A division of Ryder System, Ryder Supply Chain Solutions is active across a number of industries, including retail, high-tech and electronics, food & beverage, energy and utilities, consumer packaged goods, aerospace & defense, and automotive. In this interview, conducted near Ryder's Miami headquarters, Jennings identified the supply chain challenges that manufacturers of heavy durable goods must contend with. Learnings taken from working with automotive sector customers enable a supply chain management and logistics services provider to better serve the needs of industrial manufacturers, he says.
Q: I think we all can agree that there are a number of hurdles facing the industrial supply chain or the industrial manufacturing sector. But let's define our terminology first. Just what should we mean when we speak of industrial manufacturing?
A: Jennings: By comparison, let's talk about the automotive sector at the same time. In our business, we think about automotive and industrial as those groups of customers who provide and manufacture basically durable goods. So automotive produces cars, obviously, and then in the industrial sector, it's kind of everything else.
Q: How broad is that?
A: Jennings: From locomotives to buses to heavy machinery to agricultural to refrigeration. It's those commodities that are relatively large, have a relatively long life span and require you then to have aftermarket parts since a durable good needs repair and replacement from time to time.
Q: You mentioned the automotive industry, which Ryder has been quite active in. What learnings can you share with us that you've gleaned from working with that particular sector?
A: Jennings: That’s kind of what brought us into the industrial sector as a point of interest in the first place. If you think about lean manufacturing, that kind of began in this country about 1987, and that has the premise that in the manufacturing environment, you basically begin with what's important to the person sitting on the assembly line. You make sure their life is very easy and very productive. Then you take the supply chain all the way back to the supplier. So what we're talking about is putting together a material flow system on the external side of the business to support the internal flow that people want to see at the assembly plants.
That practice has been in place in our country probably since 1987 or a little bit before, but it was pronounced during that time frame. Then companies in the OEM environment adapted those practices and principles and are still perfecting them today. That's a continuous improvement cycle that begins with transformation, and then as we move forward in time, people continuously find ways to improve, quite frankly because it allows people to reduce overall enterprise costs associated with making material appear at the assembly line to construct the product. That's the one side of the business.
The second side is, as I mentioned, these are durable goods – products that need repair and need replacement on occasion. So we get into thinking about the aftermarket side of business as well. The aftermarket has been pretty well perfected by the OEMs. We can take those patterns and learnings over the past years and apply them to the industrial sector, which seems to be maybe a little bit behind in that maturation process.
Q: Lean is all about eliminating waste and cost reduction – about money, if you will. So, speaking of that, how should industrial manufacturers deploy their capital?
A: Jennings: We have a little bit of economic downturn here in the U.S., and the economy is kind of moving slowly. At same time, everyone seems to be interested in globalization and trying to reach the emerging markets. But that costs money. That's the capital you spoke of. When you think about how is it that people can build in another country or in this country and ship to another, then the supply line and movement of parts and materials and of finished goods becomes very important because it becomes a much greater cost than if you're building in the Midwest and shipping to Nebraska or building in Florida and shipping to Georgia. So it becomes even more important in that case for people to minimize the cost and make the efficiency associated with the supply line so the capital is available to compete in the market that everyone wants to run toward.
Q: It's one thing to identify some of the challenges confronting the industry. The question then is, what are the things that companies need to consider when they encounter these hurdles?
A: Jennings: This is where I can circle back to what I said about learnings from the automotive sector. If you think about the types of products we're talking about being built – basically large – and then compare that to automotive, there is a difference in demand. There is a difference in the way products are manufactured. So for example, at an auto assembly plant, it's not unusual for an automaker to make 1,000 vehicles a day. That requires a plan to allow enough parts to come through the cycle so the parts can be put on the cars and then continue on being built. There's a lot of discipline applied to that. By comparison, in the industrial segment, you don’t have that type of velocity. You have a proposition where perhaps someone is building 12 combines a day. Someone builds 20 refrigeration units a day. How does that material supply chain proposition fit that different production cycle? The answer is pretty simple really: the same discipline and the same rigidity and the same planning that goes into supporting automotive manufacturing is also necessary in lower-production cycles. That's principally because the cost of the goods is much higher when you're talking about building a combine or a locomotive or an airplane than when you're talking about building an automobile. In that instance, what we want to do is concentrate literally on a plan for ever part.
If we go back and adapt lean principles, what we do is satisfy the operator at the assembly line and then build product based on proper inventory levels, proper stacking levels and proper buffer levels as it relates to how long it takes material and product to get to the assembly plant. You combine all of that activity to reduce the cost and eliminate waste in the system.
Think of it this way; think of a slow-moving train, and in each car are the necessary components to build large industrial products. You just want that train to move at a nice level so we don’t have far too much inventory. That's kind of the manufacturing side of the business.
Q: Let's talk about another side then – the partner side. What does the industrial manufacturer look for in a logistics services provider?
A: Jennings: There are links in that chain. At first, you would be looking for someone who has the engineering capability to be able to do the planning associated with making certain that the parts are ordered from the supplier at the proper time, that the proper time is allotted to have the parts transported and that the proper cadence to feed them to the assembly line is satisfied as well.
On the planning side, if it takes six months to plan and one week to implement, instead of the opposite, you have a much better proposition for yourself. What that does is it also drives the proper level of inventory. We know how expensive it is to carry costly parts.
The second thing is you have to have visibility. When you tighten down that supply line, you have to be able to kind of manage by exception. If the supply line is moving in accordance with its principles and engineered standards, everything’s fine. But you have to know that, and you have to have visibility to where those parts are in the cycle. So you would be looking for someone who could bring that. The other thing you want to think about, particularly if you are in a multiplant or multiple-division corporation, is working with someone who has the ability to do network optimization. Because one of the things that happens is deteriorating efficiency – and that can cost more money – if you have a kind of a plant-centric activity. If you have a singular plant, and then another plant and then a third, but the focus is on one, that focus is just parochial. You miss the opportunity to accomplish what we call network optimization. That means we're going to take all of the data for all of those facilities, put it into the bucket and see where it makes sense to leverage opportunities. All three of those plants may have same supplier, for example. Well, maybe instead of going there and picking up three times a day, you pick up one time a day. Maybe we introduce a cross-docking system.
So those are really three big elements, I think: plan literally for every part, have the ability to provide the necessary visibility, and then have the ability to leverage across multiple networks.
Q: Certainly, you can respond better, easier and quicker to opportunities when you have the right partner.
A: Jennings: It's really been interesting to watch this evolve over the years. I think years ago people would have considered transportation and logistics as necessary costs. I think today people consider a really, really solid supply chain to be a competitive advantage.
And what's really interesting is watching large corporations and how they respond, including the kind of mandatory time being spent in the supply chain group by high-profile and high-potential executives.
Ryder Supply Chain Solutions
Keywords: 3PL, global logistics, international trade, logistics management, logistics & supply chain, transportation management