Volvo’s process of delivering spare parts on time

Published: 2 April 2019 - 2 p.m.
By: Dennis Daniel

Volvo Group’s 8,000-sqm regional distribution centre (RDC) for Middle East and Africa, located in the Jebel Ali Free Zone in Dubai, stocks 55,000–60,000 spare parts for five brands in the region – Volvo Trucks, Volvo Construction Equipment (CE), UD Trucks, Renault Trucks and Mack Trucks. Approximately 30% of the inventory constitutes Volvo CE parts, followed by 25% for Volvo Trucks, and the remaining is shared by UD, Renault and Mack Trucks. SDLG will be added to the RDC’s portfolio by Q2 2019.

The RDC started operations in 2006 with parts for Volvo CE, Volvo Trucks, and Mack Trucks. The facility began stocking parts for Renault Trucks in 2008 and UD Trucks in 2011. Its strategic location in Dubai enables short lead times as well as low transport and inventory costs for Volvo’s importers in the MEA markets.

During the last year, the RDC Dubai has come into the spotlight for its continuous improvement methodology and has become a case study in operations excellence within the Volvo Group. In 2018, the facility was awarded the ‘platinum level’ in the Volvo Production System (VPS) assessment. The VPS is the Volvo Group’s framework for working with continuous improvement. VPS assessments reflect the extent to which the continuous improvement culture is embedded across the organisation and reflected in its results.

The platinum level is the second highest level, behind the diamond level, that can be achieved by a business entity in the Volvo Group. The order of progression in the VPS assessment is from the basic or foundation level to bronze, silver, gold, platinum, and finally, the diamond level.

The Dubai RDC is the only warehouse facility within Volvo Group Trucks’ Service Market Logistics operations to have been given the platinum level recognition among 66 similar parts distribution centres around the world. The Dubai facility achieved this feat after its first VPS assessment.

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The Volvo Group regional distribution centre at the Jebel Ali Free Zone, Dubai.

Humera Shaikh, acting director, Volvo Group Trucks Operations, says: “We made significant progress in the last five years from the foundation level. Last year, we felt confident to apply for the VPS assessment and we managed to take the leap from the foundation to platinum levels in the first attempt.”

VPS assessors awarded the platinum level to the RDC on the basis of their evaluation of performance KPIs that included safety, quality, delivery, cost, environment and people. The optimisation of these parameters were enabled by the structured ordering process that Volvo has created at the RDC.

Dealers place their orders online, which are received by the operations department. The orders are picked and packed by the warehouse operators, and then the parts are loaded on trucks for delivery.

The RDC accepts orders in three different categories (or classes) depending on their urgency. The priority for delivery increases from class 3 to class 1 orders. Class 3 orders, called stock orders, are made by dealers for stocking their warehouses. Class 2 orders, called day orders, are made for workshop requirements.

“We have made remarkable progress in lead time during the last few years. In 2013, the lead time for stock orders, from order to dispatch, was 168 hours or 5 days. Currently, it’s below 8 hours. Since 2017, we’ve been able to extend the cut-off time for stock orders from 1pm to 2pm for certain dealers. Stock orders received before 2pm are picked, packed, and dispatched on the same day by 4pm,” says Humera.

The top 500 fast moving parts are maintained at 98% availability. Fast-moving items at the RDC include service parts such as filters and brakes. Usually, they are stocked in advance by the dealers, but they face situations when they need to procure a part, immediately. Such requirements are handled through Class 1 or vehicle off road (VOR) orders, which have the highest priority. VOR orders are raised only during emergency situations, such as when a vehicle breakdown requires a part for repair, urgently.

The daily cut-off time to place a VOR order with the RDC is 3pm, and the turnaround time for VOR orders is the same day. Volvo has nominated local transporters to handle each class of order.

“If an order is placed by a dealer within this deadline, we pick and pack the items and dispatch them on the same day. If the order is from the UAE, then the delivery happens on the same day. For other countries in the region, the delivery time could extend to 2–3 days via air shipments,” says Humera.

Anoop Thomas, WH operations manager, Volvo Group Trucks Operations, adds: “We receive VOR orders from outside the UAE almost every day. Dealers generally place VOR orders for parts without which a truck could not function; for example, a brake shoe. On the other hand, parts like wiper blades are not placed as VOR orders because they don’t affect the functionality of a truck under normal circumstances.”

The RDC has staff dedicated to handle VOR orders. They are identified by the red colour of their uniforms and are given the highest priority in picking and utilisation of resources. These staff are trained on end-to-end processes and are empowered to take decisions by themselves.

Quality is measured in parts per million (PPM), which indicates failures in a million order lines. Failures occur generally due to picking inaccuracies, packing discrepancies and damage of goods in transit.

“Five years ago in January 2014, our quality performance was 3500ppm. We have improved it significantly to achieve 250ppm, which means 1 error in 4000 order lines out, and we aim to achieve zero defects in future. We have also achieved 98% stock accuracy,” says Anoop.

The RDC handles an average of 4000–4500 order lines every week. As a slight variation in defects or failures can have a major impact on the quality performance, the quality control team at the RDC follows a process that involves all the RDC departments while addressing claims.

The claims at the RDC are addressed through an activity scheduled daily for the entire team at 3pm. Staff from different departments gather in a designated ‘quality analysis’ area to discuss quality claims. One of the staff assumes the role of the customer and challenges the other departments in the RDC to address the customer complaint. The debate ends only when all the departments provide a solution that satisfies the customer. The manager in charge of quality claims must respond within 24 hours providing the investigation result and action plan.

“A few years ago, we noticed that a large component of our quality claims were due to damage of parts. Our investigation revealed that the damage occurred on fragile parts during transit because their packaging did not provide sufficient protection. We received the fragile parts in bulk sea shipments which were well protected. When they are removed and repacked in smaller quantities for delivery via road or air, the smaller packages did not offer as much protection as the bulk packages,” says Anoop.

“The best course of action was to separate and handle the fragile parts carefully in our warehouse before packing. So we started identifying fragile parts while picking, and we created a zone dedicated to sort fragile parts with signage to indicate the sensitive nature of the items. The zone for fragile parts is equipped with additional packaging material to provide the cushioning required for transportation. This process helped us reduce damage claims, significantly,” he adds.

Humera points out that every process at the RDC revolves around the Japanese process improvement methodology of Kaizen and its 3G principles Gemba, Gembutsu and Genjitsu.

“This methodology involves solving a problem by defining it and conducting a root cause analysis to arrive at a solution for that particular problem so that it doesn’t occur again,” says Humera.

The RDC has applied this methodology to safety, a cornerstone of Volvo’s brand identity, by encouraging its staff to identify and report safety gaps in every stage of its processes. To make this exercise more appealing, the RDC gamified the task in the form of a competition called ‘the safety race’.

The safety race competition requires members to identify unsafe conditions and acts, report them and take immediate action to rectify the problems. The RDC staff are divided into four teams, represented by four colours. Each team is rewarded 1 point for problem detection and 2 points for problem solving. The progress of the teams are visualised on a symbolic race track installed at the RDC.

“The competition drives our staff to keep hunting for unsafe acts. So far, they have detected over 4000 unsafe acts and conditions and reported them in the plan-do-check-act (PDCA) format, which has helped us take corrective action. These safety initiatives have led to our current safety record of around 1800 days without any loss time accident,” says Humera.

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The symbolic race track of the safety race competition indicates the progress of different teams at the RDC in identifying unsafe conditions and acts and reporting them.

The 3G principles also extend to staff training, warehouse space and cost optimisation. The RDC has a VPS training room where staff have access to training material, and continuous training programmes are scheduled by identifying their skill gaps on various processes, and progress is rewarded through recognition programmes every month. The warehouse, which is 70% occupied currently, has undergone a space optimisation, replacing horizontal picking with vertical picking. Currently, one of the focus areas of the RDC in its process improvement is cost deployment.

“Freight is the major component of our costs. We use value stream mapping to find ways to reduce costs through improvements in processes,” says Humera.

In the midst of these process improvements, Humera is preparing her team for the diamond level assessment, next year.

“The diamond level requires end-to-end workplace organisation and complete visibility of the supply chain, from the supplier to the end user. We would also need to introduce a certain level of automation in our processes. We are on track to achieving these objectives and we expect to be ready for our diamond level evaluation in 2020,” says Humera.

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