ZF’s Transition from Lean to Provide Chain Resilience

I interviewed John Sobeck, Vice President Materials Administration Providers and Provide Chain 4.0 on the ZF Group, about their digital provide chain transformation journey. It seems ZF has been on this journey for over 20 years! They started this journey earlier than the time period “digital transformation” was even getting used.

ZF is a Tier 1 provider to the automotive business. This expertise firm is headquartered in Friedrichshafen, Germany. ZF had gross sales of 38 billion euros of their final fiscal yr. Amongst different issues, ZF manufactures electrified powertrains, automotive chassis expertise, lively and passive security programs, and superior driver help programs. Whereas most of their gross sales are to automotive OEMs, additionally they promote parts that go into different merchandise – vehicles and busses, wind generators, tractors, development tools, and so forth. ZF affords product and software program options for established automobile producers and newly rising transport and mobility service suppliers. Lastly, they’ve an aftermarket elements division.

The ZF provide chain is advanced. This producer has 188 manufacturing places internationally. These services obtain uncooked supplies and parts from about 10,500 suppliers, about 1,000 of whom are strategic. ZF transforms these bought merchandise into over 2,000 merchandise. For those who have a look at the best way the completely different parts could be mixed into their completed items, you find yourself with over 7 million potential mixtures.

ZF’s Digital Provide Chain

ZF has been working with a provide chain options supplier known as SupplyOn since 2001. SupplyOn gives multi-enterprise provide chain community (MSCN) answer. This can be a key expertise for improved collaboration throughout an prolonged provide chain.  A MSCN platform is constructed on a many-to-many structure which helps a group of buying and selling companions. MSCN options present provide chain visibility, network-based purposes, and community analytics.

Based on Mr. Sobeck, the SupplyOn answer signifies that when you have to “register a provider or to replace their info, you solely want to try this as soon as as a substitute of a number of instances.” This info features a provider profile that units out the standards for which suppliers are used to assist the manufacture of designated merchandise, and which factories these distributors provide.

However the visibility benefits, Mr. Sobeck defined, are much more necessary. “We  use digital call-off info in a number of methods. What number of elements do we’d like? From whom? When?” ZF sends the call-off, together with the forecast, not simply to their suppliers, however to their carriers and 3PLs. This allows carriers to optimize their transportation capability to ship the cargo on time at finest worth.

Mr. Sobeck harassed how interconnected the data flows have been. When the provider has produced the products, they ship a sophisticated ship discover (ASN) to ZF by way of SupplyOn. This ASN mechanically kicks off a transport order that’s despatched from SupplyOn to the service that may transport that provider’s items to the designated manufacturing facility. As a result of these are tightly built-in message flows, the method has added surety.

Then, Mr. Sobeck defined, “we have now transport info.” Which ship are the parts being shipped on. Which service goes to select up the container and when is that scheduled to occur? Which truck will the products arrive on? Items movement to consolidation facilities the place their 3PL companions scan the elements right into a container. Due to this, ZF understands which parts are by which containers after which the place these containers are on an ongoing foundation.

This visibility to inbound shipments is married to ZF’s manufacturing system.  Will the wanted elements arrive at their plant on time? If the supply is a bit brief or will likely be a day or two late, is that also ok?  Will ZF nonetheless be capable to ship to their prospects on time?  “If something adjustments, we have now this end-to-end visibility.”

Previous to the usage of this SupplyOn enabled answer, ZF relied on fastened lead instances. “We have been assuming a cargo from Hamburg to Shanghai  takes 14 weeks. We relied on that. After 14 weeks the ship will arrive, customs clearance and post-carriage will likely be executed and we’ll get our elements.” That lead time, nonetheless, was removed from precise.

Now as a result of SupplyOn is processing the ocean vessel’s monitoring info, they get new estimated instances of arrival day by day. Now, “we may give our colleagues in Shanghai up to date info on when they’ll obtain their elements.”

And this isn’t executed by e-mail. It’s fed immediately right into a planner’s system. “It pops up in his every day work display screen.”  The planner sees the up to date estimated time of arrival, the quantity of elements that will likely be delivered, and might see whether or not they have the products they might want to assist the manufacturing plan. If there’s a downside, the planner seems on the choices. “Can we rearrange manufacturing? Or do we have to ship this by air?” Are there different choices?

Having updated info on an ongoing foundation is the transparency ZF wanted for extra optimum choice making. However expertise just isn’t a magic wand. “Transparency is value nothing,” Mr. Sobeck exclaimed, “if it doesn’t set off selections. And these must be the best selections to save cash and guarantee on time deliveries to prospects”.

The platform has helped the corporate save giant quantities of cash. The answer has led to course of efficiencies – fewer individuals required to do the identical quantity of labor. Extra considerably, there have been substantial price financial savings in transportation from utilizing SupplyOn’s transportation answer. There are additionally averted prices. If a planner is aware of that the required parts received’t arrive on time by ship, and that air freight should due to this fact be used to expedite the cargo, “it makes an enormous distinction on air freight charges if you have to have a ton on the airplane subsequent week versus in 4 weeks.”

The Transition from Lean to Resilience

No business has been extra dedicated to lean practices than the auto business. One instance is the demanding observe of delivering parts to an OEM manufacturing facility just-in-time, just-in-sequence. Lean cuts stock out of the availability chain. However when issues go improper, lean can result in giant losses in gross sales as a result of there are not any just-in-case stock buffers. Within the final annual report, the corporate admitted that the chip scarcity led them to extend inventories of their provide chains. This did adversely have an effect on their monetary outcomes.

Even earlier than COVID, Mr. Sobeck defined, forecast accuracy had been declining as product gross sales turned extra unstable. Reducing forecast accuracy makes it tougher to run a lean provide chain. Then COVID hit and the already declining forecast accuracy plummeted even additional. The auto business is now making the transition from being lean to changing into resilient.  Sourcing from extra native suppliers and having shorter provide chains is a part of the reply. ZF is now additionally regularly checking the creditworthiness of their suppliers to safeguard their provide chain. However the granular provide chain visibility offered within the SupplyOn answer has additionally made the transition to working a resilient provide chain simpler.

One instance of that is offered by the semiconductor scarcity. This scarcity plagued the complete business and led to the lack of tens of billions of euros in revenues throughout the business. Due to the digital call-off processes, additionally intercompany, ZF knew which chips have been going into which merchandise, which prospects wished these merchandise, and what number of they wished. ZF had visibility into what shipments they might count on in 4, or 6, or 8 weeks. They might then clearly talk what they might produce and the way that manufacturing could be allotted throughout their buyer base. ZF has a transparent coverage of offering a justifiable share to all their prospects. This implies, that the product briefly provide that may be produced is allotted throughout all their prospects in accordance with their unique share of the whole quantity.

Whereas the coverage is evident, having the ability to do the justifiable share calculation, after which executing it pretty, is in no way easy. The SupplyOn answer helped them to make this end-to-end transparency to their prospects potential. At any time when prospects requested, Mr. Sobeck mentioned, “we may at all times share what their allocation was” based mostly on the whole quantity of chips out there and the method. “We have been capable of be very clear and show that we adopted our rules.” In some circumstances, exterior audits proved that ZF had performed by the foundations. If we needed to talk with “e-mail and Excel solely, there is no such thing as a approach we may have achieved this. Digital communication was the important thing for achievement on this space.”

The Path Ahead

However extra work stays to be executed. SupplyOn is the defacto business normal for Tier 1 automotive suppliers in Europe. That signifies that if a Tier 2 vendor is supplying ZF Group, Continental, Bosch and different Tier 1 producers, they don’t must be utilizing completely different collaboration instruments. However relating to the automotive OEMs, each OEM requires their Tier 1 suppliers to make use of a distinct portal.

Mr. Sobeck’s imaginative and prescient is that info ought to be capable to movement out of a system like SupplyOn and into different comparable programs, and that the data needs to be reworked mechanically right into a format usable by the opposite system. “It needs to be just like the cell phone world.” One particular person is likely to be utilizing an iPhone, one other a Galaxi. The customers could be on completely different mobile networks. And but these two individuals can nonetheless talk with none issues. Mr. Sobeck has excessive hopes for collaborative, open knowledge ecosystem for the automotive business based mostly on frequent guidelines for knowledge sovereignty in accordance with GAIA-X.   A consortium known as Catena-X is working to drive precisely this type of seamless, cross portal, communication – and SupplyOn and ZF are a part of it.