Staying on Track
Moving automotive parts from Asia into the U.S. by itself is a huge task for Hyundai Motor America. To keep track of where every part is at every step along the way added so many technological wrinkles to the task that Hyundai decided to look elsewhere for some help.
“Supply chain visibility is a huge issue for us,” explains George Kurth, director, supply chain logistics with Hyundai Motor America. “We track all inbound shipments from Korea through a third party, BridgePoint Inc., giving us visibility in every major point from Korea to our U.S. parts distribution centers. We track milestones such as shipment to the port, vessel sail date, vessel arrival date, entry into Customs, release by Customs, origin rail head, destination rail head, delivery to our parts distribution center, and putaway. We have comparable tracking points for air shipments.”
When shipments hit a milestone, the carrier sends a signal to BridgePoint. Using XML (Extensible Markup Language) as a universal translator, BridgePoint receives data and feeds them into a single database that updates estimated time of arrival (ETA) in Hyundai's system.
“It looks simple but it's not,” states Kurth. “You have to manage files from several sources and convert them to one standard. For example, every piece of data has to hook to something so you can track a shipment all the way through the movement. When parts are packed in Korea, we don't yet have the container number the steamship uses to track the shipment on the ship and across the U.S. land bridge. Managing these links is just as challenging as managing data formats.”
BridgePoint accepts many different types of messages and connects them. Corey Rhodes, director of commercial services with BridgePoint, explains how he links different tracking numbers. “In a relational database, we build objects that tie together. We can tie objects to a booking number, a product number, or any other identifier.”
BridgePoint also handles the challenge of receiving data out of chronological sequence. “We build skeletal space holders where the data should be,” says Rhodes. “As the data come in, we populate the database.”
If a milestone is missed — say, Customs delays a container through inspection — the system sends a message to Hyundai's inventory managers. The ETA is updated at Hyundai's purchase order item level. The revised ETA is automatically uploaded to the inventory management system and goes into the right slot as a future receipt on the amended date.
By having accurate ETAs in the system, Hyundai's inventory management system has the data to order accurately, explains Kurth. Typically, Hyundai's inventory management system would take average lead time and put received goods into a receipt slot. “Through the third party's system, we can replace the program's average lead time with a more accurate ETA,” he notes.
“In addition to being able to operate with leaner inventory, we use the dependable ETA for dealer customer service,” Kurth adds. The familiar Hyundai website that dealers use for availability of parts also shows our ETA. Dealers know how soon we can fill one of our rare backorders. In the last several months, the number of calls from dealers has dropped significantly,” he reports.
When a part is ready to ship and actually departs, BridgePoint checks the quantity shipped against the quantity ordered. Once it's physically moving, transportation providers send the shipment's updated status to BridgePoint.
“Some carriers are very good at sending messages, while some are challenged,” admits Rhodes. “3PLs [third-party logistics providers] that have grown through acquisition may have difficulty getting data from certain regions. In these cases, we aggregate data from customers who allow us to do so and use root cause analysis to help 3PLs uncover and solve messaging problems. They see value in working with us, and we need the cooperation of our customers' carriers and trade partners.”
Convincing management of the potential value of Hyundai's and BridgePoint's partnership was a struggle for Kurth. In part, he sold the deal on Hyundai's ability to reduce safety stock.
“We cut inventory by two weeks. You can run lean if you have confidence in the ETA,” Kurth adds. However, since inventory reduction was being approached on several fronts at Hyundai, he admits only part of the gain was from the BridgePoint partnership.
Kurth also sold the fact that Hyundai would have better fill rates and could order more effectively. “We have the highest fill rates in the automotive industry,” he claims, “and more contented dealers. Since Hyundai's dealers have access to dependable ETAs, calls from dealers have dropped by two-thirds as they learn to trust our ETA.”
Linking the cost of using BridgePoint to the benefits realized was an internal challenge. “We can make assumptions — lead time from Korea is better — but we cannot put a percentage on the factor. What we could do was convince management it's a part of the supply chain we need. On the one hand, demonstrating ROI is difficult; on the other hand, it's not an expensive solution,” notes Kurth.
“From the data we collect and process, a company can get a firm understanding of its distribution network and actual results of the distribution plan,” suggests Rhodes. “There are significant inventory reduction opportunities in identifying the actual distribution and cycle times of products. For example, a large consumer products company found shipments typically sat at the port three to four days because the trucking company only picked up one day a week. Switching carriers cuts more than a day from cycle time. The farther up the supply chain you can look, the greater the opportunity,” he adds. LT