haulage companies and international freight-movers became increasingly professionalised and thereafter consolidated.

The result was that transportation and logistics grew into sizable sector of its own, the increasingly diverse universe of B2B and B2C products requiring transportation necessitating ever greater specialisation and so ever more specialised carriers to perform the more demanding haulage function.

Given the special requirements of transporting various types of vehicles, investments were made by certain hauliers into highly dedicated equipment and facilities. From improved double-decker articulated trailers, to dedicated rail-carriages, to secure port-side storage areas etc. The national and worldwide growth of the passenger car, van, pick-up truck and HGV demand meant that hauliers recognised the worth of their own re-investment cycles and ever greater innovation and solutions provision.

Given the grown complexity of managing what had become an immense and diverse value-chain, many auto-players, led by the Americans, decided to outsource to varying degrees.

Depending upon specific context companies created their own structures to suit.

Some simply using contractors for transportation between factory and distant foreign-owned satellite sales subsidiary.

Others, especially the Japanese and later S.Koreans were initially denied from owning foreign sales companies in their western export markets, so could not control the furthest 'down-stream' portion; but could at least reduce costs by running (Keiretsu / Cheabol) company-owned or leased ships to those distant shores. The words Toyota, Datsun, Nissan and Hyundai familiar on ship hulls in the 1970s and 1980s.

Alternatively, those VMs who operate across a full span of vehicle types from cars to heavy goods trucks, will quite obviously seek to have their own trucks used by external logistics firms when transporting their numerous cars.

Thus, as with the historical cases of Daimler, FIAT, Ford, GM, Chrysler-Dodge, Renault and TATA, the continued use of those same self-made vehicles by an external haulage provider to create an intrinsically self-reliant, lower cost, transport capability.

Lastly, there is the rare current operator of the full value chain.
One such being 'Porsche Salzberg' as part of the Volkswagen-Porsche empire.

It recognised the need to command its regional, semi-captive, continental market given the early 1960s experience of effective denial of logistics and retail ownership during the early exporting years of the VW Beetle into the USA during the post-war German export drive. That led to the Germano-Austrian firm maintaining its strangle-hold across many European countries ever since, whereby MAN and Scania trucks with leased and owned trailer units are used to haul Skodas, Volkswagens, Audis, Porsches, Lamborghinis, Bentley's etc.

Today, the typical model is that Distribution of ex-factory vehicles is transported by freight-forward firms either directly to domestic dealers, or internationally to the hands of what may be referred to as a foreign based National Sales Company.

These may or may not be VM owned, depending upon region and local political / regulatory restrictions.
Typically in the early years of regional expansion the NSC will be that of an independent local agent, who themselves may or may not be responsible for the shipping and local delivery of the vehicles, much depending upon agreement with the VM.

Vehicles are usually stored port-side with the NSC organising delivery to the dealers, so as to avoid the CapEx and operational costs of a separate storage property and additional haulage to and from that site.

The likelihood is that if the NSC is independent (often started as a new initiative from an established local trading company), so the dealers will have been established as independent agents also, usually with close ties to the central distributor.

Thus we see that the norm is that Distribution is usually an out-sourced affair, and depending upon contract agreements will be either run (domestically) by the corporation (corp) or by the NSC independently (ind).

The internet coupled with geo-positioning capabilities has obviously had an enormous effect upon the ability to raise the efficiency of the task of scheduling, both outbound from the factory and between dealer sites. (Official and unofficially recognised inter-dealer sales are an intrinsic requirement, which whilst theoretically inefficient helps to 'shift stock'). The web has ironically allowed far greater 'horse-trading' by dealers given the ability to see the full inventories of each and the ability to track-down the whereabouts of an exacting model type. This has in turn created greater demand for inter-dealer logistics and transportation.

Yet also simultaneously, a new car can now be tracked using its 'VIN' (vehicle identification number) and on-board CPU (central processing unit) from the moment it rolls off the production line, through the delivery logistics process, and thereafter throughout its life. The after-market tracker systems so beloved in spy stories are increasingly being integrated into the vehicle itself to forever have a cyber presence as long as the battery is connected and has power.

Add together the idea of a constantly 'alive' vehicle and the theory of self-driving vehicles and the distant future of logistics and delivery within an IoT environment could see vehicles one day operate as self-directed entities the moment they leave the factory gates.

There is presently a humorous advert on UK television which shows a four tier 'piggy-back' amalgamation of vehicle types. At the top is a Honda Monkey-bike which sits upon the bed of a Piaggio 'Ape' (very apt), which itself sits upon the bed of an an old VW Type 2 pick-up, which sits upon the bed of a Bedford Terrier LWB truck, this upon a double-deck semi-trailer car-transporter.

In the world of Delivery and Distribution, such a theoretical picture is that of ideal and efficient logistics.
From automated road-trains to (far more sensible) load on load piggy-backing.

As with the AI governed routines of self-guided factory dispatch carts, taking auto-parts from stores to production lines, the true full extent of the IoT could form another logistics revolution for the world at large.