1、Auto Logistics and Supply Chain Management Summit 2003ThePracticeofVMIinChina陈 晖中国物流公司 执行总裁1AgendanOurunderstandingoftheautomotivelogisticsneedsnWhatisVMIdefinition,proceduresandbenefitsnChallengesofVMIinChinanCasestudynBriefintroductiontoChinaLogisticsCompany2An automotive OEMs logistics needs cove
2、r both inbound and outbound operations of parts and finished vehiclesPlantSuppliersConsolidationandLoadingCenterServicePartsDistributionCenterLogisticsforProductionPartsLogisticsforServicePartsLogisticsforCompleteVehiclesDealerDealer/ServiceStationBondedWarehouseforImportPartsOur understanding of th
3、e automotive logistics needs3Supply chain management(SCM)is the strategic management tool that coordinates the material and information flows across the value chain to support adaptiveness4“Demand-pull”value chain requires the companies to be flexible and able to“control”a large part or the entire s
4、upply chainSuppliersManufacturingDemand indirectly drives manufacturing volume through forecastsWarehouseWholesale/Retail“Supply-push”Logistics ChainSuppliersB2BExchangeManufacturingDirectDelivery“Demand-pull”Logistics ChainManufacturing driven by actual demandTherateofsupplywassetbythemanufactureri
5、nadvance,basedonexpecteddemandItwastheroleofthelogisticsproviderstoensureajust-in-timesupplyofcomponentsTherateofmanufactureisdeterminedonareal-timebasisbytherateofdemandWhilethismodelismoreefficient,itrequiresperfectintegrationofalllogisticsoperationswithinoneprocessSource:LehmanBrothers,A.T.Kearne
6、yAnalysis5Third-party logistics providers(3PLs)can directly,or through a partner network,provide a range of servicesProcurementPayablesmanagementSupplierpaymentandconsolidatedinvoicingVendorperformancemonitoringandexceptionreportingJointprocessimprovementwithvendorsOverallfreightcoordinationFullload
7、truckcarryingLess-than-loadtruckcarryingSmalllot(lessthan150pounds)carryingOrderconsolidationDeliveryschedulingExpeditingspecial/rushordersReturningandreprocessingundeliverableordersDeliverytracingPerformanceandexceptionmonitoringandreportingOverallinventorymanagementOptimizingsupplierorderschedules
8、OptimizingdealerorderschedulesCertificationofincomingshipmentsBarcodingPerformanceandexceptionmonitoringandreportingTrackingandReportingSystemsaccessibleviaInternetMaterialResourcePlanningOrderpreparation/assembly/consolidationSourcingofpackagingmaterialsPrintingofcorrugateand/orlinerboardmaterialsL
9、abelingShrinkwrappingofcasesandpalletsFreight and Distribution CoordinationWarehousing and Inventory ManagementMinor Assembly and PackagingProcurement6Difference between traditional business model and VMI modelTraditionalVMIPurchaseOrderPlacementWhenacustomerneedsproduct,theyplaceanorderagainstamanu
10、facturer.UnderVMI,thevendorgeneratestheorder,notthecustomer.InventoryTransparencyOnlyorderistransmittedtosupplierwhenproductisneeded.Thevendorcanviewthe“real-time”stocklevelofeveryitemthatthecustomercarriesaswellastruepointofconsumptiondata.InventoryReplenishmentThecustomerisintotalcontrolofthetimin
11、gandsizeoftheorderbeingplaced.Thevendorisintotalcontrolofthetimingandsizeoftheorderbeingplaced.InventoryPlanThecustomermaintainstheinventoryplan.Thevendorisresponsibleforcreatingandmaintainingtheinventoryplan.7Simplest VMI workflowManufacturerSuppliers23411.The manufacturer approves the purchasing t
12、erms with suppliers,including the commonly agreed inventory responsibility and maintenance scheme.2.The manufacturer sends product activity data to the supplier.This product activity is based on warehouse movement of product consumed at the assembly line level.3.Based on the agreed inventory mainten
13、ance scheme,the supplier edits,approves and releases the suggested purchase order.4.The manufacturer approves this purchase order and send it to the supplier.8Consolidation and Loading Center is commonly used to reduce the complexity in coordinating multiple vendorsnQualityofdeliveryservicesfromvend
14、orstoline-sidemightbedifferentnVendorsshippingvolumemightbeverysmallgivenmorefrequent“demand-pull”ordersnVendorsmightneedalargeline-sidebuffertocompriseafull-truckloadandmake-upasafetystocknLargeline-sideareaisneededtoaccomplishunpacking,kitting,andpossiblysequencingofpartsbeforefeedingtoassemblylin
15、enIndividualvendorsmightrentwarehousesforthemselves,withlimitedscaletosharewithothervendorsnConsistentdeliveryservicetoline-sidenOptimalshippingvolumetoreducetransportationcostandinventorycostnReducedrequirementonline-sidewarehousespacenCoordinationbetweensuppliersandproductionlinepossibletopromotes
16、ynchronizationandJITHow Consolidation and Loading Center Approach HelpsPotential Issues in Simplest VMI Model9Win-win situation can be achieved for both manufacturers nPlanningandorderingcostsforthemanufacturergodownduetotheresponsibilitybeingshiftedtothevendornImprovedcustomerservicevendorscanbette
17、rrespondtocustomersinventoryneedsintermsofbothquantityandlocationnReduceddemanduncertaintybyconstantlymonitoringcustomersinventoryanddemandstream,thenumberoflarge,unexpectedcustomerorderswilldwindle,ordisappearnThemanufacturerismorefocusedthaneverinprovidinggoodserviceandtheoverallservicelevelisimpr
18、ovedbyhavingtherightproductattherighttimenSpeedandaccuracyofdataprocessingareimprovedduetocomputer-to-computercommunicationsnReducedtotallogisticscostandimprovedcash-flow10 and vendorsnSmoothingdemandthesupplierisabletosmooththepeaksandvalleysintheflowofgoods,andthereforetokeepsmallerbuffersofcapaci
19、tyandinventory.nBettercoordinationthesupplierhasbetteropportunitiestoco-ordinatetheshipmentstodifferentcustomers,suchasscheduling-eitherpostponingoradvancing-shipmentsaccordingtoproductionschedules,customerinventorysituationsandtransportationcapacitynReducedinventoryrequirementsbyknowingexactlyhowmu
20、chinventorythecustomeriscarrying,avendorsowninventoryrequirementsarereducedsincetheneedforexcessstocktobufferagainstuncertaintyisreducedoreliminatednSpeedandaccuracyofdataprocessingareimprovedduetocomputer-to-computercommunicationsnReducedtotallogisticscostandimprovedcash-flowThe binding of customer
21、s to vendors once relationship is established,customers will be reluctant to endure the amount of work needed to switch vendors11Currently,most automotive manufacturers in China consider Consignment Inventory as VMInVMIareusuallyusedasamethodtorealize“zeroinventory”whilethepartsaresittinginmanufactu
22、rerswarehouse,vendorsareforcedtofinishthetransferifpartsownershipuntilassemblyisdonenConsignmentInventory,ontheotherhand,aretheexactpracticeofmostvendorsandmanufacturersvendorsarenotinvolvedininventoryandlogisticsdecisionsChallenges of VMI in China12This concept/belief reveals the transactional rela
23、tion between suppliers and manufacturersnPrice-drivensourcingdecisionwithoutin-depthunderstandingofcoststructureLogisticscostandmaterialcostarecommonlyaddedupasalump-sum“CIFprice”Fewsuppliersarewillingto“opencost”totheircustomersunlessmarginisverythinSupplychainmanagementtargetsforcefullydrivesuppli
24、erstoreducepricetomaintainbusinessrelationnPaymenttermsandpaymentsituationconstrainsuppliersfromgettinginventoryinformationunderconsignmentinventoryInventorymovementmeansactualconsumptionofproducts,immediatelystartingthemanufacturerpaymentcyclenNeithermanufacturersandsuppliersmakesignificantinvestme
25、ntinbuildingEDItofacilitatedatasharingWithout transparent data sharing and collaborative supply chain planning,lose-lose situation arises due to higher operation(transaction)cost 13To avoid the potential conflict between manufacturers and suppliers,an independent third party can be employed to help
26、manage the VMI initiativenThird-partyconsolidatestheshipmentfromvarioussuppliersnThirdpartyfacilitatetheinformationexchangebetweenmanufacturer,consolidationandloadingcenter,andthesuppliersnInformationisneutraltobothsuppliersandmanufacturers,signalingtransferofownershipaccordingtopre-agreedtermsnThir
27、d-partycanhelpmanageinventory,unpacking,kitting,sequencinganddeliverytoline,milk-runningtheinboundpartsandpotentiallyplacingpurchaseorderonmanufacturersandsuppliersbehalfnOwnershipremainsunchangedbeforeorafterVMIisimplemented14However,internal resistance against outsourcing the VMI service remains g
28、enerally very strong nNocommonunderstandingofhowthird-partycanhelpsmooththeVMIoperationnStaffcurrentlyinchargeofinboundlogisticsareafraidoflosingjobsnGeneralbelieftoholdpotential“profit”withinthecompanynNocostbenchmarktocomparetheoverallcostunderthird-partymanagementnResistancetoshareinventorydatawi
29、ththird-partynA cultural adjustment as well as a significant reorganization of everyday job duties is required to accomplish a major change of company operationsVMI will achieve its acceptance gradually,especially after the anticipated competitive environment in 2-3 years15A Chinese OEM outsourced i
30、ts inbound logistics to China Logistics for operating assets,skills and better managementOEM Inbound LogisticsnTheOEMwaspreparingformassproductionofanewpassengercarmodelonatotallynewplantnInthepast,thesupplierswereaskedtodeliverallcomponentstothelinesidewarehousenTherearenotenoughin-houseoperationst
31、affandspacetocopewithexpansionofproductionnThemanagementoftheOEMwouldliketofocusonmanufacturingofvehicles,whileoutsourcemostofitslogisticstothirdpartynChinaLogisticsrefurbisheda4,500Sq.M.warehousesituated8kmfromtheassemblylinenInaddition,emergencyorderscanbedispatchedwithintenminutesofnotificationan
32、ddeliveredtolinesidewithin30minutesnPartsarestored,pickedandmarshalledaccordingtowheretheyareusedontheassemblyline,withloadsconfiguredindirect-to-lineordernScalerampedupfrom40unitsperdayinNovember2002to180unitsinMarch2003nInatypicalweek,theChinaLogisticsteamhandlesmorethan3,000differentproductlinesa
33、ndmakessome250just-in-timedeliveriestolinesidereceivingpointsChina Logistics ApproachSituationSelected Case Studies16There are several different factors to consider in designing an appropriate inventory levelOrderto-deliveryleadtimeOrdersizeandfrequencyAnnualthroughputPerSKUdemandCompletevehiclesale
34、svolumeCarparc(penetrationrate)TotalnumberofSKUsKittingorotherneedsPurchasingleadtimeTransportationleadtimePurchasingordersizeandfrequencyCustomer NeedsVolume ForecastSKU ComplexityInbound ProcessSolution SelectionTotal CostTransportationcostWarehousingcostLaborcostLevel of IntegrationSourceofmateri
35、als(externalsuppliersorOEMfactory)LocationofsuppliersOEM Inbound Logistics17Current Operational Characteristics related to Materials Management20+domestic and 50+overseas suppliers SupplierSupplier1 1Customer involving:nLogistics DeptnQuality DeptnPlanning DeptSupplierSupplierX XSupplierSupplier2 2S
36、upplierSupplier3 3SupplierSupplier2222nnOperational characteristics:Component Supplier Inbound LogisticsAt present,Customer X directly contact a multitude of suppliers,to PlaceP/O;MonitorP/Ostatus,changeP/Oifnecessary;Receiveandunpackparts,storeandpickingInspectandsortparts;Delivertoassemblyline;Che
37、ckdocumentationandfinallypayinvoice.It involves functions across the customer:ProductionPlanningQualityControlLogisticsandMaterialsManagementITFinance18Major capacity and quality issues arises when 50%annual growth is anticipatednUnder-capacityforwarehousingspaceThereareconstraintsasproductioncapaci
38、tyneedstobeboomedtomeetincreasingcustomerdemandsnManufacturingflexibilityislowWhenpartsorderedbeforearealreadyontheirwaywhileproductionplanneedstobechanged,eitherthepartshavetogobackortheproductionplanhastoremainunchangedsincethereisnospacefortheunwantedpartsWhenpartsreceivedarefounddefectedproducti
39、onhasnotbeenabletoswifttoalternativeplanasthereislittleotherstockinthefactorynQualityhasbeencompromised:Asthereislittlestockonhandsomepartswithdefectshavetoberepairedandused,hencequalityisnotatitsbestfromtimetotimenCommunicationsconsumeplentyoftimeEachfunctionmayhavetocontactsuppliersfortheirownresp
40、onsibilitiestoconductthepreviouslymentionedactivitiesmakingtheoperationlesssmoothComponent Supplier Inbound Logistics19Project Roll-out ScheduleContract negotiation Supplier agreement negotiation SetupGo liveJulyJulyAugAugSeptSeptMain tasksWarehousedecorationOfficeset-upWMSSystemfinetuningStafftrain
41、ingProcurementofequipmentsInternalSOPQualityinspectioncapabilitiesimprovementMain tasksMain tasks PricePrice ProcessProcess SOPSOP KPIKPIMain tasksMain tasks InventoryInventorylevellevel PriceandPriceandPaymentPayment SOP&KPISOP&KPI NegotiatingNegotiatingcontracts,i.e.contracts,i.e.warehouse,warehou
42、se,equipmentsequipments etc.etc.StartingStartingrecruitmentrecruitmentMain tasksMain tasks SOPinplaceSOPinplace StaffinplaceStaffinplace QualitycontrolQualitycontrolprocedureinplaceprocedureinplace ITsysteminplaceITsysteminplace FacilitiesandFacilitiesandequipmentinplaceequipmentinplaceSeptSeptComponent Supplier Inbound Logistics20