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CASE STUDY COLLECTION, Study notes of Logistics

Production plants of ŠKODA cars are located in 7 countries around the world: • The Czech Republic (Mlada Boleslav, Kvasiny, Vrchlabi).

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GREEN SOLUTIONS FOR BUSINESS AND INDUSTRY
2014 - 2017
ŠKODA AUTO University, Mladá Boleslav, Czech Republic
CASE STUDY COLLECTION
ŠKODA AUTO University
Seinäjoki University of Applied Sciences
University of Žilina
OTH Regensburg
Dresden University of Applied Science
WSB University in Wroclaw
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GREEN SOLUTIONS FOR BUSINESS AND INDUSTRY

2014 - 2017 ŠKODA AUTO University, Mladá Boleslav, Czech Republic

CASE STUDY COLLECTION

ŠKODA AUTO University Seinäjoki University of Applied Sciences University of Žilina OTH Regensburg Dresden University of Applied Science WSB University in Wroclaw

The project Green Solutions for Business and Industry aims at sharing good practices in Green Business educational process with close connection to industrial enterprises. The project helps participants to understand and deal with company values using a balanced approach to economic and environmental efficiency. Organisations have been facing changing conditions for several years. In addition to increasing diversity and dynamics, environmental issues have become increasingly important. Social, political and economic demand for sustainable solutions forces organizations to consider the impact of their activities on environment and to develop sustainable strategies for their product and service offerings, supply chains, manufacturing and transport, among other business-related issues. The collection of case studies was produced during the short-term activities for learners – International summer and winter schools in Mladá Boleslav. The project "Green Solutions for Business and Industry" is funded with the support of the European Union under the programme "Erasmus+", project registration number: 2014 - 1 - CZ01-KA203-002096. Document reflects only the author's view. The National Agency and the European Commission are not responsible for any use that may be made of the information it contains.

GREEN SOLUTIONS FOR BUSINESS AND INDUSTRY

30 August - 12 September 201 5 ŠKODA AUTO University, Mladá Boleslav, Czech Republic

EDC - ECONOMY, ECOLOGY AND

ELECTRONIC DELIVERY CONCEPT

IN ŠKODA AUTO

Oleksii DIEIEV, ŠKODA AUTO University Nikola SNYDROVA, ŠKODA AUTO University Katerina BASUSOVA, ŠKODA AUTO University Lecturer: David HOLMAN, ŠKODA AUTO University

Table of Contents

  • 1 Introduction......................................................................................................................
  • 2 Company Description
    • 2.1 History
    • 2.2 Organizational structure
    • 2.3 Sectors and products
    • 2.4 Markets
  • 3 Findings and discussion
    • 3.1 Current state analysis
      1. 2 Major problem identification
    • 3.3 ŠKODA AUTO solution proposal
    • 3.4 Alternative solution proposal
  • 4 Evaluation and Recommendations
  • 5 Conclusion
  • References

2 Company Description

SA is a significant worldwide producer of automobiles. SA was incorporated into VW as a joint-stock company on 20 November 1990. The Company’s main business activities are the development, production and sale of vehicles and related accessories. The Company has its main production plant in Mlada Boleslav and two other production plants in Vrchlabi and Kvasiny. SA is a subsidiary of VOLKSWAGEN FINANCE LUXEMBURG S.A. included in the consolidation group of its ultimate parent company and its ultimate controlling party, VOLKSWAGEN AG (Volkswagen Group), with its registered office in Wolfsburg, the Federal Republic of Germany. The Volkswagen (VW) automotive family is currently the second largest automotive producer in the world, aiming to be number one by as late as 2018 not only through innovative products but even delivery concepts which could significantly support fulfilling this ambitious goal 2.1 History SA has a rich history, which dates back to 1895. At this time, the bookseller Vaclav Klement decided to repair bicycles. He joined forces with machine fitter Vaclav Laurin, and together they created the brand name, Slavia. The first automobile was made in 1905. It was called Viturette A. The interest in the first car was enormous. As a result, they created the joint stock company in 1907. During World War I, the Company manufactured grenades as well. In 1925 they merged with SA’s plant in Pilsen. This was the end of the company’s name as Laurin & Klement since it had become Skoda Auto (SA).. After World War II the Company was nationalised. Because of the permanent stagnation of the economy which started after the 70s, economic growth was only secured by the production of the model range SA Favorit, which went into production in 1987. After the political changes of 1989, the Government of the former Czechoslovak Republic and the management of SA began to search for a strong foreign partner whose experience and investments would be capable of securing the long-term international competitiveness of the company. In December 1990, the government decided to cooperate with the German Volkswagen Group. The VW Group gained 31 % of SA. The SA – Volkswagen joint venture began operations on 16 April, 1991 under the name SA, automobilova a. s., becoming the fourth brand of the VW Group alongside VW, AUDI & SEAT. Since 2000, the VW Group is the sole proprietor of SA [1]. 2.2 Organizational structure There are 7 main departments in SA (see Table 1), which are furthered divided into sub- departments. Each organizational unit has its own abbreviation – a letter or/and a number. Since 1 January 2016, the company has harmonised the abbreviations of its departments in line with the other companies from the VW Group. The Company employs almost 24,000 internal employees plus external employees and trainees. The profit in 2014 was 665 million €. SA delivered a recorded 1.037 million cars to their customers, representing an annual increase of nearly 13 %. For the first time in its 119-year history, the Company surpassed the figure of the one million vehicles delivered in a single year.

The operating margin reached 8.1 % in the first half of 2015. The improvement in earnings was mainly due to a mix of improvements and the lower cost of materials. Table 1 Organisation structure in SA [ 2 ] Production plants of ŠKODA cars are located in 7 countries around the world:

  • The Czech Republic (Mlada Boleslav, Kvasiny, Vrchlabi).
  • Slovakia (Bratislava).
  • Russia (Kaluga, Niznij Novgorod).
  • Ukraine (Solomonovo).
  • Kazakhstan (Usť Kamenogorsk).
  • India (Aurangabad, Pune).
  • China (Sanghaj, Ningbo, I-Ceng). 2.3 Sectors and products Currently, the company offers 7 product lines – Citigo, New Fabia, Roomster, Rapid + Rapid Spaceback, Octavia, Yeti and New Superb. Citigo – the smallest SA model, with its fashionable three or five door body, is especially ideal for the city. Since its introduction in 2011, it has won the hearts of many city-dwellers, mainly due to its agility, economy and safety. New Fabia – the latest generation of the Fabia model, this successful compact car, with its clearly defined and sporty proportions, is extremely eye-catching. The Fabia incorporates the advanced safety and comfort elements and infotainment systems of higher class cars. Roomster – as the name suggests, the spacious luggage compartment of the Roomster is its most important feature and the key to its success with customers. Rapid and Rapid Spaceback – Rapid bridges the gap in the model range between the Fabia and Octavia. The interior features a range of clever details and provides a generous amount of space. With specific version for India and China, the Rapid is a key model in the SA growth strategy. Rapid Spaceback is the first model with a hatchback body in the lower medium class. The latest version Rapid Spaceback with the ScoutLine accessory package will be heading to dealerships in selected markets throughout Europe during 2015. The main features of the model include its Current designation of areas till 31. 12. 2015 New designation of areas from 1. 1. 2016 G G Central management department E F Commercial Affairs P V^ Sales^ and Marketing V P Production and Logistics T E Technical Development Z S Human Resources Management N B Purchasing

3 Findings and discussion

3.1 Current state analysis The entire logistics concept starts with the planning of production and calculation of needs, followed by the setting of timetables and the creation of call-offs, taking into account the current stocks. The logistics concept also includes packaging management, information labels on the pallet, expeditions and last but not least, solving exception handling, monitoring and the communication with suppliers. Currently, timetables are based on the daily management and selection of time windows. Therefore, it must be determined how many trucks will be needed, as well as the pick-up times and of course pick-up volumes. The supplier alone orders and provides transport on the basis of this information. In SA, this activity is handled by the Skotrans Department. Also important is the data communication between SA and the supplier. For SA, this especially means the sending of call-offs, when the Dispositions Department recalled the daily amount without connection to a specific shipment. The supplier may move volumes forward while ensuring the utilization of transport, but it is their own responsibility. On the supplier side, the MAT data are then sent. These data contain the same information as on the delivery sheet and the subsequent invoicing. Based on the long-term and short-term offs, the supplier executes available input material and manages his own production planning. Both processes are in the full purview of the supplier. Long-term call-off (LAB) is performed once a week with a six month perspective, a fine or a short-term call-off (FAB) is performed daily, with minimum five day perspective. Another option is the Kanban call-offs. These Kanban call-offs are based on the situation when SA recalled parts from the external suppliers on the basis of the processed amount of material in production, and according to the determined minimum stocks in the logistics warehouse space at a specified time. Kanban call-off is passed on to an external supplier through fax orders at a specified time. A fundamental element for specifying the part and implementing call-offs is the part number. Normally, part identification numbers are used in call-offs, which determine the type of part and his technical or colour version. In regards to management packaging, the supplier is responsible for the planning, acquisition, maintenance and cleaning of all transport pallets that circulate among the supplier’s factory and an external logistics service provider. The supplier orders empty packages through the B2B portal, where the VW factory determine for each relation the ratio of full and empty packages and manage their expedition. In exceptional cases, the packages may be delivered from different factories within the group than the one that was accepted. All pallets are provided with information labels VDA 4902 (Odette Transport Label), called B and C information labels shown in the figure below, which are used throughout the process to the point of consumption and they have a uniform delivery sheet (see Figure 1).

Fig. 1 B and C logistics information labels [4] Solving exceptional handling means a special process designated for exceptional cases in which the standard processes are not working. Today, exception handlings are not standardised within the logistics concept. The evaluation of suppliers is currently run without the process monitoring, the goal of which should be to monitor in a transparent way the quality of supplies and the whole logistics process and consequently deduce the appropriate measures. For example, the measurement of process deviations at the supplier should reflect these results in the supplier rating by drawing up a report about solving the problem with the measured supplier focused on eliminating problems, and last but not least ensure a permanent improvement process. The material flow of the supplied parts from the supplier in SA is provided by the department of Brand Logistics (VL) / Logistics Planning (VLL). The material flow from supplier to the warehouse is performed by manipulation and transport equipment. Particularly in SA, there is a case of direct drive, groupage or Kanban deliveries, whose more modern alternatives are JDC (Japan Delivery Concept) deliveries. In the case of direct drive, one full truck from one supplier is dispatched directly into the plant of SA. Groupage, as the name implies, concerns those suppliers who group smaller quantities of pallets from more suppliers in a single delivery. In the plant, trucks are controlled by the SA LKW control, where telematics guide them to an individual storage place. There, the driver hands the delivery sheet to the storekeeper, who will check it and then enter the data into the logistics system. A C information label, according to which the material is placed in a store, is subsequently printed. Empty packages are returned to the suppliers in two ways. In the first case in LKW after unloading the material, empty packages are loaded and carried back to the supplier. In the second case, the supplier sends special trucks for the empty packages. This LKW may be sent to any factory within the VW group; it doesn't have to necessarily be in the same factory which delivered the material. From store to the tact of the assembly line, forklifts and trailer trains are used which have regularly scheduled routes and intervals. Intervals are displayed on the notice boards of the system SQ Visual or ITLC (Internes Leit Transport System). Trailer trains are prepared for the so-called "station", where the ITLC system is used to assign them to a specific truck. The rough description of the current SA supply chain status is seen in Figure 2.

3.3 ŠKODA AUTO solution proposal The proposed SA solutions are based on 4 pillars (see Figure 3 ):

  1. QUICK CHECK-IN “The geo-fencing project, called 'Quick Check-in', involves a simple smartphone app that uses GPS technology to verify the position of incoming trucks, and connects to the control system for checking in material at the plant. The system allows trucks that adhere to delivery and production schedule to bypass the entry gate and move directly to the plant dock or the logistics centre adjacent to the factory without any extra paperwork or stopping.” [ 5 ]
  2. FOLAB “FOLAB is the material requirement calculation program for delivery instructions which always runs once a week, now including the vehicle build-program for the 3rd production week in line. Single calls are shown in the delivery instructions from Monday of the following week. If no delivery has been recorded for the material requirement that was scheduled for a delivery date before the current requirement period, this will be entered as backlog in the delivery instruction. The total material amount entered as backlog and urgent requirement (plus any material requirement for the following delivery day) should be shipped immediately. If necessary, the mode of shipment should be agreed separately with the responsible material follow-up analyst.” [ 3 ]
  3. GTL “GTL (Global Transport Label) was created in order to substitute the outdated system of separated B and C labels, constituents of VDA 4902 (Odette transport label). GTL has been created in accordance to ISO 15394. GTL label is the most universal solution to ensure a stable delivery in the transport chain from the supplier via the intermediate storage to the point of assembly or directly to the customer.” [ 7 ]
  4. CNG “Compressed natural gas, or CNG, is natural gas under pressure which remains clear, odourless, and non-corrosive. Although vehicles can use natural gas as either liquid or gas, most vehicles use the gaseous form. Natural gas is produced worldwide at relatively low cost and is cleaner than gasoline or diesel fuel. Natural gas vehicles show an average reduction in ozone-forming emissions of 80 percent compared to gasoline vehicles.” [ 8 ]

Fig. 3 Pillars of EDC concept [ 6 ] Four new technologies used separately in VW were combined in SA into one supply chain solution. FOLAB, QUICK CHECK-IN, GTL and CNG helped to improve logistics KPI. Figure 4 shows the main advantages of EDC. FOLAB is responsible for a better utilisation of trucks (lower number of trucks in circulation) and management of loading on the supplier’s side. Quick Check-In helps to reduce waiting time of trucks at the producer’s warehouses – SA. GTL simplify the flow of information and workload of warehouse employees with a correct management of documents. CNG directly influences the emission of CO 2 into the atmosphere.

3. GTL

In the possible future, transport labels can be replaced by the next generation of QR-code, which will be read by wearable technology (e. g. Google Glass) and then transformed into recognisable information.

  1. CNG CNG was implemented in the delivery system as a more environmentally-friendly alternative to the diesel engine. However, according to the certain tests, CNG can be substituted by the clean diesel engine. While historically CNG had an inherent emissions advantage, new technologies applied to diesel have dramatically narrowed the gap. However, according to the research provided by M.J. Bradley & Associates LLC, USA in 2012, CNG transit buses currently cost, on average, approximately $70,000 more to purchase than equivalent diesel buses. When converting from diesel to natural gas operations, transit agencies must also invest in new CNG fuelling stations, which can cost $25,800 or more per bus. On the other hand, natural gas currently costs approximately 35% less than diesel fuel per diesel gallon equivalent
  • which can result in over $11,000 per bus in annual fuel cost savings for CNG buses compared to diesel buses. For at least the next 20 years, natural gas will continue to be priced significantly lower than diesel fuel, so that annual operating fuel cost savings from conversion to CNG buses will persist throughout the life of a transit bus purchased today. [ 9 ]

4 Evaluation and Recommendations

The expected benefits of EDC concept against conventional deliveries are (see Figure 5):

  1. Logistics expenses, including fuel and pallets costs, are reduced by 25% in comparison with the existing system.
  2. Expenses on material inventories are 55% lower.
  3. Expenses associated with logistics space are also decreased by 55%.
  4. CO 2 emissions are 60% lower through the use of CNG in LKW instead of diesel engine. Also reduction of CO 2 emissions is caused indirectly by the use of the FOLAB system. FOLAB helps to reach an optimal truck loading , which decreases the number of trips and therefore fuel consumption.
  5. Quick-Check-In enables a smooth entry to the plant. The truck does not wait and goes directly to the loading bay, which results in the reduction of movement time within the plant and simultaneously it eliminates the downtime. Unlike conventional deliveries, EDC system enables the truck to avoid the unnecessary 15 minutes spent due to the administrative issues.
  6. Unified GTL label simultaneously substitutes B- and C-type labels. This results both in an economic advantage associated with the time saving and in ecological friendliness due to the reduction of amount of printed materials. Fig. 5 Benefits of EDC compared to conventional deliveries [ 10 ] A literature search and subsequent consultation of the findings with automotive professionals enables the identification of the best possible solution for the current Sustainable Supply Chain in SA. More efficient particular solutions for each part of the supply chain process can be found in the current technological world. Supported by a verified system logistics theory [ 11 ], the proposed EDC system solution could improve sustainable efficiency of the whole process better than only particular high-tech optimisation.

References

[1] ŠKODA Media Portal. History , [cited 03 /0 8 /2015]. Available from: https://media.skoda- auto.com/en/Pages/history-new.aspx. [2] ŠKODA Media Portal. ŠKODA’s Deliveries, Sales revenue and Operating Profit increase in First Half of 2015 , [cited 03/08/2015]. Available from: https://media.skoda- auto.com/en/_layouts/Skoda.PRPortal/pressrelease.aspx?ID=886. [3] ŠKODA AUTO. Annual Report 2014 , [cit. 04 /0 8 /2015]. Available from: http://www.skoda-auto.com/en/company/investors/annual-reports. [4] PEKAŘ R., RAIS T. Global Transport Label. Internal materials of ŠKODA AUTO. [5] LUDWIG C. Audi geo-fencing project takes top VW Group logistics prize , [cited 23/08/2015]. Available from: http://www.automotivelogisticsmagazine.com/news/audi- geo-fencing-project-takes-top-vw-group-logistics-prize. [6] UNGERMAN P. Koncernový bronz pro logistiku. ŠKODA Mobil. No. 7, 2015. p. 11. [7] Volkswagen. Implementation Guideline: Global Transport Label (GTL) , [cited 23/08/2015]. Available from: http://goo.gl/OkRSvQ. [8] Consumer Energy Center. Compressed Natural Gas (CNG) as a Transportation Fuel , [cited 23/08/2015]. Available from: http://www.consumerenergycenter.org/transportation/afvs/cng.html. [9] MJB&A. Clean Diesel versus CNG Buses: Cost, Air Quality, & Climate Impacts , [cited 23/08/2015]. Available from: http://www.catf.us/resources/publications/files/20120227- Diesel_vs_CNG_FINAL_MJBA.pdf [10] PEKAŘ R., STRNAD D., RAIS T. Handoutseiten Skoda. Internal materials of ŠKODA AUTO. [11] PERNICA P. Logistika pro 21. Století Supply Chain Management. Praha: Radix, 2005.

GREEN SOLUTIONS FOR BUSINESS AND INDUSTRY

30 August - 12 September 201 5 ŠKODA AUTO University, Mladá Boleslav, Czech Republic

INNOVATIVE APPROACHES IN

INTERNAL GREEN TRANSPORT

Jonas SESEKE, Dresden University of Applied Science Joonas HÄMÄLÄINEN, Seinäjoki University of Applied Science Kateřina BAŠUSOVÁ, ŠKODA AUTO University Gabriela ŽIAKOVÁ, ŠKODA AUTO University Mateusz JAWORSKI, WSB University in Wroclaw Martin PODPLESKÝ, University of Žilina Lecturer: David STAŠ, Radim LENORT, Pavel WICHER, ŠKODA AUTO University