Logistics Efficiency for Global Tire Supply Chain Management < TES Insights | TES | CJ Logistics
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Follow up the Insight of CJ Logistics, Korea Logistics Innovation Leader.

Report Logistics Efficiency for Global Tire Supply Chain Management 2017-11-26

Logistics Efficiency for Global Tire Supply Chain Management

Resolve Complexity. Reduce Costs.

CJ Logistics

Logistics Efficiency for  Global Tire Supply Chain  Management

The tire industry is being increasingly challenged by global economic conditions, fluctuations in its front-end automotive industry, and fierce business competition. Under the circumstances, product differentiation and efficient management of complex global supply chains are key factors to improve the competitiveness of tire manufacturers. In particular, systemic, agile and accurate logistics supporting the supply chain management can greatly contribute to business growth by satisfying the needs of various customers such as automobile manufacturers, tire distributors, and consumers.

Industry Environment

Fluctuations in Front- & Back-end Industries and Competition
In the present situation of increased uncertainty in the global economic environment and long-term economic downturn, changes in the front-end automotive industry and trade variations affected by government policies in individual countries have increased volatilities in the tire industry. Further, fluctuations in raw materials, such as natural and synthetic rubber, foreign exchange rates, and oil prices which represent a major cost in tire production, intensify the importance of managing production and sales prices. Meanwhile, the growth of local tire companies, especially in emerging countries, and newcomers to the industry have increased competition, leading to an unprecedented, high excess supply and a persistent burden from price-cutting races.

Industry Environment

Industry Environment

Globalization of the Automobile Industry
The automotive industry is one of the most globalized industries and tire manufactures are expanding their manufacturing sites and distribution networks around where automobiles areas are built and sold. Recently, emerging countries, including China, India, South-East Asia, and Latin America have shown noticeable economic development and rapid urbanization, which has accelerated motorization, making them important markets on a global scale. Under the circumstances, the establishment of efficient global supply chain that can minimize inventory through product life-cycle controls from raw material procurement to final products sales and that can facilitate prompt product supply has become a critical strength in competitiveness, every bit as important as product differentiation strategies.

Motorization by region (Source: OICA)

Motorization by region (Source: OICA)

New Technologies in Production and Logistics
As with any product, continuous investment is essential in tires to develop new products that keep up with the trends. With rapid changes in automotive technologies that have introduced electric cars and self-driving cars, new tire technologies are being developed in close collaboration with automobile manufacturers. While flexibility is considered a virtue in a supply chain to quickly respond to market demands, systemic quality control of products has improved with integrated sensing techniques, such as RFID, in the product life-cycle from production to distribution to driving.

Increased Complexity and Cost
A gradually increasing number of tire manufacturers are now trying to directly manage multiple distribution channels, because sales strategies have been changed and distribution steps have been cut down. Also, with changed consumer expectation, new business models, such as renting tires, have been introduced, suggesting changes in the tire distribution process. In addition, as automobile segments are highly divided and various tire products with different performance and price become available in the market, the number of SKUs has increased even in mass production systems. Therefore, increases in logistics complexity are responding to changing market needs such as small quantity and high frequency orders, same-day order processing, customized delivery, and return and collection, which increases costs and drives up prices.

Tire Logistics to Efficient SCM

Network Efficiency
The establishment of a global logistics network that provides integrated support for the original equipment (OE) supply and the replacement equipment (RE) supply is a fundamental requirement to build business competitiveness. A global network strategy must be prepared and at the same time, regional logistics systems must be established based on deep understandings and rich experiences in the local environment.

Industry-Specialized Logistics Operation
Operation plans must be made through careful analysis of market and sales data and implemented with flexibility to ensure that the cost structure can be efficiently controlled based on a changing volume. In addition, standard operating processes must be established to maintain consistent logistics quality, which can be achieved by close monitoring that ensures efficient storage and accurate delivery with appropriate quality controls for the nature of unpacked rubber products.

Integrated Monitoring
Essential IT systems for logistics operation (WMS, TMS, etc.) must be optimized to the characteristics of tire logistics and integrated into ERP, so that we can synchronize the real objects and data and obtain visibility on the logistics resources and goods in throughout all processes of the supply chain management (SCM).

CJ Logistics Delivers Excellence

Global Experience
Customer Partnership We provide regional logistics services for Global Top 5 tire customers and have over 10-years of experience in entire logistics operation of a global-level tire company.
End-to-End Logistics Operation In major countries, including Korea, China, South-East Asia, and America, we are handling over 50 million tires a year in inland transport, freight forwarding, custom clearance, warehousing, and delivery (FTL/LTL/Intermodal/ Express). We run tire logistics centers of about 260,000m2 in 8 countries across the globe.

Industry Specialty
Understanding tire customers Based on the long-term experience of logistics service for various customers, we have enhanced our expertise in the characteristics, market structure and logistics operation of tire products. We resolve issues with our deep understanding of the tire industry to help our customer’s business.

Consulting based on analysis In addition to experienced operation staff, we have over 70 logistics consulting specialists who facilitate customer’s logistics strategies, which improves operational efficiency. Through the multi-dimensional analysis process, they suggest strategies across the entire logistics process, including network optimization, design of warehouse layout and operational processes, optimization of routes, introducing optimal facilities, and change control. In particular, many cases have demonstrated that the reorganization of the logistics network can improve the balance of short- and long-term logistics resources and inventory as well as reduce costs.

Network analysis using a simulation tool

Network analysis using a simulation tool

Operational Specialty
With accumulated experience and know-how in various industries, we provide meticulous management services from logistics strategy development to detailed field work.

Global Standard Operating Procedure (SOP) Through careful management of storage and shipment by production time based on DOT codes, product quality, picking & sorting, verification, and accurate delivery times, we are dedicated to 1) eliminating potential effects on automobile production and assembly schedules, 2) maximizing sales opportunities at retail stores, and 3) minimizing financial losses due to defective tires and aging stocks. For example, a triangle inspection is conducted to minimize work errors and correctly track information. This has achieved a 99.92% inventory accuracy and improved one-day delivery rates to 97% (one-day delivery service varies by country).

Service quality improvements We conduct the following activities: partner company management, including training for operators and drivers, field monitoring, risk management actions, operational evaluation, and improvement projects. Also, we continuously improve the service quality by focusing on KPI management.

Cost competitiveness and maximized flexibility We have a competitive cost structure through economy of scale based on total quantity of goods transferred and provide proper flexibility for global tire logistics by unifying transporter/shipping company communication via a control tower, including a package deal on multiple countries/multiple routes.

Application of innovative technologies We have many qualified technicians and engineers to improve logistics efficiency in storage, loading/unloading, picking, and routing using state-of-the-art technologies and professional analysis tools. In addition, we suggest innovative solutions though our internal research on high technologies, such as robotics, IoT and wearable devices.

Market monitoring: While providing logistics service, we monitor the detailed needs of tire customers in the course of distribution and reflect them into improvement activities.

IT Specialty
In-house IT specialists consider product characteristics and customer’s needs and design optimal operation systems for tire logistics. The system is used to control DOT codes that support First-In-First-Out (FIFO), an important factor in tire logistics and to configure RFID sensing and information management functions. An integrated visibility system provides visibility on the operating status and analysis information from factory release to final delivery.

Integrated Monitoring & Control

Integrated Monitoring & Control

WMS(Warehouse Management System)
We provide a specialized WMS for the tire industry that supports DOT/RFID data management of incoming/outgoing products, storing & picking goods for FIFO, inventory risk alert, and value-added services (special tire storage, labeling, etc.).

TMS(Transportation Management System)
Using an internally developed engine, this provides optimal vehicle allocation and routing, tracking & tracing, customer notification of arrival schedules and electronic POD (Proof of Delivery) management.

Single Visibility
Based on the interface between various logistics operation systems and customer ERP, this allows customers to monitor the entire logistics processes in global regions. For example, customers can get various information in single spot, including current stock and inbound & outbound volume in distribution centers, import & export cargo operations, key logistics cost indicators, order process records, alerts of detention/ demurrage*, real-time tracking of import/export cargo, delivery tracking and confirmation, and hotline communication. As a result, customers can proactively use this for not only one-stop monitoring, but also productivity improvement, prevention of potential business risks, real-time reactions to delays, errors or other events, and global business strategy development.
* Detention/demurrage: Penalty applicable for shipments for exceeding the standard free time applicable both in the import & export cycles.

3D Visualizer
This shows the locations and attributes of stocks in 3D graphic screen to facilitate timely review on current statuses. This helps efficient staging and picking activities and identifies old inventory so prompt action can be taken. It can be especially useful for a product where aging control is important, like tires. Integrated Monitoring Center CJ Logistics’ Monitoring & Control Center (MCC) allows to have comprehensive information on the current operation status and to take flexible actions.

In addition, we have other operation systems, including order management system, international logistics system, and payment settlement system, and provide seamless global supply chain management through customer interface establishment and system customization.

Our Services

By providing fundamental logistics services and other various additional services related to the tire business, we support our customers’ global supply chain management

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