How MercedesBenz turned research into reality – Global…

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Mercedes-Benz Turk

How Mercedes-Benz turned research reality

By adopting proven from the supply chain a Mercedes-Benz bus factory in Turkey reinventing the supply chain while making big gains in and efficiency.

As the year 2008 to a close, the global economy was Even so, we at the Mercedes-Benz bus plant I work in Hosdere, near Turkey, were determined we would not simply weather the downturn but would also production capacity by 30 percent. We it would be a huge challenge of economic conditions and the increasingly nature of supply chains. we went ahead with the which ultimately proved

[Figure 2] Raw material and component held as a percentage of the 2008 per each bus produced Enlarge image

[Figure 3] Average backlog as a percentage of annual Enlarge this image

put, EBSCP is the incorporation of practical or research findings daily supply chain practices. It involves taking has already been discovered—examining examples and current research—and implementing it and enhancing it in actual This concept facilitates everyday operational decisions and strategic plans.

By drawing on knowledge, EBSCP lets chain managers succeed in challenging business environment, and it mistakes stemming from or individual preferences. Critical to its is employing people with skills and knowledge.

EBSCP supply chain managers to the kind of crash tests often undergo when new initiatives in complex, intertwined chains. Rather than without guidance, they can advantage of widely available For example, they can learn journal articles and books by supply chain researchers the world who are rigorously working to principles and find solutions for They can also learn practitioners who share their through case studies in and business publications, as well as other means, such as associations and professional networking on the Internet.

In short, with so complex challenges facing chain practitioners today, it sense to learn from and advantage of already published, information and solutions to problems. By so, companies will strengthen supply chains, and that eventually lead to greater and an improved quality of life the world as products and services where and when needed.

The team begins its work

Türk A.#350;. was founded in under the name Otomarsan in Istanbul, Turkey, by Daimler-Benz AG and its partners, Mengerler T. A.#350;. and Has A.#350;. The company’s initial in Hosdere was 0.6 buses per day. By it was already exporting buses, to the Middle East and North In 1986, the company added a production plant to its portfolio, in Turkey, and changed its name to Türk A.#350;. in 1990.

the years, MBT, now a subsidiary of AG, evolved into a manufacturer of buses and trucks. An increase in activities led MBT in 1995 to add a second bus in Hosdere and to convert the first to manufacture bus chassis and bodies for the new A few years later, the new plant was to include chassis and body and the original plant was shut Today the Hosdere factory four basic bus models: Tourismo, Intouro, and Conecto. It has a capacity of 14 buses per day, and it vehicles to Europe, Asia, and MBT also markets and sells automobiles and light commercial in Turkey.

In 2008, in order to boost and to get the bus plant ready for a potential increase, project Hosdere was launched. The first thing the decided to do was to bring highly and talented individuals together to a logistics project team. more about the human considerations involved in EBSCP, see the Invest in talent to make a success.)

Despite significant over the last couple of many manufacturing firms activities such as in-plant and warehousing as a necessary evil. logistics task-force team a contrary point of view and to pay closer attention to activities to about increased profitability and success. 1. 2. 3

The logistics team that the plant was facing problems as material shortages, inventory, and high transportation Previous attempts to solve had not been entirely successful, and the outcomes of those attempts not what managers had expected. more information was needed. that practitioners and researchers the world have confronted issues, the team decided to an evidence-based approach, making use of research findings to help it those problems.

Since Mercedes-Benz Türk A.#350;. has several supply chain that the logistics team while consulting research case studies, and other best practices. (The throughout this article to the published information sources provided some of the ideas we into our solutions.) The following are two examples of how we applied evidence-based chain practices to achieve cost and efficiency improvements we might not have been to achieve otherwise.

1. Matching flow with production

One where the logistics team EBSCP was in adapting the assembly warehouse and in-plant material-flow to the increased rate of production. As of that effort, the team set out to a new process in the warehouse, since the process limited how quickly the could perform such as picking, sorting, kitting, and delivery to the assembly line. An problem was that the on-time of components at the assembly line was percent. Although this seem good at first it’s actually on the poor for an assembly plant and has considerable implications.

The team began by several ideas, looking for to increase not only throughput but parts availability and overall The questions then were, of the ideas would work, and would be the best way to implement To answer those questions, the consulted some books, and other documents, and then that information with past experiences and the theoretical provided by their formal Using all of those resources, the developed the following solution.

20,000 components and raw materials being stored in the warehouse. But 0.5 percent of those items delivered just-in-time to the assembly after having been from a dedicated storage For the rest, a pull system was where assembly workers internal orders in the MRP (materials planning) system in batches in full pallets); warehouse picked those materials their storage locations and delivered them to the line. practice resulted in a significant of inventory positioned in the assembly but provided little protection stock-outs.

The master production schedule was for three days out. The team hypothesized that if the in the MRP system was 100-percent correct, it was theoretically possible to pick in single pieces from the sort them in the right place them on trolleys in and deliver them to the corresponding station just-in-time and in perfect with the three-day, fixed production schedule. This greatly reduce, if not eliminate the inventory of components located to the production line. The strategy also provide more for production-related activities and reduce the time that production spent walking back and between assembly stations and storage locations, some of were not optimally positioned. In since almost all of the inventory be in the warehouse area at any given it would be much easier to a probable stock-out a few days in just by looking at the current level in the warehouse and in-transit the supplier. If there should be a probability of a stock-out for a critical item used in, say, the bus model, then the scheduled date for Conecto buses be pushed back a few days it entered the three-day frozen and other bus models for which were available could be forward.

Taking the above into consideration, the team to increase the number of parts from the dedicated just-in-time in the warehouse. This basically that the team would to balance the trade-off between the of adding some more space and the benefits of improved of delivery to the line. Since proposed system would for almost no margin of error in the MRP critical parameters entered the MRP system, such as pallet batch sizes, and delivery were carefully checked and when necessary.

After this plan, the percentage of picked from the dedicated and delivered just-in-time to the assembly increased from 0.5 percent to 15 percent. Because we learned our reading that a reduction in the to pick and deliver was a direct of warehouse configuration, 4 we made modifications to the configuration of the warehouse helped to increase picking and speed. Another renovation was the of the small-parts storage area to an storage and retrieval (AS/RS)

2. Supply base localization

As we the year 2008, MBT became in acquiring more parts local Turkish suppliers. In we established a group within our department that was assigned to with localization of supplies. One of our was to decrease the company’s total by reducing logistics-related costs. thinking was similar to the total-cost-of-ownership described in the article Time to home? in CSCMP’s Supply Quarterly . 5 ) Over the last years, the division has successfully more than 5 percent of the that originally had been from suppliers located Turkey.

Using more suppliers was also a way to perform management by addressing both side risks and catastrophic two of the five main risk outlined in an article on that by Stephan and Bode (2008). 6 We put forward a hypothesis that we to balance both prevention and response preparedness in our risk practices. 7 Proof that hypothesis was correct came a of years later, when firms that were in prevention programs had difficult during such disruptions as the earthquake and tsunami in Japan and the of the Eyjafjallaj kull volcano in No manager would have to include such unusual, events in a prevention program or to contingency plans for them. 8

Meanwhile, many companies were stronger in response continued spending time, and money on response activities due to the even though at least of those efforts could been avoidable if they had more attention to prevention. It also be noted that the eruption and the earthquake led managers the world to realize that their supplier base be beneficial. However, managers not have needed those chain disruptions to come to realization, since the principle diversifying the supplier base by orders among multiple could indeed be beneficial on certain factors) was already evidenced in literature. 9, 10 As discussed in articles, the expected reduction in costs could make worthwhile for some very components.

With those in mind, we decided to perform analyses for new components. If risks high, then we would the components dually, from one and one local supplier. This diversify the supply base in of both alternative suppliers and locations.

Thanks to our decision to the dual or multiple sourcing wherever possible, we avoided disruptions during such as the eruption of the Icelandic volcano and the and tsunami in Japan. We also had experiences closer to home. For in 2011 a very trusted supplier of ours had a fire incapacitated its plant for more a month. Despite that we kept the material flowing in, one portion coming from the supplier and the other portion another local supplier. And in 2012 we faced another disruption when a foreign of a critical assembly part was to deliver it because of the extreme conditions in Europe. Trucks not move, railways were with ice, ships leave ports due to extremely winds, and rivers flooded near the Turkish border. We able to manage despite weather conditions because we had split the order between a and a foreign supplier. The local located just two hours from our plant, sent its of parts just-in-time, and that was enough to keep production until the shipment from the supplier arrived. Looking at those situations, it is clear the costs we would have if we had experienced disruptions would far outweighed the costs associated placing orders with the local supplier.


Thanks to the two implementations above, as as to many others that are of the scope of this article, MBT saw a rise in efficiency indicators. As in Figure 1, the on-time-delivery service of parts to the assembly line from 99.38 percent in to 99.81 percent in 2011. this 0.43-percent increase may like a small nuance, it represents a significant cost That’s because when are available where and when there is less overtime and no penalties for late deliveries of to customers. As of February 2012, the rate had reached 99.85

The drop in raw material and component is also a strong indicator of how has contributed to the cost savings Benz Türk A.#350;. has so far. Figure 2 compares year’s average raw material and inventory levels with of 2008. We are aiming to continue the shown in the chart in the coming

Figure 3 shows late of buses as a percentage of the daily rate, from the assembly to the respective sales organizations deliver the buses to the end customers. The fall from the year to 2009 was mostly attributable to the of the economic crisis. During time we had more production then demand, which we could deliver buses more ease than in a year. As the demand gradually in 2010, the backlog also as expected in 2010 through The rate of the backlog increase in was less than that of because the effects of the EBSCP had started to kick in. We have begun to see the full impact of the as demonstrated by a backlog of just percent as of February 2012—despite a demand and daily production

As a result of the implementations described and other Hosdere 2010 MBT has achieved a significant drop in and has sustained profitability despite the economic downturn. This has attracted the attention of upper-level at Daimler AG. As a result, the bus plant has several visits and received from the parent company’s In fact, Daimler AG’s management meeting was held in in July 2011, and during the executives had a chance to see the implementations’ firsthand.

Top management has been so with our accomplishments that it is implementing some of our ideas in the company. For example, an extension of the delivery to the line strategy, known by the German term (or the Turkish term set sevkiyat MBT employees), is now being considered for into an ongoing process-harmonization for other bus plants in Europe. The in-plant logistics system we is about to become a companywide and, with minor variations, has the potential to be implemented in any of bus plants.

We believe it is important to our knowledge and ideas with Accordingly, our plant has hosted by many logistics- and manufacturing-related and logistics specialists from all Europe, as well as by faculty and from local universities.

The MBT team can point to many Yet even while we work on projects, the fast-changing nature of means that already are new challenges that must be As we deal with them, the supply chain practices that has proven so successful in the will continue to be our guide.

in talent to make EBSCP a

Getting the full benefit evidence-based supply chain (EBSCP) takes more simply reading academic and literature, or sharing information peers. It also requires the right people on staff—supply and logistics professionals who have the skills, and abilities that are to understand, develop, and carry out ideas.

The supply chain calls for quick decision This allows supply to become lean and agile. employees have to get approval their superiors for every deviation from the norm, the loses flexibility. By employing the supply chain talent, will not have to think before delegating responsibility to who have the skills to make the decisions. Furthermore, companies individuals who are proficient in converting supply chain concepts to cost and profit figures. way they can induce the right chain alignment for the organization by the chief executive officer’s eventually leading to lower costs and higher profitability.

The logistics team members who the implementations described in this and many others possible for Türk A.#350;. (MBT) selected from among the existing employees. Since MBT had a good job of attracting, continuously and encouraging talent as well as of individuals with the necessary management did not have to look for team members.

At MBT, we found that the following principles laid the groundwork for EBSCP and getting the greatest from what we learn. are recommendations based on our experience:

1. talented people with educational backgrounds. Imagine a very talented and well-educated to perform brain surgery on a As odd as it may sound, this is analogous to an individual with an irrelevant background to perform a supply task. Academics at times about the conceptual difficulties many managers in the field with statistical reasoning 11 and say this hinders practitioners’ to use models to solve problems. A of ability by managers and front-line to understand and apply analytical is a factor that stands in the way of decisions. 12 Therefore, it makes to pick supply chain members who have relevant backgrounds. The right formal provides individuals with the skills, tools, methodological and statistical reasoning ability. it has been shown that chain education and training supply resiliency. 13

Mercedes-Benz Turk

A well-planned, education with a strong component provides individuals the knowledge of the most up-to-date methods. For example, plenty of optimization methods exist in the chain literature. Many of are fairly easy to implement on and offer strong support for chain managers’ decision However, failure to attract with the right technical means that these methods may not be fully put into which means lost for the supply chain organization.

It also be noted that competitive environment requires supply chain professionals not be experts in their own field but have an idea about happening elsewhere. A sound chain education, preferably with a background in another such as engineering, finance, marketing, and so forth, will the field. Since attracting and talent is not an easy task, chain executives should not to consider retention incentives to talent in the profession. The fast-paced and to mention exciting and fulfilling—nature of the chain profession should be among younger generations to them to the discipline.

2. Provide for continuous learning. Due to the ever-changing of the discipline, it is of utmost importance for chain professionals to be dedicated 14 In addition to formal education, exposure to what is happening in the chain field through events such as conferences, and workshops (both within and of their industry) is a must.

chain managers also work with their in order to prepare annual plans for them and collaborate universities to ensure continuous opportunities for their employees. can, in turn, cooperate academics to co-instruct undergraduate graduate courses as a way to help new talent for the supply chain (Thanks to collaborative efforts and between MBT and several local for example, the author of this had the privilege of serving as a co-instructor for an course at a local college.)

3. Encourage team members to research and contribute ideas. they encounter complicated supply chain executives make the most of their knowledge by eliciting subordinates’ and making them a part of the process. Encouraging them to evidence for their ideas directly lead them to research findings and best-practice

4. Provide team members the necessary tools. It is intuitive even the best talent achieve top-level performance up-to-date decision-support tools. It is the chain executives’ responsibility to sure that individuals access to the right tools, as appropriate software. This be a high priority.


1. MacLeod, Making the Warehouse Automotive Logistics . July-September

2. A. E. Ellinger, M. Natarajarathiram, G. A. Frank, J. B. D. Hofman, and K. O’Marah, Supply Management Competency and Firm Success, Journal of Business 32.3 (2011): 214-226.

3. C. and C. Hofer, Inventory Types and Performance: Vector Autoregressive and Error Correction Models, of Business Logistics 32.3 227-239.

4. G. Ghiani, G. Laporte, and R. Introduction to Logistics Systems and Control . John Wiley (2004).

5. Harry Moser, to Come Home? , CSCMP’s Chain Quarterly . Q4 (2011).

6. M. W. and C. Bode, An Empirical Examination of Chain Performance Along Dimensions of Risk, Journal of Logistics 29.1 (2008):

7. Bruce Arntzen, Global Chain Risk Management 1: Differences in Attitudes , Massachusetts of Technology Center for Transportation and White Paper (2010).

9. D. J. and J. E. Tyworth, Pooling Lead-Time by Order Splitting: A Critical Transportation Research Part E (2006): 245-257.

10. P. D. Berger, A. and A. Z. Zeng, How many suppliers are A decision analysis approach, The Journal of Management Science (2004): 9-15.

11. E. A. Silver, D. F. and R. Peterson, Inventory Management and Planning and Scheduling . John Sons (1998): 50.

12. Thomas H. and Jerry O’Dwyer, Tap into the of Analytics, CSCMP’s Supply Quarterly Q4 (2011).

13. J. Blackhurst, K. S. and C. W. Craighead. An Empirically Derived of Global Supply Resiliency, 32.4 (2011): 374-391.

Bayülgen is the team manager, supply for Mercedes Benz A.#350;. in Istanbul, Turkey.

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