These are not the easiest of times in which to be a Tier 1 automotive supplier. Even before the onset of the current economic uncertainty, the world’s big vehicle manufacturers – faced with consumer demands for cheaper new cars more than ever before – were putting the squeeze on their own cost base.
Last month Lear Corporation, the US-based component giant, joined other major automotive suppliers in warning that production cutbacks by car makers would badly hit its short-term profits.
With demand shrouded in uncertainty, suppliers are finding it even harder than usual to meet the automotive industry’s just-in-time schedules.
In a bid to achieve cost and efficiency benefits without having to make large capital outlays, Lear is testing a ‘rented’ web-based supply chain collaboration system at plants in the UK and Belgium as a prelude to what could be a wider roll-out across the group.
The system gives Lear and its suppliers access to a single source of real-time information on schedules and forecasts, with only a PC and web browser needed to view it.
The move followed construction within the last year of new plants at Halewood, Merseyside, and Genk in Belgium to supply seating and interiors systems to Ford, one of its biggest customers.
The UK plant supplies the Jaguar X-type factory while the Belgian facility is connected directly to the adjacent Ford Mondeo plant via a 1.3km overhead conveyor.
Iain Wells, e-business manager for Lear, says equipping the new plants with supply chain systems was a balancing act between the need for maximum flexibility while staying within a tight budget.
The resources were simply not available for major capital investment in an internal system, but the plants needed effective supply chain visibility to have any chance of meeting Ford’s ultra-demanding performance targets.
‘We needed instant communication with the supply chain,’ says Wells. ‘It was very clear in the case of both the new plants that doing everything on fax and e-mail was just not dynamic enough for the environment we are in.’
Wells says the Halewood and Genk operations work strictly according to just-in-time principles and are designed to act as ‘warehouses on wheels’.
‘Material coming inwards is in transit to its ultimate destination at Ford and does not hang around for long. There is not enough space to store stock at the plants, even if we wanted to,’ says Wells.
Lear settled on the Wesupply Chain web-based collaboration system produced by Wesupply, a supply chain specialist based at the Warwick University Science Park.Founded in 1999, Wesupply is one of a new breed of e-business companies operating as application service providers (ASPs).
ASPs ‘rent’ software applications and services to companies, which pay either a fixed subscription tariff or a ‘per use’ rate.
The growing popularity of the ASP model has not come without considerable soul-searching by corporate IT users.
On one hand, using an ASP removes the need for considerable up-front expenditure on software licences, as well as the often costly additional hardware infrastructure needed to support advanced applications.
However, some companies remain nervous about using an external partner to manage some or all of their IT services, especially if they underpincritical parts of their business.
Particular concerns include data security and whether the ASP is a secure enough corporate entity not to vanish in a puff of smoke, taking its applications with it.Lear piloted the Wesupply system at its existing Crosspoint factory in Coventry before approving it for the new plants.
Wells admits some diplomacy was necessary to persuade Lear’s own suppliers – many of who were completely unfamiliar with web-based systems – to begin working via Wesupply.
‘We have a mixture of suppliers. Some of them used EDI and others a fax machine to communicate with us. We knew that we couldn’t force this on anybody. We had to explain that this is the way we want to do business, and show them the benefits for both Lear and themselves.’
Those agreeing to use the system were given training by Wesupply on how to use the system, which costs suppliers around £150 per month.
Wells says 20 out 24 major suppliers are now using the system. ‘I believe all 20 are happy, and am fairly sure they would have told me if they were not.’
According to Wells, the key advantage is the web-based system’s ability to keep everyone in the loop. ‘Both customer and supplier are looking at the same information at the same time.’
He claims suppliers like the system because a real-time view of Lear’s schedules helps them plan their own production and logistics more efficiently.
Because of the ability of the system to generate and calculate supplier invoices based on what Lear has actually received, not on out-of-date forecasts, Wells says that disputes over invoices have plummeted, allowing Lear to pay its suppliers more quickly.
The web-based system also lets Lear keep a much closer eye on its suppliers’ performance. The company can see which are delivering accurately and on schedule, and try to find ways of ironing out any problems in the chain.
‘The benefits are hard to quantify, because in a new plant there is no previous system to compare it with,’ says Wells.
‘But we can look at it against other plants, and from my point of view the main benefit is very simple. The suppliers are much clearer about what they need to supply and when.’
Lear’s best estimate is that the system will enable annual savings of around $200,000 between the Halewood and Genk plants.
The company is now undertaking a full implementation of Wesupply at Crosspoint, and Lear’s UK division expects other businesses within the group to take a keen interest in the project.
Wells says Lear has been besieged for the last 18 months by e-business technology providers claiming to have the answer to all its problems.
‘The reality is that we are an automotive company with one customer, the end manufacturer,’ he says. ‘Most of them don’t know what our business is, and want to web-enable functions within the company where there is no reason todo so.’
‘Ultimately we will do things on the internet for only one reason – if it will help us make more money.’