Logistics and planning the location of production plant or warehouse has many more factors than just computing a break-even analysis. Our textbook discusses BMW and their strategy and the factors in the decision to create a production facility in Spartanburg, South Carolina. Another German automobile company that places focus on logistics and location is Mercedes-Benz. “Logistics is becoming more and more important for us,” says Markus Schäfer, member of the divisional board of Mercedes-Benz Cars for production and supply chain. Mercedes has been growing very rapidly, expanding “by around 1m units in sales and production in just five years, with passenger car output at around 2.4m in 2017”. A rapid expansion such as this can be a logistics and supply chain nightmare. In response, the company “has overhauled its supply chain management department, moving from a transport-focused organisation to a global end-to-end approach that integrates planning and capacity planning, purchasing and operations across inbound, in-plant and vehicle logistics.” The article discusses factors that can affect a company’s strategy in determining a location for manufacturing plants or distribution centers. These factors are similar to what we have discussed in class and read in the textbook and they are: “shifting customer demands, regulations, currency changes or even in response to tariff or customs barriers – like Donald Trump’s plans for elevated duties on steel and aluminum, or fallout from the Nafta and Brexit negotiations.” Germany is ranked 20th in ease of doing business according to “data.worldbank.org”. As usual, the advancement of technology brings forth a lot of benefits but also brings forth the ability for companies to improve, and in this specific situation it is the ability to improve logistics with the help of technology. “Logistics also has an essential role to play as production and distribution use more digital technology. The carmaker’s plans for a new facility at its Sindelfingen plant, near Stuttgart, known as ‘Factory 56’.” This new facility will have driverless transport systems and the use of automated driving features for vehicle logistics handling. According to the wikitravel page of Sindelfelgen, it is “characterized as an industry city with a large Mercedes-Benz manufacturing plant dominating large parts of the city.” Even in the first description of the city, it includes a mention of Mercedes’ manufacturing plant which demonstrates the colossal impact of the plant on the city. Would it be possible to incorporate customers into a company’s supply chain? Yes it can, Schäfer “envisions further links between customers and the supply chain, with the potential for customers to modify their orders and deliveries via smartphone.” Incorporating customers into the supply chain could create a competitive advantage in terms of flexibility. In the article, Schäfer was posed the question, “How important is logistics in this strategy?”. He answers, “Logistics is becoming more and more important for us because of several different elements. One is in controlling inventory, which a global company like ours has huge potential to reduce. There is also a lot of cost involved in transporting goods from supplier to plants, moving material within factories, and delivering the product to market.” This was the motivation to create their own operation that covers the whole supply chain.
Is location and logistics (in terms of production) the most important aspect that determines the success of an automobile company?
Here’s a link for more info on automotive logistics: