Distribution and warehouse structures

The spare parts and accessories are mainly produced at one of 1200 VP suppliers. These parts are predominantly delivered by Volvo Logistics to a central warehouse. There are minor material flows directly from suppliers to dealers, this is however very small in comparison. Besides getting parts from

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suppliers, the CW and RW receives remanufactured and reconditioned parts (see Appendix 2) from one of its remanufacturing plants. The importers have historically handled large portions of VP markets. Nowadays most of the markets are handled by VP and no pure importer controlled markets exist in Europe besides in Portugal. The distribution structure of VP aftermarket of spare parts and accessories is presented in Figure 4.2.

4.2.1.1 Central warehouse

The central warehouse is the main provider of spare parts and accessories to the regional warehouses, support warehouses (SW) and dealers in VP’s distribution network. The CW stocks the majority of the total parts needed and contains the whole parts range for the markets which it is responsible for. At CW the parts coming from supplier are handled, pre-packed if needed and stocked. When orders are placed by dealers, RW, SW or importers the order is prepared, picked, packed and loaded onto trucks leaving CW multiple times a day. The CW is also responsible for assembling kits of multiple parts (see Appendix 2) and the painting of certain parts if this is not provided by the suppliers.

Figure 4.2 The main material flows in Volvo Parts distribution structure of its aftermarket

spare parts

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For Volvo Truck Corporation (VTC) and Volvo Bus Corporation (VBC) spare parts and accessories the central warehouse in Europe is located in Ghent, Belgium. This CW opened in 1973 as a complement to the CW in Torslanda, Gothenburg. The location in Belgium made it possible to reach importers in both Europe and other continents quickly. In 1993 a separation of parts ranges was started as a consequence of calculations showing cost reduction potential. All central warehouse operations for VTC and VBC in Europe were moved to Ghent and all car parts were moved to Gothenburg. As of 2006 Ghent had a total parts range of 134 000 parts and handled over 7.1 million order lines per year within its 82 hectare large facilities, see Figure 4.3.

Besides handling VTC and VBC parts the CW in Ghent also handles parts to other business areas such as Volvo Penta, Renault Trucks and Volvo Construction Equipment (VCE).

Figure 4.4 illustrates the parts range and order line distributions between the VTB & VBC, Volvo Penta and VCE spare parts in Ghent (data from 2006). Although VBC & VTC only stands for about one third of the parts range, it stands for the vast majority of the order lines in Ghent.

4.2.1.2 Regional warehouse

A regional warehouse (RW) acts as a local central warehouse for a market (or markets) where the distance to the regular central warehouse is too large, resulting in too long lead times to get deliveries within reasonable time. The RW then replenishes the dealer inventories just as a CW would, with the

Partsrange 0 20000 40000 60000 80000 100000 120000 140000 160000 180000 200000 80 82 84 86 88 90 92 94 96 98 00 02 04 06 VT & VB Penta RT VCE

Order Lines 0 1000 2000 3000 4000 5000 6000 7000 8000 7476 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 VT & VB Penta RT VCE Figure 4.4 The parts range and order line distribution over time at the central warehouse in

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distinction that RW only has full service for the parts range active on the market(s) it provides. The RW also distributes priority orders, commonly known as day orders, to the dealers. The replenishment of the RW, also called refill orders is mainly supplied with parts from a CW, but also (although small by comparison) by suppliers whose location is closer to the RW than the CW. The western and central European market does not contain a RW due to the proximity to CW in Ghent. There are however two RWs in the eastern parts of Europe, in Moscow and Istanbul.

4.2.1.3 Support warehouse

A support warehouse (SW) distributes the priority orders (in the future referred to as day orders) to dealers on a market (or markets). These day orders should arrive to the dealer the very next day after the order is placed. The location of the SW is therefore located much closer to the dealers than the CW and hence has shorter transportation times. The shorter transportation times are the main reason for having an SW, since the costs of transportation from an SW is significantly smaller than of a day order from the CW that often has to be transported by taxi or airplane in order to arrive the very next day. In Europe there are currently a total of eight4 _{operational SWs at the following}

locations: Rugby in the UK, Helsinki in Finland, Wroclaw in Poland, Gothenburg in Sweden, Lyon in France, Madrid in Spain, Bologna in Italy and Vienna in Austria.

The parts range at a SW is much narrower than at the CW. The parts stocked at SW are typically parts with low demand, parts that exist in low stocks at the dealers (or not at all) but should be available on short notice. There is also be a small buffer of high demand parts so that in cases where the demand at the dealers suddenly gets very high there is an opportunity to quickly replenish the dealer inventories while waiting for replenishments from CW to arrive.

The SW is replenished by the CW, with so called refill orders, and is managed by the Refill department and a Regional Inventory Manager (RIM) responsible for the market that the SW supplies.

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4.2.1.4 Dealers

It is the dealers that satisfy all demand from end customers. The characteristics of dealers vary greatly. A dealer could be a simple retailer of parts with no mechanical workshops or a full service establishment that provides parts, repairs, services and sales. The dealers could also be small privately owned businesses or large business chains with multiple establishments owned either privately or by Volvo.

A dealer’s inventory is generally replenished from CW, but if special need arises priority orders can be sent to SW.