10/30/2003

TDS Automotive has come a long way in a short time, literally quadrupling its turnover in just four years. And no one can accuse it of buying business, talk to CEO Jos Opdeweegh and he makes the case clear: his company is in business to make a profit, and a decent one at that.

“The difference between us and the general logistics industry is that we specialize in only a portion of the logistics segment and embark only on projects where the comparison of total financial liability and return meets our ‘hurdle rate’.” Brave words, indeed, for a man heading up a logistics enterprise where transit rates are often pared to the bone to win business.

But TDS Automotive is not about simple logistics, carrying parts between point A and point B, as Opdeweegh explains “We are not interested in undemanding warehousing or transportation tasks, our interest is in complex material handling tasks, transforming a number of parts into modules, and assembling vehicle kits that demand complicated packing.”

The module assembly and packing operation (read, respectively, inbound and outbound) that Opdeweegh refers to are the two key aspects of the TDS operation. On one hand it serves as a Tier Zero™ supplier, positioned at the factory gate, serving as the umbilical between numerous tier ones and the vehicle manufacturer. Its other hand is engaged in export CKD packing, mainly for blue-chip brands, working on most continents across the globe.

Of the two disciplines, inbound activities account for some 60 per cent of the company’s current $300+ million turnover, and outbound around 40 per cent. Do the math and the two figures total 100 per cent - in other words, there is nothing left for anything else! Yes: TDS is that rare commodity, a logistics provider totally dedicated to automotive! A marketing man would call this a USP, but to executive vice president of business development, Michael Neumann, it is much more. “We believe that a large part of our success is due to this sole focus on the automotive industry. It is not just that our guys out in the field talk the same language as our customers; we also act in the same way. We do not behave like a typical logistics service provider, which may have migrated from the role of a transportation supplier or from a freight forwarding company, but rather as a full partner. “

Horst Klingspor, COO of global operations, describes TDS as: “Having the internal heartbeat of an automotive company. When customers outsource work to us they are comforted by the fact that we act in the same way that they act. Unlike some in the industry that merge activities across a variety of industries and thus have a variety of cultures and mindsets, ours is a total automotive mindset.”

TDS started life, in 1941, as the Canadian-based Livingston Export Packaging Company, boxing parts for the Ford Motor Company destined for other parts of the manufacturer’s sales empire. Over the years it added first General Motors and then American Motors (now part of Chrysler) to its client list, while, at the behest of customers, also extended its activities across the border into the US. The name of the company was changed to TDS (Total Distribution Systems) following a management buyout in 1986.

Jos Opdeweegh freely admits that back in those days, when the company was only involved in outbound export packing, TDS was a “a low cost, low complexity type of provider,” and that remained the situation until the late 1990s, when a new management team, which included Opdeweegh, Klingspor and Neumann, took the helm. “At that time the strategy of the company changed quite dramatically,” Opdeweegh records. “We decided to diversify, in terms of getting more customers, in more countries, and getting involved in inbound logistics, specifically the build-to-order industry.”

The opportunity for global diversification came off the back of a Ford request for TDS to extend the CKD services it provided in North America to Brazil and Europe. The foothold in Europe also enabled the company to establish its first inbound contract for VW in Brussels and shortly thereafter to Ford in Genk, and subsequently to extend that globally, in 2001, with the purchase of Mackie Automotive Systems. The same year saw another significant move, the establishment of a base in China.

The move to the Orient was, in many ways, a natural progression for TDS. Apart from the obvious opportunities to grow with the embryo market, it was already running CKD operations into the country for customers such as Buick from North America, Audi from Germany and, latterly, also BMW. As Michael Neumann explains: “We preach a market-to-market philosophy and being able to deconsolidate the products we have packaged-up in Europe or North America makes sense. The customer is able to devolve complete responsibility into our hands, including intermediary steps such as customs clearance, transportation, container yard management and shuttle services up to deconsolidation.”

So does the market-to-market missive mean that we will shortly see TDS performing on-site sub-assembly operations in China, as it does in Europe and North America? “We have to do something as regards final assembly,” admits Neumann. “We want to be the service provider at both ends of the chain in these emerging markets, and although we are not yet involved in complex inbound logistics, it is part of our plan to be there when these markets reach maturity.”

TDS describes itself as a “material handling logistics provider”, meaning, as far as its inbound business is concerned, managing sub-assembly and sequencing operations on behalf of manufacturers under the Tier Zero™ concept. “More and more we are seeing the scenario of OEMs setting up supplier parks and appointing dedicated logistics providers, such as TDS, to manage those operations and pushing their tier ones to use that provider in that park,” explains Horst Klingspor.

“There is increasing realisation amongst the OEMs that having numerous suppliers or their self-appointed logistics providers entering assembly plants and bringing parts to the line on an individual basis does not make sense, and that consolidating activities under one roof, both figuratively and literally, is a better option. Apart from the obvious advantages, it also allows us to leverage a number of indirect services that otherwise would have to be duplicated by the various tier ones.

“The principle of Tier Zero™ is very simple,” continues Klingspor. “The OEM contracts us to integrate a number of tier one businesses and for us to delver the subsequent sub-assembly and sequencing services. It is a perfect fit for the way the automotive industry is now moving - the tier ones provide the parts, the OEMs want to outsource module build and we sit nicely in the middle ground providing what I call the build-to-order functionality.”

A by-product of the system that Klingspor describes is that in addition to contracts with OEMs such as Ford, General Motors, Chrysler, Volkswagen Group and BMW, TDS has also managed to build relationships with a wide number of leading tier ones, from the likes of Delphi and Visteon down.

Although TDS may have grown rapidly over the past few years it is still a hungry company. “Our mission is to become the largest independent supplier of specialist, complex and value added logistics services to the automotive community. To achieve that means pursuing additional customers and expanding the complexity of the services we offer,” says Jos Opdeweegh. “Our objective is to double the size of the business in the next five years.”

The formula to achieve that target is to do “more of the same,” according to Horst Klingspor. “It is all down to providing customers with a top-notch service. That has allowed us to grow as an organisation; that is what causes automotive customers to come to us, that is what will continue to enable us to grow in the future.”

But, as Michael Neumann, explains, this does not mean taking on business just for the sake of it. “We are not interested in turning a stone that others have already turned and only getting in because we are cheaper. Our strategy is to add value through a quality focus and using systems solutions that we have developed to not only manage projects but also to drive processes by leveraging our manufacturing and systems engineering capabilities. This is a concept that more and more manufacturers, particularly at the high-end of the market, are coming to appreciate, realising that taking an objective view can result in total cost reduction.” 

New business wins in Europe and Asia

TDS continues to grow its business with existing customers and capture new contracts. During the last few months the company announced three major new business gains.

Under an extended contract, TDS is supplying more than 100 commodities to General Motors’ Vauxhall assembly plant at Ellesmere Port, UK, which produces 175,000 Astra and Vectra models annually for the European market. Although TDS has been providing sub-assembly and sequencing services to Vauxhall since 1995 (via the former Mackie operation), its mandate has recently been extended to include functions previously carried out by a second provider. The newly awarded business sees a significant increase in its scope of services, which now include receiving, warehousing, sub-assembly, sequencing and transportation to the assembly plant. The new business, together with a portion of TDS’s existing operations, have been consolidated in a dedicated 30,000 m2 facility within the Ellesmere Port supplier park.

In mainland Europe, TDS has won a contract to extend the services it provides to Volkswagen’s manufacturing plant at Brussels in Belgium, where it has been resident since 1999. Here, a six-year contract has been signed to handle rear axles and corner modules to support production of the new Golf Mk V and the Lupo being built at the factory. TDS’s responsibilities include receiving, inventory management, sub-assembly, axle drive-parameter adjustment, sequencing and line-side delivery. It has also taken charge of the transportation of sequenced materials.

Further afield, BMW has selected TDS to provide outbound logistics services for its new China project. The five-year agreement sees TDS providing CKD export packing services for the BMW 3 series, from a brand new 40,000m2 building at Regensburg, Germany. Export of the new BMW 5 series to Shenyang is expected to follow next year.

At Shenyang, TDS is responsible for the Container Yard Management of the packaged inbound component parts; and are working toward providing BMW, and its joint venture partner, Brilliance China Automotive Holdings Ltd., with comprehensive deconsolidation services. Ultimately TDS hopes to sub-assemble and sequence components to the Shenyang assembly plant, thus by completing the full-service material handling loop of their one-company Market-to-Market philosophy.