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The Mazda Motors parts center in Willebroek, Belgium, halfway between Antwerp and Brussels, is a squat, unassuming structure surrounded by fields. Pigs and chickens wander about next door, and local traffic is light. But inside the building, Mazda has achieved what many companies can only dream of: the centralized distribution of spare parts for all of Europe.
Mazda was the first Japanese automaker to grasp the importance of keeping local dealers stocked with aftermarket parts. It opened its first European parts center in 1968. The facility has changed locations three times since then, settling on Willebroek in February 1995.
The current site spreads over 230,000 square meters, including a 40,000-square-meter warehouse. Total investment in the facility, including land acquisition cost, is around $40m, according to Steve Hawlena, general manager of parts and accessory logistics for Mazda Motors Logistics Europe N.V.
|While Mazda uses barcoding in its operation, it is not overly reliant on information technology to control every detail of picking and putaway.|
|Mazda appears to be on the verge of an explosion in European car sales, but its |
goal is to continue reducing the number of parts it keeps on hand.
|Manufacturers complain of a lack of logistics |
providers with real pan-European reach
|The pieces all appear to be in place. Most of the European Union finally has come together under a common currency with virtual borders allowing for the free flow of product across the continent. Why, then, are there so few logistics providers who can cover the entire region?|
Some even say there are none. Kraft Schumann, executive director of Siemens IT Service, has encountered nothing but frustration in his efforts to hire a single logistics vendor who can provide service in every European country.
Siemens IT is a division of electronics giant Siemens AG, created to handle the service and spare parts business of its German parent. It services a full range of products, including personal and mainframe computers, automated teller machines and point-of- sale systems for retailers. Alone, Siemens IT generates around DM3bn ($1.8bn) in revenues; revenues for Siemens AG totaled DM110bn ($65.2bn) in fiscal year 1996-97.
Schumann has enough problems running his business internally. He is torn by the conflicting needs of the manufacturer, its sales force, field engineers and support centers. They are frequently at odds over such issues as optimal product life cycle, inventory levels, customer service, cost control measures and material flow.
Siemens IT sits smack in the midst of that sprawling organization, supporting Siemens products across Europe with 800 service bases, 31 customer help desks, five support centers and 17 systems management centers. With so wide a dispersal of assets, the company relies heavily on top-quality logistics to hold it all together. In some areas, said Schumann, nearly 40 percent of the processes stemming from a service call are logistics-related.
Since 1997, Siemens has moved parts from a central warehouse to a European distribution center, both in Germany, then to depots which were formerly country warehouses. In 12 countries, Siemens IT ships parts directly to the trunks of field engineers' cars. Where that is not possible, the company will arrange for delivery at prearranged dropoff points.
Information technology is a key arrow in Schumann's quiver. As of January 1999, he was able to track the flow of parts from ordering and dispatch to return and availability - a cycle that is designed to take no more than 72 hours. At the same time, Siemens IT has been working hard to reduce inventory levels throughout the supply chain by 50 percent.
All of which places the onus on logistics providers to perform with maximum efficiency. But Schumann was shocked to discover that there was no single provider that could tie together the company's European network of depots. Potential vendors either didn't serve every delivery point, or refused to pick up seven days a week.
Granted, the Siemens logistics network is a complex one. It involves some 20 million shipments a year, 80 percent of which weigh less than 30 kilograms. Trucks handle 60 percent of the traffic, intermodal 20 percent, ocean carriers 10 percent, air-cargo providers 5 percent, and barges 5 percent.
Moreover, logistics vendors of Siemens IT are expected to offer a menu of value-added services, fit squarely into Siemens' own logistics model, and meet air-emission standards for environmentally conscious Europe.
Instead, said Schumann, most logistics providers expected Siemens IT to fit into their service portfolios, which vary from country to country. He likened his search for vendors with a truly global approach to "a fight against the windmill."
The biggest vendors haven't capitalized on the opportunity to use Siemens' requirements as a starting point for better service to all their customers, Schumann said. And no one seems capable of slashing through the thicket of differing customs regulations in non-EU countries, such as Switzerland and Turkey, and in much of Eastern Europe.
Sometimes a company's inability to centralize European distribution through a single provider arises from the nature of the product itself. Otis, the leading maker of elevators, escalators and moving walkways, has designated Charles de Gaulle International Airport outside Paris as its center of service-parts distribution for Europe. The goal is next-day delivery of parts throughout the region.
Otis must cope with diverse regulations governing its products, even within the EU, said European Service Director Pierre Amar. Elevators are considered to be public transit in most countries and are regulated accordingly. That makes standardization of product impossible.
Otis has nevertheless been able to streamline its European logistics network, closing many country warehouses and regional parts centers. But the higher level of service required from logistics providers - seven days a week, 98 percent on time - hasn't been easy to achieve. In early pilot programs, the company learned that no one operator could satisfy its requirements. While Europe's logistics network is growing in size and sophistication, obtaining service on weekends and holidays continues to be a problem, Amar said.
Many companies find themselves turning to a select number of providers with expertise in particular countries. The situation is likely to grow more complex in 2003, when additional countries, including Slovenia, Hungary, Poland, the Czech Republic and Estonia, are slated to join the EU, said Marcel Stuve, vice president of corporate strategies and logistics with Buck Consultants Ltd. in the Netherlands. Logistics providers will be faced with an even greater mix of languages, cultures, tax codes and physical infrastuctures.
Stuve had expected to see a substantial number of pan-European logistics providers emerging in line with European unification. "They didn't step up to the plate," he said. "Very few can do it."
He sees some hope in the recent rash of mergers, acquisitions and alliances among global providers - Schenker International and Bilspedition, P&O Containers and Nedlloyd Line, Royal Dutch PTT's purchase of TNT, and the German postal service's recent bid for Danzas Corp. The result could be a "seamless solution" among companies with expertise in individual countries, he said.
The EU used to be known as the Common Market, "and one of the things that was 'common' was an agreement to disagree," said Gary Smith, principal consultant for Internet Global Commerce with Syntra Ltd. in Dallas. With its 15 countries and 11 languages, the EU can't be easily compared with the U.S., vast though the latter's territory may be. Securing a single logistics provider in the U.S. is far easier than in Europe, Smith said, especially when shippers venture into countries that lack the most modern infrastructure.
The promotional claims of logistics providers notwithstanding, "to say that one can adequately cope [with all of Europe] is a very broad statement that needs a lot of investigation," he said.
It won't always be that way, in the view of William Villalon, vice president of global marketing for APL Limited. Speaking at a recent conference in Rotterdam, he said new alliances among shipping lines, inland carriers, freight forwarders and others will soon provide the kind of all-inclusive service that global shippers crave.
"European firms are among the leaders in making the transition from basic transportation to value-added supply-chain logistics," Villalon said.
Rolf Noetzli, vice president of logistics with Danzas Corp. in Seattle, said new advances in information technology, along with the debut of the euro as the EU's single currency, will allow logistics providers to cross borders with ease. They are moving quickly in the direction of handling everything from a single envelope to millions of tons of product at a time, he said. Add to that a slew of value-added services, including trade financing, foreign sales management, and pick and pack operations.
But the European logistics community isn't there yet. Service-intensive companies, such as Siemens IT, are still waiting for vendors to make good on their predictions. "What I really miss," said Schumann, "is a provider telling me, 'I bring you the European solution.'"
- By Robert J. Bowman
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