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Issue 4 2012


Automotive is on the move for Yusen Logistics


Portability is the key to success in providing services to the global car industry, says Yusen Logistics’ director of business development, Michael Storey. “If you can be successful in one area, like Europe, you can provide similar services somewhere else, like South America for example,” he told FBJ. “Maybe it’s the nature of the times, but if you can work in one place, your customer is likely to take you with them.” This, he


believes, could be


a crucial advantage in the car industry, which has become even more global in its scope in the past few years, with manufacturing and assembly operations springing up in all sorts of countries that were not traditionally thought of as centres of the motor industry. Manufacturers’ desire to reduce their


number of core global


suppliers could also be a factor, he says. The setting up of Yusen Logistics


within the NYK group has created an organisation with a much more global spread, says Michael Storey. “When we were NYK Logistics, we used to be very focussed on UK car builders but we are now doing a lot of work in, for instance, eastern, northern and central Europe with, for example, the VW group or Renault.” The fact that, as a group, NYK operates car-carrying ro ro fleets around the world also helps, he adds.


just geared to the local market – it’s for export to North America too.” Yusen Logistics has also put


Michael Storey The


world’s car makers


are dealing with a shortage of specialised car-carrying ships, which seems likely to persist until at least 2014. “We’re moving far more cars in containers than we were, especially to the newer markets” says Michael Storey. These could be fully assembled or in ‘kits’ for making up at local assembly plants. “We are seeing a lot of that type of work in Russia, for example.” The shortage of shipping


capacity could also encourage more manufacturing – as opposed to simple assembly - in distant markets like Russia, where there are also financial and tax incentives for car makers to do so. In fact, there is plenty of evidence to suggest that Russia is gearing itself up to export cars, something it hasn’t done on a large scale since the days of the Soviet Union. Renault,


a lot of investment into central Asia, for example Kazakhstan and Azerbaijan, places where there are fast-developing car markets and also the glimmer of a possibility that manufacturing may develop at some stage. Again, it is a long supply chain and the market might ultimately be better served by local manufacture or assembly. “It suits our own trade axis between Turkey and Russia very well, and we actually feel at home in many of these places because our group’s shipping arm is already involved in the oil and gas industry.” North Africa is another potential


growth area and, while there has been unrest in some countries, it is a well established location for ‘Tier 1’ suppliers to the car industry – firms that make major assemblies that are then put into cars at a later stage of the manufacturing process. Countries like Egypt and even Sudan have carved out a niche in labour-intensive work such as making wiring looms. What makes for a good


automotive logistics specialist? “Our strengths are process control, procedural control and value for money. We have very good attention to detail and believe that the Kaizen principal helps us become more innovative.” It’s also important to be able to


Recession or not, car making


in Europe has held up well. The economists may be wringing their hands over the fate of the Euro but its weakness has done wonders for overseas export sales, particularly for premium cars. “Supporting these longer supply chains has added a new dimension for us at Yusen Logistics,” says Michael Storey.


a major Yusen Logistics customer, is especially strong there, and in Eastern Europe too. “Russia wants a more balanced economy, rather than just relying on oil and gas exports,” Michael Storey suggests, continuing: “The other place where this is happening is Mexico, where the government is encouraging manufacturing in the centre and north of the country. Again, it’s not


use capacity efficiently. Winning a major contract to move car parts somewhere is one thing, but in order to run economically, you need other business out of there to balance the flow. Yusen Logistics is adept at finding return traffic – oſten, not necessarily automotive related and in some cases ‘triangulating’ via a third country. “Now that we’re much more global, it’s become much easier for us to do that, compared with NYK Logistics, which was structured on more of a country-by- country basis.” At the same time, the car


manufacturers themselves are becoming not only more global, but it is setting up some plants in places that would been off its radar only a few years ago. The Chinese manufacturers are looking for locations in Europe, for example – and one has been considering Bulgaria, a country with very little


history in the sector. The Japanese Tsunami and the


Thailand floods also concentrated minds in the car industry. Up till now, many have driven volumes into a single supplier, which reduces costs but also makes the supply chain more vulnerable if things go wrong – as they regrettably did a year or so ago. “Perhaps there has been a tendency to focus very much on small cost savings, without thinking about the wider picture,” says Storey.


///AUTOMOTIVE A vital link in the


extended supply chain


“We can be a career-saver or a budget-buster,” says Andrew Austin, CEO of Priority Freight. The Dover-based company provides specialist emergency delivery services to a range of customers, of which automotive manufacturing is one of the most important. Car manufacturers – and others


– are averse to building up excess stocks and this, coupled with globalisation, has made supply chains “much more fraught and extended” - so the effect of the tsunami, ash cloud and floods has been all the more severe. Car makers


are also sweating So far, Yusen Logistics has been


active in the manufacturing side of the car industry but it is keen to get into the aſter sales segment too. “It’s a very different business,” says Storey. “It’s much more reactive, it’s unpredictable with volume going up and down and, these days, being successful in it is increasingly dependent on the logistics provider being able to find synergy with other flows. You need to run a vehicle to the dealer every day, whether you’ve got a whole truckload or just a small box - and some of the supply lines are very long, such as Belgium to the south of France, so there can be real pressure on costs.” Yusen Logistics, which is already


working with two major car makers’ spare parts departments, is looking to see whether it could combine more car parts business with similar flows, for example spares for the construction or agricultural machinery sectors. “Car spares is a difficult market to get into. The industry has very mature networks – in some cases the same operator has had the contract for 20 years – and the manufacturers also want to reduce costs by 5% a year. But if you do have a good network, it can be an attractive sector to try and break into.”


their assets, oſten running their production lines 24 hours a day, so there is little chance of making up for lost time if a stoppage does occur. Cars also have perhaps twice as many individual components than they did a few years ago. All this adds up to the need for


an effective emergency back up service of the type that Priority Freight can provide, says Andrew Austin, whose career in the industry included the National Freight Corporation, FedEx and Schneider Logistics in the Netherlands. The company took the decision to become “asset light” a few years ago – its former depot at Whitfield near Dover is now one of the area’s most successful secure truck parks – and it can number “several thousand” logistics and transport suppliers throughout the world. It can summon up a truck or plane anywhere in the world at short notice. Priority Freight works for


its


customers in broadly two ways. It can be used as a ‘first responder’ to deal with any emergencies as and when they arise. Or, it can take on a role managing the customer’s urgent logistics requirements, oſten running a special desk within the company’s own organisation. Some car markers have in fact accepted that one of prices of extended supply chains is more spending on urgent freight shipments and allow


for it in their accounting. Chartering a plane costing


perhaps £350,000 to carry a load of plastic hoses worth a few hundred pounds sounds like the economics of the madhouse, but consider the implications of shutting down a luxury car-maker’s production line for a few hours at cost of perhaps £350,000 per hour, without even beginning to add in the effects of lost customer goodwill. In times gone by, it might have been possible to build the rest of the car and wait for the hoses to turn up, but car assembly is


a much more precise and


choreographed affair these days and such retrofitting is not usually possible, says Andrew Austin. It’s not only supply side


breakdowns that can bring Priority Freight into play. “One manufacturer offered a new style of panoramic sunroof that they anticipated would be demanded by 10% of customers,” explains Andrew Austin. “But it was wildly popular, with around 90% of customers wanting it.” Extra units had to be moved in quickly to satisfy the unexpected demand. The supply chain has


traditionally not been a priority area for manufacturers in many sectors – not just cars – and this can sometimes show when things go wrong. Stocks of metallic paint suddenly became unavailable following the Japanese tsunami, because all the suppliers were based in the affected area. “That led to a dramatic increase in matt finished cars,” Austin recalls. The turbulent events of the


past have modified supply chain thinking in the car industry, he says, but there are limits to localism. “People may talk about sourcing locally, but where a supplier base has disappeared, as in the Birmingham area in the past few years, you can’t recreate it overnight. A lot of the people with the skills needed will have retired or are stacking shelves now.”


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