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Southeast Asia was no place for U.S. automakers to be, during the economic crisis of 1997-98.
"We sold virtually no cars," recalls Greg Bilski, director of aftersales with Chevrolet Sales of Thailand Ltd. Since then, activity has picked up. And it's more important than ever to have a smooth-running system for distributing automotive parts throughout the country.
General Motors Thailand, Chevrolet's parent, supplies more than 50 dealers there, mostly for the Opel and Chevy models. Its parts-distribution system has evolved in line with sales growth. In 1997, GM hired Emery Worldwide Services Thailand Ltd. to manage the delivery and distribution of parts for a new Opel model, to be produced at the automaker's factory in Rayong province.
Emery, a subsidiary of Palo Alto-based CNF Transportation Inc., had just set up a wholly owned logistics unit in Thailand. For a decade prior to that, it had operated under a joint venture with a local logistics provider, says Supachart Leesuwat, logistics manager for Thailand. More recently, Emery was rebranded under the name of Menlo Worldwide LLC.
Menlo's scope of services has expanded since it began working for GM Thailand under the Emery banner. It began with freight forwarding and customs brokerage. Then it was expanded to include the handling and distribution of imported parts for the Opel. Today, Menlo manages two separate programs for GM: a parts distribution center (PDC) for aftermarket parts to dealers, and a vehicle processing center (VPC) for supplying components to an assembly line, which modifies basic vehicles for local consumption.
For the first three years of the PDC service, Emery provided its own leased facility for aftermarket parts, says Marc Schneider, now regional logistics manager with Menlo in Singapore. More recently, GM shifted the operation to its own building near Bangkok, where Menlo performs receiving, warehousing, inventory management and distribution.
The new dedicated warehouse occupies 21,600 square feet, and is managed by a staff of 14 Menlo employees. Menlo receives orders directly from GM dealers by fax, phone and e-mail. It then generates an invoice and books transportation, using a mixture of scheduled and irregular less-than-truckload carriers. It is also responsible for clearing the imported parts through Thai customs. Most shipments come from Singapore, although many parts originate in Europe, says Bilski. He oversees volumes of around 5,000 lines per month.
For critical orders, the PDC can provide same-day delivery to dealers. Other items arrive as weekly stock orders. Replenishment is on a periodic basis, triggered by GM's automated order system. Menlo receives two shipments by sea each month, Bilski says, with the use of expensive airfreight kept to a bare minimum.
The VPC program began in 2000. It involves the receipt, storage and just-in-time provision of parts for an adjacent GM assembly operation. In Thailand, the automaker produces generic vehicles, which are then equipped with features tailored to the local market. Individualized components include bumpers, seats, air conditioners, CD players and various decorative touches.
The VPC is staffed by six Menlo employees, who perform kitting and line-side grouping, as well as kanban replenishment at the production site. Menlo also picks up any unused or damaged parts, which are taken back for restocking or disposal. The whole operation is controlled by Menlo's own dedicated warehouse management system.
In taking on an expanded range of services for GM, Menlo faced several challenges. One was fulfilling a new role as neutral intermediary between the automaker and its dealers. Another was becoming an expert in the identification and classification of GM parts for the Thai market. Working directly with dealers and the production side, Menlo staffers must know which part goes with which assembly, and what's needed at any given moment. The vendor was aided, says Schneider, by the fact it was already managing PDCs for GM in India, Latin America and Europe.
Menlo is required to manage an extensive inventory of aftermarket parts for old models. It might be asked to take in five years' worth of parts for a model that has reached the end of its production life. And, of course, it has to ramp up to service new models as well. A new car can generate between 5,000 and 6,000 SKUs, Schneider says.
By taking over GM Thailand's parts operation, Menlo allowed the customer to focus on its core competencies of manufacturing and marketing, says Schneider. It provided the automaker with a more flexible cost structure, which can adjust to dips and rises in volume. And it eliminated the need for GM to staff an ancillary operation with its own people.
Operational quality has improved as well. Bilski says the Chevrolet division now has 95-percent first-pick availability of parts in Thailand. At the same time, overall costs have dropped, and GM has greater visibility of local inventory than ever before.
Bilski says Menlo is well equipped to handle a further expansion of GM's sales in Thailand, and possibly the distribution of parts beyond the country's borders at a later date. "They've shown the capacity to grow with us," he says.
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