The right place and the right time

Manufacturers and suppliers must cooperate closely so that the flows of goods are moving in time with manufacturing processes. This requires mutual trust and permanent dialog


Before a chip is built into a mobile phone, it has been getting around in the world. From Germany to Singapore, from there on further to Taiwan and back again to Germany. "We have global production", says Hans Ehm, Supply Chain Manager of Infineon. Scheduling is global, production is global. That's how it is today. And because everything must be available at a specific location and a specific date, the supply chain must work smoothly. If not, there will be trouble. Big trouble. Because any delay will cost money. Mobile phones don't work without a chip and thus cannot be sold. So it's important that the supply chain is not broken and has no slack. That's the challenge because it's important to smoothly connect the individual links of the chain: Ordering party, suppliers and the logistics providers for transport. All partners must adjust and coordinate themselves and their processes with each other. That's the essence of supply chain management – controlling the flow of goods and information in the supply chain.

Infineon also sets up its supply chains so that production will be flexible and fast. In practice, it's clear where supply chain management really starts. At the customer. And the customer is king. What he wants, must be delivered – and on time. But the automotive supplier Webasto now knows just how difficult that is to implement. Six years ago, Webasto opened up a plant in Palmela, Portugal to produce hardtops for the Volkswagen model Eos. In the beginning, 70 suppliers shipped their supply parts to Palmela whenever they fancied it. Usually in large quantities. They wanted to save costs and delivered at different times. And so it happened that many parts arrived too late, yet others were stockpiled, and warehouses were jam-packed. Of course, VW was not happy about it, and Webasto even less. But the component supplier did not feel up to the task of bundling and timing the flows of goods from 70 suppliers. So another player came on board: Schenker, a Deutsche Bahn company. Schenker tackled the matter differently: They collected the goods from suppliers located in Germany, Austria, Hungary and Slovakia. Then they bundled the goods and delivered them to the plant in Portugal so that they arrived precisely on time for the start of production.

Bundling and timing flows of goods
"Just in time" is a method with even two benefits at the same time: All parts arrive exactly when needed at the factory, and they don't tie up any inventory cost. "The shorter the period of time between the delivery of the required parts at our plant and the date of delivery of our component, the better for us", says Webasto's logistics manager Dieter Ruh. Because Schenker collects the material beforehand, there are only 50 trucks per week at the loading ramps in Palmela – instead of formerly 100 trucks. Delays with the delivery to the customer are the exception. But that works only because Webasto and Schenker are in permanent contact and dialog. Until today, someone from Schenker will regularly visit the plant in Portugal and clarify the processes and flows in detail. Typical questions will then be: Which parts do you need? When do you need the deliveries?

"The ultimate prerequisite is trust", says Ruh. Trust is paired with transparency. For supply chains to work, all parties involved must always be informed about the processes. "Trusting collaboration between suppliers and buyers is required to exchange information about the order situation." The software used for it will become ever more important because it helps to cope with the complex meshwork of orders and time specifications by the customers. This type of software is also ever more frequently used within a company, for example at BSH Bosch Siemens Hausgeräte. The enterprise produces kitchen ranges, dishwashers and refrigerators – in 40 factories worldwide. Of course, here again, the left hand must know what the right hand is doing. "Flexibility is impossible if every department is working on its own", says Hans-Gerd Bauerfeind, Head of Logistics at BSH.

At BSH, for instance, things go as follows: Sales prepares forecasts which are oriented on the dealers' inventory. Distribution passes these forecasts on to Production. Now, Production will know what it must produce in the future, how many parts it needs, and how many employees are necessary for it. The people from Logistics, in turn, will be able to plan transport processes. If forecasts change, the program again draws up and compiles any progress and flows. As laudable as it sounds: That's the result of hard work. At BSH, they first had to record which parts are procured from which suppliers for which products. And sometimes, it turns out that rather identical parts are obtained from two or three suppliers, and at surprisingly different prices.

Good supply chain management begins with purchasing
Anyone wanting to set up a good supply chain must first examine the suppliers. And their prices. "Good supply chain management begins with purchasing", says Gerd Kerkhoff from the business consultancy Kerkhoff Consulting. He also adds that some companies are so chaotic that they only find out after many years that suppliers sell them the same product at different prices. That's why it's easier for smaller companies than for bigger ones, says Michael Kaltenbach, IBM expert for supply chain management: There just would not be such proliferation. A company with a small number of suppliers would also be able to more easily survey the processes. In small companies, supply chain management would thus be almost intuitively sensible. "Larger enterprises with different divisions rarely pursue only one single strategy in the supply chain", says Kaltenbach. Not because it's convenient but because it's not sensible or expedient. The work divided up among supplier, producer and vendor is far too complex for the duties of every single supplier to be recorded in one single system. In addition, corporate groups often buy up other companies; and then, it would be a complex business of interlocking the systems. Kaltenbach accordingly proposes to at least adjust supply chains for specific products. At Webasto in Palmela, the chain is taut: The tops are delivered "just in sequence" to VW, exactly in the sequence of production. And that's not elaborate or expensive: VW has its place right around the corner in Palmela.