Suppliers look to Agility for innovation and service.

The manufacturing hub of Gothenburg, the port city on Sweden’s southwest coast, is where vehicle makers such as Volvo (trucks and cars) and their tier 1 suppliers use many of the most advanced practices in automotive logistics, including various “postponement” techniques, to shave cost.

Agility’s Gothenburg logistics center is at the heart of those efforts. The center’s role is to work with suppliers and manufacturers (Original Equipment Manufacturers, or OEMs) to synchronize movements of parts, maximizing efficiency and minimizing risk to all the parties in the supply chain. In recent years, OEMs have moved aggressively to push off – or postpone – supply chain steps that add to their costs. Today, they:

  • Hold less inventory. That means they need less space for storage and fewer staff to manage parts and in-house deliveries.
  • Purchase parts at the last possible moment. That means less working capital tied up in component stocks and less risk that they will be holding obsolete parts if sales fall, models change or assembly shifts to another location.
  • Get key suppliers to locate facilities near assembly plants. “Milkruns” – the industry term for daily deliveries from nearby supplier warehouses – dramatically cut time and cost.
  • Arrange parts deliveries on a just-in-time and sequence basis. By carefully synchronizing parts shipments, they operate at maximum efficiency, regardless of their level of production utilization at any given moment.

In Gothenburg, Agility manages a bonded warehouse that offers benefits to the OEMs and to their suppliers shipping components from China, India and other distant emerging markets, as well as mature markets outside the EU such as Japan and the United States.

At the warehouse, Agility is able to store parts shipped from non-European Union countries without clearing them through customs or arranging for customs duties to be paid until the components are ordered for delivery by the manufacturer. Goods that are phased out or obsolete can be scrapped without ever incurring duties; goods re-exported out of the EU need never go through the customs clearance process or face duties. Old restrictions on bonded warehouses requiring strict segregation of cleared and bonded goods have been lifted, so the two can be stored on pallets next to one another with only a scan of labels offering a clue as to which is which. Agility’s Warehouse Management System keeps track of the goods and automatically initiates the customs process if bonded goods are to be delivered from the warehouse.

Agility has developed sophisticated tools to give suppliers better visibility and improved ability to forecast.

Agility’s Gothenburg facilities have provided critical visibility to automotive industry customers. As OEMs’ have procured more parts from far-off emerging markets, the risk of supply chain disruption has grown. The postponement techniques they use push most of that risk onto their suppliers. Agility has developed sophisticated tools to give suppliers better visibility and improved ability to forecast.

Johan Lindahl, product director for Contract Logistics at Agility GIL in Gothenburg, is an expert in lean production and efficiency. He says Agility’s tools “help suppliers avoid the ‘bullwhip effect’ by providing early warnings of shortages or accumulation of available stock. Transparency at every step is key to driving a cost-efficient supply chain.” Suppliers have looked to Agility Gothenburg for innovation and service that gives them added flexibility.

In one instance, Agility Gothenburg assembled exhaust manifolds made from parts shipped from China. If the manifolds had been assembled in China, transportation costs would have been double because of their awkward, hard-to-pack dimensions.

Agility also used an industrial washing machine to clean powertrain parts shipped from India. The parts were coated in anti-corrosion grease, which is necessary for shipping but must be removed before assembly.

SE logistics centre 2011 – truck aisle 1With equipment to update software and maps in GPS, Agility makes sure that parts being delivered to tier 1 suppliers in Europe are the latest versions. Postponing delivery increases product quality and reduces manufacturing costs.

Agility also has helped OEMs improve production quality and reduce the space they need for storage by implementing sequence delivery that uses racks to mount parts and cluster them in the order they are used in assembly.

“They will be on racks in the same sequence as production so they are synced up. We already put the chassis number on the part when the rack leaves our warehouse. So instead of 10 different part numbers in different quantities on different racks, they get what they need in the quantity and order they need it all at once,” Lindahl says.

“Long-term storage is really bad business in the auto sector. These guys need quick-moving, high-turn stocks. The suppliers include the logistics cost in the piece price so helping them to turn the stocks rapidly will improve their profitability, and ours, since we are not making money on storage but on activities. Win-win.”