Leading automotive OEMs and suppliers understand they need much more advanced supply chain processes and technology to support corporate goals for profitability and agility in this age of consumerism.
The Great Recession - natural disasters - bankruptcies - consolidation – growth. The automotive industry has experienced significant upheaval over the past six to seven years and has recently been going strong. Two important realizations that have come out of this turmoil are a renewed emphasis on profitable operations and the critical role of supply chain processes and advanced decision-support technology in attaining corporate goals.
There has also been a dramatic shift in the marketplace. The consumer is now firmly in control and their expectations are changing. They want cars, trucks and SUVs that are fuel efficient with low emissions. They want their vehicles to have the latest in electronics, navigations systems, communications systems and driver assistance capabilities. And they expect high quality and longer vehicle life, but they still want style, performance, comfort and value.
Leading automotive OEMs and suppliers understand that they need much more advanced supply chain processes and technology to support corporate goals for profitability and agility in this age of consumerism. Specifically, they need an integrated supply chain that will enable them to:
• Better sense and forecast ever-changing global consumer demand by region, product category and business segment;
• Design manufacturing and distribution networks that can rapidly and profitably respond to changing consumer demand;
• Synchronize global capacity across internal production facilities and suppliers;
• Improve velocity and efficiency while reducing waste through broader application of lean principles and supply chain optimization;
• Re-energize aftermarket segments to improve margins and customer service; and
• Become more agile, responsive and profitable through integrated business planning and analytics.
Today’s automotive supply chain continues to evolve in response to economic shifts, vehicle brand consolidation, increased use of common vehicle platforms, renewed interest in applying lean principles, and consumers’ changing attitudes towards sustainability, vehicle longevity and advanced electronics. Automotive manufacturers and suppliers are responding with a new breed of integrated processes and technology that supports this supply chain evolution and enables new levels of efficiency, profitability and collaboration across the value chain. With increasing pressure to support improved profitability through more efficient operations, many companies have placed a broader emphasis on lean principles across manufacturing, distribution and transportation.
Manufacturers of highly-configurable products such as automobiles not only have to meet customer commitments, they must also balance schedules that respect different option capacities, material constraints, workload distribution across assembly lines and sequence coordination among multiple stages. Upstream and downstream changes frequently wreak havoc on planned schedules, requiring quick turnaround from plant schedulers. Maintaining efficiency can be very challenging in this environment. The enterprise focus on lean operations is raising the bar on productivity, necessitating streamlined business processes with advanced decision-support technology, especially for the following business processes.
Lean operations start with clear alignment between all stakeholders in the process, and there has been a growing realization over the past six to seven years to drive improved alignment. An effective sales and operations planning process (S&OP) enables automotive manufacturers and suppliers to align corporate objectives, financial goals and operational plans to bridge the gaps between demand and supply at each node in the supply chain. These forward-looking plans synchronize production from raw materials to finished vehicles across time horizons that stretch from immediate reaction to disruptions to planning scenarios over 24 months or longer. Advanced technology today allows vehicle demand to be aggregated and reviewed at any level of granularity across regions, and part-level demand derived using option attach rates and engineering usage statements. Exception-based frameworks allow visibility into supply-demand imbalances, based on existing part-supply commits from global suppliers. Interactive “what-if” scenario planning frameworks allow analysts to explore different resolution alternatives, examining operational feasibility and financial attractiveness at the same time. An effective S&OP process gets everyone ? from internal departments to global partners ? marching to the same set of agreed-upon business objectives and operational plans, reducing lead times, supply gaps and production costs while improving vehicle availability.
On the assembly line, every individual vehicle is configured to order in that it represents a collection of engineering-feasible option combinations that must be assembled together. Efficient order slotting and sequencing of fully configured vehicle on a manufacturing line is a difficult problem. Done well, it improves manufacturing plant utilization and overall order-to-delivery processes. Lean manufacturing on the supply side, and customer responsiveness on the demand side, are often conflicting objectives that manufacturers must address simultaneously. Advanced order slotting and sequencing solutions in the market today consider each individual order and generate overall schedules based on conflicting requirements such as customer priority, delivery commitments, order features like paint color and production constraints such as tool changeovers, daily capacity, spacing requirements, minimum and maximum runs and materials availability. These solutions enforce hard constraints – which are physical limits on production – as well as soft constraints which can be preferentially violated, but that carry penalties. As with advanced sales and operations planning, simulation capabilities in order slotting and sequencing allow order schedulers to test the results of various what-if scenarios before actually implementing a plan. Schedulers can modify rules, assess different scenarios and respond in real time to any changes on the shop floor. Advanced decision support technology in the market today offers optimizers that comprehend operating constraints and ensure that orders are scheduled in the most strategic manner to maximize the productivity of upstream and downstream processes. Effective order slotting
and sequencing enable leading OEMs to strategize, plan and execute assembly processes across multiple facilities for profitable production and greater production synchronization with suppliers.
The sharp uptick in vehicle demand across many global markets, coupled with the increase in global platforms across various regions has created a universal part shortage problem for many automotive OEMs. Supplier collaboration has taken a new meaning in recent years. An effective supplier collaboration process provides a holistic view of supply operations that enables automotive manufacturers to proactively work with suppliers to execute strategic business plans. It provides a robust process that helps manufacturers proactively identify supplier bottlenecks, collaborate with suppliers to develop resolution strategies, and track and manage execution throughout the purchase order cycle. It enables automotive planners to easily manage complex inventories, as well as their daily interactions with suppliers, so supply shortages can be identified and resolved proactively.
Effective warehouse management significantly improves warehouse and distribution center efficiency, accuracy and throughput. Streamlined processes and decision support technology today automatically assign the next most productive task to each worker based on task priority and the worker’s certifications, equipment and current location. Advanced systems direct movement of materials, parts and components to and from production lines, through distribution and onto transportation in the most efficient manner. In conjunction, effective workforce management optimizes workforce utilization and productivity across manufacturing, distribution and transportation. Advanced systems today plan and schedule the workforce based on order volumes and characteristics to ensure the right number and skilled workers are available to match work content and priorities. They continuously monitor work completion by worker or team against pre-defined engineered standards alert supervisors to performance problems and barriers to success.
Streamlined transportation management optimizes the flow of parts, assemblies and finished goods across global supply networks and on to dealers. Advanced transportation management systems manage the procurement, planning and execution of transportation assets to ensure the lowest cost modes, carriers and routes are always used based on contracted rates and capacities. They optimize utilization of internal fleets and contract carriers to ensure lowest cost transportation consistent with internal policies and contracted capacities. Responding to the ever-demanding consumer, the automotive industry, slowly but surely, has launched the next wave of innovation. Focused on enhanced profitability, lean operations across the automotive ecosystem have been driven to much higher levels of performance over the past six to seven years.
Puneet Saxena is vice president, industry strategy, at JDA Software. JDA Software is the leading provider of end-to-end, integrated retail and supply chain planning and execution solutions for more than 4,000 customers worldwide. JDA’s unique solutions empower its clients to achieve more by optimizing costs, increasing revenue and reducing time to value so they can always deliver on their customer promises. Based in Scottsdale, Arizona, JDA is online at www.jda.com.