Executive Briefings

Frans Maas Keeps Parts Flowing to AutoEuropa

A thriving logistics partnership between Dutch frieght forwarder Frans Maas and a Portuguese auto plant is giving new meaning to the term "just in time."

Never mind those plants where automakers keep only a few hours' worth of parts on hand. Many of the components that feed the AutoEuropa facility outside Lisbon aren't even manufactured until the vehicle starts down the assembly line.

What makes such tight scheduling possible is the existence of a 900,000-square-meter industrial park right next door to the plant, in the fields of Palmela. Frans Maas is the park's manager, a job that requires it to reach well beyond its roots as a freight forwarder, warehouser and trucker.

In fact, "freight forwarder" doesn't begin to describe what the vendor does for AutoEuropa, a 50-50 joint venture of Ford Motor Co. and Volkswagen. Frans Maas picks and sequences the movement of parts from 10 suppliers inside the park, as well as six others within a 25-kilometer radius. And while that number represents a small portion of the 365 companies from 17 European countries that supply the plant with nearly 7,000 parts, it covers many of the most critical components, including seats, doors, paint, axles, tires and instrument panels. Together, suppliers in Palmela account for nearly 40 percent of the value of all parts that go into AutoEuropa's vehicles.

The project represented a brave new world for both vendor and manufacturer. The AutoEuropa plant was inaugurated in April 1995, less than five years after the partners fixed on Portugal as a place to build minivans for the European market. And Frans Maas hadn't previously managed the flow of parts for a major auto plant, according to Joao Pereira De Almeida, general manager of the entity known as Frans Maas Logistica Palmela Lda.

Returned merchandise is processed
and scanned at the customer service counters in Kmart stores, and the goods are dispatched at designated intervals to the assigned returns center.

The Dutch company was no newcomer to the world of third-party logistics, however. A long-time provider of value-added warehousing and transportation, it already was serving major multinationals, such as Sun Microsystems and Xerox. For Rank Xerox, it had built a successful just-in-time parts pipeline in the Netherlands, which reduced inventory while smoothing out the peaks and valleys of manufacturing.

The company's track record was enough to win it the huge task of managing locally produced parts for AutoEuropa, whose output in 1997 accounted for an estimated 12 percent of Portugal's total exports, and 2.2 percent of its gross domestic product. AutoEuropa makes three minivan models for Europe: the Ford Galaxy, VW Sharan and Seat Alhambra.

For items entering the park from nearby suppliers, Frans Maas unloads the trucks, receives and stores the contents, and feeds them to the assembly line as needed. Parts from more distant locations are carried directly to the auto plant by Wheels, a European trucker. Additional parts move directly to the plant from inside-the-park manufacturers, although Frans Maas retains complete visibility of all parts in the park at any given time.

Inside-the-park manufacturers produce exactly what the plant needs, typically receiving orders from 90 minutes to four hours before a part must be available on the line. Often production doesn't begin until the order is received.

Similarly, Frans Maas receives sequenced orders at its on-site warehouse, where it holds two days of stock from other suppliers. These orders are activated by switches on the assembly line and sent out only after a car actually is in production, Almeida said. At the warehouse, a small, glassed-in office houses a row of desktop computers and printers that produce bar-coded sequence tickets transmitted by AutoEuropa.

The tickets tell Frans Maas exactly where in the warehouse an item is stored, based on data logged into the system at the time it was received. The part is then picked and transported to the plant next door, by vehicles powered by natural gas.

Frans Maas sequences approximately 43 percent of the parts needed by AutoEuropa on a just-in-time basis, Almeida said. Another 3 percent moves under the Japanese kanban system of unit loads, which are automatically replaced as they are used. The rest are delivered from more distant points by Wheels, based on orders sent by AutoEuropa six days prior to required delivery.

The stream of incoming parts is constant. Frans Maas receives between 40 to 60 trucks a day, six days a week, for an average of 1,200 per month. That translates into about 40,000 individual shipments each month. The company employs 350 workers inside the park, second only to Sommer Allibert Industrie S.A., whose workforce of 700 produces bumpers, doors and instrument panels.

AutoEuropa expects to turn out 140,000 vehicles this year, up from 131,000 units in 1997, according to financial director Kevin Brown. An entire car can be assembled in just over a single shift, with about 677 units rolling off the highly automated production line daily.

The venture has proved to be a near-instant success. In just three and a half years, the partners have captured a third of the growing European minivan market, which still accounts for just 2.8 percent of auto sales in the region. Brown predicts that minivan sales will reach 500,000 units a year by 2000, up from nearly 350,000 in 1997.

Other major producers of a European "multi-purpose vehicle" include Renault, Chrysler and Toyota.

The plant's location in remote Portugal hasn't hurt the automaker's ability to serve the European market. Less than 2 percent of the cars produced at Palmela are sold inside Portugal, Brown said. Nearly 40 percent are shipped to Germany, with Great Britain accounting for another 17 percent. (Approximately 1 percent is earmarked for Japan.) Vehicles move from Palmela by dedicated rail to the nearby Port of Setubal, where they are shipped to Ford and VW dealers in 44 countries.

Visitors to the 1.1 million-square-meter assembly plant find no safety stock and only a handful of near-empty parts racks alongside the production line. The operation relies on the constant movement of parts into the facility. But things can and do go wrong - "almost every day," said Brown.

Murphy's Law can wreak havoc with a tightly run, just-in-time operation. A truck may show up late, or with only half the parts numbers that are supposed to be inside. The plant uses six different kinds of sun visors alone; one type missing is enough to throw off the laborious planning that goes into the building of three distinct models of minivan on a single assembly line.

Almeida speaks of "job-stoppers" - key components that can shut down the line if they don't materialize on schedule. Yet many problems are beyond the control of even the most attentive plant manager. Barricaded roads or trucker strikes - hardly a rare occurrence in Europe - can easily upset the careful sequencing of inbound loads.

Frans Maas and AutoEuropa maintain detailed contingency plans that hold disruptions to a minimum. For small items, such as the missing sun visor, the plant may arrange to have an on-board courier rush a limited number of units to the plant for immediate production. The rest can be brought in later by less expensive means. In emergencies, Frans Maas has relied on planes and helicopters to ship parts to a nearby landing field, Almeida said.

"In my time, we have only lost production once due to missing parts," said Mark Penhall, trim and accessories business manager for AutoEuropa. "We're extremely flexible in overcoming any situations that arise."

The partners keep problems to a minimum through the use of satellite tracking, which allows for total visibility of inbound parts in transit, as well as early warning of any potential disruptions. In addition, said Almeida, all suppliers in the industrial park share Ford's in-house ordering system. Frans Maas uses the data to prepare weekly reports to AutoEuropa, detailing all picks and errors and grading its own performance on a scale from "unacceptable" to "perfect."

The key to the operation's success is a tight relationship between vendor and manufacturer. Evidence of that closeness is both real and symbolic, ranging from the physical proximity of the industrial park, to the blue shirts that constitute the uniform for all 4,000 workers in the plant as well as for Frans Maas's employees next door. In addition, the two sides keep identical hours: two shifts of eight hours each, with a five-minute break and half an hour for lunch.

Frans Maas is accustomed to remaking itself in the image of its clients. With the formation of the European Union and the removal of administrative borders, the 108-year-old freight forwarder has recently been stressing the third-party logistics side of its business. A separate chief executive officer of logistics reports directly to the Frans Maas board.

The company's services to major multinationals include inbound transportation, storage, picking, packing, shipping and proof of delivery. It has even developed its own shipment information and forecasting software, known as LogimaX, although AutoEuropa has opted for Ford's internal ordering system.

Frans Maas will need to become even more flexible to keep pace with growth at the AutoEuropa plant, which at full buildout could produce 180,000 cars a year. The automaker generally informs Frans Maas two months prior to any change in production levels, but the actual lead time can be much shorter. What's more, Almeida said, the industrial park will have to increase in size as AutoEuropa ramps up production of new and more complex models for the year 2000.

One change that Frans Maas hopes to make soon is an end to the joint venture that it was required to form with PGS, a Portuguese entity. The deal was a condition of the operator receiving Portuguese government grants for initial development of the park.

Profits are shared, with Frans Maas taking 51 percent and PGS 49 percent. With the joint venture now more than three years old and incentives no longer an issue, Almeida would like to see all profits flow directly to Frans Maas, a move the company believes will help it to gear up for an expanded operation.

Frans Maas also would like a bigger piece of the business of moving parts into the plant from sources all over Europe. It had originally offered to handle the entire service package, but AutoEuropa settled on a second provider for long-distance transport.

"Of course we would like to handle more," said Almeida. "It's our core business."

Never mind those plants where automakers keep only a few hours' worth of parts on hand. Many of the components that feed the AutoEuropa facility outside Lisbon aren't even manufactured until the vehicle starts down the assembly line.

What makes such tight scheduling possible is the existence of a 900,000-square-meter industrial park right next door to the plant, in the fields of Palmela. Frans Maas is the park's manager, a job that requires it to reach well beyond its roots as a freight forwarder, warehouser and trucker.

In fact, "freight forwarder" doesn't begin to describe what the vendor does for AutoEuropa, a 50-50 joint venture of Ford Motor Co. and Volkswagen. Frans Maas picks and sequences the movement of parts from 10 suppliers inside the park, as well as six others within a 25-kilometer radius. And while that number represents a small portion of the 365 companies from 17 European countries that supply the plant with nearly 7,000 parts, it covers many of the most critical components, including seats, doors, paint, axles, tires and instrument panels. Together, suppliers in Palmela account for nearly 40 percent of the value of all parts that go into AutoEuropa's vehicles.

The project represented a brave new world for both vendor and manufacturer. The AutoEuropa plant was inaugurated in April 1995, less than five years after the partners fixed on Portugal as a place to build minivans for the European market. And Frans Maas hadn't previously managed the flow of parts for a major auto plant, according to Joao Pereira De Almeida, general manager of the entity known as Frans Maas Logistica Palmela Lda.

Returned merchandise is processed
and scanned at the customer service counters in Kmart stores, and the goods are dispatched at designated intervals to the assigned returns center.

The Dutch company was no newcomer to the world of third-party logistics, however. A long-time provider of value-added warehousing and transportation, it already was serving major multinationals, such as Sun Microsystems and Xerox. For Rank Xerox, it had built a successful just-in-time parts pipeline in the Netherlands, which reduced inventory while smoothing out the peaks and valleys of manufacturing.

The company's track record was enough to win it the huge task of managing locally produced parts for AutoEuropa, whose output in 1997 accounted for an estimated 12 percent of Portugal's total exports, and 2.2 percent of its gross domestic product. AutoEuropa makes three minivan models for Europe: the Ford Galaxy, VW Sharan and Seat Alhambra.

For items entering the park from nearby suppliers, Frans Maas unloads the trucks, receives and stores the contents, and feeds them to the assembly line as needed. Parts from more distant locations are carried directly to the auto plant by Wheels, a European trucker. Additional parts move directly to the plant from inside-the-park manufacturers, although Frans Maas retains complete visibility of all parts in the park at any given time.

Inside-the-park manufacturers produce exactly what the plant needs, typically receiving orders from 90 minutes to four hours before a part must be available on the line. Often production doesn't begin until the order is received.

Similarly, Frans Maas receives sequenced orders at its on-site warehouse, where it holds two days of stock from other suppliers. These orders are activated by switches on the assembly line and sent out only after a car actually is in production, Almeida said. At the warehouse, a small, glassed-in office houses a row of desktop computers and printers that produce bar-coded sequence tickets transmitted by AutoEuropa.

The tickets tell Frans Maas exactly where in the warehouse an item is stored, based on data logged into the system at the time it was received. The part is then picked and transported to the plant next door, by vehicles powered by natural gas.

Frans Maas sequences approximately 43 percent of the parts needed by AutoEuropa on a just-in-time basis, Almeida said. Another 3 percent moves under the Japanese kanban system of unit loads, which are automatically replaced as they are used. The rest are delivered from more distant points by Wheels, based on orders sent by AutoEuropa six days prior to required delivery.

The stream of incoming parts is constant. Frans Maas receives between 40 to 60 trucks a day, six days a week, for an average of 1,200 per month. That translates into about 40,000 individual shipments each month. The company employs 350 workers inside the park, second only to Sommer Allibert Industrie S.A., whose workforce of 700 produces bumpers, doors and instrument panels.

AutoEuropa expects to turn out 140,000 vehicles this year, up from 131,000 units in 1997, according to financial director Kevin Brown. An entire car can be assembled in just over a single shift, with about 677 units rolling off the highly automated production line daily.

The venture has proved to be a near-instant success. In just three and a half years, the partners have captured a third of the growing European minivan market, which still accounts for just 2.8 percent of auto sales in the region. Brown predicts that minivan sales will reach 500,000 units a year by 2000, up from nearly 350,000 in 1997.

Other major producers of a European "multi-purpose vehicle" include Renault, Chrysler and Toyota.

The plant's location in remote Portugal hasn't hurt the automaker's ability to serve the European market. Less than 2 percent of the cars produced at Palmela are sold inside Portugal, Brown said. Nearly 40 percent are shipped to Germany, with Great Britain accounting for another 17 percent. (Approximately 1 percent is earmarked for Japan.) Vehicles move from Palmela by dedicated rail to the nearby Port of Setubal, where they are shipped to Ford and VW dealers in 44 countries.

Visitors to the 1.1 million-square-meter assembly plant find no safety stock and only a handful of near-empty parts racks alongside the production line. The operation relies on the constant movement of parts into the facility. But things can and do go wrong - "almost every day," said Brown.

Murphy's Law can wreak havoc with a tightly run, just-in-time operation. A truck may show up late, or with only half the parts numbers that are supposed to be inside. The plant uses six different kinds of sun visors alone; one type missing is enough to throw off the laborious planning that goes into the building of three distinct models of minivan on a single assembly line.

Almeida speaks of "job-stoppers" - key components that can shut down the line if they don't materialize on schedule. Yet many problems are beyond the control of even the most attentive plant manager. Barricaded roads or trucker strikes - hardly a rare occurrence in Europe - can easily upset the careful sequencing of inbound loads.

Frans Maas and AutoEuropa maintain detailed contingency plans that hold disruptions to a minimum. For small items, such as the missing sun visor, the plant may arrange to have an on-board courier rush a limited number of units to the plant for immediate production. The rest can be brought in later by less expensive means. In emergencies, Frans Maas has relied on planes and helicopters to ship parts to a nearby landing field, Almeida said.

"In my time, we have only lost production once due to missing parts," said Mark Penhall, trim and accessories business manager for AutoEuropa. "We're extremely flexible in overcoming any situations that arise."

The partners keep problems to a minimum through the use of satellite tracking, which allows for total visibility of inbound parts in transit, as well as early warning of any potential disruptions. In addition, said Almeida, all suppliers in the industrial park share Ford's in-house ordering system. Frans Maas uses the data to prepare weekly reports to AutoEuropa, detailing all picks and errors and grading its own performance on a scale from "unacceptable" to "perfect."

The key to the operation's success is a tight relationship between vendor and manufacturer. Evidence of that closeness is both real and symbolic, ranging from the physical proximity of the industrial park, to the blue shirts that constitute the uniform for all 4,000 workers in the plant as well as for Frans Maas's employees next door. In addition, the two sides keep identical hours: two shifts of eight hours each, with a five-minute break and half an hour for lunch.

Frans Maas is accustomed to remaking itself in the image of its clients. With the formation of the European Union and the removal of administrative borders, the 108-year-old freight forwarder has recently been stressing the third-party logistics side of its business. A separate chief executive officer of logistics reports directly to the Frans Maas board.

The company's services to major multinationals include inbound transportation, storage, picking, packing, shipping and proof of delivery. It has even developed its own shipment information and forecasting software, known as LogimaX, although AutoEuropa has opted for Ford's internal ordering system.

Frans Maas will need to become even more flexible to keep pace with growth at the AutoEuropa plant, which at full buildout could produce 180,000 cars a year. The automaker generally informs Frans Maas two months prior to any change in production levels, but the actual lead time can be much shorter. What's more, Almeida said, the industrial park will have to increase in size as AutoEuropa ramps up production of new and more complex models for the year 2000.

One change that Frans Maas hopes to make soon is an end to the joint venture that it was required to form with PGS, a Portuguese entity. The deal was a condition of the operator receiving Portuguese government grants for initial development of the park.

Profits are shared, with Frans Maas taking 51 percent and PGS 49 percent. With the joint venture now more than three years old and incentives no longer an issue, Almeida would like to see all profits flow directly to Frans Maas, a move the company believes will help it to gear up for an expanded operation.

Frans Maas also would like a bigger piece of the business of moving parts into the plant from sources all over Europe. It had originally offered to handle the entire service package, but AutoEuropa settled on a second provider for long-distance transport.

"Of course we would like to handle more," said Almeida. "It's our core business."