Making the auto supply chain transparent

By Russel Beron

Similar to Haier Group, China’s automotive industry has an array of suppliers which require sophisticated systems to manage them. China’s auto market, an ongoing hot topic is becoming more competitive and manufacturers have to look at the entire supply chain to cut costs.

BeijingBenzDaimlerChrysler (BBDC) is a more recent joint auto venture which built a new manufacturing facility in Beijing in early 2007 to build the EClass Mercedes and Chrysler 300C. Recognizing the importance of communication with their suppliers, BBDC implemented a web-based EDI system which is user friendly for all levels of BBDC suppliers. This implementation earned Seeburger the CHaINA award of Best IT Supply Chain Solution for China.

According to James Hatcher, managing director of Seeburger Asia Pacific Ltd. who managed this project, the implementation “Gives BBDC a way to optimize their supply chain while giving them a competitive advantage.” Hatcher has worked in Asia for 24 years in Taiwan, Hong Kong and Singapore in various supply chain capacities.

Just-in-Time (JIT) and Just-in-Sequence (JIS)

BBDC went live in January 2007 with their complete JIT/JIS solution that also integrated their 3PL for full visibility. This project is a good example of some of the innovative changes that have begun to take place in China’s automotive manufacturing industry. Over 150 suppliers are live and using the system daily giving BBDC a competitive advantage in the domestic automotive market. Their market leading solution has now forced most other OEM’s to re-evaluate their SCM solutions.

“One of the big challenges with the China supply chain is the fact that many tier 1 suppliers, while they might have ERP, can’t necessarily do system to system communication,” says Hatcher, explaining the rationale behind the Web-EDI system.

“Part of what we architected for suppliers who could do traditional EDI messaging is a comprehensive web EDI portal which provides a user interface, so that while they don’t have an IT system, they have the ability to do JIT and JIS.”

“This means you have a fully integrated solution for any level supplier,” explains Hatcher. “For BBDC, this means there is no data entry required, they can just scan the bar-code, there is little room for error.”

Deliver faster, sell more

According to Chunmei Han, the system administrator at Seeburger who helped implement the system, “The benefit for BBDC of the web-EDI system in that we can send out the PO and our material schedule automatically through the system, which allows us to save time and the vendor can supply the material in time.”

Just-in-time and Just in Sequence are key differentiators in a competitive market. “The biggest challenge for China automotive manufacturers is demand and inventory,” says Hatcher. “Because demand is growing in irregular spurts it’s constantly a challenge to juggle how much inventory to keep versus having lead time from suppliers. When you implement this type of comprehensive supply chain solution you can more quickly share demand from your customers down to your supply base, improving inventory management and shortening lead times. If you can deliver faster, you sell more.”

The Web-EDI system also helps BBDC to optimize their production line so they can produce more than one car on the same production line – from 2008, they will produce the Mercedes C-Class — and receive parts directly to the production line through the JIS information. This allows BBDC to bypass delivery of the parts to a warehouse.

The regional trend appears to be that China will continue to take on more business process and service functions while countries like Vietnam will grow in manufacturing.

As China’s role in the global supply chain continues to shift, manufacturing companies in China will have to continue raising the bar by establishing and maintaining new best practices.

Russel Beron, Chaina Magazine

This is the fourth and last part of the Chaina article “Learn lessons from some of the leading companies in China”. Read part I, part II and part III.