5 Common Mistakes Made By Auto OEMs while Selecting Their Logistics Partners

Logistics Company


            Automotive manufacturers are known to raise the charge to develop innovative methods squeezing optimal profits from their production and manufacturing operations. While doing so,they tend to concentrate on optimizing profits and they end up neglecting the quality of logistic services which are provided by partners who matter most in the process. Sometimes, they are forced to get back to the supply chain with hope of gaining more efficiency only to incur unnecessary costs in the process.It should therefore be noted that while selecting logistics service providers, automotive manufacturers make mistakes that are critical to their industry in several ways.

  • First, most Auto OEMs pay much attention on the partner who would offer the cheapest services at the expense of the quality needed– Thus, the manufacturers’interest is usually on the immediate tangible cost savings as opposed to the intangible long-term cost savings. The short-term tangible cost savings include the avoided taxes on warehousing and transport as well as wages for the extra service that would be rendered. By focusing much on these savings, Low, Patrick, and Deborah argue that the manufacturer usually foregoes the amount of money that the industry would save through value addition if the product would be worked on by expert logistics (39). Similarly,they forego the profit they will be guaranteed on return clients or even referrals because of impeccable quality of products. For instance, cars that are made to withstand the dynamic climatic condition may warrant long to produce but would ensure high return on investment as compared to the feeble cars that only suit a condition.
  • most OEMs usually consider individual service providers, other than End to End Logistics Service Providers.Usually, end-to-end service providers provide flexible and integrated solutions that are perfectly designed to satisfactorily meet the needs of the clients. In the process, they guarantee fulfillment, they offer transportation services, third-party logistics, warehousing together with distribution,contract services as well as import and export platform (Seides 48). Failure to adopt this option leaves the automobile manufacturers with the trouble of having to deal with Multiple Firms, which only specialize in a specific service only. Eventually, they end up hiring several companies to render distinctive services such as transportation firms, freight forwarding firms, customs clearance firms and warehousing and 3pl firms. The process causes a myriad of issues with data transparency, resulting to the mismanagement of resources, and delays in the delivery of material among other technicalities.
  • OEMs still exist in a MYTH,that a firm comprising a larger trucking fleet size can guarantee assured service given the fact that the transporter has a large fleet of owned trucks.Thus, they suppose large truck owners can give them a desired service quality,not realizing the shortcomings of a fleet owner or even asset heavy setup. What the manufacturers forget is that often, fleet owners are more concerned with the optimization of fleet management, but not necessarily offering long term solutions to clients. 
  • Additionally, the quest to provide efficient metrics, automotive manufacturers creates strong partnerships with their third-party logistics. Se ides elaborates that this normally obliges them to invent new mechanisms of moving materials, which has always forced them to deal with the cost equation that emerged between 1980 and 1990 following the increased levels of complexity in the production processes of automobiles (115).
  • Finally, the fact that automobile manufacturers operate at a large scale nearly in everything creates ample room for mistakes as well. When one runs lean, there cannot be any possibility for mistakes, because when something goes wrong, it does not consume mush time and resources to correct as compared to the massive losses that are to be incurred in automobile industry (Low,Patrick, and Deborah 81). In other words, the level of risk and vigilance makes the manufacturers consider assorted logistics service providers to decentralize the risk.