Heavy Metal Control and Savings

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When automaker Mitsubishi Motors began buying directly from steel mills, a logistics challenge loomed. It found a metals specialist to keep the coils rolling.

Mitsubishi Motors North America uses a lot of steel to produce 240,000 Eclipses, Gallants, and Endeavors a year at its state-of-the-art, 2.4-million-square-foot plant in Normal, Ill. With the steel market so volatile in recent years, the automaker faced some serious logistics challenges.

To help control its supply chain and protect against market volatility, Mitsubishi launched a steel resale program in partnership with ADS Logistics LLC, Homewood, Ill. The program shifts its steel purchases from service centers to steel producers.

Flat-rolled steel is the commodity at the heart of the resale program. "After it goes through a stamping process, flat-rolled steel is used for auto parts such as fenders and hoods," explains Gordon Gustafson, chief commercial officer for ADS Logistics.

Mitsubishi runs six stamping machines at its Normal plant, and 25 outside stampers supply parts. Mitsubishi buys steel and resells it to those stampers.

"We want the stampers' final price to be based on a consistent price per pound of steel," says Greg Neville, senior buyer, materials and services procurement and supply for Mitsubishi.

"In the past, we worked solely with steel service centers, which are essentially distributors; the steel mills are the manufacturers," Neville explains.

Mitsubishi turned to a steel resale program for two main reasons: cost and stability. "We are now able to control the cost of the steel we send to the stamping supplier," Neville says. "And the program helps us stabilize supply. When material gets tight at steel mills, they generally favor original equipment manufacturers (OEMs) such as Mitsubishi."

Moving steel from mills to processors, to "roll-and-hold" warehouses, and finally to stampers, is no small logistical challenge. Mills produce flat steel in long strips up to 50 inches wide. Those strips are then rolled into cylinders called master coils.

Because some stamping machines require smaller widths, service centers may cut master rolls into usable widths before transporting them to their vendors. (Mitsubishi cuts master rolls at its own stamping operation.) Further complicating matters, rolled steel also comes in different grades.

"We realized we needed a partner to help us manage our steel program," says Neville. "We tapped into ADS Logistics' expertise."

Steeling the Show

ADS Logistics is a metals industry specialist that operates a fleet of 400 trucks and a network of 18 warehouses, two of which are active in Mitsubishi's steel resale program.

The company has provided just-in-time steel delivery to the Normal plant since 1995, so Mitsubishi was comfortable working with the logistics provider. "We had a relationship with ADS. We were familiar with its people, its expertise, and its technology systems," Neville explains.

The Mitsubishi steel resale program was officially announced in November 2005, and today ADS Logistics is responsible for managing the program end to end.

"When a steel coil has to move from mill to processor to parts maker to Mitsubishi, we coordinate the process," says Gustafson.

The company also acts as a single point of invoice for Mitsubishi. "Mitsubishi invoices ADS for those services, and it's our responsibility to pay the individual suppliers," Gustafson says.

The logistics provider, however, plays no part in negotiations or transactions between Mitsubishi and its many suppliers. Mitsubishi selects its steel sources and chooses service providers such as trucking companies and warehouse facilities.

"Once they've made the specifications and entered into agreements, ADS comes in," Gustafson explains.

ADS also helps Mitsubishi manage logistics via a metals-based information and supply chain management system called LoMaS. LoMaS is a software solution that enables shippers to conduct transactions and control metals shipments from the point of production to processor, warehouse, and to the final user.

ADS staff presently use LoMaS on Mitsubishi's behalf while they develop customized screens and data collection processes specific to Mitsubishi's business model. Mitsubishi staff will use the LoMaS system directly via the Internet once this customization is complete.

Mastering the Process

Through its partnership with ADS Logistics, Mitsubishi gained a greater understanding of the processes involved in the mill-to-OEM supply chain, enabling it to improve logistics efficiency.

Buying steel in master coils from the mill, for example, creates the opportunity to use the product more efficiently, says Al Hudson, managing director, international for ADS Logistics.

"The steel specification of a master coil may be appropriate for more than one auto part. There may be minor differences, but the gauge, width, and chemical makeup of the steel might be the same," he explains. "Mitsubishi is now able to do cross application, taking parts of that master coil—once processed—to more than one stamper."

This gives Mitsubishi better product control. "It can plan ahead for maximum use of master coils, minimizing scrap loss," Hudson explains.

To help further control material quality, ADS does a final inspection of Mitsubishi's steel coils before they are shipped. "We make certain what is delivered to Mitsubishi is 100-percent usable material that can go on its stamping lines," says Gustafson.

This means Mitsubishi doesn't have to inspect the steel shipments coming into its plant. As a result of the new solution, it also doesn't have to worry about keeping on top of inventory.

"We've automated the order process significantly," Gustafson says. "Every time Mitsubishi orders parts, our system drives the replenishment order to the stamper, which in turn drives a processed coil replenishment from the service center, triggering an automated master coil replenishment order from the mill."

This automation helps Mitsubishi keep its steel coils—and its entire auto production process—rolling.

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