LEADING TIER 1 AUTOMOTIVE SUPPLIER

The Challenge:

AUTOMATING CUSTOMER DEMAND TO SUPPLIERS

The automotive parts supplier currently makes use of QAD ERP in the cloud at its manufacturing sites and has fully automated the customer-to-supplier demand process.

Many suppliers in the automotive industry think their ERP system cannot fully automate MRP and instead continue to rely on spreadsheets throughout various points in the process, facing issues with collaboration, visibility, obsolescence, premium freight and administrative errors.

“We cringe when we hear about plants using spreadsheets for supplier releases. They are very manual and the data doesn’t flow into the supplier’s ERP,” commented the Senior ERP Analyst. 

The Solution:

USING QAD CLOUD ERP TO FULLY AUTOMATE DEMAND FROM CUSTOMERS TO SUPPLIERS

This Tier 1 automotive supplier uses QAD ERP in the cloud to fully automate demand coming in from the customers down to hundreds of its suppliers. The organization runs MRP every night through a batch job and then sends out daily releases to their suppliers.

When all of the weekly releases are in on Monday morning, the company’s production schedulers use the demand to firm up scheduling. They use QAD’s Master Planning and Scheduling Workbench (MSW/ PSW) to create the production schedule to align with customer demand, while also taking into account the need to build a bank or build in maintenance time.

Each day, the company creates a shipping schedule using the data from the night’s MRP run, taking into consideration any last-minute customer requirements or notices, which have been very common during the COVID-19 pandemic, especially with all the parts shortages. By running MRP every day, its data properly reflects any new or differing customer EDI information, for example, for backing out parts or accounting for extra availability. The team firms up the production schedule with QAD MSW/PSW. They create a daily ship schedule with 14 daily buckets and up to 80 weekly buckets for the planning schedule. The company then sends the forecast and shipping schedule to their suppliers via EDI or the QAD Demand and Delivery portal. 

On certain items, this global automotive supplier might only get a customer shipping schedule or a planning schedule. They use QAD’s netting logic to interpret the EDI information from the customers and to fully understand what the customer actually needs.

“I need QAD MRP even more so in this dynamic, fluctuating environment due to the pandemic and part shortages. Only with MRP can I digest and calculate what customer changes mean to my supply chain the first thing every morning. I need to run MRP now more than ever,” said the Senior ERP Analyst. 

About 85-90% of customer demand comes in through the ERP system. Customers typically provide six- to eight-months’ worth of demand. This global automotive parts supplier then forecasts out the balance of one year for all customer requirements. In the case of their electronics suppliers, the company sends planning information for several weeks.

In North America, approximately 85-90% of the company’s suppliers use traditional EDI, which allows their suppliers to load EDI releases and shipping schedules directly into suppliers’ ERP systems. The other 10-15% of suppliers use the QAD Demand and Delivery portal. 

QAD Demand and Delivery creates value for manufacturers by improving supplier collaboration and supply chain visibility, allowing faster responses to changes in supply and demand. The solution facilitates real-time communication between manufacturers and suppliers while  reducing error-prone, manually intensive processes. 

The QAD Demand and Delivery portal has been very useful for improving electronic communication of requirements, especially with smaller suppliers who cannot afford to implement traditional EDI. One benefit of the QAD Demand and Delivery portal is that it facilitates the automatic printing of a company-specific label to meet its requirements for inbound shipments.

“These smaller suppliers can access the portal and automatically access the correct, company-specific label. It has really minimized label accuracy issues,” commented the Senior ERP Analyst.

ANTICIPATING THE CHIP SHORTAGE 

The management of this Tier 1 automotive supplier has been very proactive, looking into the potential issue of the semiconductor chip shortage years ago, before the pandemic causes greater challenges. The demand for semiconductor chips by cell phone manufacturers is far greater than the demand from automotive manufacturers. The automotive industry accounts for millions of chips but cell phone manufacturers account for billions.

With this background, management understood that electronic component suppliers needed more visibility into demand, so the company adjusted to providing more than a year’s worth of forecast data to their electronics suppliers. By increasing the MRP control file, they could project farther for its key electronic suppliers. 

QAD’s Automotive Director, Terry Onica commented, “What this Tier 1 automotive supplier is doing with these three suppliers is unprecedented in the automotive industry, especially now with so much supply chain disruption. More organizations should follow their lead and consider doing the same with suppliers.”

“On electronics finished goods, we ask our plant Production Schedulers with input from Sales & Engineering for an 18-month forecast so that MRP will drive the planned orders for a full year and a half period,” explained the Senior ERP Analyst. “To give them the full 80 weeks horizon, we go into the scheduled order, we choose to do all weekly buckets – we show 52 weekly buckets, so our suppliers get a full-year release. Our electronics suppliers get a full 80 weeks of release demand data.”

“While increasing our forecast window didn’t eliminate the chip shortage, our purchasing group told us it made an enormous difference for getting the key chip components we needed. It helped to mitigate the shortage for us,” commented the Senior ERP Analyst.

The Benefits:

TRUSTING THE DATA AND THE SOFTWARE

One of the main reasons that this company is able to increase their forecast window and provide additional data is because they know the data is accurate and correct. The manufacturing plants are tracking inventory correctly with QAD ERP in the cloud and following industry best practices for inventory management. By automating everything and prohibiting the use of spreadsheets, the company is confident in the data.

“When organizations do not trust the data, they are hesitant to forecast beyond eight weeks,” explained Onica.

This company utilizes forecasting tools to take into account any engineering changes and to project if a particular automotive program is continuing with current finished goods. The Plant Production Schedulers, with input from Sales & Engineering, are comfortable loading most current forecast data on the current finished goods. 

“Our forecasting tool helps us move from one part number to the next with engineering changes within QAD. Then MRP takes the finished good numbers. Sales consumes them. We create our forecasts. QAD’s netting logic is a big advantage for us and the consumption logic is very helpful to drive any extra MRP demand,” explained the Senior ERP Analyst.

In addition, QAD gives this company the ability to forecast shipping times, which is especially important now with overseas suppliers encountering port delays.

USING QAD SUPPLIER PERFORMANCE OPTIONS

The company has recently implemented the QAD Supplier Performance module and QAD Demand and Delivery to better collaborate on-time delivery with its suppliers. It measures for under, over, early and late shipments and ASN timeliness. QAD Demand and Delivery improves supplier collaboration and visibility by promoting real-time communication. It eliminates manual processes that are error-prone and spreadsheets that quickly become obsolete.

“QAD Supplier Performance is working very well for us right now. Before I couldn’t measure on-time delivery and ASN timeliness, now I can,” commented the Senior ERP Analyst.

QAD Supplier Performance helps this company improve communications about shipment delivery performance. By sharing performance data with suppliers, it has significantly improved overall on-time delivery with its suppliers.

NEXT STEPS: CONTINUOUS IMPROVEMENT USING QAD DIGITAL SUPPLY CHAIN PLANNING (DSCP)

As a growth-minded company, this Tier 1 automotive supplier is always looking ahead to improve their current processes and find the most value out of their solutions. It has launched a pilot program using the QAD Digital Supply Chain Planning (DSCP) solution for improved scenario planning.

The solution identifies how information flows to downstream tiers, especially regarding any capacity issues, and particularly with its electronic components suppliers. The global company will use the solution to improve communications from its Tier 2 to Tier 3 suppliers.