Disruptive technological forces are rapidly changing future planning scenarios in the automotive industry. It is still anyone’s guess as to how fast autonomous vehicles, electric vehicles (EVs) and mobility will take off locally or globally. No two industry forecasters have the same predictions over the next five years, let alone 15-20 years. As stated by Akio Toyoda, CEO of Toyota, “This is an era in which the correct answers are unknown.” Yet, the automotive supply chain has no choice but to perform future scenario planning for the long-term in order to survive in the new world of technology and mobility.
Long-term Planning and Forecasting
There are multiple “what if” scenarios that should be considered when looking into long-term planning in this transformative era. The industry will need to navigate in this new world by considering the following “what if” scenario plans to manage in a disruptive environment:
- The impact of autonomous vehicles, electrical vehicles and ride sharing
- Geopolitical risks such as trade wars
- Adoption of electric vehicles in markets such as France, UK, China, India and Brazil
- The volume scale-down of the internal combustion engine
- The impact of Industry 4.0 in areas such as using additive manufacturing to produce parts
One of the major risks of the inability to properly do long-term forecasting could be extinction. If we look at just one of the scenarios, the electrification of the vehicle, automotive strategy consultant Paul Eichenberg predicted 75 percent of the world’s top 100 automotive suppliers will not survive the industry shift unless adaptation plans are made now. It has been reported that by 2023, the top 12 OEMs will launch 182 new EV nameplates.
Tools for Strategic Decision Making
The ability to make proper strategic decisions in this evolving landscape will be crucial in order to ensure sustainability as well as appropriate margins, capacity and inventory levels throughout the supply chain. Organizations that are unable to accurately manage long-term planning based on these “what if” scenarios will be placing themselves at significant risk. Long-term planning will require multiple facets to be considered to avoid risk and more accurately manage revenue and capacity projections. Robust tools should include the following abilities:
- Take in multiple “what if” scenarios and create one plan
- Include phase in/out calculations for capacity decisions
- Allow for collaboration and approval from multiple sources (e.g., sales, finances, supply chain)
- Provide access to historical decision making data
- Turn the global plan into local plans
- View the impact of the plan on operational and financial planning
- Place the resulting consensus plan into ERP for forecasting and production planning
The key to the future viability is to act now. If organizations are not scenario planning for the future today, it could mean bankruptcy or extinction in the years to come. With a solution like QAD Demand and Supply Chain Planning (DSCP), it is critical to do an impact analysis using “what if” scenarios in order to reduce exposure to risk. Organizations who continue to manage this process through complex spreadsheets, which are prone to errors, will not be able to keep up with all the scenarios facing them in the future.
Keep Up with Demand by Planning Ahead
Long-term planning will require a robust set of repository information which includes all the history from ERP and new OEM programs, especially considering all the new launches, in order to get an accurate simulation and plan. By not acting now, it will mean incurring costly premium freight, overtime, obsolescence and personnel at a time when competition from non-traditional competitors and innovation investments will be at an all time high.