CUM­MINS CEN­TRAL SUP­PLY CHAIN OPER­A­TIONS

Lean Lo­gis­tics

Africa Outlook - - Contents - Writer: Matthew Staff | Project Man­ager: Ed­die Clin­ton

Pow­er­ing a more pros­per­ous world

um­mins has in­stilled it­self as a re­spon­si­ble, ef­fec­tive and successful in­dus­trial op­er­a­tor in Africa for more than 70 years and con­tin­ues to lever­age this al­most un­par­al­leled knowl­edge and ex­pe­ri­ence. A cru­cial suc­cess fac­tor that un­der­pins this cur­rent and fu­ture suc­cess is the Com­pany’s in­vest­ment in and de­vel­op­ment of a world-class sup­ply chain that is both flex­i­ble and re­silient to the trade flow and op­er­a­tional risks of the re­gion.

In­cept­ing on the con­ti­nent in 1946, the wider group has been a pi­o­neer and in­no­va­tor across realms of en­gines, gen­er­a­tors, gas gen­er­a­tion, in­dus­trial ser­vices and parts, and so­cial en­rich­ment; later be­com­ing a wholly-owned dis­trib­u­tor in South Africa in 2000 via Cum­mins South­ern Africa. Go­ing on to repli­cate this model through joint ven­tures in Nige­ria and Ghana as well, the or­ganic growth that the or­gan­i­sa­tion has en­joyed has cul­mi­nated in one of the most im­pres­sive turnkey port­fo­lios in

Africa. And through the in­tro­duc­tion of Cum­mins Cen­tral Sup­ply Chain Oper­a­tions (CSCO), Cum­mins can truly claim to be a lead­ing player at ev­ery stage of the in­dus­trial value chain.

“As part of a global and African strat­egy ex­e­cu­tion, we first de­cided to es­tab­lish re­gional dis­tri­bu­tion cen­tres (RDCs) in Africa, start­ing in Ghana (2014) and then South Africa (2015),” re­calls Sup­ply Chain Di­rec­tor, Ger­ald ‘Ged’ Mack­ell. “Over­all, the Africa oper­a­tions fall within the ‘AfricaMid­dle East’ re­gion which com­prises 11 wholly-owned dis­trib­u­tors, two joint ven­ture dis­trib­u­tors, and four in­de­pen­dent dis­trib­u­tors; in ad­di­tion to the two wholly-owned re­gional dis­tri­bu­tion cen­tres.

“With the es­tab­lish­ment of CSCO in Africa, we brought world-class or­der man­age­ment, ware­house man­age­ment and ma­te­ri­als plan­ning sys­tems to the con­ti­nent. This has

in­creased the breadth and, se­lec­tively, the depth of in­ven­tory on the con­ti­nent and has also brought global pro­cesses in or­der pro­cess­ing and ware­house man­age­ment to Africa.”

As has been proved by all of Cum­mins’ pre­vi­ous ex­pan­sions and di­ver­si­fi­ca­tions through­out the decades, such so­lu­tions not only bring in­no­va­tive new ideas to an ev­er­chang­ing in­dus­trial land­scape; but are also flex­i­ble enough in their own right to be ap­pli­ca­ble to the en­tire con­ti­nent, rather than just an iso­lated na­tional hub.

Mack­ell con­tin­ues: “Through net­work stud­ies we can de­ter­mine the best lo­ca­tions to serve our dis­trib­u­tors and end cus­tomers, al­ways with the aim to re­duce lead times, to im­prove avail­abil­ity, and to cap­i­talise on economies of scale to re­duce over­all lo­gis­tics costs.”

With this driv­ing mis­sion in place, Mack­ell goes on to pin­point four key com­pet­i­tive ad­van­tages that will stand CSCO in good stead in the years to come: “Treat­ing all our cus­tomers on an equal foot­ing by us­ing clearly com­mu­ni­cated, stan­dard­ised pro­cesses; de­mand­ing con­tin­u­ous process and cost im­prove­ments; of­fer­ing a wider range of ser­vices; and greater lev­els of in­te­gra­tion and col­lab­o­ra­tion with our third-party lo­gis­tics part­ners.”

Sig­nif­i­cant growth op­por­tu­nity

To fully un­der­stand the rea­son be­hind Cum­mins Africa’s suc­cess and con­tin­u­ously grow­ing in­flu­ence, you need only to look back at the his­tory of the wider Cum­mins Group. Ini­tially formed in 1919 as the Cum­mins Engine Com­pany out of In­di­ana, USA, the busi­ness im­me­di­ately es­tab­lished a rep­u­ta­tion as a trail­blazer, as one of the very first diesel engine man­u­fac­tur­ers.

Fol­low­ing nu­mer­ous di­ver­si­fi­ca­tions and re­mit broad­en­ings, the name was fi­nally changed to Cum­mins Inc in

2001, safely en­trenched in the global in­dus­trial fab­ric as a global power leader that de­signs, man­u­fac­tures, dis­trib­utes and ser­vices diesel and nat­u­ral gas en­gines and re­lated com­po­nents.

Ac­count­ing for ar­eas of fil­tra­tion, af­tertreat­ment, tur­bocharg­ers, fuel sys­tems, con­trols sys­tems, air han­dling sys­tems, trans­mis­sions and elec­tric power gen­er­a­tion sys­tems, Cum­mins’ sig­nif­i­cance to OEMs was and is ob­vi­ous; and it there­fore be­came equally ob­vi­ous to then ac­count for the sup­ply el­e­ment between provider and user as well.

“We serve our cus­tomers through a net­work of ap­prox­i­mately 500 wholly-owned and in­de­pen­dent dis­trib­u­tor lo­ca­tions and more than 7,500 dealer lo­ca­tions in more than

190 coun­tries and ter­ri­to­ries,” the Com­pany ex­plains. “We have four com­ple­men­tary op­er­at­ing seg­ments: Engine, Dis­tri­bu­tion, Com­po­nents and Power Sys­tems. These seg­ments share tech­nol­ogy, cus­tomers, strate­gic part­ners, brand recog­ni­tion and our dis­tri­bu­tion net­work in or­der to com­pete more ef­fi­ciently and ef­fec­tively in their re­spec­tive mar­kets.

“Our prod­ucts com­pete pri­mar­ily on the ba­sis of per­for­mance, fuel econ­omy, speed of de­liv­ery, qual­ity, cus­tomer sup­port and price.”

Net sales for 2017 reached US$20 bil­lion, with the dis­tri­bu­tion seg­ment ac­count­ing for 27 per­cent of this fig­ure; an in­dict­ment of this arm of the busi­ness and how piv­otal it has be­come in com­ple­ment­ing the Com­pany’s tra­di­tional rev­enue driv­ers.

“Our global dis­tri­bu­tion seg­ment con­sists of 28 wholly-owned and 10 joint ven­ture dis­trib­u­tors that ser­vice and dis­trib­ute the full range of our prod­ucts and ser­vices to end-users,” the Com­pany con­tin­ues. “Our whol­ly­owned dis­trib­u­tors are lo­cated in key mar­kets, in­clud­ing North Amer­ica, Aus­tralia, Europe, China, Africa Rus­sia, Ja­pan, Brazil, Sin­ga­pore and Cen­tral Amer­ica, while our joint ven­ture dis­trib­u­tors are lo­cated across South Amer­ica, the Mid­dle East, In­dia, Thai­land and Sin­ga­pore.

“The Africa Mid­dle East re­gion is pri­mar­ily a dis­tri­bu­tion busi­ness formed from the re­cent 2017 merger of the Africa and Mid­dle East re­gions and rep­re­sents a sig­nif­i­cant growth op­por­tu­nity for Cum­mins and is the fo­cus of multi-year in­vest­ments.

Sales rev­enue here is ex­pected to reach US$1bn in the next three years with planned CAGR of more than 10 per­cent.”

Power and re­sources

Since its in­cep­tion, CSCO has strongly em­pha­sised the need to im­prove the over­all cus­tomer ex­pe­ri­ence by im­prov­ing ser­vice lev­els us­ing world­class stan­dard­ised pro­cesses as part of a more all-en­com­pass­ing, lean con­tin­u­ous im­prove­ment strat­egy.

Ul­ti­mately en­acted through a ded­i­cated Global Lo­gis­tics Im­prove­ment Group (GLIG) team, these lean method­olo­gies dis­play clear over­laps from Cum­mins’ successful en­gi­neer­ing oper­a­tions through an en­hanced reliance on ro­bust Six Sigma im­prove­ments (in­clud­ing the use of Voice of Cus­tomer and KJ stud­ies), value stream map­ping, value stream trans­for­ma­tion, and strate­gic A3 im­prove­ments.

Tan­gi­bly, Mack­ell has seen this ap­proach re­sult in a num­ber of successful roll­outs, project suc­cesses and part­ner­ship es­tab­lish­ments across Africa.

“Firstly, more cus­tomers are be­ing served di­rectly from lo­cal RDCs, bring­ing the power and re­sources of Cum­mins to the con­ti­nent,” he says. “There has also been more reg­u­lar shipments to cus­tomers to im­prove over­all prod­uct avail­abil­ity and re­duce the bull-whip ef­fect; ex­panded lo­calised kit­ting ca­pa­bil­i­ties;

an up­dated ma­te­rial plan­ning sys­tem; im­proved in­ter-con­nec­tions across sys­tems to re­duce er­rors and im­prove in­for­ma­tion flow; and for 2019, we will see an up­grade of our Red Prairie ware­house man­age­ment sys­tem as part of its global roll­out.”

Ad­di­tion­ally, a net­work study is al­ready be­ing car­ried out to de­cide whether a third RDC will be in­tro­duced in the re­gion, com­pounded by an al­ready de­cided-upon Ghana­ian tran­si­tion which will see the Com­pany move into a new state-of-the art leased fa­cil­ity.

Mack­ell adds: “Cap­i­tal in­vest­men­t­wise, we will also see a re­lo­ca­tion of our South African dis­trib­u­tor to a new green­field fa­cil­ity com­pris­ing a more mod­ern ware­house; a re­lo­ca­tion of our Nige­rian dis­trib­u­tor to an equally con­tem­po­rary brown­fields fa­cil­ity; the es­tab­lish­ment of a new dis­trib­u­tor in Morocco with a new ware­house; and - on the tech side - the de­sign of each afore­men­tioned, new ware­house via the util­i­sa­tion of FlexSim ware­house de­sign and op­ti­mi­sa­tion soft­ware.”

“Cum­mins has a long his­tory of cor­po­rate responsibility, based on the frame­work of link­ing the im­pact on our stake­hold­ers to re­spon­si­ble busi­ness de­ci­sions. Our em­ploy­ees have in­vested tal­ent, pas­sion and re­sources into try­ing to solve prob­lems in our com­mu­ni­ties and so­ci­ety since the Com­pany’s in­cep­tion in 1919.

“Our cor­po­rate responsibility ac­tiv­i­ties in Africa are gov­erned by a Cor­po­rate Responsibility Coun­cil con­sist­ing of eight mem­bers.”

Cum­mins has a long his­tory of cor­po­rate responsibility, based on the frame­work of link­ing the im­pact on our stake­hold­ers to re­spon­si­ble busi­ness de­ci­sions

Sup­ply chain in­te­gra­tion

Cap­i­tal ex­pen­di­tures aren’t solely en­acted in an at­tempt to ex­pand and be­come more ad­vanced though; rather they are done so in line with the very lat­est in­dus­try and cus­tomer trends that Cum­mins is bet­ter equipped than most to iden­tify given its co­pi­ous ex­pe­ri­ence across mul­ti­ple in­dus­tries.

Fur­ther ex­am­ples in more re­cent

times have also en­cour­aged CSCO to move many of its ap­pli­ca­tions to the cloud while min­imis­ing cus­tomi­sa­tions in or­der to pro­vide smoother up­grade paths.

Mack­ell adds: “We’ve also aligned sup­ply chain sys­tems to en­able out­comes and pro­cesses that our cus­tomers re­quire - i.e., im­proved re­spon­sive­ness and a bet­ter in­for­ma­tion flow.

“We con­tinue to strive for greater end-to-end sup­ply chain in­te­gra­tion. This is both in­ter­nally across our busi­ness and with our sup­pli­ers.”

‘In­te­gra­tion’ is an apt term when analysing many facets that make Cum­mins the successful, multi­na­tional busi­ness it is to­day. From a hu­man re­source per­spec­tive, es­pe­cially in Africa, the Com­pany has made a con­certed ef­fort to em­bed it­self as an in­trin­si­cally lo­cal en­tity; an ide­ol­ogy which can only be achieved through the hir­ing of lo­cal ar­ti­sans, be­fore pro­vid­ing them with the req­ui­site training to ul­ti­mately build a sus­tain­able tal­ent pool on the con­ti­nent.

To this end, each Re­gional Dis­tri­bu­tion Cen­tre in Ghana and South Africa is staffed by in­di­vid­u­als em­a­nat­ing from each re­spec­tive coun­try, even de­spite the end ser­vices be­ing much more global in their na­ture.

“Training and re­ten­tion is key, es­pe­cially in mar­kets where these skills are not read­ily avail­able,” Mack­ell em­pha­sises. “The use of our e-learning based sup­ply chain academy there­fore helps to de­velop tech­ni­cal skills, while we con­cen­trate on so­cial en­rich­ment through a fo­cus on as­pects like gen­der di­ver­sity to in­crease the num­ber of women with ca­reers in sup­ply chain.

“Con­se­quently, this ethos helps us to bet­ter collaborate with our cus­tomers and part­ners on a more per­son­able level; to then ex­pand both their and our busi­ness prof­itabil­ity through pro­vid­ing sup­ply chain value-added ser­vices at com­pet­i­tive costs.”

Training and re­ten­tion is key... The use of our e-learning based sup­ply chain academy there­fore helps to de­velop tech­ni­cal skills, while we con­cen­trate on so­cial en­rich­ment through a fo­cus on as­pects like gen­der di­ver­sity to in­crease the num­ber of women with ca­reers in sup­ply chain

Cum­mins brings in­no­va­tive ideas to the in­dus­trial land­scape

Cum­mins is both ef­fi­cient and ef­fec­tive in its ser­vice

Reg­u­lar shipments are de­liv­ered to cus­tomers

QSK50 Tier 2 Red 3qtr Fuel

The Com­pany strives for greater end-toend in­te­gra­tion

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