Future-Proofing Supplier Capacity Management in the Automotive Sector

By Sharad Jadhav, Shish Kumar, Jitendra Kandpal
APICS Magazine – 2018

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Staying competitive in today’s complex and dynamic automotive market requires automotive original equipment manufacturers (OEMs) to balance their demand-supply equation. This makes it possible to not only meet customer demand, but also optimize overhead and keep capital expenses under control.

Industry has evolved in responding to customer demands quickly and efficiently, it still faces a number of issues related to effectively managing supplier capacity, which lead to significant lost capital and untapped opportunities. So, how can OEMs ensure that the right capacities are created and maintained? OEMs must continuously monitors demand signals, analyzed their components, and compares them with supply to highlight constraints and overcapacity.

Capacity management

Many OEMs lack an integrated, automated capability to calculate demand for parts based on forecasts or actual orders and the ability to compare it with supplier-installed capacity across the entire product life cycle. Identifying areas of risk and quantifying the effects of changes to forecast production demand also are limited, typically resulting in demand-supply mismatch, overused supplier capacity and compromised customer aspirations. Other challenges facing automotive OEMs today are:

• Product complexity. The uniqueness of the automotive industry lies in its ability to offer millions of vehicle configurations to satisfy every customer segment.
• High demand variability. OEMs often are forced to alter a completed order just a few days or weeks before delivery to give focus on customer-centricity, which could leads to high demands fluctuations and influences downstream activities, including supplier capacity.
• Global expansion. Provides OEMs with opportunities to examine existing efficiencies that directly affect profitability and increases the challenges related to seamlessly integrating fluctuating demand with supplier capacity.
• Ineffective feature-to-part mapping. A significant problem in understanding demand signals lies in the complexity of the feature mix and demand calculations. Customers can choose from among hundreds of features across multiple car lines. Each option is made up of several parts. To streamline production, it is essential to accurately estimate part demand and enable visibility across product lines.

Real-world solutions

The bottom line is that automotive OEMs struggle to connect disparate data with actionable insights. The solution is approach centered on data that maximizes the value of existing information technology tools and investments. It will provides visibility to capacity information, enables what-if studies and helps users gain access to actionable insights by connecting disparate, cross-functional data.

The highly cross-functional nature of the solution demanded a unique approach. The product creation and evaluating dependencies, limitations and challenges and presenting them to project stakeholders and sponsors at requirement workshops. Tools and dashboards were designed prior to approval and finalization through follow-up sessions with subject matter experts.  The environment encompassed capacity planning data, gateways, a business intelligence engine and output in the form of dashboards for cross-functional teams.

The solution collates capacity planning data from multiple sources and drops the data at different gateways. The business intelligence engine then extracts, integrates, transforms and displays logical data on dashboards, providing a single source of information to cross-functional teams. As a result, the OEM has real-time visibility into demand and supplier capacity variance, from program to production, along with what-if analysis capabilities. Other benefits include the ability to

• translate vehicle demand into part level demand through the product life cycle
• gain up-to-date information from suppliers at the part level to identify capacity gaps
• enhance collaboration between supplier and buyer teams
• use intuitive dashboard features with drill-down capability
• see instant alerts on any supply-capacity gap to related buyers and the production planner
• identify data quality issues.

The new capacity management solution focuses on maximizing the value of the company’s existing capacity management tools while optimizing process changes. These shifts were required to address the parts capacity management issues related to visibility, collaboration and actionable insights. Today, the capacity management tool is heightening efficiency and productivity and generating business value by offering a holistic, integrated, insights-driven user experience. It provides full visibility into joint capacity requirements for common parts. Increased volumes enable the automaker to get better negotiated rates on the materials and services procured.

Better visualization of long- and short-term volume variance, global part visibility, actionable insights and an enhanced what-if scenario analysis around demand fluctuations provide the automaker with significant operational advantages. In addition, access to dashboards covering capacity challenges by individual part — and alerts in the supplier ecosystem — equip capacity planners with actionable insights.

Finally, the digitized and mobile-compatible solution is based on a scalable network, enabling simple future business developments, while the need for reduced computing power leads to lower hardware requirements and significant cost savings. This, in turn, makes it possible for the company to optimize its supplier capacity management and compete successfully in the evermore challenging automotive market.