A Swiss specialty chemicals group had integrated its production plants in Europe into a new structure and bundled the flow of goods into a newly established supply center. All group companies were to be supplied with goods from there, as direct delivery from the production plants was no longer permitted for tax reasons. In the expansion stage, the supply center was also to be able to supply larger customers directly, primarily automotive customers throughout Europe.
Several project managers had led the development stages with varying degrees of success. Then, however, the error costs in test operations for automotive customers reached an extreme level and the delivery performance of at least 98 percent was nowhere near achievable. At this point, the current interim manager was entrusted with the project. He was given the task - at the time in a permanent position - of enabling the supply of automotive customers with high performance and quality.
Project management for setting up a separate automotive distribution center
In the first preliminary discussions, it became clear that individual dominant project managers had only uncritically copied and rudimentarily adapted the IT processes for the exchange of information between the Swiss Group's supply center and plants. What weighed particularly heavily was that they had neglected to align the IT processes in such a way that they could be adapted to the particularly high requirements of external automotive customers.
Since the project work for supplying the Group companies was already well advanced at this point, changing the IT structures without jeopardizing the overall project was no longer an option. A division of the supply center into two parts was also rejected. The managing directors of the automotive companies and the supply center agreed to set up a separate automotive distribution center. The interim manager took over the project management.
Concept for commissioning external logistics service providers developed
The interim manager initiated a project team with managers from the production plants, the supply center and the automotive company, who had not previously been involved in the failed project, or only to a minor extent. This allowed unencumbered individuals to be deployed in their areas based on their expertise. The project team's concept favored the commissioning of external logistics service providers in close proximity to the new supply center in order to keep additional transports to a minimum. In addition, the existing IT structure of the company's own automotive company was to be used so that no further adjustments had to be made.
Specifications drawn up: Logistics service provider audited and contracts negotiated
The interim manager drew up a comprehensive list of requirements for the selection of the logistics service provider. This specification included the requirements of the automotive customers, customer references and proof of quality as well as comparisons of costs and performance. The interim manager also carried out audits in advance and during personal visits. In this benchmarking process, a previously unknown provider came out on top. It was awarded the contract on the basis of the best performance and high flexibility for future growth. The interim manager was responsible for negotiating and drafting the contract, which also incorporated best-practice experience from the group. A final cross-check was carried out by the in-house counsel.
Approval obtained from German and French car manufacturers
One of the biggest challenges in this project was gaining the acceptance of the German and French car manufacturers for the approval of a new site. All VDA and Odette standards as well as specifications for electronic communication (EDI) had to be met right from the start. Together with a key account manager from the group of companies, the interim manager succeeded in winning the plant of a southern German premium car manufacturer for active support with the test scenarios. The automotive customer thoroughly checked test documents and physical test shipments. All results were flawless. This meant that the supply changeover could be scheduled immediately.
Supply changeover in waves went smoothly
A changeover for all customers on the same date was considered too risky by all parties involved. The interim manager therefore divided the car manufacturers and the most important suppliers into waves based on volume and complexity. A list of "cut-over activities" was drawn up and processed for each wave. This enabled high availability with low additional expenditure. In addition, each customer go-live was accompanied on site at the logistics service provider so that any problems could be resolved immediately with the responsible managers. The interim manager took over communication with the customers together with the respective key account managers and a downstream customer service department.
Delivery performance above 99% from the start
The project team was able to focus heavily on each customer due to the wave-like commissioning. The complex project was completed in stages, which the new logistics service provider also managed without any problems. The changeover went without any customer complaints or error costs. The delivery performance was more than 99% right from the start, which meant that both the customer and the company were extremely satisfied.
Costs reduced by 600,000 euros per year
The previously changed delivery structure had resulted in additional transport costs of 600,000 euros per year, which were eliminated by the commissioning of the distribution center. The cost structure of the new logistics service provider, a specialist in handling sensitive chemicals and hazardous substances, was significantly more favorable than that of the supply center, resulting in savings of more than EUR 1 million over 4 years.
