Similar to its cousins in the construction industry, the rail sector has always grappled with the issues of delivering projects on time and within budget. Often, the complexity of projects, the high number of suppliers and the overriding need for safety conspire to push back delivery schedules and inflate project costs.
Early in 2006, Alstom successfully completed a €149 million contract to supply Tube Lines with new carriages and trains for the London Underground Jubilee Line. This project represented the first time that the French-based manufacturer had outsourced its supply chain management to a specialist contractor, DHL Exel Supply Chain. The results create a potential supply chain model for other manufacturing sectors involved in cross-border projects.
In terms of size and scope, the work involved Alstom supplying 59 brand new carriages to convert all the Jubilee Line’s existing trains from six to seven cars, plus another four complete seven-car train sets – boosting capacity on the line by 17 per cent, or 6,000 passengers an hour.
After working on the manufacture of the new rolling stock for over a year, the existing Jubilee Line trains were all converted during a single five-week period from December 2005 to January 2006 – with seven-car passenger services commencing ahead of schedule on New Year’s Eve.
Although the existing Jubilee Line trains had been manufactured by Alstom in the UK, the new carriages were built at its facility in Barcelona, Spain – but with components and assemblies sourced primarily from the original suppliers in the UK and North West Europe. Not only were suppliers therefore at a substantial distance from the manufacturing plant, but the Barcelona site also suffered from limited storage capacity.
Jonathan Shortis, commercial director for DHL Exel Supply Chain’s industrial sector operations, explains: ‘Due to the long distances involved and the limited space at the Barcelona plant, we needed to develop a cost effective, yet flexible, solution that was still robust enough to cope with the complex and elongated supply chain.
‘A key part of the solution was the establishment of a consolidation operation at Worcester in the UK. Here, we were able to check and sort materials collected from suppliers and create specially formulated manufacturing kits, using bills of materials – consisting of relevant parts – for each of the 120 processes required to finish the assembly.
‘This approach was mirrored in Spain, where we secured the use of DHL’s automotive site in Barcelona as a staging post to ensure on time, in full delivery to the nearby production line, whilst circumventing the storage restrictions on site.’
Providing European logistics support
DHL Exel Supply Chain was selected to provide European logistics support on the project following a competitive tender. The company created an efficient inbound supply chain, providing a comprehensive service covering supplier management, materials collection and inspection, inventory control and consolidation, kitting, and delivery to Barcelona – in accordance with a strict schedule.
Shortis said: ‘Apart from the huge distances involved in procuring equipment, one of the biggest challenges facing us was the sheer number and diversity of parts that created the tailor-made kits. Some €74 million worth of parts were handled in total, ranging from a single washer to complete door assemblies. Taking this potentially onerous complexity and turning it into a managed function was a key part of the added-value we were able to deliver.’
Alstom divided the manufacture of each carriage into eight stages, with around 15 separate assembly processes in each. At its Worcester shareduser warehouse in the UK, DHL consolidated materials collected from suppliers and prepared the kit of parts for each process. The logistics services company then transported these by road to its shared-user warehouse in Barcelona for checking and storage, prior to delivery to the Alstom plant only four kilometres away – on a just-in time basis.
Altogether DHL made around 1500 scheduled collections from suppliers and managed the delivery of consolidated loads of kitted materials from Worcester to Barcelona (including deliveries direct from suppliers) over a period of more than a year. Transport synergies and economies of scale were achieved through backhauling – typically reusing vehicles carrying product from Spain into the UK on the return trip – with the resultant cost savings passed on to customers.
DHL’s ability to utilise its dense logistics ‘footprint’ to achieve cost savings was an integral part of the project deliverable. Harnessing the often-ignored potential of ‘empty running’, where over 20 per cent of trucks and trailers are transporting just fresh air, was key to the project team’s ability to drive cost out of the process.
The logistics specialist also deployed its planning expertise to manage suppliers and maximise materials availability against production requirements. In addition it prepared reports for Alstom on supplier performance.
Shortis explained: ‘Often this type of complex project fails because of poor buy-in from suppliers who don’t really understand what is required of them and what they need to do to hit performance targets. Our team worked tirelessly to agree key performance indicators at the outset, creating a strong culture where getting it right first time was the norm.
‘We have found it is important to establish a strong quality culture at the outset. All too often, supply chain issues get brushed under the carpet and are rarely addressed in an open, constructive way. By bringing in a third party supply chain expert, Alstom was able to hand over this often emotive aspect of the manufacturing process and focus on its core competence of designing and building trains.’
Both DHL and Alstom agree that one of the key deliverables outsourcing can bring to complex projects is end-to-end management of a highly visible supply chain.
‘DHL brought unprecedented levels of control to this project’, said Peter Jones, Alstom’s project director. ‘They had the scale, best practice techniques and global reach necessary to integrate our requirements into their existing operations, leading to operational efficiencies. Although this was the first time we have outsourced supply chain management on a project of this magnitude, I’m sure it will not be the last.’
Experience that counts
Shortis added, ‘Our experience of managing, pan-European supply chains in a number of sectors, as well as our track record in the railway and manufacturing industries, meant that we were well qualified to support Alstom’s requirements. I am pleased to report that we exceeded all the company’s KPIs on this project, and I am proud of the role we played in Alstom’s ultimate success.’
Stephen Peat, director of operations for Tube Lines, commented; ‘It is not every day that you come across a real success story in our industry. Alstom and its logistics partner are to be congratulated on completing this major supply project on time and within budget, helping us to achieve the largest upgrade of any underground line under the PPP (public private partnership) to date. So effective was the partnership that Alstom was able to deliver more than the contracted number of carriages before the New Year’s Eve launch.’
In terms of facts and figures, the solution reduced original supply chain cost estimates by 25 per cent, delivering the project ahead of time and within agreed budgets. Shortis concludes: ‘This experience was a great success for all parties involved and shows how effective supply chain planning can deliver remarkable results. We believe this work shows how outsourcing can add significant value to complex manufacturing challenges, creating a new model for the rail industry that Alstom looks set to adopt for other projects.’
