Automaker Subaru has been growing steadily in the US since 2008. The company, a division of Japan’s Fuji Heavy Industries (FHI), sold 513,693 units in 2014 and sales were up 21 per cent compared with 2013. During the three years since 2011, sales have increased a total of 92 per cent. Subaru’s growth to 3.1 per cent of the US light vehicle market in 2014 is impressive, but most astonishing is Subaru’s capture of 10 per cent of the industry’s entire 2014CY growth without offering products in the pickup truck, minivan, luxury, or econobox segments. Today, it is ranked among the top 10 car brands in the US. Part of Subaru’s success is due to its well-planned, stable scheduling and logistics flow with a strong mix between rail and long-haul trucking.
Much of Subaru’s supply chain centres on its consistent, smooth flow of vehicles through its processing centres and shipments to retailers who have operated with a low on ground inventory level since “cash-for-clunkers” concluded in August, 2009. Because supply is tight, retailers have become pros at selling from their vehicle pipeline.
Customer desired vehicles not available from a retailer’s ground stock or allocated pipeline can be ordered against future allocations (Subaru production). These “sold orders” have significantly increased over the past few years as demand has out-stripped supply. As pre-sold vehicles they are prioritized in processing and shipping.
This tightly run order-to-delivery cycle is possible due to the strong collaboration between corporate vehicle sales planning, distribution and logistics management, all under the responsibility of Gerald Lee, Vice President of Vehicle Planning and Logistics for Subaru of America.
His sales planning and analysis group creates the master ‘rollout’ document, which forecasts car line production, wholesale sales, retail sales, as well as retailer, port and in-transit inventory. Lee calls it Subaru’s “guiding light”, and it is updated at least once per month.
The planning group also works with Subaru’s sales zones and distributors on a monthly vehicle purchase order and allocation based on model, option, color and emission specification. For the Japanese plants, orders are for the next month’s production, while for Subaru’s U.S. plant, Subaru of Indiana Automotive Inc. (SIA), it is two months in advance. Once the monthly allocations are set, retailers can view their full pipeline.
The purchase order and distribution plans are shared with logistics, which uses them as a basis for processing schedules and transportation forecasts.
A suite of IT systems integrates the order flow between FHI, SIA, Subaru of America, processors, transport providers and retailers.
“There is a big focus on scheduling in our systems,” says Logistics Planning Manager Mike Lupacchino. “Order info is sent to the port processor as an EDI file, so they also know which vehicles are a priority. It is then sent by advance ship notice to the carrier for the railhead, so when the carrier is building loads it sees which cars are sold and should be prioritized.”
Larry Strug, National Transportation Manager, says such scheduling has advantages across the supply chain. “We look at the schedule, look at the transit, and we know within these parameters we need more rail, truck or accessories month by month,” he says.
Stability in the carmaker’s scheduling – and advanced planning - is essential for Subaru’s providers to maintain a consistent workforce and ensure the quality of service. Carriers are given advanced plans and encouraged to combine volume with other carmakers to complete loads.
“I want our ports and logistics to be full-time operations throughout the month” says Lee. “I want our port processors to have the same workforce day in, day out, month in, month out to produce consistent quality in accessory installation and efficiency in vehicle shipments.”
As production increases – and with the potential to expand capacity from the current 250,000 units to 400,000 units – at its plant in Lafayette, Subaru of America has been reshaping its network. It has already added new rail tracks at the Lafayette railyard over the past three years, increasing railcar spots from 36 to 69.
With Subaru’s growth in the US, there have already been some shifts from rail to road. However, in the near future Subaru’s network is likely to need more rail, not less. Strug says “We will be prepared to increase the rail mix of incremental production.”
Subaru of America’s long-term relations with providers may have helped its trucking performance. The OEM avoids putting logistic services out to bid, instead using rolling, ‘evergreen’ contracts for as long as the quality is right, says Strug.
“We don’t change the carriers unless there is a real reason, such as a volume we need to diversify or a performance issue,” adds Lupacchino.
In many cases, Subaru seeks providers directly if it can find better economics and performance. “We go to the terminal people and find out who has the least dwell time and who serves cars quickest,” Strug says. “It is in the rail or port processor’s best interest to get vehicles out of their terminals fast.”
The automaker is also putting pressure on its providers to upgrade their IT systems and provide Subaru with more real-time information. While Subaru’s systems capture delivery milestones, there are gaps. Dealers pay carmakers once vehicles are shipped for final delivery. However, for example, a vehicle may leave a terminal on Monday morning, but some yards will wait until Tuesday to run a batch of updates.
“We sometimes get messages from dealers saying they have received vehicles but they can’t get them drafted, and hence reported sold, because the ramp hasn’t outgated them,” says Lupacchino.
“If this could be captured in real time, it would prevent financial and sales reporting delays.”
One sign Subaru’s system is working well is the company’s accuracy for forecasted estimated time of arrival (ETA). It meets 95 per cent of its original ETAs on or before the forecasted date. Lupacchino says this rate is partly due to the level of sold orders and to the many Subaru models in short supply, since both get delivery priority.
But he also credits Subaru’s network of truck providers. “Our truck carriers are doing great. The highest dwell time we see is currently four days from unloading,” he says. “They are handling larger volumes really well, without increasing their damage rates.”
Port processing is also critical to Subaru’s efficiency and profitability in the US. As well as inspecting cars for final delivery, more than 200 accessories – ranging from cargo nets to spoilers and lighted exterior mirrors - are added at ports.
“Doing this work at the port tends to be less expensive and more effective than doing it at retailers, and also frees up retailer service bays for warranty and retail service work,” concludes Lee, who added “many Subaru retailers are expanding service capacity to support not only their recent vehicle sales growth but anticipated increases in future volume as well.”
WWL and Subaru in North America
WWL provides logistics services at three locations in North America for Subaru, plus handling Subaru in British Columbia, Canada. WWL in Baltimore and Brunswick handle the Japanese imports and provide port processing services. Lafayette, Indiana, is a Subaru factory location where WWL is responsible for yard -management and rail loading in addition to vehicle -accessorisation.