LOGISTICS INTEGRATION OF SUPPLIERS FROM INDIA IN SUPPLY CHAINS OF GERMAN MANUFACTURERS

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1 LOGISTICS INTEGRATION OF SUPPLIERS FROM INDIA IN SUPPLY CHAINS OF GERMAN MANUFACTURERS REQUIREMENTS AND KEY ACTION FIELDS UNDER AN INDUSTRY 4.0 PERSPECTIVE Dr.-Ing. Tobias Hegmanns Delhi, September 3 rd 2014 Fraunhofer Seite 1

2 Agenda Introduction and Methodical Approach Some key findings from expert interviews Key Action Fields Potentials and Challgenges under Industry 4.0 Project examples Outlook: Stakeholders for Implementation Fraunhofer Seite 4

3 Scope of Supply Logistics Forecast Delivery plan Call-off Supplier Advance Shipping Notice Delivery papers Documentation Customer Werkshalle Finished Good Inventory Transport Material inventory Long-Distance Supply, Consignment Warehouse, Industry Park Dispatching and Inventory Strategy Packaging Labelling Transport Cross-Docking and Transshipment Incoming Goods Procedure Delivery Documentation Quality Check Communication (Delivery Note) Call-Off and Just-in-Time Fraunhofer Seite 6

4 Methodical Approach Scientific literature Logistics standards Manufacturer s documents Functional and qualitative requirements Similarities in context and motivation of the actions Analysis of documents Expert interviews Catalogue of requirements Measures Clustering of measures Key Action fields + Industry 4.0 related potentials Practitioners Scientists Interview guide Assign practical measures to requirements German resp. Indian automotive industry as subject of analysis. The logistical systems in this industry are of very high standard and very well documented. Fraunhofer Seite 7

5 Interview Insights: Logistics Process Performance Readiness: operating established logistic delivery processes guaranteed days of coverage with forecast and call-off consignment warehouse Vendor Managed Inventory Just-in-Time / Just-in-Sequence Supply Corporate understanding for process requirements Transport reliability and cooperation with local carriers Material sourcing process of supplier requires support by customer Fraunhofer Seite 8

6 Performance of Indian Suppliers Failure rate in ppm Delivery reliability in % Suppliers from other growth markets 54 Suppliers from other growth markets 68 Suppliers from industrialized countries 28 Suppliers from industrialized countries 78 Suppliers from India 37 Suppliers from India 83 Best Practice <20 Best Practice 96 Survey among 20 automotive OEMs and multi-national suppliers in India Quelle: Beine, Entwicklung Integration innovativer Lieferanten in Schwellenländern, S. 196 Fraunhofer Seite 9

7 Focus of supplier development in India Supplier performance Proportion of supplier development activities Efficiency Production cost Failure rate Equipment Management skills Financial power Environmental issues Other 24 % 19 % 16 % 12 % 12 % 10 % 8 % <1 % Survey among 20 automotive OEMs and multi-national suppliers in India Quelle: Beine, Entwicklung Integration innovativer Lieferanten in Schwellenländern, S. 202 Fraunhofer Seite 10

8 Interview Insights: IT and Communication EDIFACT and supplier web-portals as status quo Transparency: demand order status upwards and downwards capacity inventory stocks Reactivity and speed in decision making real-time data standardized interfaces Fraunhofer Seite 11

9 Interview Insights: Human Resources Corporate philosophy customer-centered quality-centered loyalty collaboration performance Process know-how master logistics processes continuous improvement Fraunhofer Seite 12

10 Interview Insights: Organization Today focus on traditional logistics task transportation warehousing Value-adding logistics tasks little established packaging & labelling information management planning & scheduling customer-specific tasks Global supplier with worldwide service Fraunhofer Seite 13

11 Interview Insights: External Factors? Identified bottlenecks and unpredictable factors traffic congestions reliability of transportation custom formalities Positive effect of industry clusters locally integrated suppliers shorter distances shorter delivery times leverage synergies Fraunhofer Seite 14

12 Key Action Fields Overview Cluster Analysis of statements and documented OEM requirements led to four KEY ACTION FIELDS: Synchronization Transparency Standardization Qualification with respect to future challenges and potentials of the Industry 4.0. Fraunhofer Seite 15

13 Key Action Field: SYNCHRONIZATION Demand-driven production and supply Synchronize customer/market demand with supply. Technological and organizational means to coordinate synchronization. Industry 4.0 related potentials: Promote inter-operable IT systems Use web-based communication services and user-friendly frontends Collaborative order management Service-based IT infrastructures and use of mobile devices Retrofitting solutions to speed up informational process integration Other Potentials: Financial support and financial supplier development measures to ensure economic survival of SME in order to build-up competencies and expertise in long-term relationships Fraunhofer Seite 16

14 Key Action Field: TRANSPARENCY Key enabler for advanced planning and control of logistic networks Organizationally, documented and comprehensible processes. Operationally, planning processes based on high-frequent exchange of information. Industry 4.0 related potentials: Transparency on supply chain operations for real-time control and increased reactivity Status information on order processing and production data (e.g. batch number, revision stand, QC check data etc.) need to be communicated based on existing standards and necessary extensions. All object events at AutoID-/sensor read points in the supply chain are captured, stored and made available to partners through the integration framework and its communication infrastructure. Interactive information exchange between down- and upstream transport systems and infrastructures (provision of information about transport flows, traffic situation, etc.) that can be passed to other actors in the supply chain Other Potentials: Risk management and resilience management on the corporate-level as well as on the level of authorities responsible for infrastructure management Fraunhofer Seite 17

15 Application Case: Supply Chain VW Amarok Bremerhaven CKD-Anchieta Pacheco Buenos Aires Santos Bremerhaven Integration of operative IT systems Santos Transports 2 Systems (ELCD-Database, freight rate calculator) Stock levels & Dynamic data 4 Systems (LOAD, SAP, VDA 4913, PLUMA) Buenos Aires Orders & Forecasts 4 Systems (INFAS, MBV, bill-ofmaterials, BESI) Vessel position 1 System (Vesseltracker) Fraunhofer Seite 18

16 Planning and Control based on Improved Transparency 1. Supply Chain Monitoring 2. Configuration of actions (e. g. air freight) 3. Simulation experiments for measure comparison Fraunhofer Seite 19

17 Fraunhofer Seite 20

18 Key Action Field: STANDARDIZATION Key enabler to the ideas of Industry 4.0 and cyberphysical systems in general. Process standards Standardized technical components and equipment, e.g. containers Data interfaces and exchange formats for interoperability of systems. Industry 4.0 related potentials: Technical basis for the Internet-of-Things and Services Standardization helps building up competitive edge in the SME-dominated transportation and logistics service sector Early efforts for industry-wide harmonization of standards. Industry working groups supported by branch associations. Other Potentials: Establishing high-quality industrial services, also for SMEs, in the logistics sector Establish business support services for supplier identification and integration Modal shift to rail and waterways requires efforts in standardization to streamline operations at truck-rail transshipments points and hinterland traffic Fraunhofer Seite 21

19 Example: Standardization of Customer- / Supplier Communication in OEM-1 st tier Delivery Process Status today Bilateral communication based on bilateral standards ERP EDI-Processing DelJIT Development towards event-based solutions Delivery: 1/day EDI-DELJIT: instantly Status 2010 Cumulated delivery note translated into -report ERP EDI-Processing CDN Delivery: 1/day Kanban-supermarkets EDI-CDN: 1/day Status 2008 Delivery based on conventional dispatch call-off ERP stock Delivery: 1/week EDI-Processing Dispatch call stock EDI-call off: 1/week Fraunhofer Seite 22

20 Key Action Field: QUALIFICATION Organizational exploitation of Industry 4.0 only if personnel and organizational skills are developed accordingly Logistics evolves to a high-technology sector Jobs in the logistics sector will experience an extensive knowledge intensification. Industry 4.0 related potentials: Prepare personnel to manage a higher degree of automation in production and logistics; Focus of work will shift from operating machines to monitoring machining operations, maintenance and problem-solving in case of errors, break-downs or failures of complex technical systems Prepare personnel for increased IT usage at workplace, for operating internet-based services and mobile devices Other Potentials: Behavioral change in understanding the importance of adherence to standard procedures Operational and management skills for complex processes and time-critical operations, e.g. JIT-/JIS processes. Fraunhofer Seite 23

21 Outlook: Organisation and Stakeholders for Implementation National Plattform for the Roadmapping Process Coordinating interests of politics, science and industry R&D agenda Branch organizations and industry Associations ensure joint effort of the industry organizing working groups on specific topics Industry pilots and roll-outs International cooperation global standards Fraunhofer Seite 24

22 Thank you for your kind attention! Fraunhofer Seite 25

23 Contact Data Dr.-Ing. Tobias Hegmanns Academic Director Division Enterprise Logistics Tel.: Fraunhofer-Institut Materialfluss und Logistik Joseph-von-Fraunhofer-Str Dortmund Fraunhofer Seite 26

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