How OEMs Can Benefit From Demand Capacity Management
Nick Ostdick - December 29, 2016
Today’s OEMs often find themselves at an interesting and confusing crossroads: The need or opportunity to increase sales by increasing production volumes without significantly altering short and mid-term planning strategies, which can result in severe bottlenecks or disruptions across a company’s entire value chain from dealer to customer. It’s a Catch 22 - how to grow and expand without overextending an OEMs resources, production programs, facilities, personnel, and planning platforms - and it’s a problem more and more companies face in a complex, diversifying industry.
The automotive supply chain is already a variant-rich industry with the potential for serious pitfalls in production shortages, overages, and disruptions, especially with entry in new and emerging markets in disparate parts of the globe. Unforeseen events or fluctuations in demand or planned production programs are at the front of planners’ and managers’ minds as they strive to cut through the complexity of the global supply stream and leverage enhanced visibility and transparency into their supply situation. It makes sense then that the opportunity for volume increases adds another layer of complication onto an already delicate balancing act of demand and capacity.
What is demand capacity management?
Enter a Demand Capacity Management solution. This kind of intelligent, integrated planning platform not only helps OEMs efficiently respond and react to changes in planning strategies based on increased volumes or associated events, but it also helps planners and managers identify areas of potential bottlenecks or disruptions long before they occur in order to best combat these breakdowns. Demand Capacity Management solutions help planners balance all product levels for all markets at any given moment to avoid orders with potentials for bottlenecks and run complex what-if scenarios to gameplan for similar bottlenecks in the future.
Think of it this way: The larger a vehicle you drive, the more safety features you should have in place to protect you and other motorists from potentially fatal accidents. A go-kart, for example, may only require a seatbelt and helmet for maximum safety. On the other hand, an 18-wheeler comes equipped with backup cameras, multiple side and rearview mirrors, motion sensors, and other safety features based on the sheer size of the vehicle. A Demand Capacity Management solution functions in a very similar way as today’s OEMs move from go-kart status into 18-wheeler territory.
Because of the integrated nature of Demand Capacity Management and its ability to work in conjunction with other planning and production strategies and solutions like BOM management, Plan for Every Part, and Every Part Every Interval, Demand Capacity Management has another special feature: high-performance information processing. This means planners and managers not only have the ability to gather, process, review, and actualize data and metrics in real-time, but they can also implement this data to conduct detailed hypothetical planning simulations to gain greater insight into their supply situation. As we discussed earlier with the paradox between increased volumes and less stability in production, the ability to run detailed simulations is a vital value proposition for OEMs in generating new and revised parameters for planned production.
Now that we understand how Demand Capacity Management works, it’s important to ask: What are its benefits? How can OEMs gain value from deploying such a solution? Here are a handful of ways OEMs can benefit from implementing a Demand Capacity Management solution in today’s global automotive network.
Benefits of demand capacity management
Because Demand Capacity Management helps balance production at all levels across all facilities or hubs in a production network, planners and managers have enhanced insight into the part supply situation and the inventory necessary to fill scheduled orders. This also helps OEMs generate a yard, dock, or container management strategy where planners and managers are only moving the parts necessary to maintain proper inventory levels for on-time delivery.
As we discussed earlier, one of the key drivers in the value of Demand Capacity Management is the capacity to identify bottlenecks before they happen and pinpoint orders which may be impacted by these bottlenecks. This allows planners and managers to alter inventory, production programs, resource allocation, and other elements of production to help avoid these bottlenecks and ensure continued productivity. This ability also allows OEMs to, if necessary, work with other suppliers or partners to source materials, resources, and labor to further ensure production competency, on-time delivery, and customer satisfaction.
As we mentioned earlier, Demand Capacity Management is an integrated solution that works in coordination with several other intelligent planning platforms. Enhanced BOM explosion and the ability to see which component parts are necessary for production, their location in the supply stream, their capacity for allocation or reallocation, and other critical factors is a core value proposition for OEMs in considering Demand Capacity Management. Particularly as production volumes increase, OEMs require more insight and visibility into the component elements necessary for production programs. Rapid, detailed BOM management provides this level of end-to-end (E2E) visibility.