OEMs and suppliers from all tiers are rethinking the supply chain model, from sourcing of raw materials to production of finished products to delivery of finished goods and everything in between. A proactive approach is critical, especially in these fluid situations. Companies have little choice but to pivot meaningfully and strategic planning is the key to survival. Increased attention to the status of inventory at the supplier location, supplier production schedules, and status of supplier shipments will provide early warning of shortages and allow upper tier suppliers to respond accordingly. Companies that are electronically connected to key direct suppliers and have real-time data on the inbound flow of products and materials can move quickly to implement programs to access data and enhance management and decision making capabilities. Om Vijayvargiya, Head – SCM & Logistics, Schaeffler India, informs Upamanyu Borah, on how their plans have included rigorous restructuring strategies, while also including developing solutions for their partners, and how forecasts and analytics have enabled to perform on contracts or other obligations.
Genesis and operations
Schaeffler is a German group known for high-precision components, system and bearing solutions. As a leading global supplier to the automotive and industrial sectors, along with innovative technologies, products and services for CO2 efficient drives, electric mobility, Industry 4.0 and renewable energies, Schaeffler has been driving forward ground-breaking inventions and developments in the fields of motion and mobility for over 70 years.
For over five decades, Schaeffler has had a strong presence in India with four plants and eight sales offices. Its three major product brands- FAG, INA and LuK are well represented in India. The manufacturing plant in Vadodara of Gujarat produces a vast range of ball bearings, cylindrical roller bearings, spherical roller bearings and wheel bearings, sold under the brand name of FAG. The other plant in Vadodara at Savli produces next generation deep groove ball bearings and large size roller bearings, also sold under FAG. Schaeffler’s third state-of-the-art plant, located at Talegaon near Pune manufactures steel cages, pulleys, cam rollers, bushes, plastic cages and a wide range of precision engine components, sold under the brand name of INA. Its fourth manufacturing location is based out of Hosur, which manufactures clutch systems and dual mass flywheels for passenger cars, light commercial vehicles, heavy commercial vehicles and tractors, and are sold under the brand of LuK.
In October 2019, Schaeffler merged its three entities to form one strong ‘Schaeffler India’ and consolidated the business among the largest industrial and automotive components and systems manufacturer in the country.
COVID-19 and tackling disruptions
Imports and exports constitute large parts of our supply chain, and the pandemic impacted the complete chain across the board. We observed significant delay in the clearance of imported cargo during lockdown period in India as an impact of COVID-19. Shipments accumulated at the port (from March last week to May first week) and its clearance posed to be the biggest challenge. CFSs were fully occupied and destuffing of new container was a challenge. Searching our cargo, loaded either as FCL or LCL, at the time of clearance was not easy.
To overcome the prevailing challenges, we created a task force within our organisation along with CHAs and local transporters and gained control over the situation within a month’s time.
Flexibility in times of supply chain uncertainty
There was some level of flexibility in the supply chain in the pre-COVID period. But no one has imagined this extraordinary scale of disruption in the supply chain. Actions have already started from our side to revisit risk management policies and systems once again, and then update planning. While discussing new contracts for 2021 with our various business partners- freight forwarders, CHAs, 3PL service providers, domestic transporters, etc. who are involved in managing our supply chain, we are emphasising on mitigation strategies to minimise or eliminate threats that may arise from similar future situations. We are working with them to add agility and transparency in overall operations so that the supply chain bears minimum impact. These revised processes have become critical and we are making them part of our regular practice.
We are also restructuring the distribution network to exploit network effect to achieve dominance, time to market, and maintain the desired service levels for customers. We are Consolidating and Distribution Centres (CDCs) at strategic business locations in India with the plan to keep the inventory close to the customer and deliver on shortest lead time.
Apart from this, we are working on various other logistic projects comprising key elements with advanced capabilities to improve efficiencies around track and trace and monitoring systems. More focus on digitalising our existing manual processes in the supply chain to add transparency and improve supplies of our product.
Hands off: tech at work
Digitalisation is enabling our business to build end-to-end supply chain solutions which will help us to avoid bottlenecks in the supply chain. Interestingly, real-time or near real-time information is the key of success in supply chain management.
We are focussing on increasing track and trace of our consignment under transport management system. Globally, Schaeffler has deployed advanced technology solutions to get information about imported consignments. It provides information on shipments from the point an invoice is generated at the origin plant to the goods receipt note at the receiving plant.
Our teams are also working to automate the invoice and billing verification process using AI and ML, etc.
Building virtual relationships
Managing its massive global supply network is a tall task, so Schaeffler set out to automate business processes via EDI technologies and utilising tools to connect suppliers and transporters with its own systems and helping efficiently transfer information without added complexity. At present, few domestic suppliers are connected with our system, but we are soon going to add more of them. This will enable smooth data transfer from suppliers end to the Schaeffler SAP system, enabling real-time information on supplies and product shipments.
Schaeffler India caters to both automotive and industrial sector customers. On-time and in-full delivery is our goal. In order to meet customer requirements, the management puts a lot of focus for continuous improvement in logistics operations. Rejigging and redrawing the network for optimisation, digitalising key operational aspects, and adding the processes for agility and adaptability are part of our ongoing efforts towards order management strategy. It grants broader visibility over the movement of our materials from manufacturing sites to customer’s location, helping in smooth and reliable distribution solution.
Major operational activities are with our value chain partners, starting from transporters, freight forwarders, warehouse operators and customs clearing agents.
Schaeffler team is involved with the network partners to improve their services continually. We track the monthly KPIs and conduct ‘Quarterly Business Review” (QBR) with our service providers.
Significance of logistics
Most of our inbound and outbound supply chain activities are outsourced and managed by experts in the sector. In fact, the percentage of outsourcing of our activities has increased in the last three years. Our logistic partners are involved in transportation, CDC operations, freight forwarding, customs clearance, etc.
We expect our partners to be agile, driven by modern day technology capabilities, offering cost-effective services, although consistently out performing all others in its class.
Indian automotive market is quite volatile. Besides, in the current pandemic situation, agility in business processes would be considered the most important determinant of a service provider. Digitalisation is the key to making process faster and error-free. In this situation, we prefer partners who are tech savvy and provide maximum solutions based on data and smart solutions. In order to establish long-term business relationship, it is important for any supplier to demonstrate consistent performance over time. Over and above, supplier should always be cost-effective to achieve our logistics cost targets.
Warehouse and distribution planning strategies
Schaeffler India revised its warehousing strategy few years back and decided to restructure the entire storage and distribution network. The merger of three legal entities of Schaeffler India and GST regime also helped us to streamline and implement this plan. We defined the actions based on both warehousing and transportation to get the maximum advantage out of it.
As per this strategy, we planned to close our many small warehouses and open the consolidated distribution centres in four directions of India. These locations were selected based on their reach to our end customer and approach to plants. The freight networks were reworked keeping in focus the continual improvement and inventories close to customers.
Building systems efficiency
It is very much necessary to have an internal logistics team to work on continual improvement of key supply chain function. This team has different verticals like warehousing, transportation, logistic, etc. to watch out for. The job of this team is to improvise the existing performance and work on new topics. Currently, we are more focussed towards digitalisation and attaining SCM 4.0. We have very strong support from the Schaeffler regional team in Singapore and team from global head quarters in Germany. All teams are well aligned, and new processes are implemented simultaneously at all places. For many upcoming solutions, India is in the pilot phase.
Innovative approach to logistics management
E-commerce companies have created the benchmark in track and trace. But similar kind of tracking and tracing is still not available for industrial goods movement. I personally wish to see this change in the coming days. Any kind of track and trace should be one click away. This will make the life of a logistic manager much easier.
Another big trend is consolidation. Consolidation is not a new thing in logistics; transportation companies have been consolidating supply material in their own traditional ways since many decades. They hold the material for longer periods at their origin hub, and despatch after 2-3 days waiting period. When I say consolidation, I mean utilising technology to consolidate the material without any waiting period. Many startups are already working in this direction, but there is still room for improvement. I believe this will bring a big change in the coming years.
Logistics processes generates lots of data every day. But there was no utilisation of this data to further improvise or work on ways to simplify the same. AI has emerged as a key trend and enabler in the logistics ecosystem to utilise this data and improve processes.