Purchasing departments consider the landed cost of parts arriving at the assembly plant, including transportation, duties, and extra packaging, but if extra costs are less than the lower piece cost, there will be little hesitation.
"The data will drive decisions," says Mark Baughman, chief information officer ofCorp.'s logistics provider, Vector SCM.
At a session on JIT at the Management Briefing Seminars here, Baughman describes his company's massive database and how it is mined to determine trends, rework transportation networks and lower the cost of freight.
From left: Jim Applegate (National Logistics), Rae Bates (Pierburg), Mark Baughman (Vector SCM), Joe Stich () and Dave Hodgson ( ) discuss JIT.
His company provides detailed information on total costs to GM purchasing to help it make sourcing decisions.
Rae Bates, materials manager for Kolbenschmidt Pierburg AG's Pierburg division plant in Fountain Inn, SC, says commodity parts can be purchased offshore for 10%-30% less than in the U.S., more than enough to balance increased ancillary costs.
"We're requested to make parts in low-cost countries," she says. However, for complex or expensive parts, low-cost country sourcing may not be cheaper, she says, because of the risks involved.
Group is "working a lot with our Tier 1 suppliers to reduce the labor content of their parts by sourcing in low-cost countries without increasing their transportation costs," says Dave Hodgson, Chrysler vice president-supply operations.
He says some manufacturing jobs will disappear from North America, while new jobs will come in transportation and JIT operations or sequencing facilities.
Chrysler builds 12,000 cars a day, has 800-1,000 suppliers per plant and uses 80,000 shipments per day.
The Pierburg plant, which makes throttle bodies and oil pumps and is adding lines for diesel and gasoline exhaust-gas recirculation valves, has not been asked to deliver JIT, says Bates.
The plant occasionally makes deliveries weekly, in some cases to warehouses. Bates asks her suppliers to keep a week of safety stock on hand – four weeks for overseas suppliers – to reduce risk.
In contrast,Mfg. of Battle Creek, MI, which makes engine cooling modules and climate-control systems, has only a few hours of finished stock on hand to supply its best customers, and half a day for most, says Joe Stich, general manager of the plant.
He ships 200 truck loads a day to OEMs from Battle Creek. His group also has two satellite plants, in Arkansas and Ontario, Canada, which have injection molding and assembly capability.
With radiator cores made in Michigan, Denso can assemble modules for OEM plants regionally, so the supplier does not have to ship bulky modules all over the continent. Stich says a second satellite plant is being considered in Ontario to serve a newMotor Corp. plant there and new business with Chrysler.