How to make a lean, green logistics machine

In partnership with NYK Logistics, car maker Ford has won awards for its environmental performance in its manufacturing operations. John Haven reports

Following its recent sale of Aston Martin, Ford is in the process of finding buyers for its prestige automotive brands Land Rover and Jaguar. It is during the manufacture of these cars, however, that the company has won awards for environmental standards.

The global Ford Production System is based on lean principles, with high-frequency replenishment and sequenced deliveries to production lines in precise windows.

With the focus on removing waste, lean manufacturing also provides an ideal context for delivering environmental efficiencies in a disciplined, low-cost process. Reduced waste also means greater efficiency.

In partnership with lead logistics partner NYK Logistics, this enabled Ford's Premier Automotive Group (PAG) brands Jaguar, Land Rover and Aston Martin, to launch seven new models in the past seven years.

The partnership achieved recognition from the UK Department for Transport as part of its Transport Energy Best Practice Programme, and a Green Apple environmental award, as well as a number of awards for manufacturing and supply chain excellence.

The launch of the Jaguar X-Type in 2001 doubled Jaguar's sales in the first year. And the start of X-Type production transformed the former Ford Escort plant at Halewood on Merseyside into a lean manufacturing operation.

Built in 1963, the Halewood plant had been a production facility for many Ford models. Ford PAG's Jaguar took over operational responsibility for the plant in 1998. And Escort production was phased out during the summer of 2000.

Moving from the mass production principles used to manufacture Ford Escorts to those for the luxury X-Type demanded a physical and cultural revolution at Halewood.

The fundamental process change was the creation of a supply chain capable of supporting lean manufacturing processes. Just-in-time principles were adopted to ensure that production materials are received in the right quantities, where and when required.

Before this, Ford's suppliers had been responsible for the delivery of components to the plant. This resulted in an average 340 unscheduled vehicle arrivals a day, and a five hour wait to offload at Halewood.

To achieve the change, Jaguar outsourced the management of inbound and internal supply chains to NYK Logistics.

In six months, NYK designed and implemented an integrated inbound supply chain. This pulls in components from more than 200 suppliers throughout the UK and mainland Europe.

The solution raised efficiency; improved vehicle use; reduced inventory levels; standardised work and the elimination of waste with associated cost and environmental benefits; and provided a best-in-class model for PAG's other brands to adopt.

Key environmental improvements included improved vehicle use: from just 55% to 85%. And a 45% reduction in road mileage, and slashed fuel consumption and CO2 emissions.

The construction of a railhead at Halewood to ship finished vehicles further reduced road traffic by an estimated 8.7M miles a year. This saved more than 4Ml of diesel and 11,700 tonnes of CO2 yearly.

Following its success at Halewood, NYK was appointed Lead Logistics Partner at Jaguar's Castle Bromwich plant. It was then appointed by Jaguar's PAG stable-mate Land Rover to support the launch of the Range Rover Sport and Discovery 3.

NYK now manages the supply of components to point of fit for Land Rover's entire range, including the all-new Freelander 2, which was launched at Halewood in 2006.

The company was also brought in at the critical pre-production stage by former PAG brand Aston Martin. It helped to design the marque's facility at Gaydon to optimise material flows in advance of the launch of the V8 Vantage. And it is now responsible for the supply of components to Aston Martin's plants at Gaydon and Newport Pagnell.

PAG is unique in outsourcing its entire supply chain, from vendors throughout Europe vendor to point of fit on five UK production lines, to a single partner. By sharing the same pan-European distribution network, Jaguar, Land Rover and Aston Martin benefit from economies of scale and significant operational synergies.

NYK is responsible for the inbound supply chain including Europe-wide collections from suppliers, sequenced and second-tier supply, scheduled delivery into plant, issuing documentation and delivering improved vehicle use and reduced lead times on an ongoing basis.

Within PAG's plants, NYK is also responsible for receiving goods, management of marketplaces (short-term stockholding areas), production line supply and sequenced delivery to point of fit.

NYK employs 1,650 people for its PAG operations. The first PAG employee to handle a component is the operative who fits it to the vehicle on the assembly line. NYK is also responsible for the return of packaging and rejected parts to suppliers.

In line with lean principles, deliveries, both to plant and to lineside, are made on a just-in-time basis, in precise time windows. Within the plants, just two hours' stock is held on the assembly line. In total, the operation involves 6,800 collections of components from almost 400 suppliers in 20 countries and around 4,000 deliveries per week.

The re-engineering of the inbound supply chain has enabled PAG to accommodate greatly increased volumes and complexity, and implement lean manufacturing techniques to support the production of 12 different cars. PAG and NYK Logistics have created a solution that minimises the environmental impact of the pan-European supply chain.

Key to the solution is a comprehensive network of 22 cross-dock facilities throughout mainland Europe where components from local vendors are consolidated and sorted prior to onward shipment to the UK.

Improved transit times, reduced inventory in the pipeline and inbuilt flexibility to continuously improve speed of delivery, quality and cost have been achieved. And NYK has cut the number of vehicles to the UK by centralising small collection route vehicles at each cross dock, and delivering parts in for sorting and trunking on to the UK in high-capacity mega-trailers.

In Germany for example, the cross-dock infrastructure involves consolidation facilities in Essen, Hanover, Frankfurt and Nuremburg. Previously, collections from German vendors for the five individual car lines were carried out as milk runs, with an average of six collections a day per vehicle on 75m3 Euroliner trailers.

With the limited number of vendors which can be visited each day and fluctuations in lot size, vehicles were achieving just 60% fill. By using 100m3 mega trailers and consolidating collections across PAG's brands, NYK has increased average fill rates to 94%. And it is able to offer higher collection frequencies, resulting in reduced lot size and inventory costs.

At Halewood for example, Jaguar achieved a 55% reduction in stockholding over three years. At the same time, average road miles a week (based on the trip from Frankfurt to Solihull) dropped from 59,280 miles to 30,780. Based on 46.4 working weeks a year, this 52% reduction represents a saving of 1.32M miles a year and 50 fewer trailers crossing the Channel each week.

As a result, annual diesel consumption fell by 661,200 litres, equating to a reduction in CO2 emissions of 1,772 tonnes a year, and a cost saving of almost £500,000.

In addition, the cross-dock network has created new jobs while efficiencies in PAG's supply chain are helping safeguard jobs in both manufacturing and the supplier base.

With high labour costs encouraging companies to shift production to lower cost countries, UK-based manufacturers must eliminate waste in all areas of their operations to reduce inventory and increase productivity.

The supply chain is therefore critical to the achievement of a genuinely lean and consequently sustainable UK-based manufacturing operation.

And, while they are a by-product, rather than an objective of a lean logistics operation, the associated environmental benefits are substantial.

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