WHERE, WHEN, HOW?
Tradelanes asked Automotive Logistics’ Christopher Ludwig to identify trends and developments worth watching.
When looking at the near-shoring/re-shoring debate, there are many factors at work, notably strategies to avoid currency fluctuations, reduce supply chain risk and the cost of engineering changes. Some OEMs – including General Motors and Nissan – also have aggressive targets to reduce logistics costs directly by bringing suppliers closer to assembly plants. At the same time, the move towards consolidated platforms and modular platforms, along with global vehicle products and launches, means the supply chain has to be as flexible as possible to respond to global needs. In some cases, there could be contradictions to these approaches, including for tier suppliers who could lose economies of scale by fragmenting their operations.
Changing focus for emerging markets
Some of the BRICs or other notable emerging markets are facing risks or instability. We’ve seen carmakers delaying or cancelling investments in places including Russia & CIS, India, Thailand, Turkey, and the Middle East. Brazil also looks unsteady. The major focus now seems to be increasingly on China and, for the North American market, plant investments in Mexico. This will reshape the geographies of flows to some extent, as well as the direction of investments by suppliers. With Europe and Japan looking stagnant or with modest rises at best, the industry could move increasingly towards two “super regions.” That could have implications for international flows (container, air and ro-ro shipping) as well as logistics acquisitions and investment. But there are risks, too, notably a slowdown in China or saturation in the US market
The major focus now seems to be increasingly on China and, for the North American market, plant investments in Mexico.
Automated driving
There is a lot of hype around the technology and the companies getting involved. I’ve spoken to some experts who suggest that automated truck driving (or a strongly automated driver-assist technology) could come to the market even before advances in passenger cars are widely available. Owing especially to complex regulatory hurdles, this might begin only for “closed-access roads,” including private roads in and around plants or ports. But in the long run, when such trucks reach the highways, the potential could be huge, not least considering the global shortage of drivers. That said, there are many questions, including how to deal with loading/unloading and final handoffs.
The future of Chinese automotive logistics
The growing market share and influence of western OEMs has implications for logistics. The dominance of western brands over the Chinese in the world’s largest market has not always translated into benefits for the global 3PLs handling their domestic logistics because Chinese JV partners often have in-house logistics operations or a stronger (and much more price-focused) influence on domestic logistics. There are signs that these in-house monopolies are eroding, however, not least because such providers cannot keep up with the growth using their own assets or capacity alone, and so are partnering with or subcontracting more to private companies. Also, in the future, should China’s National Reform and Development Commission allow OEMs to take financial control and majority stakes in their China JVs, we could see dramatic changes (although logistics management is unlikely to be a primary focus).
While Chinese carmakers have made limited headway in western markets, we are starting to see signs of Chinese LSPs moving more international automotive freight to China. There are examples of Chinese logistics companies and freight forwarders effectively taking control of some trade lanes for inbound parts and kits from Europe to China among the VW Group, BMW and Chery JLR, for example.
Logistics skills and temp/permanent labor
Everywhere I go I hear about a lack of qualified logistics professionals, both in operational and management roles. While some of this is down to demographics, particularly for driver shortages, there may be some overlap here with a significant rise in the use of temporary labor across the supply chain in both developing and developed markets. But in some regions, that cycle of labor outsourcing may now start to ebb or at least slow. I have heard of companies from Mexico to the US, UK and China that are looking at tipping the balance back towards permanent employees for some logistics operations, although the share of temporary is likely to remain high.
