With the recent focus on survival rather than growth, Automotive manufacturers need to be able to identify risks in the Global supply chain and be able to manage any potential threats to their own business. One potential risk area is currently in outsourced logistics, including transport, distribution and sequencing; just a few of the many diverse activities currently outsourced to Logistics Service Providers (LSPs).
With more LSPs struggling for survival there is an increased risk of continuity of supply and the in-house skill and expertise, let alone the physical infrastructure, does not always exist due to the historical drive to outsource logistics expertise resulting in internal “de-skilling”. The answer to mitigating this risk is not necessarily to bring logistics “in-house” as it would require substantial time and investment in physical resource and up-skilling the workforce through large scale training and recruitment programs. The answer is however to ensure a better and detailed level of understanding of the current LSP service and how it operates and also of the overall Global LSP market. This higher level of understanding will enable the OEM to quickly identify what expertise is available and where to react quickly to OEM and Tier supplier demands should the current LSP be unable to continue. It will also enable the OEM to identify the early warning stages of potential issues and where possible to work with the LSP to overcome them.
How quickly an OEM can get back to ‘business as usual’ in the event of their primary LSP going out of business depends on how effectively it can put into action a business continuity plan.
In this case it will require investment into a specialised internal Logistics risk management team within the OEM to work very closely with the current LSP to understand every aspect of their operations and capabilities, and also of the LSPs own disaster recovery or business continuity plan. A small percentage of money saved in previous years by outsourcing logistics should now be integrated into the expenditure budget to facilitate these measures.
It may not be the ideal time to invest, except where the investment could protect your business and enable you to react quickly and efficiently to unavoidable changes in the supply chain, and the uncertain future of your LSP.