The role of maritime ports in the global supply chain networks of automotive OEMs

In the big picture, supply chain design often combines activities and resources. But regardless of how those activities and resources are broken down, their design breaks down to two steps.

First, it must be decided which warehousing, distribution and manufacturing operations will be needed at a particular location or node. And second, specific activities within those operations must be integrated with the global supply chain network.

In the case of an automotive OEM’s global supply chain, of which maritime ports are standard nodes, it means deciding which production and distribution processes will be entrusted to a given port.

Regarding the distribution process, some activities are inherent to the very nature of a node and can only be performed there. Inbound and outbound trans-shipment activities are examples of what typically happens at maritime port nodes.

As a way to add value, distribution activities likely to be entrusted to ports are warehousing, localization and/or pre-delivery inspection (PDI).

When providing (at least short-term) vehicle warehousing, the port acts as a vehicle distribution center for the local/regional markets and/or as a buffer point for cars on their way to inland or export markets.

Port-conducted localization encompasses some or all of the actions that must be taken into account for the specificities of the vehicle import or export market. This might include adjusting the car configuration to comply with legal requirements (installing head and tail lights of the right color) and linguistics constraints (infotainement programming), and/or processing the information flow associated with the import or export operation (handling customs documentation).

Successive product quality checks are performed on cars from factory exit until final delivery. Maritime port nodes are typically key locations for these checks especially after cars arrive from a multimodal journey. These port nodes are entrusted with not only carrying the quality controls of PDIs, but also with doing whatever needs to be done subsequently such as cleaning, painting and/or repair services. As EVs account for a more sizeable share of import and export flows, battery checking and recharging are often added to this set of pre-delivery activities conducted at port nodes.

In addition to such distribution process activities, OEMs may also allocate some production activities to maritime ports. This typically happens when cars leave the factory not fully finished as part of a postponement strategy, for instance. The aim is to better deal with demand uncertainty and volatility as well as minimize inventory costs.

Extra or full compliance of a car’s configuration to a given order is then performed at the maritime port, making it an extension of the manufacturing plant. Some activity centers at the port might even look like manufacturing assembly lines.

All of this makes one wonder whether all OEMs make the same decisions regarding activity allocation to their maritime port nodes.

As a first step towards answering this question, a survey was done of North America’s top eight vehicle handling ports in 2021. Those ports are: Baltimore, MD, Brunswick, GA, Jacksonville, FL, New York-New Jersey, Vancouver, BC, San Diego, CA, Hueneme, CA and Portland, OR. They were asked what activities are performed there for the various OEMs. Additional data was gathered from key websites and web-based sources. On the whole, 28 OEMs and 11 auto processors were identified as using at least one of the eight ports for warehousing, assembly, localizaiton and pre-delivery.

Key findings of the survey

At least partly because OEMs presumably want to profit by the port crossing to perform a number of sub-processes that would otherwise require another stop elsewhere, the sampled ports are entrusted with the full range of activities identified by the survey.

That said, all OEMs do not allocate the same activities to their maritime port nodes. For instance, in-port assembly tends to be conducted for global OEMs but premium OEMs tend to use ports for localization. It is worth noting that warehousing and pre-delivery activities were typically found at all ports.

There also appears to be another difference of approach between global OEMs and premium OEMs. For instance, vehicle processing /preparation /distribution centers are predominantly self-operated by premium OEMs. Meanwhile, the operation of these centers is rather systematically outsourced to auto processors by global OEMs. A possible reluctance on the part of premium OEMs to share resources with other manufacturers, as well as higher import / export volumes to be handled in the case of global OEMs, may contribute to these differences.

As the automotive industry is on its way to mass-market new products, namely hybrid and full EVs, OEMS will need to significantly upgrade the agility and resilience of their supply chains. As a result, the contribution of maritime ports to production and distribution processes is likely to notably evolve in the years to come. Such an evolution stands as a great mix of opportunities and challenges for OEMs’ supply chain designers going forward.

Charles H. Fredouet’s primary research interest is global supply chain design and control, with a specific focus on maritime port links. He has led Le Havre University (LHU, Le Havre, France) research lab in logistics (CERENE) and been vice-dean for research at LHU School of Logistics (ISEL). After three years leading IMARPOR research program on small- and medium-sized ports at Saint-Malo (France) Institute of Technology, he is now research director at ESPRIT Industrial Campus’s School of Logistics (ESLI) in Redon, France. He can be reached at [email protected].

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