Ford’s finished vehicle finesse

Five years ago, Ford was embarking on a road to recovery; rationalising its product range in Europe and beyond and redesigning its production location strategy has had a profound impact on its finished vehicle distribution network as Simon Duval Smith reports. 

In Europe, the last few years have seen an upturn in the OEM’s sales and profits and this has put tremendous pressure on both its production and distribution networks.  

The shifts in production plans for some of its most popular vehicles have extended well beyond European borders and have seen such location changes as bringing the production of its increasingly popular EcoSport small SUV to Europe from India and Brazil. 

Other notable changes in production location include several Focus models now being exported from its Saarlouis, Germany plant to global destinations along with the Transit light commercial vans shipping from Turkey and Spain to global markets. Saarlouis has been affected by the market downturn in Brazil and other South American markets, causing the carmaker to re-think output and model plans for the German plant. 

Global agility and flexibility

Ford has shown a nimble and imaginative attitude in responding to market changes around the world, and has done so with an agility not seen in many major OEMs. By comparison, GM has foundered in Europe, failing to address the changing market with the open-minded flexibility on plant locations and imports and exports shown by Ford, leading GM to sell its Vauxhall and Opel divisions to PSA. 

Joe Hinrichs

Joe Hinrichs

Speaking at our Automotive Global Awards in Detroit recently, Joe Hinrichs, Executive Vice President and President, Global Operations, said: “We rely on our finished vehicle shipping and transport partners more than ever now that we take a totally global view on where we can make a vehicle and the fact that we can now ship it to and sell it in almost any location.” Addressing the assembled LSPs and other logistics providers and shipping companies, Hinrichs added: “This flexibility is only possible due to the excellent service we get from you guys. As a former logistics manager myself, I never forget how important our global transportation partners are; it’s you guys that make our global network as efficient and cost-effective as it is.” 

Indeed, just considering Europe, Ford has had no hesitation in importing vehicles from afar to satisfy market demand. It has brought the the Ka+ and previously the Ecosport from its plants in Sanand and Chennai in India, its Ranger pickups from the Silverton Assembly Plant in Pretoria, South Africa, the Mustang from Flat Rock, Michigan and the Edge from Ontario, Canada. 

Re-using the Romania plant 
Steven Armstrong

Steven Armstrong

The OEM’s plant in Craiova, Romania had been building the B-Max minivan/small MPV since June 2012 but sales of the sliding-door car never really took off and the plant stopped making it in September 2017. The EcoSport had been imported from India into Europe since it launched in the region back in 2014 and according to its latest results, Ford sold 62,700 EcoSports in 2017, up around 5,500 on the previous year, and the UK was the company’s top market by registration. The company has seen an overall increase in sales of crossover models in Europe over the last year. Showing its agility, Ford started production of the EcoSport in Craiova just one month after B-Max production finished, shifting tooling and expertise from India to help get the facility up and running as fast as possible. Imports of the Ford EcoSport compact SUV into the UK from Romania are now fully underway via the port of Constanta. Ford has invested some €200 million ($235 million) in the Craiova plant for EcoSport production and for another, as yet to be announced model. Ford said that the expenditure is a sign of the company’s trust in government promises to deliver key upgrades to infrastructure and logistics improvements.

According to Ford the government has indicated that it will prioritise the following projects: the Pitesti-Sibiu highway; Craiova-Pitesti express road (with the two ring roads, Slatina and Bals); the rehabilitation of Timisoara-Craiova and Craiova-Calafat rail links; and the Craiova Intermodal Transport Terminal. 

“It is important to ensure there is a clear and visible timetable on implementation,” says Steven Armstrong, president and CEO Ford of Europe, Middle East and Africa. “The tenders for the Craiova-Pitesti express road and the Pitesti-Sibiu highway have already been launched, but keeping to the calendar announced is always a challenge in Romania. We would like firm commitments from the government that the announced calendar will be maintained.”

That has already significantly increased inbound and outbound operations, says Armstrong, adding: “With the second vehicle coming now to Craiova, the current limitations of Romanian infrastructure raise a question mark on the overall competitiveness of our Romanian site.”

Ford said its investment was based on the government’s promises to deliver key upgrades to the transport infrastructure and any delay would significantly constrain the efforts made by the carmaker and its suppliers to move increased volumes of vehicles and components.

“We are committed to working with the government to ensure these vital road and rail upgrades are completed,” adds Armstrong. 

Ford declined to give further details about arrangements made with component suppliers and logistics service providers, including transport of finished vehicles, or about what the €200 million investment will pay for. 

To enable a second vehicle to be produced at Craiova, Ford Romania expects to hire around 1,500 basic and skilled operators for a third shift to augment the current workforce of more than 4,400. 

Armstrong speaks of the commitment the OEM is making in the region: “The addition of this second vehicle is a testament to the operational flexibility of our Craiova plant and reflects the strong partnerships we have with local suppliers and the community.” 

The new investment takes the company’s total capital expenditure in its Romanian manufacturing operations to nearly €1.5 billion since acquiring Craiova in 2008. The latest upgrades included more than 550 robots being installed to improve efficiency and quality in the paint, trim, chassis and body shops. 

Ford Starts European Production of the New EcoSport SUV
Global strain on the supply chain

While its Craiova initiative makes for interesting reading, the influence of sales success in Europe is being felt much further afield and this has driven a lot of changes in Ford’s global finished vehicle strategies.

Andy Barratt

Andy Barratt

As Andy Barratt, Chairman and Managing Director of Ford of Britain, told us recently, changes in the way cars are ordered and delivered have had a profound effect on the finished vehicle supply chain. "We always build to dealer order, we never build speculative runs of vehicles to our own specifications. Some orders are pre-sold, indeed our sold order content of new build has never been higher.” While customers are prepared to wait a little longer for their exact specification to be built into a car, these same customers are demanding more features and services from carmakers, and with vehicle variety much greater than say 20 years ago, this puts great pressure on all finished vehicle delivery organisations. 

Ford has worked very hard to streamline this area of its operations, implementing stricter inventory and management systems but as Joe Hinrichs says, “We need the LSPs, the large and small operators, right down to the last mile vehicle transporter driver, to really step up and complement what we are doing at the back end, with great Ford customer service.”

Tracking and monitoring vehicles through its order fulfilment process has improved immensely at Ford in the last 10 years or so, and this has helped give more accurate delivery times to dealers and ultimately buyers. This is further complicated by the mix of European-built vehicles and those coming in from further afield.  

In the past this situation would have led to shortages at some times and vast over-stocking at others but Ford is running a much leaner operation now, as Andy Barratt tells me. "We have one vehicle holding centre in Flushing (Vlissingen), in Belgium which is empty most of the time. We are constantly watching how many vehicles dwell at locations for three, five or ten days, which we follow up to try and control,” he says. “We also pay similar attention to quality, assessing where damage issues may occur.” 

To help expedite more efficient finished vehicle logistics, Ford has been investing in hardware and software to track vehicles better, using RFID for trucks using its finished vehicle yards in Europe and, like BMW, as reported in Automotive Purchasing and Supply Chain recently, is harnessing vehicles’ own telematics for more connected distribution. 

Vehicle holding centres and Brexit

As Andy Barratt says, the Vehicle Holding Centre (VHC) concept has been started in Europe, for UK-bound vehicles and is part of the OEM’s new policy on how distributors and dealers hold vehicle stock. Put simply, the VHC concept, operated by Ford on behalf of its dealers, allows many vehicle retailers to pool stock in one place and thus benefit from a virtual ‘shared showroom’ which allows them access to more variety of models and specifications that they can swap and change with other dealers. This works by having the dealers nominally owning a certain number of vehicles each, and being able to choose from vehicles across the VHC, effectively swapping or buying inventory from other dealers. Once a dealer selects a vehicle from the VHC, Ford delivers it to the desired location within five to seven days, though in some cases vehicles pass through modification or processing centres for accessories or additional options. 

The system would seem to benefit the dealers most but as Ford has already wholesaled the vehicles, it no longer owns them and has benefitted from their sale. 

As well as Flushing, the OEM manages around 30 VHCs across Europe on behalf of dealers, including countries such as Germany which has several. 

Flushing is a central point to consolidate shipping flows by barge, rail and short-sea from Ford’s European plants, and the short and frequent shipping into the south-east of the UK is a cost-effective and efficient way to serve Ford’s largest market. At least three vessels depart each day from Flushing to Dagenham, east of London, for distribution in the UK.

As the stock for UK dealers is held within the EU, at Flushing, there is some uncertainty and concern about Brexit - what tariffs etc will be attached to vehicles in this situation? And while the carmaker has a lot of imports coming in from outside the European single market and customs union there remains some risk of tariffs and other costs in delivering to what is the OEM’s single largest European market, once Brexit is resolved. 

Routes to success 

There have been many changes to the carmaker’s shipping and other mode distribution routes in the last decade, involving clever utilisation of defunct plants such as Dagenham and Southampton. 

In no particular order, vehicles such as the Fiesta built at its traditional base in Germany, Cologne, travel by barge on the River Rhine to Antwerp in Belgium and to the aforementioned UK VHC at Flushing. From there they travel by ferry to the UK while for other European markets, the multi-modal approach centres around train transport and some truck carriers. The best-selling Focus models travel from Saarlouis to Flushing by train, from where they move to either the VHC or directly to dealers via ferry if sold, as well as to the port of Antwerp for export. A clever and efficient use of a route can be seen in the rail route between Saarlouis and Ford’s plant in Valencia, Spain which carries both finished vehicles and engines. 

The closure of the giant Dagenham plant in the UK, along with the smaller Transit plant at Southampton has freed up some valuable port facilities and the OEM has also added Liverpool as a major hub. These ports are used to process both outgoing engines, from the Bridgend plant in Wales, and incoming vehicles. The carmaker has been an investor in facilities and infrastructure for more than 15 years; it owns its final vehicle delivery truck fleet and has invested in some of its port facilities such as at Dagenham where it spent almost $8 million on rebuilding its own terminal to take its own vehicles and some other OEMs’ from Flushing, and from which to export engines. 

The EcoSport SUV built in Romania has proven to be a good seller in the UK and western Europe and most (around 90%) of these vehicles are sent by rail to central and western Europe with some going to the the port of Constanta for export by ship. 

Short sea and deep sea efficiency

Indeed, ship traffic has been significantly increased by Ford and it is clear that with efficiency and cost-saving the OEM is keeping a weather eye on the environmental impact of its finished vehicle logistics. Significant routes include a short-sea network from Turkey, with vessels moving Ford Transit and Tourneo vans from Kocaeli to the ports of Koper (Slovenia), Venice (Italy) and via Valencia to the northern European ports of Southampton, Flushing and Bremerhaven (Germany). 

Deep sea routes include that of LCVs from Turkey to Africa, Asia and the Americas, the Focus from Saarlouis and the Transit Connect from Valencia to global markets. 

Managing these vehicle flows brings many challenges and Ford seems keen to harness the latest track and trace type technology to monitor movements. It uses a modern version of the traditional Bill of Lading, where each time a vehicle (or an engine or set of components) moves from one mode of transport to the next, it is scanned and logged, providing visibility of the whole supply chain for the OEM but also for the dealer network which can see where the order is at any time. As Joe Hinrichs says, “The white heat of technology is a great thing inside the vehicle, making safer and more efficient cars with more features to delight the customer but we must also employ technology to make cars more efficiently and get them to our customers in a timely and efficient fashion - that’s where you guys (logistics providers) can help us improve our networks.” 

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