2012 Automotive Logistics Special: CHEP India drives new efficiencies in logistics

As lean, mean and green catches on as the latest growth driver in the Indian automotive sector, component makers and OEMs, both Indian and multinational, are vying for reusable and returnable packaging solutions to save on costs. This is part of their adoption of global processes in their operations to meet international standards and integrate their functions over geographies. This is where CHEP, a leading player in pallet and crate pooling globally, steps in as a catalyst towards achieving this goal.

CHEP’s packaging solutions result in savings of three to 15 percent in the overall supply chain, says Mudit Gupta, head – automotive, North and South OEMs, CHEP India. The company has 180-plus automotive customers in India, with plans to double its automotive revenues within a year.

Making this possible will be the targeted acquisition of over 50-odd customers in a year’s time as well as lane expansions brought about as component makers commence supplies of parts to more OEMs. Gupta says that the industry has realised that it has to collaborate at the back end to remain competitive at the front end as the sector slowly transitions to a global hub for manufacturing.

The CHEP TCM (Total Crate Management) solution based on total crate management involves outsourcing of designing, development and management of reusable packaging to a service provider. Vehicle manufacturers and their suppliers are converting all their existing and traditional one-way packaging such as corrugated and wooden boxes within their supply chain to high quality, ready to use, reusable packaging involving use of plastic bins and foldable large containers which bring about efficiencies and cost savings at multiple touch points. These are owned and managed by CHEP which also takes care of cleaning, conditioning and on-time deliveries. Its solutions design team works closely with the suppliers to develop the solutions.

Standard crates are customised internally to accommodate various sizes and shapes of components to enable safe and just-in-time movement from the component supplier’s plant to the OEM’s production line. All the while, IT systems and processes track and control all the packaging at each node in the entire supply chain to ensure smooth movement. The solutions are available on a Pay-As-You-Use basis, freeing up valuable capital that can be deployed in the core business by the industry.

At present, business from the automotive sector accounts for around 30 percent of CHEP India’s business and the company wants to scale it upto 70 percent within a decade. The FMCG sector currently holds the lion’s share of business. Globally, the automotive sector contributes around five percent of CHEP's revenues and the gameplan is to double it. Clearly, India will play a key role in this endeavour.

Optimising just-in-time flow of parts

In India, CHEP is engaged with most of the top component manufacturers who supply their products to passenger vehicle and tractor makers in the country with the TCM solution reducing costs, shoring up productivity gains, improving component quality and greening the end-to-end supply chain.

TCM as a solution helps optimise just-in-time component flow to the OEM’s production line as and when required and ensures that there is no decanting of components at intermediate warehouses as the components flow to the OEM’s facility, saving time and space.

The company’s consultants map the entire supply chain to ensure that the operations are lean at every stage of the supply cycle. And empty packaging equipment at the OEM location is recovered to optimise packaging usage. Usually, automotive manufacturers leverage one-way disposable packaging that involves the use of corrugated, wooden boxes and various non-standard packaging. The industry needs a paradigm shift to understand the relevance of the TCM solution, says Gupta. However, a challenge is that most industries compare the costs of disposable packaging with the cost of the TCM solution. CHEP is trying to match this through customer engagement, education of the end-to-end supply chain, value propositions and collaborations.

TCM helps drive benefits to OEMs

Since most of CHEP's automotive customers have derived benefits from the TCM solution, they are pressing for lane expansions to newer products as they convert their entire packaging to the solution.

Consequently, the OEMs have become the biggest proponents of TCM as they standardise the component flow to their production lines and enhance the value proposition with a more efficient supply chain.

Collaboration is the best strategy to harmonise supply chains and standardisation is the basic tenet of collaboration. CHEP says its customers have improved their operations as they migrate their component packaging to TCM.

“We will achieve 100 percent efficiency when each and every component flowing to an OEM will follow the TCM solution. While we improve the internal processes, government bodies and industry forums should advocate standardisation of truck bodies, material handling equipment at warehouses and better road infrastructure. Collaboration and standardisation is the future of efficient supply chains,” sums up Gupta.

SHOBHA MATHUR