Award-winning vehicle processors and their challenges in North America

As part of our focus on automotive outbound logistics in North America we look at the role of vehicle processors and their relationships with OEMs, ports and road and rail services. By Simon Duval Smith

The trend of OEMs using service providers to process their vehicles at ports and railheads has grown over the last 20 years and there is a mix of traditional logistics companies and specialised vehicle processors across the US. While there is no doubt that in 2017 overall flattening of the market and very high dealer inventories in Q1 caused product to back up and dwell excessively at ports, which also caused a sharp inbound volume drop in February 2017, followed by a gradual climb back to normal volumes by the end of 2017, 2018 looks to be performing much more strongly.

We profile three such companies and share their views on the challenges facing them and their customers, as vehicle technology changes faster than at any time since the birth of the automobile.

AMPORTS

AMPORTS has been a leader in the global automotive service industry for over 60 years and with multiple locations in the United States and Mexico it is one of the largest auto processors in North America. All of AMPORTS’ deep-water facilities are located near major highway systems serving densely populated regions. The company offers real time vehicle tracking, state-of-the-art technology, custom software, and backup technology.

AMPORTS USA has seven US port facilities, located in Jacksonville (FL), Tampa (FL), Benicia (CA), Freeport (TX), and three facilities in Baltimore (MD). Its global headquarters is in Jacksonville and its corporate branch IT and engineering office is located in Baltimore. AMPORTS Mexico consists of three facilities, two port facilities located in Altamira and Lazaro Cardenas, with one inland railhead facility located in Toluca. AMPORTS Mexico corporate headquarters is located in Santa Fe. 

The company has won numerous industry awards, including:

2018 Automotive Global Awards -  Logistics Quality Award
2018 Automotive Global Awards - Leaders Award
2017 FCA Qualitas Award North America

The only port processor in North America to receive this award

2017 Automotive Global Award - Logistics Quality
2017 Automotive Supply Chain Awards - Logistics Quality
2017 Honda Superior Quality Award
International Auto Processing

International Auto Processing (IAP), which provides vehicle processing services at the US port of Brunswick, handled its six millionth vehicle at the Colonel’s Island terminal in 2018.

As well as Hyundai-Kia, IAP handles vehicles for Audi, Bentley, General Motors, Honda, Mercedes-Benz, Toyota and Volkswagen at the terminal. IAP’s handling services include unloading and storage of new vehicles, providing quality checks, accessorisation and also preparing the vehicles for transport to dealers.

Vehicles imported via Brunswick arrive from Europe, Asia and Mexico, and account for around two thirds of volume handled by IAP at the port.

International Auto Processing began its Colonel’s Island operation in 1986, with its first shipment of 567 Yugos.

Since the beginning of operations at the automotive terminal, IAP has been joined by three other auto processors: Amports, Atlantic Vehicle Processors, and Mercedes-Benz USA. According to Georgia Ports Authority (GPA), in 2017 four processors served 20 carmakers, moving 674,327 vehicles over Colonel’s Island an 8.3% (51,625-unit) improvement over fiscal year 2013.

Award winners

International Auto Processing, Inc. was the proud recipient of the Vehicle Processing Center Award at the fourth Automotive Global Awards North America in 2018. Held in the heart of Motor City, the event’s industry audience heard how IAP began operations in 1986. Since then, it has processed over 6.1 million vehicles in Brunswick, GA, and over 1.7 million at other locations.

Based on feedback from multiple customers and the auto industry’s need for more port space, IAP worked closely with the GPA creating ways to develop property quickly and cost effectively, resulting in an additional 21,000 spaces, a 38% increase in Brunswick’s current footprint and helping customers close off-site locations. The judges attested to IAP’s belief that their most important assets are its people; its talented and diverse workforce is a key competitive advantage. International Auto Processing was one of 21 companies and individuals rewarded for having achieved the unachievable or for having pioneered a new way of thinking or working.

Pasha Automotive Services

Pasha Automotive Services (PAS), headquartered at its flagship location at the National City Marine Terminal in the Port of San Diego, CA processed a total of more than 448,600 vehicle units across its four port terminal facilities in the US through 2017 for around 17 customers. The company, which is an independent operating subsidiary of The Pasha Group, has operations on the US west coast at the ports of Grays Harbor, San Diego and at Pier 80 in San Francisco, as well as the Tradepoint Atlantic terminal at the port of Baltimore on the East Coast.

PAS’s facility at San Diego handles the biggest volume by far and in collaboration with the port authority has participated in multiple environmental initiatives to support the port’s drive to be a green terminal. PAS also carried out some extensive renovation work at a former Oil Tank Farm property within its facility at the terminal and reclaimed the land for truck haulage operations to improve throughput for its customers.

The company also secured a contract last summer to process FCA vehicles imported into Grays Harbor, on the US west coast, from the port of Lázaro Cárdenas in Mexico. PAS kicked off the New Year of 2018 by introducing specialised port-processing services for Toyota Motor Manufacturing de Baja California (TMMBC). Beginning January 3, Toyota Tacoma trucks arriving via auto hauler to National City Marine Terminal from TMMBC’s Tijuana, Mexico plant were greeted with a dedicated crew and body shop at the PAS facility.
The company also secured a contract last summer to process FCA vehicles imported into Grays Harbor, on the US west coast, from the port of Lázaro Cárdenas in Mexico. PAS kicked off the New Year of 2018 by introducing specialised port-processing services for Toyota Motor Manufacturing de Baja California (TMMBC). Beginning January 3, Toyota Tacoma trucks arriving via auto hauler to National City Marine Terminal from TMMBC’s Tijuana, Mexico plant were greeted with a dedicated crew and body shop at the PAS facility.

The new volume of vehicles has increased the local workforce at PAS in National City and provides advancement opportunities for the company’s factory-trained personnel. Following processing and accessorisation, the Toyota Tacoma trucks are then transported from National City via Pasha Hawaii’s Jones Act roll-on/roll-off vessels to Toyota dealers in Hawaii, or via rail and auto hauler to dealer destinations across the Continental US and Mexico.

Recruiting expertise from an OEM customer

PAS is in an enviable position, having recruited Brian Mason, formerly of Toyota Logistics Services (TLS), to be Vice President Business Development & Administration in 2015.

Mason spent 31 years with the carmaker in the US, most recently as TLS’s national manager for strategic planning and communications, based at its former headquarters in Torrance, California. Mason focused on a range of cost and performance analyses across Toyota’s outbound logistics operations, as well as communication with its North American logistics providers.

In his role at PAS, Brian leverages his experience and industry relationships to create and sustain strong business relationships with PAS OEM customers, as well as monitoring customer operations services and proactively addressing performance opportunities. Brian frequently represents PAS as a speaker at Industry conferences with the objective to position Pasha Automotive Services as a strategic solution provider for all finished vehicle logistics customer OEM projects.

Exciting new contracts with OEMs
Brian Mason

Brian Mason

I was interested to know about new contracts and how arrangements with different OEMs and vehicle processors differ, especially given the rapidly-changing nature of vehicle technology and the demands this must put on the processor. Don Asdell, President & CEO, International Auto Processing said that there are great variations in OEMs’ demands. “IAP currently has contracts with Mercedes-Benz, Hyundai GLOVIS (Hyundai & Kia), BMW, Honda, GM, Toyota, and VW. Most agreements range from three to five years in duration.

“The services required by the OEM’s vary greatly, however IAP is fully capable of providing: damage inspection, accessory installation, fleet prep, warranty repairs, wash, undercoating, paint/body repairs, campaigns, rail loading/unloading, homologation, pre-delivery inspections, aged vehicles maintenance and coordination with ocean, truck and rail providers.”

Brian Mason of PAS speaks of an exciting new contract. “In 2017, PAS welcomed Tesla to our new San Francisco Pier 80 Terminal, beginning with spot business shipping Tesla product to China. This expanded in late 2017 to include Tesla exports to Europe. Tesla has been an excellent partner and we look forward to continuing to grow our relationship in 2018 and beyond.”

Bottlenecks and solutions

I wondered where the bottlenecks are found in access to vehicles coming in to processors; are they best (or worst) in rail, port or road transport connections?

Richard Kilbride, Chief Commercial Officer of AMPORTS puts the current climate in a historical context: "Before the financial meltdown of 2008-2010 in the US we were pretty much at capacity with trucking, rail and land in the ports. During the crunch time the industry considered that there was plenty of capacity and so no-one did very much to add rail, trucks or land. When the markets recovered, the number of units to be processed went up and we are thus back in the same situation as before the crisis. The other challenge is that seaports are not designed as long-term parking lots. One of our guys, Gary Salvador has a much-quoted saying: 'These are ports not resorts'. In the trucking area the big problem is the shortage of drivers; young people are just not attracted to the truck driving business."

Kilbride says that the processor is just a very small part of the logistics chain and is caught between the relentless output of OEM plants and the vagaries of customer demand. "As US customers expect to be able to choose from stock vehicles and often do not have a car built to order, so plants keep pumping out the vehicles for dealers to have a good range of stock but the market cannot always absorb this output."

AmportsAmports
Don Asdell

Don Asdell

Don Asdell of IAP says that the flow of imports/exports usually works well in the port of Brunswick, “When issues occur they are usually related to empty rail car availability and vessel bunching. Ideally the vessels would be spread out evenly throughout the month. When the vessels arrive at the same time with imports it creates challenges to clear enough space at FPOR. Another good example is when there are three export sailings a month and all three vessels call at the port in the last week of the month. It increases dwell for the export vehicles and takes up additional storage space.”

Brian Mason of PAS says he faces similar challenges but is very positive about improvements in rail networks and facilities, “With the recent BNSF improvements at National City, San Diego and the excellent existing rail facilities in our Grays Harbor terminal, our rail facilities are in excellent condition. We will continue to partner with BNSF and the port authorities in San Diego and Grays Harbor to keep our rail facilities in top condition.” As to bottlenecks, Mason calls out the problem of vehicle dwell. “Long dwelling of unassigned vehicles contributes to terminal congestion and increased labour costs due to vehicle movement and consolidations. Added to this is the inbound bunching of vessels and inbound railcars – when the terminal has an uneven flow of units into the terminal, it suffers from spikes in demand for storage space and labour, resulting in higher costs. Another issue is inaccurate vessel arrival schedules caused by vessel delays at preceding ports, when vessels are delayed in other ports due to congestion, then all of the subsequent ports on the vessel’s schedule are impacted.

“This kind of event can take a smooth, well planned arrival schedule and turn it into a bunched, unanticipated arrival schedule, placing high demand on acreage, labour and inland transportation resources to move units out of the port following discharge.”

Richard Kilbride of AMPORTS says he finds the main bottleneck to be in the outbound route from his processing facilities. "Usually the hold-up is the transportation out of our locations because there isn't enough truck capacity, usually caused by driver shortages, or the dealer cannot take the finished vehicles but at the moment it is the delay in lifting the vehicles, loading them onto trucks. If this was alleviated, we would need a lot less land."

An extension of the OEM plant

I ask Don Asdell how advanced he feels vehicle processing companies can become and thus how much customisation and ‘accessorisation’ can they extend their processes to? He says he likes to think of IAP, in many cases, as an extension to the assembly plant with the ability to provide any customisation that the OEM requires, “It can be simple installations like wheel locks or more complex work like interior lighting kits. There is also significant value in completing campaign work in the ports where thousands of vehicles can be repaired in one location versus trying to coordinate it at multiple dealer locations. These campaigns too can be simple (reflashing) or complex (switching out an engine).

IT and the connected car

With the increasing sophistication of vehicles, in connectivity, advanced IT and electronic systems, I ask the executives about the new challenges in these areas that their teams face in dealing with new vehicles. Don Asdell explains that while the vehicles are ‘wired for connectivity’, they are not shipped in a fully functioning state. “Many of the vehicles are shipped in transit mode which limits the ability for the processor to use any of the connectivity or advanced IT functionality,” he says, explaining that, “many OEMS are investigating the use of this technology to improve visibility of the vehicles in the supply chain. IAP has been working with our customers to help facilitate their studies. IAP has been using GPS to improve location accuracy and monitor aging.” Brian Mason says that Pasha Automotive Services has invested in technology that assists in tracking, communicating and optimising vehicle flows. “We have launched into a significant upgrade of our systems, communications and yard management capabilities.

“Beginning in late 2017 and continuing through 2018, we have re-architected our EDI communications capability with all of our OEMs in order to lay the foundation for future implementation of a sophisticated yard management solution. The team is currently working through detailed process mapping to support a smooth implementation.”

Richard Kilbride says that AMPORTS has no problem in keeping track of cars. "Right now, we can tell you exactly where every car is in our yards. A truck driver can come in and we can tell him where to find each vehicle; we are very proud of the efficiency of our yard management systems."

Richard Kilbride

Richard Kilbride

Accessorisation and damage repair

Some OEMs have said that when shipping cars built for stock (not ordered by car buyers), they will monitor how many custom features become popular and transfer the fitting of them back to the vehicle plant when the take-up reaches a certain level. I ask Don Asdell about his experience of this. He says that IAP tends only to see the end result of this. “IAP has experience receiving autos as stock vehicles that have not been allocated to dealers. When the regional sales offices allocate the vehicles, they work with dealers and market sales trends to have IAP add accessories based on what they believe the end customer will want.”

Damage repair is an important part of any vehicle processor’s work; in theory it should be falling as vehicle’s have more sensors and even cameras to enable damage-free movement and parking. Don Asdell says: “IAP has five paint booths and does a significant amount of damage repair. In addition to repairing damage caused by transportation providers delivering to the port, IAP also receives in-transit repair vehicles from the Southern region for multiple customers. As a percentage of overall volume the damage is very low and has been trending down over the years.

Richard Kilbride says that rates of damage have fallen in the last few years. "The transportation guys have got better and better in handling vehicles, driven by the OEMs. It has been a community effort across the whole logistics chain."

Some industry commentators have long held the belief that the damage repair side of vehicle processing is as profitable as that of bodyshops working for insurance companies after the vehicle is sold but Kilbride is keen to explode this myth. "We would love not to have a bodyshop! If we can get our bodyshop to break even we think we have done a good job. Unlike accident repair work on customer vehicles, we have to achieve an absolutely factory finish."

New skills and manpower shortages

Between accessorising new vehicles and repairing any damage, and general preparation, much of the work carried out by processors is highly skilled. I ask Asdell about the mix of high skills tasks and semi- or even unskilled work. “Most employees start out as distribution drivers after a robust training process, then progress through other departments based on their skill set. Some of the most skilled employees are the master mechanics and body shop painters that receive certifications based on the education and skill level.

“In most cases, IAP hires from within and has employee succession opportunities. For example, a worker can start as a driver, then move to the accessory department, team lead, supervisor, manager, etc. Many of IAP’s employees have been working for the company for 20 to 30 years.”

As with many parts of the automotive industry and the supply chain, staff retention is an issue and Asdell says there are some challenges. “Our core staff is stable and reliable. With our flexible/temporary staff we are challenged to fill the labour order every day due to unemployment being so low. Our employees are also required to have a TWIC (transportation worker identification card) to work in the Port of Brunswick. This can add approximately 30 days to the hiring process.”

Richard Kilbride say that while increased connectivity and electronic system sophistication in today's and tomorrow's vehicles should make accessorisation and other operations carried out by processors simpler and faster, these advances mean hiring more highly skilled personnel, which is expensive. "The jobs we can offer to technicians are more attractive as they are dealing with 'cleaner' systems but they are more expensive for us as they require more highly qualified technicians to carry them out."

Streamlining the business

As suppliers of services to OEMs and also working alongside logistics companies, companies such as IAP have multiple stakeholders in the chain to satisfy and deal with and I ask Asdell what OEMs could do to make IAP’s work faster and more efficient. Would better visibility of their production and sales schedules help? He says that, “Improved short term and long term OEM production schedules would help IAP better plan human resources requirements and space allocation.” On the logistics provider front he says, “The biggest impact on improving efficiencies would be to have the vessels evenly spaced throughout the month. It would reduce OEM dwell and improve the overall process.” 

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