The automotive industry has been in a state of flux for many years. Emerging companies have successfully jockeyed to take market share from the former leaders; quality leaders’ reputations have been damaged by recalls and new hybrid and electric energy technologies have captured the imagination of the consumer. Throughout all this change, new business methodologies, new communication technologies and new global supply chains have evolved at a dizzying pace. Many of the stresses felt by the large OEMs are passed right on down to the Tier I and Tier II suppliers. Only those with flexible, adaptable supply networks have survived; only those whose systems are designed to keep pace with these rapid changes have thrived.
Automotive Key Processes
Automotive manufacturers are being pressed to introduce new models faster than ever before, and to introduce new engine technology like hybrids and all-electric vehicles. Customers want well-equipped vehicles at a low cost and with high quality. New global manufacturers are coming online and giving the established old guard a run for their money. Constant change is the watchword in the industry, and the OEMs pass the demands right down to their Tier I and Tier II suppliers. OEMs put pressure on their suppliers to collaborate on the design of components with the OEMs and other suppliers around the world. The need for collaborative design tools has skyrocketed – traditional methods of new product introduction are too slow, too costly and don’t provide the visibility needed in today’s fast paced manufacturing environments. Automotive industry manufacturers are grappling with:
Automotive Design Issues
- Rapid new product introductions are required to remain competitive
- Compliance to customer initiatives (e.g. EDI, MMOG/LE, bar code labeling, quality)
- Design for manufacturability is key to cost control and modern manufacturing methods like Lean and Six Sigma
- Shared components help to reduce inventory costs and potential stock outs
- Effective phase-in and phase-out of products can make or break the profitability of many short life-cycle products
- Global design teams and supply chains make visibility and communication more important than ever
Automotive Design Metrics
You can’t improve what you don’t measure, and analytics and process measurements are basic to modern manufacturing methodologies such as Six Sigma or Lean. Many people say the design process can’t be measured – it’s too creative. But effective design processes show up in many common business metrics:
- Controlling scrap through quality and process management – design for manufacturability
- Reduced inventory obsolescence due to more effective phase-in of new models
- Lower inventory and fewer line disruptions due to shared components across models
- Fewer suppliers to deal with, as the number of components becomes more manageable and suppliers become part of the design team
If you don’t know where you’re going, how do you know when you get there? Planning provides the roadmap to manufacturing success. From high level sales and operations planning to ensuring that the company’s strategic objectives can be met, right down to production schedules for each day at each work center or cell, planning is the heart of manufacturing. But end customers are fickle and their choices affect the schedules at the OEMs – who pass that volatility on to you.
Automotive Plan Issues
The one thing you can count on is that the real world rarely matches up to the plan. So it’s important that you start with the best possible plan, and that you have visibility to react quickly when things go wrong. Even without changing forecasts -materials are late, tooling breaks, and workers call in sick – the list of potential pitfalls is nearly endless.
- Volatility of demand may lead to inefficiencies on the line because of frequent changeovers, capacity and utilization fluctuations, excess inventory – and all this results in higher costs that you can’t pass on
- Supply chain visibility is crucial to proper planning – and it needs to encompass downstream suppliers all the way through to the customers
- Inability to plan can result in unnecessary costs due to overtime or special freight charges to meet delivery demands
- Without visibility to sales promotions you may not have inventory to meet orders
- Inaccurate inventory records can cause line stoppages due to shortages
Automotive Plan Metrics
The results of poor planning can show up in virtually every performance measure:
- Premium freight charges eat into profitability
- Excess inventory as a result of demand volatility
- Large WIP caches in queue at work centers indicate manufacturing inefficiency
- Poor on-time delivery performance as unneeded jobs make prioritizing harder
- Frequent unplanned overtime, high cost variances
Automotive companies have exceptionally complex global supply chains. It’s well understood that industry leading companies have the most effective supply chains. In leading companies, materials are intelligently sourced and many suppliers are treated like partners – integral parts of the design and delivery process. Suppliers are chosen based on a myriad of criteria, possibly including their proximity to the manufacturing facilities, the price of the item, trade terms, their design expertise, and their delivery and quality reliability. Each supplier’s performance is continuously measured and usually shared with the supplier.
Automotive Source Issues
Effective sourcing is a complex balancing act that involves weighing the relative merits of a host of complex details that may not always be quantifiable up-front. With limited time for analysis, buyers use their “best guesses” to estimate the impact of a particular factor in a sourcing decision. Coupled with the mandate on limiting the number of suppliers that so many companies enforce, it’s no wonder many buyers skip the analysis and place orders with their tried and true vendors.
- Higher safety stocks or expedited freight charges may be needed to respond to fluctuating demand
- Trade terms and prices can have a major impact on product profitability
- Late deliveries from your suppliers or poor quality can affect your ability to meet promise dates on orders
- Suppliers with specific domain expertise may offer design assistance that existing vendors cannot – and this expertise may result in significant cost savings for you
Automotive Source Metrics
Not so long ago, the only metric applied to the purchasing department was purchase price variance (PPV). Today, manufacturers better understand the effect that sourcing decisions can have on every aspect of their business. For example:
- Supplier performance ratings can help determine if a supplier should be replaced or if contracts should be reallocated to multiple suppliers – their performance affects your performance rating with the OEMs
- Supply chain visibility from customers to material suppliers is a critical early warning system for both demand changes and supply interruptions
- Safety stocks raise costs, but you may need to stock more than you’d like to be able to respond to demand changes
- Poor quality materials may not show up until late in your process, resulting in high rework or scrap charges. It’s even worse if they’re not caught until they’ve been delivered to the OEM
Numerous studies have shown that better performing companies have almost universally adopted a “modern” manufacturing methodology. The surprise is that it makes no difference whether it’s Lean, Six Sigma, TQM or something else; what matters is the commitment to a methodology for continuous improvement. The automotive industry as a whole has embraced Lean/Just in Time, but they sometimes pass on to their suppliers the costs of ensuring adequate inventories to meet changing schedules. Effective enterprise applications can help you by providing the communication tools, like EDI, you need to achieve the visibility you need to react.
Automotive Make Issues
If everything went according to plan, manufacturing would be easy. Unfortunately, there are a nearly infinite number of things that can go wrong. OEMs respond to changes in their demand by changing order quantities or due dates on you. In addition, your machines may break down, materials may be missing, or deliveries may be delayed. Almost every decision made in your organization affects your shop floor, and that affects your rating with the OEMs – your customers. How you respond to unforeseen events can make or break the company’s profitability – and possibly your career.
- Unexpected demand results in changed production priorities and may result in excess inventory or missed shipments
- You need stable, repeatable predictable processes
- You want to utilize lean manufacturing techniques like kanban and back-flushing to streamline reporting from the shop floor
- You may be required to implement EDI or MMOG to satisfy your customer’s requirements
- Inaccurate inventory records result in parts shortages – and missed completion dates
- You need specialized process capabilities that require you to outsource some or all of your manufacturing process
- Ramping up for new products may have steep learning curves affecting efficiency and utilization rates – and costs
- Unexpected machine breakdowns or tooling defects require unplanned schedule changes or re-routing of orders
Automotive Make Metrics
Almost everything that happens in an organization affects what eventually happens in manufacturing. The trick is in understanding the cumulative effects of all these decisions and achieving your goals despite unplanned events.
- Design decisions affect both cost to manufacture and quality of the final product
- Inventory management decisions affect the ability to complete orders as planned
- Forecast errors result in excess finished goods or late customer deliveries
- Breakdowns and tooling or set-up problems can result in late orders and escalating WIP levels
Every time you interact with your customers, it’s an opportunity to cement your relationship – or not. Some research has shown that customers rate the ease of doing business with suppliers and the access provided to information about their orders as nearly as important as the actual products they buy – as long as the line keeps running. Your business processes and the enterprise systems that support them can make or break any customer engagement by making it seem effortlessly easy.
Automotive Engage Issues
- Poor business processes or inadequate supply chain visibility contribute to loss of orders by frustrating or annoying customers
- Customers want communication using the method they prefer, whether that’s EDI or RFID
- Design changes are a fact of life – how quickly and accurately you can communicate when the change will be incorporated, can make a world of difference to the customer
- If things go wrong after installation or a product needs repair, the OEM is going to expect you to be able to provide the information they need for recalls or warranty repairs – along with whatever revised components are required
- Supply chain visibility allows you to see potential disruptions before they occur. You can communicate the problem to the OEM and take steps together to ensure the line keeps running
Automotive Engage Metrics
If you treat your customers well, you’ll be rewarded with repeat orders and word-of-mouth referrals. But treat them badly and you can lose your contracts without much notice. Beyond measuring calls to the complaint line, how can you be sure your systems and processes are not sending your customers straight to your competitors?
- Conversion rates of quotes to orders show that customers appreciate your products and the ease of doing business with you.
- Low repeat order rates may show that customers are not satisfied after engaging with you. Measuring repeat order results may help you understand what you’re doing right.
- Customers understand that sometimes things go wrong. They do not understand when you don’t communicate the problem and the expected solution early on.
- Sometimes a customer just needs the answer now – they want to check their order status or place an order by themselves or on the phone. Measuring call volume and self-service visits can help you satisfy your customers’ varied needs by providing the right tool and the right service levels.
- Quote-to-order conversion rates can help you understand if your customers like your products and pricing, but they may also reflect whether your business processes are too slow or cumbersome to meet your customer’s needs.
Even if you do everything right – you’ve got a great product, high quality, the price is on target – you may not achieve the market share you deserve, if you consistently miss promised delivery dates or if you short-ship items or ship the wrong items. Fast, efficient, consistent and accurate are the hallmarks of great companies’ delivery systems. It sounds so simple, yet it can be very hard achieve.
Automotive Deliver Issues
When the end-of-day or end-of-month crunch hits, your team wants to perform. They try their best to fill all orders quickly and perfectly, but system errors or cumbersome processes can get in their way. Customers increasingly demand special packing or pallets, special labeling or custom bar codes or RFID chips.
Automotive Deliver Metrics
Even beyond the obvious, are orders going out on time without errors? There are clues that can help you streamline your business processes and improve profitability while delighting your customers with perfect orders. You need to measure your performance and then dig in to the underlying causes, if you miss the mark.
- Perfect orders make customers happy. Late deliveries point to problems in inventory or production management - or maybe poor visibility into supply chain interruptions or demand fluctuations.
- Shipping the wrong items may point to materials stored in the wrong locations or mismarked inventory. Bar coding or RFID can help solve this problem and improve performance by identifying materials correctly at picking and at put away.
- When your inventory record shows an item is in stock but the bin is empty or the count is off, short shipments happen, followed by unhappy customers. Inaccuracies in finished goods inventory is a good predictor of future customer problems.
- Freight charges can be better controlled when you have visibility into the customer’s orders and the costs of different shipping methods – and when your results are predictable
- Picklists generated to maximize picking efficiency can make your team more productive without adding more steps to the delivery process – and increase your throughput without adding headcount
When the unthinkable happens and your product is the subject of a recall, it’s a perfect opportunity to make your customer glad they chose to buy from you. Tracking and tracing of lots and serial numbers can help limit the enormous costs of a recall for both you and the OEM.
Automotive Service Issues
It’s costly to provide excellent service, but it’s REALLY costly to provide bad service. When you don’t have the information you need readily available, the customer gets annoyed. Annoyed customers don’t place repeat orders – they’re likely to look for a new source of supply if it’s at all feasible.
Automotive Service Metrics
By treating your customers’ goodwill like the valuable resource it is, you can cement that relationship and save money in the process. Good service can win you that customer for life. But how do you know if you’re needlessly spending money and squandering customer goodwill?
- Measuring the elapsed time from when the customer first logs the call to its final resolution can show you the effectiveness of your service organization
- Skills tracking along with measuring training completed can ensure that you have technicians with the right skill set available in a reasonable time frame.
- A high level of repeat service calls for a single incident may mean that your techs don’t have the right skills to diagnose the problem.
- Warranty costs can show you not only how reliable your product is, but how well your service is satisfying your customers.
Modern manufacturing methods put as much stress on the financial systems as they do on the manufacturing side of traditional restrictive enterprise applications. Traditional cost accounting with its emphasis on work order variances and detailed material tracking and operation reporting doesn’t cut it when you’re back-flushing materials from open storage locations and replenishing by kanban rather than pre-pulling inventory by work order from closed secure stockrooms. Vendor managed inventories mean treating a supplier like a trusted partner when nobody checks that actual receipts match the invoice quantity. EDI communications replace traditional paper documents. Electronic payments have largely replaced traditional paper checks. Mergers, acquisitions and intra-company supply and demand mean finance needs flexibility like never before. Consolidations and eliminations, multi-currency, and automatic allocations are just a few of the items on your accounting team’s wish list. It’s a whole new world.
Automotive Finance Issues
Government compliance mandates have put strict new controls on the finance team, but the business requires streamlined processes to remain competitive. Finance teams struggle to find the right balance between controls and the business’s emerging needs. New ideas like vendor managed inventory render traditional payables processes obsolete when the supplier processes both the receipts and the invoices. The global economy means international business is the new normal while frequent mergers and acquisitions make chart of accounts and general ledger flexibility mandatory. Varying compliance regulations require localizations; multi-currency transactions affect profitability; cash management is crucial; and reporting has to be quick and easy.
Automotive Finance Metrics
The finance team is used to metrics - much of accounting is designed to measure and report the business’s performance. But global compliance regulations means new measures, new reports and new controls need to be put in place or the company and its officers can be at risk. Fleet emissions reporting, government grants for developing new energy sources and bail out restrictions and covenants add to the complexity. Finance often struggles to put the right checks and balances in place to allow the smooth running of the business and still ensure traceability and confidence in the numbers.
- Measuring inventory and COGS can be tricky if inventory is consigned at the customer’s site, if a supplier drop ships goods or if part or all of production is outsourced.
- Intra-company shipments and orders require careful reporting to ensure profits and revenue are not over-stated
- Cash flow projections can show whether DSO is on target and that out-going payments are in line with actual inventory levels
When shopping for new enterprise applications, savvy buyers don’t just focus on long lists of detailed functionality. It’s more important now than ever that the infrastructure and architecture of the system is flexible and adaptable so that the business can react to changes quickly.
Automotive Enable Issues
Companies today run a mix of applications from multiple vendors and their ERP system is usually the core or backbone of it all. The infrastructure and architecture of the ERP system are crucial. Master Data Management capabilities are key to ensuring consistency of data among disparate systems. Quick implementations are required because the lean and mean manufacturers of today don’t have the resources to do long involved implementation projects and lots of training. That means the systems have to be intuitive and easy to use. And since business processes are the real key differentiators among competitors in the age of rapid product introductions and short product life-cycles, the ability to hone these processes through cost-effective simple customization is essential.
Integrated EDI, along with bar coding or RFID are mandated by customers. It’s vital that core systems accommodate these changing standards – and customer specific mandates. Analytics and business intelligence are important to enable all the measurements you need to run your business well.
||Support for ECOs /ECNs
Product Change Control (PCC)
Master Data Synchronization
Bill of Materials
Features and Options
Time-phased planning, costing and execution of capital project
Costing using Enterprise Edition
|Product Design Specification (PTC)
Product Lifecycle Management (PLM)
Manufacturing Planning, Sales and Operations Planning
Rough-cut Capacity Planning
Product Line Planning
Distribution Network Design
Materials Requirement Planning
Master Production Scheduling
Capacity Requirements Planning
Materials Requirement Planning
Master Production Scheduling
Capacity Requirements Planning
Supplier Collaboration Portal
Purchase Order management
|Supply Chain Portal
||Manufacturing Execution Workbench
Production Scheduling Workbench
Lot Serial Traceability
WIP Lot Trace
Shop Floor Control
Process visualization with full kanban support
||Manufacturing Execution System
Automated Data Collection
||Customer Relationship Management (CRM)
Customer Self-Service (CSS)
Customer Schedules APM
Lot/serial allocation at order time
Buying groups Questionnaire for configured items
Features and options
||PO to third party to drop ship to customer Standard shipping from the warehouse
Inventory Control (min/max)
QAD Consignment Inventory
QAD Supply Chain Portal (SCP)
Final assembly work
Returns process including RMA, warehouse, and accounting orders
||Service and Support Management (SSM)
Mobile Field Service (MFS)
Installed Base Management
Vertex Sales and Use Tax Interface
||Support for Sox, GAAP, IFRS, CFR Part , MMOG/LE, ISO 9000, RoHS, WEEE, ELV
QAD Business Intelligence (BI)
QAD Quality Management EDI eCommerce
Enterprise Asset Management (EAM)
QAD Trade Management System (TMS)
Customers and Supplier Schedules
Advanced Pricing Management (APM) for Medical