Mercedes Counting on New Supply Chain Center to Reduce Logistic Costs

Mercedes Reorganizes Its Supply Chain Network to Reduce Auto Costs

As an expanding global footprint requires an ever-more efficient supply chain, luxury automaker Mercedes-Benz is in the process of reorganizing of its supply chain network to achieve that goal. As reported by Christiaan Hetzner in Automotive News, the company is aiming to reduce logistics costs by about 20% per vehicle.

Last year the company produced more than 1,754,000 Mercedes-Benz and smart passenger cars, marking the fourth record in a row for annual production.

 “Logistics plays a key role for our company’s success,” explains Markus Schäfer, member of the Divisional Board of Mercedes-Benz Cars, Production and Supply Chain Management.

Schäfer said supply chain costs can exceed manufacturing costs in some of the division’s lower-wage plants, as reported by Hetzner.

The automaker has increased production outside of its German home over the past decade but many of the components used in its cars are still sourced from Europe.

“With more than 30 vehicle derivatives each built from several thousand parts, the complexity is immense,” Schaefer said in Speyer, Germany, where the carmaker last week opened a consolidation center.

When the Center becomes fully operational in 2016, it will ship several hundred sea containers every week via inland waterways or rail to Antwerp and Bremerhaven, where they will be loaded onto freighters and transported to Beijing (China), Tuscaloosa (U.S.), and East London (South Africa).

Up until now, logistics service providers in Bremen were solely responsible for managing shipments of materials from German and European suppliers to the major Mercedes-Benz plants abroad. This new arrangement will allow deliveries from European suppliers south of the Main River will no longer have to be shipped over long distances, which will significantly reduce the logistics costs, the company explained.

The new route will also be environmentally sound as direct links between the center and the ports via inland waterways and rail lines will lower relevant CO2 emissions by more than 25%.

In terms of inbound logistics the planned increase of unit volumes at Mercedes-Benz Cars will lead to a significant expansion of merchandise flows throughout the global production network, especially at plants outside of Germany. The increasing product complexity resulting from a larger number of engine versions and personal customization options, for example, are putting an additional strain on logistics operations. The company the new Consolidation Center will be able to provide highly specialized logistics services. 

Growing demand in growth regions like China and NAFTA with demand for  local suppliers in these regions and the increasingly strategic employment of regional suppliers for global deliveries of production materials could result in the company opening similar consolidation logistic centers.  

Optimizing Material Flow

With regard to intralogistics the company is focusing on the intelligent optimization of material flows in production plants - from material deliveries to component installation in vehicles.

Such optimization begins at an early stage with logistics and load carrier planning, which have a major impact on inbound logistics freight costs, the company says. 

The continual modularization and standardization of production processes is accompanied by the use of state-of-the-art digital transformation approaches resulting from Industry 4.0. These include wireless real time monitoring of materials and empty packaging, support from big data cockpits for the planning, monitoring and control of processes, and largely automated driverless transport systems.

The Mercedes-Benz plant in Kecskemét, Hungary, for example, is currently implementing a pioneering project in which materials used in the final assembly area are exclusively brought to the line in prepackaged baskets by driverless transportation systems (DTSs). This not only eliminates the need for workers to go get the materials themselves: A look into the baskets is sufficient to determine if all components have been installed - yet another simple and effective way to improve quality assurance.

Activities in the area of outbound logistics revolve around the realignment of the global transport network in order to prepare it for the significant increase in unit volumes at the company's plants around the world.

A key strategic project in this area was recently given the green light. It involves the construction of a new network hub at a port in the Adriatic Sea that will be used to ship vehicles to Asia. Other measures include the systematic use and further development of a reference calculation method for the allocation of transportation services, much in the same way this has been done successfully with production material procurement.

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