This document discusses creating a sustainable supply chain for automotive parts. It first provides background on the complex global logistics network and profitability of automotive parts. The top challenges for supply chain management are identified as visibility, risk management, cost containment, customer demands, and globalization. To improve sustainability, elements like redesigned logistics, warehouse management, obsolescence management, product compliance, customer protection, IT systems, and developing people are discussed. The document provides examples of strategies within each element to reduce costs, environmental impact and improve customer satisfaction for a more sustainable automotive parts supply chain.

1. Creating a Sustainable Supply Chain
The Cargo Show MENA 2015
Dr. Igor Egorov
by Dr. Igor Egorov

2. To Be Covered:
• Automotive parts SC – intro
• Challenges’ ranking
• Ways to SC sustainability
• Sustainability by SC professionals
• Ways to SC sustainability
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Dr. Igor Egorov

3. • Highly complex logistics
– Thousands suppliers
– Dozens thousand customers
– Millions of SKUs
– Global yet localized
• Parts - profitable business
– 20-30% of the revenue
– 30% net profit (capital good industry)
– US automotive aftermarket = $318.2 billion (2013)
• Right part, right time, right place at lowest cost
• Full speed while looking at rear mirror
Automotive Parts SC
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Dr. Igor Egorov

4. Triad markets – Central Logistics Centers
Secondary: Mixed 2PL and 3PL
Large markers, partially with own production: 3PL
Logistics hubs: 3PL
Dubai’s automotive spare
parts trade: AED 37 billion
Automotive Parts SC
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Dr. Igor Egorov

5. 1. SC visibility
2. Risk management
3. Cost containment
4. Customer demands
5. Globalization
Challenges Ranking*
* Reference: IBM Automotive SCM Study The Cargo Show MENA 2015
Dr. Igor Egorov

6. Sustainability for SC Professionals
• 43% - cost reduction
• 35% - environmental
impact
• 25 % - customer
satisfaction
PwC, PwC’s Global SC Survey
Cost
Enviroment
Customer
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Dr. Igor Egorov

7. Elements of SC Sustainability
• Redesigned logistics
• Warehouse management
• Obsolescence management
• Product compliance
• Customer’s protection
• IT
• People
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Dr. Igor Egorov

8. Redesigned SC
• Transport management
– Reduce air shipments
– Consolidation
– Avoid unnecessary transshipments
• Reverse logistics
• Partners with sustainable policies
• Localization:
– Oil – move manufacturing from US to
Oman
– Batteries – to UAE
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Dr. Igor Egorov

9. Warehouse Management
• Reduce energy cost:
– AC schedule, day-light, solar power
• Smart packaging, not “shipping air by air”
• Packaging re-use
• World Class Logistics policies reduce waste
• Automation and Productivity
• Interconnected inventory management
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Dr. Igor Egorov

10. Obsolescence Management
• Supply chain visibility
• End-to-end inventory planning
• Strict shelf life monitoring at
each SC point
• Scrapping – environment
certificate
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11. Product Compliance
• Automotive parts - high risk
(as per customs authority):
• SASO
• KUCAS
• EGYPT ECE
– Brake pads (asbestos free)
– Chemicals
– Oils
– Batteries
• etc.
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12. Customers’ Protection
• Government agencies request wider
inventory
• Heavy fines
• Additional costs - airfreight & inventory
• Disruptions in SC
• High customer expectations
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13. ICT: great servant, bad master
• Global networks impossible without IT-support:
ERP, WMS (Warehouse), TPS (Transport), SCM
• 50%+ of logistics systems outdated
• 3 of 4 companies’ systems “weak”
• Significant investments
* Reference: Study of Aachener Institut für Operations
Research und Management GmbH (Inform)
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14. People
• Support educational needs
• Motive staff, incentivize improvements
& environment initiatives
• Measure managers not only on
cost savings, but on sustainable factors
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15. THANK YOU
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Dr. Igor Egorov