In Transit?

East London born and bred, Ford’s director of material planning and logistics for Europe, Stephen Harley, has worked around the globe for Ford, beginning his career in logistics, spending some time as manager of the old Ford assembly plant at Dagenham, and then returning to his primary interest – logistics. In recent years he has overseen the transfer of Ford Transit production from Genk in Belgium to the company’s new facilities at Kocaeli in Turkey, and before that he spent three years at Valencia,
Spain. Now, as material planning and logistics director for Ford Europe with responsibility for all European operations – and manufacturing taking place in nine countries from the UK to Spain, and Turkey to Russia – I wondered whether he retained the identity of being British, or thought of himself as European.

“I work in a totally European environment. I’ve lived in
Germany, Spain and Britain. It might be in the DNA, but
I was brought up here in east London and that lasts.
But your attitude is impacted by all the experiences
that come afterwards. I cannot differentiate any longer
within this business, between Britishness, Germanness,
Spanishness. We’re universally European. In fact I’ve spent
five years in North America (at the global HQ, Dearborn),
and in Ford we have a culture which is global.”

The structure of Ford does, in fact, give the European
operations a fair degree of autonomy, he explained. While
there is a global vice president for manufacturing, based
in the US with worldwide responsibility for manufacturing,
“there are what we call the business groups which have
an appropriate autonomy. This has created a very good
balance. The business units have regional responsibility
with regional budgets. So the manufacturing budget for
Europe is European. The fact that Joe Hinrichs is the
group VP ensures there is a common best practice and
investment efficiency. He drives the policies, but the
execution is local.”

Ford in the US has suffered considerably from the
changing habits of American car buyers, away from the
huge gas guzzling SUVs and towards smaller more cost
effective vehicles. And to make matters worse, many
global automotive industry experts have predicted that
this autumn will be dire as a result of the credit crunch.
However, the SMMT (Society of Motor Manufacturers and
Traders) has made a more modest downward revision
of the overall UK car market this year, from almost two
and a half million to 2.2 million. Harley resisted the
temptation to give any crystal ball predictions for Ford,
and commented: “I’m in the manufacturing side and I will
react to demand. But I can tell you that we’ve consistently
been running at a very healthy capacity utilisation. Our
cars are all very young which may mean that we are less
prone [to this downturn].”

Harley believes that Ford Europe’s new models, with their
fuel efficiency and low carbon rating, have so far offset the
effects of the credit squeeze. And the strength of these
European models has also attracted the attention of the
US side of the business, which is struggling to adapt to
the rapidly changing requirements of its home market.
Ford is to convert three US truck and SUV plants for small
car production, and six small European vehicles are to
be manufactured in North America to feed the growing
market for fuel and cost efficient cars.

“The question will be,” he continued, “how quickly can
they convert current facilities to start assembling our
current generation and slightly into next generation of
vehicles. It’s an urgent conversion going on now.”
The world of international logistics has been, and is,
changing rapidly, and Harley is reacting quickly to the need
for low carbon operations. “People are recognising the
impact that transportation is having on the environment,
and transport companies are now working on their carbon
footprint. The interesting thing is that it’s now also driven
by costs.” The soaring cost of oil is making everyone
rethink their strategies, and I was curious to see if he
could see where the prices would go over the next year
or so. He laughed, and replied: “If I could, I’d probably
be a speculator instead of a user. What we can see is
there’s a new awareness of fuel costs. The impact has
been significant for our own carriers.”

He explained that for a truck operator, around a third of
the cost is for fuel, a third for the driver, and a third for
everything else: vehicles, maintenance and overheads. If
fuel doubles in price, as it has done, that increases the
total cost by 15 per cent. “Frankly what they’d like us to do
is pay them a cost increase. But we couldn’t absorb that
and our customers wouldn’t want us to pass it on to them
– it’s a competitive market out there.” Harley’s answer is to work closely with his carriers to help them offset the
cost increases through improvements in efficiency. “We
can’t do it completely, but most of the fuel cost increases,
so far, have been offset by method improvements.”

He described how he works with DHL Exel, his lead
logistics provider. DHL uses a sophisticated model
to calculate material flow across Ford Europe. “They
design that into a network which we then place with
road carriers, rail transport or our shipping company.
That enables us to retain control.” If the logistics provider
perceives a change in demand at Ford, or any other
client, “then we hear about it and can adjust our routes
to optimise transport utilisation and reduce costs, so
it’s really collaborative between the carrier, the logistics
provider and ourselves.”

He optimises the flow of materials within the Ford
supply chain as efficiently as possible, but, “the natural
flow of goods isn’t always that perfect. Sometimes
material moves in one direction and we don’t have any
counterbalance, so the carriers would provide that.”

One important facet of maintaining a well optimised and
effective logistics network is: “we don’t frequently change
carriers – we don’t go shopping for carriers. We’d much
rather be in a relationship where we understand and can
help with cost. You can’t do that if you just go out and
buy transport.”

Ford is in the enviable position of being completely
multi modal, which gives Harley the capacity to use
road, rail and sea transport to their most cost effective,
and Ford Dagenham lies at the heart of the UK
logistics web. Transport radiates from here to all ends
of Europe. “When Henry Ford chose the location for
the Dagenham plant, some 80 years ago, he chose an
ideal logistics location,” Harley told me. “He didn’t do
it knowingly, but the fact that we’re on the river, with a
rail link, and right next to the motorway network, makes
this an almost perfect place to blend all these modes
of transport.”

The Dagenham site sits on the Thames with its own
busy port facilities, handling three ships a day to and
from Vlissingen in the Netherlands. The motorway road
link feeds into the M25 and the site has railway siding
directly linked to the national rail network for transporting
loads to the north of England and through the channel
tunnel to Europe, a service Harley has been using for
years. “In fact, we were the first contracted users of the
channel tunnel,” he told me. But to put the icing on the
cake, the new high speed channel tunnel rail link passes
directly alongside the plant, and he has negotiated for
direct access to it, considerably speeding up the journey
times for the daily trains to Valencia, Spain.

Meanwhile, Ford and Dagenham are deeply embedded in
the British national psyche – the American car company
has always had a special relationship with English car
buyers, and therefore the closure of the Dagenham
assembly plant in 2002 was a painful event. And for
Harley, it was a particularly poignant occasion, as he
had spent six years as the plant manager.

Today, six years after the closure and following
considerable investment by Ford, Dagenham produces
all the diesel engines for Ford Europe, and is a global
centre of excellence for diesel engine design and
manufacture. The old car assembly plant is nothing
more than memory – a concrete slab in the ground. The
walls have been demolished and the land now belongs

to the London Development Agency. By contrast, the
engine plants, one old and one new, are powered by
two wind turbines from Ecotricity, with a third due to
be commissioned next year to ensure the expanding
manufacturing plants continue to be 100 per cent
powered by renewable energy.

Looking to the future, I asked Harley where he saw the
next round of supply chain changes. “With money being
so expensive, we have to make sure the whole pipeline
is lean and we have as little cash as possible tied up in
inventory between the supplier and the point of use. We
pick up on the hour now,” he said, and he believed the
current challenge was to get the timings right – pick up
too frequently and the extra freight costs don’t offset the
inventory savings.

“Another big change is in the global supply base.
Suppliers are moving progressively to China and eastern
Europe where they can exploit emerging markets. The
Chinese automotive industry, for example, is growing at
a much faster rate than the European one. Suppliers
can then offer us very attractive ex works prices, but the
challenge for us is to convert this to landed cost price.”
In other words, ensure the cost remains low after the
cost of transport around the globe has been added.

This links in very closely with Harley’s last point – energy
price rises. “The ocean container is suddenly becoming
more expensive, and this is causing people to reconsider
sourcing and see if there’s a more optimal footprint –
maybe over shorter distances – or perhaps there will be
commodities for which long distance makes sense, but
others where it doesn’t, and it’s going to be too expensive
to transport it.”

With this in mind, I wondered if Harley foresaw that we
would return to the situation where it was financially
and environmentally more sensible for suppliers to be
located in satellite formation around the assembly plant.

“I’m not sure they’ll get that close,” he replied, “because
eastern Europe still has significant opportunities.” As an
example, he explained that Ford has recently acquired the
old Romanian Daewoo plant in Craiova, to provide extra
capacity to meet the increasing demand for vehicles in
Europe. “The acquisition also offers us the opportunity to
check the capability of the local supplier base feeding the
plant, to test the water and see whether those suppliers
will subsequently have the wherewithal to become the
suppliers to other plants in Europe.” Production in Romania
is due to start next year with a small service vehicle currently in production in Turkey – the Transit Connect.

And this will be followed in 2010 with a small car.
In the UK, the Southampton Transit factory hit the headlines recently when the media got wind of the beginning of the cyclical negotiations for the manufacture of the next Transit model, which is due to come into production in 2011.

“Plants compete, that’s the thing,” Harley said. “At the
moment we build Transits in Kocaeli in Turkey and in
Southampton, and both plants are required for the volume.
But they both want to get the lion’s share of production.”
Ultimately, however, the decision will come down to
economics – and both plants will have to demonstrate how
much they can increase their productivity and efficiency.
“So, at this round we ask the plants what they think is ‘in the art of the possible’ in terms of their own contribution to
their competitiveness.”

Many other factors in the equation, such as the price
of steel, are global commodities, and affect both plants
equally. “So it comes down to the workforce, and now’s
the time for them to give it their best shot and tell us what
is their best offer.”

And no sooner is one product launched than the plants
begin working on improvements to help them in the bid
for the next model. “This is done collectively between the
plant management, the teams, the unions, everybody
starts working on what could we do.”

Harley is already working on the logistics for the next
model. “I engineer the system to presume things stay the
same, but with the flexibility that if things change there’s
the consequential plan. If you take Southampton, the
engine comes from Dagenham which is four hours away
from Southampton and four days from Turkey. This all go
into the sums.”

And so the merry-go-round of constantly changing supply
chain and logistics continues to evolve, and in a world
becoming increasingly conscious of its carbon footprint,
squeezed by the credit crunch and oil and materials costs,
the calculations are becoming increasingly complex and
increasingly important.