The Challenges of Intelligent Network Planning in Automotive Logistics

Every day, more than 15 million vehicles worldwide travel from the factory to the customer. This creates significant costs and sometimes considerable delivery times. Because the vehicles are produced worldwide, the cars often have to travel a long way from the production site to the end customer. This route can be by rail, ship or truck. Stops are made at huge terminals where the vehicles are temporarily stored. This means a big network of different possibilities for the car manufacturers in terms of organizing the transport. There are a number of conditions that must be taken into account.

Network planning is based on the sales volumes per vehicle model, which must be transported from the respective plant to the various target markets, dealers or customers. The possible means of transport mainly include sea and inland waterway transport as well as truck transports. Ports, handling terminals and modification workshops all play a role in the transportation journey of new cars.

Challenges of network planning

Growing distances between the factory and dealer

One of the challenges for network planning in automotive logistics is the relocation of assembly plants to low-wage countries. In many cases, this means that the distance between the plant and the customer becomes longer and as a result, the transport distance increases.

Variety and relocation of production steps impact the transport route

The increasing range of variants also influences network planning. As a result, there are fewer plants per vehicle model, which also leads to greater transport distances. In addition, the demand for more individual vehicle equipment is increasing the number of necessary vehicle modifications that are not carried out in the factory, but on terminals. These must also be taken into account in network planning.

Specific equipment for vehicle transport

Vehicle terminals and transporters, railway carriages for vehicle transport, roll-on roll-off ships and associated ro-ro vehicle terminals in ports can be used almost exclusively for vehicle distribution. Therefore, fluctuations in demand cannot be offset by resources from other logistics areas.

Customer claims regarding adherence to delivery dates

Due to the increasing online boom, people generally tend to have a certain expectation of orders. Adherence to the delivery dates is becoming increasingly important.

Requirements for efficient network planning

Network planning in the automotive industry must meet the challenges mentioned above and the following requirements:

Optimized network in terms of cost and delivery time

For producers, cost optimization is usually at the forefront of network planning. This includes transport, handling, service and storage costs. In addition, customer delivery times must be taken into account, which have a financial aspect due to capital commitment and storage costs on the one hand, and an influence on customer satisfaction on the other.

Viewing the entire network

Cost optimization is most effective when it relates to the entire network from the plants to the dealers instead of to individual segments of the network, such as the arrangement of the distribution center or port. The optimal combination of access routes and means of transport, as well as the selection of ports and distribution areas then optimizes the overall costs. The degree of freedom required for this increases not only the savings potential, but also the complexity of the optimization task.

Operational feasibility of the planning result

Cost optimization based solely on the offer prices of logistics service providers rarely leads to the desired goal. In most cases, it cannot be implemented due to additional contractual restrictions such as volume thresholds or capacity constraints.

In addition to the restrictions defined in contract conditions, there are other aspects that have an influence on the operational feasibility of transport networks. On the one hand, it often makes sense to limit the number of transport companies that deliver from a distribution point in order to ensure smooth processes and minimize the administrative workload. On the other hand, it can help to reduce the risk by setting a minimum number of carriers instead of having the entire volume transported by the supplier with the lowest prices.

In order to moderate the possible non-availability of a means of transport at short notice and with the lowest possible additional costs, it may be advisable to plan part of the transport volume in advance using an alternative route, even if this is more expensive.

Transparency is important for the network planner in all circumstances. There is a cost difference between solutions that have additional restrictions designed to facilitate processes or reduce risks and solutions without these restrictions. A rational decision as to whether a change is worth the extra fee can only be made by comparing the different variants.

Smooth transition from existing to new network

In addition to the conditions generally being considered in the design of transport networks, a transport network is rarely set up from scratch. Usually, a transition is made from the existing structures to a changed transport network.

This transition to a new network presents car manufacturers with many challenges, for example cooperating with transport companies and the use of terminals, which have not yet been tested and which are not yet connected to existing data processing systems. This can result in new restrictions, for instance, the requirement that only a limited number of the transporters who drive to a car terminal should be transporters who have little experience. Here, modern optimization methods with input options for customer-specific conditions can help to accelerate the process. Processes that would otherwise require weeks of calculations in Excel can be implemented and simulated in just a few minutes. This time advantage often makes it possible to test different solution variants and compare the results without any time pressure. In this way, the best transport network can ultimately be determined by taking all the relevant criteria into account.

Closing Thoughts

The aim of intelligent network planning in automotive logistics is to optimize the overall design of transport networks in terms of costs. In addition to costs and delivery times, complex conditions must be included so that the planned network can be implemented. Nevertheless, less time for calculations and comparisons of overall costs and delivery times mean that tendering cycles can be shortened and networks can be adapted more quickly to changing conditions. The reduction of costs, especially for valuable and individual freight in automotive logistics, should never be at the expense of customer satisfaction.

What do you see as the biggest challenge in network planning in vehicle distribution?

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