6 Major S&OP Challenges Facing Automotive Manufacturers
Ute Strohmaier - October 12, 2023
When engaging with S&OP managers from Automotive OEMs, a recurring set of challenges consistently arises, exerting adverse effects on the planning and execution processes of global manufacturers. Let’s take a closer look at these problems and how the handling can be become manageable:
1. Demand Volatility
For large manufacturers like those in the automotive industry, demand fluctuates significantly based on the economy, shifts in technology such as e-mobility, and other factors. The shift to e-mobility, for example, varies in different regions, influenced by different marketing campaigns, state-supported incentives, and the level of charging infrastructure. Accurate demand forecasting poses a challenge, affecting production planning for EVs and fossil fuel cars across different plants.
With Demand Capacity Management, you can harness advanced predictive analytics and machine learning algorithms to better understand and anticipate demand fluctuations. The system can analyze historical data, economic indicators, and market trends to provide more accurate demand forecasts. Additionally, it allows for scenario modeling, helping you adapt to shifts in technology and regional variations effectively.
2. Seasonal Demand
Despite the volatility in demand, some predictability exists in the seasonal fluctuations of many products, including consumer vehicles. However, planning for and managing seasonal peaks requires careful forecasting and capacity management.
A S&OP Sales Planning solution enables you to create more accurate seasonal demand forecasts by incorporating historical seasonal patterns and market data. It facilitates better capacity planning by allowing you to allocate resources, such as labor and production equipment, more efficiently during peak seasons. This reduces the complexity of managing seasonal peaks and minimizes the risks of overproduction or shortages.
3. Supply Chain Complexity
Major manufacturers dealing with variant-rich products and extensive BOM-lists face multiple tiers and scales of suppliers, manufacturers, and distributors. Calculating forecasts and demands for parts, reserving quantities at relevant suppliers, and aligning plans with adequate plants becomes difficult, especially given unpredictable delays and raw material availability.
Technologies, e.g, from flexis, provide end-to-end visibility across supply chain networks, making it easier to manage the complexity of multi-tier supplier relations. With real-time data and analytics, you can optimize inventory levels, monitor supplier performance, and proactively address any delays or material shortages. This streamlines communication with suppliers and ensures smoother alignment with production plans.
4. Customization and Product Variation
Industries like automotive offer products with various specifications. Planning for these thousands of variations heightens complexity in demand planning and leads to production bottlenecks.
The flexibility of flexis Sales Planning allows you to efficiently manage product variations and customization options. You can set up configurable rules for different product configurations, enabling automated demand planning and production scheduling for various specifications. This helps to manage the planning and prevents production bottlenecks.
5. Long-Term Capacity Planning
Production capacity must align with expected demand to prevent excessive inventory or product shortages. Accurate forecasts spanning 1-2 years are essential for reliable and economically sound supplier management.
flexis Demand Capacity Management supports long-term capacity planning by providing accurate demand forecasts for 1-5 years ahead. By integrating demand and capacity data, you can optimize resource allocation, invest in the right production facilities, and align your capacity with expected demand more effectively, thus avoiding excess inventory or shortages.
6. Need for Real-Time Information
Large manufacturing companies with multiple distribution levels and production structures depend on real-time information. Real-time data, covering sales, inventories, and production capacities, is critical to support database-driven decision-making.
Both flexis Sales Planning and Demand Capacity Management offer real-time data and reporting capabilities. They provide insights into sales, inventory levels, and production capacities across your global operations. With this real-time information, you can make data-driven decisions swiftly, ensuring that your supply chain remains responsive and resilient.
The flexis S&OP solution leverages advanced data analytics to craft a robust, dependable, and responsive S&OP plan for global-scale production. This solution seamlessly integrates S&OP with transportation and logistics, ensuring end-to-end planning from raw material procurement to final product delivery. It effectively reduces supply chain waste and equips companies to respond to disruptions at any production level in real time.
In summary, flexis technology solutions like Sales Planning and Demand Capacity Management provide the tools and insights necessary to overcome today’s challenges.
If you want to learn more get your Guide to Sales & Operations Planning
In this Guide you will learn:
Why a S&OP Process is important
How a S&OP System can be flexible and quickly implemented
Central tasks of a S&OP System
The key to more productivity
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